Half Yearly Report

RNS Number : 3925Y

Jupiter Green Investment Trust Plc

28 November 2014

 



Jupiter Green Investment Trust plc

('the Company')

Unaudited Half Yearly Results for the six months to 30 September 2014

Financial Highlights

Performance
	As at	As at	%
	30.09.14	31.03.14	change
Total assets less current liabilities (£'000)	35,847	38,142	-6.0*
Net Asset Value per Ordinary share (p)	139.58	145.00	-3.7**
Ordinary share price (mid-market)	140.50	141.75	-0.9
Premium/(discount) to Net Asset Value (%)	0.7	(2.2)	-
MSCI World Small Cap Index (Total Return)	192.88	195.995	-1.6
*   Investment performance has been adjusted in respect of share buybacks and share issues during the period. ** Ongoing charges figure for the period to 30 September 2014 was 1.87% (2013: 1.68%).

Chairman's Statement

It is with pleasure that I present the Interim Report for the Jupiter Green Investment Trust, covering the six months to 30 September 2014. It was a turbulent period for equity markets. The US Federal Reserve continued to wind down its quantitative easing programme, which had lent support to asset markets for nearly two years, and confirmed that this policy would finally cease in late October. This withdrawal of liquidity came at a time when Europe struggled with deflationary risk, in part due to sanctions introduced on Russia. As a result, the European Central Bank introduced further measures aimed at improving demand in the region, including a programme designed to buy asset-backed securities from banks with the view that may help to improve lending. Growing geopolitical tensions in the Middle East further unnerved markets.

This proved a difficult backdrop for the Trust as it tends to have a bias towards small and medium sized companies, which suffered due to risk aversion in the market, and industrial stocks that tended to underperform due to concern about global economic weakness.

During the period under review your Company's total assets, adjusted for share cancellations and warrant conversions, decreased by 6.0 per cent. to £35,847,109. This compares with a decrease in the Company's benchmark index, the MSCI World Small Cap Index of 1.6 per cent. Over the same period, your Company's Net Asset Value per Ordinary Share decreased by 3.7 per cent. to 139.58p, whilst the middle market price decreased by 0.9 per cent. to 140.50p. The discount to Net Asset Value decreased from 2.2 per cent. to a premium of 0.7 per cent. and has been trading at a discount of between 1.3 per cent. and 2.3 per cent. since 30 September 2014. This reduction is as a result of the Discount Management Policy adopted by the Board since April 2012.

I recommend the manager's review in which he discusses the headwinds created by the backdrop, but also his broader optimism about the ongoing process of "mainstreaming" in the environmental sector. Mainstreaming refers to the process whereby products and services offered by environmental businesses are competing with mainstream counterparts.

Once again the period was rich in developments from an environmental policy perspective. Most notably, the debate around investment in fossil fuels gained in intensity with a number of high profile institutions and sovereign wealth funds reviewing their investments in this area. Significantly, Norway's $880bn Sovereign Wealth Fund, which has been amassed through oil production, is presently reviewing its exposure to fossil fuel investment. Similarly, the Rockefeller foundation announced its plans to withdraw money from the sector. University foundations in many parts of the world are following a similar path.

Divestment in fossil fuels is an idea based on ecological and economic grounds. Fundamentally, if world leaders hope to keep their pledge of limiting global warming to 2 degrees Celsius, a great deal of the current fossil fuel reserves will have to stay in the ground. Therefore, the rationale for divesting in these assets is that they could become unproductive (or "stranded") with associated financial risk. The other motivation for divestment has moral underpinnings, whereby investors are sending a message to governments that more needs to be done to transform our economies away from fossil fuel dependence. One potential impact of this pattern is a flow of investment capital into areas such as alternative energy and energy efficiency, and your manager continues to monitor events closely.

Perry K O Crosthwaite

Chairman

28 November 2014

Manager's Review

Performance Review

For the six months ended 30 September 2014, the net asset value per share fell by 3.7% and the share price fell by 0.9%.  After taking into account the 1.1p dividend paid in July, the total return on the net asset value per share was -2.0 per cent during the period.* This compared to returns of -1.6 per cent.* for the Trust's benchmark, the MSCI World Small Cap Index. During the same period the FTSE ET100 TR index returned 0.0 per cent.* The FTSE ET100 index measures the performance of the largest 100 companies globally whose core business is the development and deployment of environmental technologies.

Market review

Global stock markets were volatile in the six months to 30 September 2014. The US stock market saw reasonable gains as the economy bounced back from the weather-enforced lull over the winter. However, concerns about economic weakness elsewhere in the world (especially Europe) and rising geopolitical tensions in Ukraine and the Middle East added to a growing mood of circumspection as the period progressed. The European Central Bank announced a programme to buy asset-backed securities in the latest effort to combat very low inflation, while some economic indicators in China pointed to weakness. The rally in the US dollar late in the period reflected increased aversion to risk among investors, as did the rotation out of small and medium sized stocks in favour of larger counterparts.

From an environmental policy perspective, governments in the US and China both released plans to tackle carbon emissions in their respective countries. Meanwhile, in September Ban Ki-moon hosted a UN climate summit in New York. While the summit showed political will in abundance, ambition was lacking and the world's leaders appeared to be in the wrong gear for the upward climb that will be necessary if the Copenhagen Accord is to be achieved. Perhaps most encouraging, however, was the growth in commitment shown by corporations. Several key palm oil producers agreed to cease logging by 2030 and plan to restore vast areas of forest. To coincide with the talks, the $860m Rockefeller Brothers Fund announced it would sell out of its coal, oil and natural gas investments. This is a significant move given the Rockefeller fortune was built on oil and comes at a time when Norway's sovereign wealth fund is debating about whether it should stop investing in fossil fuels. In our view, it has become clearer that despite the lack of certainty about an overarching policy framework, corporations and individuals are increasingly taking it upon themselves to recognise climate change as a significant issue and their actions have started to eclipse government policy.

Fund review

Both the Trust and its smaller companies benchmark were buffeted by a rise in risk aversion during the period. The Trust's high weighting in industrials stocks, which has a higher concentration of environmental stocks than other sectors, also proved a drag on performance. This sector was weighed down by economic growth concerns.

Looking at specific themes, the poor performance of our US organic food holdings, which have been solid performers for the Trust in the past few years, proved an impediment. Whole Foods Market lost ground after it experienced increased competition from traditional stores and was forced to revise its strategy. United Natural Foods (UNFI) lost ground on the back of this news. However, being a distributor of organic foods, UNFI is quite a different proposition to Whole Foods and should benefit from the pick-up in the sale of organic foods through mainstream stores in the US. Elsewhere, global growth concerns weighed on engineering firm RPS Group and ball bearing specialist SKF.

Despite growing concerns about the macroeconomic environment a number of holdings benefited from domestic growth trends. US engineering firm Stantec, for example, released a positive trading update and continued to expand through acquisitions. Our portfolio of Japanese holdings, which includes NSK and Shimano, also performed well in part due to the potentially positive impact of a falling yen on their international earnings.

Investment Outlook

Although the Trust has not been immune to short term volatility in markets in recent months we believe our longer term investment case remains very much intact. Environmental issues continue to grow in importance among politicians, corporate leaders and consumers. Moreover, from wind turbines to industrial metals recycling to energy efficient light bulbs, green companies are increasingly taking a lead role in addressing "mainstream" issues such as rising populations, changing demographics, urbanisation, rising global consumption and the resultant increase in resource scarcity. Importantly, products offered by these businesses are becoming more cost competitive when compared to those offered by mainstream counterparts across. Our research suggests that the process of "mainstreaming" has a long way to go and we will be monitoring the present unease in markets for any opportunities to add attractively valued stocks to the Trust.

Charlie Thomas

Jupiter Asset Management Limited

Investment Manager

28 November 2014

*  Source: Jupiter Asset Management

INVESTMENT PORTFOLIO

as at 30 September 2014

		Market
		value		Percentage
Company		£'000		of portfolio
Wabtec		1,563		4.5
Stantec		1,379		3.9
Cranswick		1,165		3.3
Ricardo Group		1,146		3.3
Smith A. O.		1,011		2.9
Novozymes		1,004		2.9
LKQ Corporation		957		2.7
RPS Group		883		2.5
Valmont Industries		800		2.3
Horsehead Holdings		799		2.3
United Natural Foods		798		2.3
FirstGroup		774		2.2
WS Atkins		769		2.2
Emcor Group		749		2.1
Vestas Wind System		697		2.0
National Express Group		695		2.0
BorgWarner		685		2.0
Johnson Matthey		683		2.0
Tomra Systems		667		1.9
Covanta		627		1.8
Whole Foods Market		623		1.8
Kurita Water		596		1.7
Toray Industries		575		1.6
Shanks Group		541		1.5
Pure Technologies		532		1.5
Latchways		519		1.5
Xylem		511		1.5
China Everbright		505		1.4
Veolia Environnement		484		1.4
Andritz		474		1.4
NSK	474			1.4
Newalta	455			1.3
Regal Beloit	448			1.3
EDP Renovaveis	426			1.2
Clean Harbors	421			1.2
Keller Group	408			1.2
Azbil	407			1.2
Air Water	404			1.2
Daiseki	391			1.1
Shimano	389			1.1
Centotec Sustainable	383			1.1
Greenko Group	365			1.0
China Longyuan Power	342			1.0
Itron	341			1.0
Wacker Chemie	338			1.0
Mayr-Melnhof Karton	335			1.0
Sensata Technologies	330			0.9
Suez Environnement	324			0.9
Schneider Electric	319			0.9
Schnitzer Steel	315			0.9
SKF	313			0.9
Keurig Green Mountain	279			0.8
Watts Water	276			0.8
Veeco Instruments	269			0.8
Augean	265			0.8
Transpacific Industries	261			0.7
First Solar	252			0.7
SunOpta	234			0.7
Abengoa ADR	232			0.7
Abengoa	217			0.6
Vossloh			204	0.6
Hub Group			194	0.6
Renewable Energy Generation			193	0.5
Ameresco			183	0.5
Casella Waste			182	0.5
China Suntien Green Energy			164	0.4
Cree			141	0.4
Atlantis Resources			113	0.3
Capstone Turbine			90	0.3
TEG Group			45	0.1
Renova Energy			Nil	Nil
Total			34,933	100.0

The holdings listed above are all equity shares.

STATEMENT OF COMPREHENSIVE INCOME
for the six months to 30 September 2014 (unaudited)

	Six months to 30 September 2014			Six months to 30 September 2013
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
(Loss)/gain on investments held at fair value through profit or loss	-	(989)	(989)	-	3,248	3,248
Foreign exchange loss	-	(5)	(5)	-	-	-
Income	360	-	360	404	-	404
Total income	360	(994)	(634)	404	3,248	3,652
Investment management fee	(16)	(143)	(159)	(17)	(147)	(164)
Investment performance fee	-	-	-	-	(230)	(230)
Other expenses	(168)	-	(168)	(155)	-	(155)
Total expenses	(184)	(143)	(327)	(172)	(377)	(549)
Return/(loss) on ordinary activities before finance costs and taxation	176	(1,137)	(961)	232	2,871	3,103
Finance costs	(8)	-	(8)	-	-	-
Return/(loss) on ordinary activities before taxation	168	(1,137)	(969)	232	2,871	3,103
Taxation	(31)	-	(31)	(35)	-	(35)
Net return/(loss) after taxation	137	(1,137)	1,000	197	2,871	3,068
Return/(loss) per Ordinary share	0.53p	(4.37)p	(3.84)p	0.69p	10.05p	10.74p

The total column of this statement is the income statement of the Company, prepared in accordance with International Financial Reporting Standards (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.

No operations were acquired or discontinued during the year.

All income is attributable to the equity holders of Jupiter Green Investment Trust PLC.

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

STATEMENT OF FINANCIAL POSITION
as at 30 September 2014

	30 September 2014 (unaudited)	31 March 2014 (unaudited)
	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	34,933	38,470
Current assets
Prepayments and accrued income	66	64
Cash and cash equivalents	966	96
	1,032	160
Total assets	35,965	38,630
Current liabilities
Other payables	(118)	(488)
Total assets less current liabilities	35,847	38,142
Capital and reserves
Called up share capital	34	33
Share premium	33,682	28,348
Redemption reserve	239	239
Special reserve	24,292	24,292
Retained earnings	(22,400)	(14,770)
Total equity shareholders' funds	35,847	38,142
Net Asset Value per Ordinary share	139.58p	145.00p

STATEMENT OF CHANGES IN EQUITY
for the six months to 30 September 2014

For the six months to 30 September 2014 (unaudited)	Share Capital £'000	Share Premium £'000			Retained Earnings £'000	Total £'000
			Special Reserve £'000	Redemption    Reserve £'000
Balance at 31 March 2014	33	28,348	24,292	239	(14,770)	38,142
Net loss for the period	-	-	-	-	(1,000)	(1,000)
Ordinary shares issued	1	5,334	-	-	-	5,335
Ordinary shares repurchased	-	-	-	-	(6,346)	(6,346)
Dividend paid	-	-	-	-	(284)	(284)
Balance at 30 September 2014	34	33,682	24,292	239	(22,400)	35,847

For the six months to 30 September 2013 (unaudited)	Share Capital £'000	Share Premium £'000	Special Reserve £'000	Redemption Reserve £'000	Retained Earnings £'000	Total £'000
Balance at 31 March 2013	33	27,285	24,292	238	(14,277)	37,571
Net profit for the period	-	-	-	-	3,068	3,068
Ordinary shares issued	-	1,063	-	-	-	1,063
Ordinary shares repurchased	-	-	-	1	(3,304)	(3,303)
Dividend paid	-	-	-	-	(370)	(370)
Balance at 30 September 2013	33	28,348	24,292	239	(14,883)	38,029

CASH FLOW STATEMENT
for the six months to 30 September 2014 (unaudited)

		2014  £'000	2013£'000
Cash flows from operating activities
Investment income received		356	400
Deposit interest received		-	1
Investment management fee paid		(161)	(190)
Other cash expenses		(534)	(869)
Cash generated from operations		(339)	(658)
Interest paid		(5)	-
Taxation		(31)	(35)
Net cash outflow from operating activities		(375)	(693)
Cash flows from investing activities
Purchases of investments		(386)	(1,409)
Sale of investments		2,931	3,705
Net cash inflow from investing activities		2,545	2,296
Cash flows from financing activities
Shares issued		5,335	1,064
Shares repurchased		(6,346)	(3,571)
Dividend paid		(284)	(370)
Net cash outflow from financing activities		(1,295)	(2,877)
Increase/(decrease) in cash		875	(1,274)
Cash and cash equivalents at start of period		96	1,415
Loss on foreign currency		(5)	-
Cash and cash equivalents at end of period		966	141

Notes to the accounts

1.      Accounting Policies

The accounts comprise the unaudited financial results of the Company for the six month period from 1 April 2014 to 30 September 2014. The accounts are presented in pounds sterling, as this is the functional currency of the Company.

The accounts have been prepared in accordance with International Financial Reporting Standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" issued by The Association of Investment Companies in 2009. The particular accounting policies adopted by the Directors are described below.

Revenue recognition

Revenue includes dividends from investments 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, expenses and interest payable are accounted for on an accruals basis. These are classified within operating activities in the cash flow statement.

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 (non-distributable) items is given in Note 5. Investment Management fees are charged 90 per cent. to capital and 10 per cent. to revenue. All other operational costs including administration expenses and finance costs (but with the exception of any investment performance fees which are charged to capital) are charged to revenue.

Basis of valuation of investments

Investments are recognised and derecognised on a trade date where a purchase and 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 cost, being the consideration given.

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 and loss investments are included within the changes in the fair value of the investments.

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.

2.    Related parties

Mr Crole is an employee of Jupiter Asset Management Limited whose subsidiary company Jupiter Unit Trust Managers (JUTM) receives investment management fees as set out below.

Jupiter Unit Trust Managers Limited 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 fee payable monthly, of one twelfth of 0.85 per cent. of the net assets of the Company after deduction of the value of any Jupiter managed investments.

Jupiter Unit Trust Managers Limited is also entitled to an investment performance fee which is based on the outperformance of the Net Asset Value per Ordinary share over the total return on the Benchmark Index in an accounting year. Any performance fee payable will equal the time weighted average number of Ordinary shares in issue during the period multiplied by 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 total return on the Benchmark Index. The performance fee will only be payable if the Net Asset Value per Ordinary share (adjusted as described above) exceeds the highest of (i) the Net Asset Value per Ordinary share on the last business day of the previous performance period; (ii) the Net Asset Value per Ordinary share on the last day of a performance period in respect of which a performance fee was last paid: and (iii) 100p. The total amount of management fees and any performance fee payable in respect of one accounting period is limited to 1.75 per cent. of the Net Asset Value of the Company on the last business day of the relevant performance period.

Availability of Half Yearly Report

The Half Yearly Report will shortly be available on Company's website (www.jupiteronline.com/Green). Copies my also be obtained from the registered office of the Company at 1 Grosvenor Place, London SW1X 7JJ on request.

By Order of the Board
Jupiter Asset Management Limited, Secretaries

Enquiries:

Richard Pavry

Head of Investment Trusts
Jupiter Asset Management Limited

[e-mail]

020 7314 4822

 

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