TIDMJSS
RNS Number : 1455B
Jupiter Second Split Trust PLC
27 February 2014
Jupiter Second Split Trust PLC
Annual Financial Report for the year ended 31 October 2013
The following is an extract from the Company's Annual Report and
Accounts for the year ended 31 October 2013.
Chairman's statement
In the 12 months to 31 October 2013, your Company's total assets
less current liabilities decreased by 0.5 per cent. This compares
with a return of 0.5 per cent. for your Company's Benchmark index,
3 month sterling LIBOR.
The geared split capital structure of the Company resulting from
the prior entitlement of the Zero Dividend Preference shares meant
that the Net Asset Value of the Company's Geared Ordinary shares
decreased by 14.6 per cent. during the period under review. The
Packaged Units are not geared by the Company's split capital
structure since they each comprise one Geared Ordinary share and
two Zero Dividend Preference shares (the rights of which balance
one another).
The Net Asset Value of the Packaged Units decreased in line with
the Company's total assets by 0.5 per cent. over the period under
review to 107.55p per Packaged Unit. The Net Asset Value of the
Zero Dividend Preference shares increased by 6.9 per cent. to
37.88p over the period under review. Revenues after tax for the
year to 31 October 2013 amounted to GBP1.76 million representing
0.81p per Geared Ordinary share (compared to GBP1.16 million for
the same period last year).
Dividend
A dividend was declared on 17 December 2013 of 0.80p per Geared
Ordinary share. This was paid on 31 January 2014 to the Geared
Ordinary shareholders (and to the holders of the Geared Ordinary
shares within the Company's Packaged Units) that appeared on the
Company's register at the close of business on 3 January 2014.
The Company's longer term track record
The Board is aware that the Company's performance in the shorter
term has been disappointing, albeit that the investment portfolio
has been managed to an absolute return objective with a LIBOR
(cash) benchmark since the Company's reconstruction in 2009. The
following longer term information about the Company's performance
since its launch in 2004 through to the end of the financial period
under review, 31 October 2013, may be of interest for its longer
term shareholders.
An investor in the Company's Geared Growth shares (as they were
then known) who had rolled over their shares into the current
Geared Ordinary shares in 2009 would have had a net asset value for
their holding of GBP1,413 for each GBP1,000 originally invested.
They would also have received a total of GBP3.25p in dividends
(net) during the course of their investment.
An investor in the Company's Zero Dividend Preference shares at
launch who had rolled over into the current Zero Dividend
Preference shares would have had a net asset value for their
holding of GBP1,771 for each GBP1,000 originally invested. Holders
of Zero Dividend Preference shares are not entitled to
dividends.
An investor in the Company's ungeared packaged units at launch
who had rolled over into the current packaged units in 2009 would
have had a net asset value for their holding of GBP1,644 for each
GBP1,000 originally invested. They would also have received a total
of GBP3.25p in dividends (net) during the course of their
investment.
Philip Gibbs' retirement and appointment of Miles Geldard
During the period, Philip Gibbs announced his intention to
retire from his role as portfolio manager of the Company, effective
from 31 October 2013. On behalf of the Board, I would like to thank
him for his efforts during this time.
In his place, Jupiter Asset Management Limited has appointed
Miles Geldard as the portfolio manager of the Company. Miles, who
has 30 years' investment experience, is head of the fixed
interest/multi-asset team at Jupiter and jointly manages the
Jupiter Strategic Total Return Fund (a Luxembourg SICAV), the
Jupiter Global Convertibles Fund (a Luxembourg SICAV) and the
Jupiter Strategic Reserve Fund (a UK Unit Trust), alongside Lee
Manzi. We are pleased to welcome Miles as portfolio manager of the
Company.
End of Life
The Company has a planned life to 31 October 2014, whereupon
holders of both Geared Ordinary and Zero Dividend Preference shares
have an entitlement under the Company's Articles to redeem their
holdings for cash. Further details of the entitlements of each
class of shareholders are set out in the section of the Annual
Report entitled 'Capital Structure'.
Hurdle rates between now and the end of the Company's planned
life
Between now and the end of the Company's planned life on 31
October 2014, the Investment Manager estimates that the Company's
investment portfolio (total assets) would need to grow by
approximately 7.0 per cent. (annualised, after meeting the cost of
the accruing entitlements of the Company's Zero Dividend Preference
Shareholders and the operating expenses of the Company) in order
for the Company's Geared Ordinary shareholders to expect a final
entitlement on that date equal to their Net Asset Value, as at 29
January 2014, of 30.48p. The Company's investment portfolio would
need to grow by approximately 0.4 per cent. on the same annualised
basis, in order for the Company's Geared Ordinary shareholders to
expect a final entitlement on that date equal to their closing
middle market price, as at [29] January 2014, of 25.00p. These
hurdles should be considered in the context of the benchmark for
the management of the Company's investment portfolio, being the
return on cash (3 month LIBOR).
The hurdle rates refer to capital growth only and do not take
into account any further dividend payable to Geared Ordinary
shareholders which may be declared between now and 31 October 2014
of income.
Reconstruction proposals
Detailed proposals for the continuation or reconstruction of the
Company and information about the arrangements for shareholders
wishing to either cash in their investment at the end of the
Company's planned life on 31 October 2014 or to continue or 'roll
over' their investment in a UK capital gains tax efficient manner
have yet to be formulated. The directors are considering various
options and proposals are expected to be announced later in the
year. A circular will be sent to all shareholders in due course
containing full details of the proposals. All shareholders will, in
any event, be given an opportunity to elect for cash should they
wish to conclude their investment in the Company on 31 October 2014
rather than roll over.
Since any proposals for the continuation or reconstruction of
the Company will necessarily require the prior approval of
Shareholders at an Extraordinary General Meeting there can be no
guarantee, at this stage, that any such proposals will be
implemented. This is reflected in the comments in Note 1 to these
accounts which relate to the going concern basis on which these
accounts have been prepared.
Regulatory
Alternative Investment Fund Managers' Directive
The Alternative Investment Fund Managers' Directive ("AIFMD") is
a European Union Directive creating a European wide framework for
the regulation of managers of Alternative Investment Funds ("AlF"),
of which investment trusts are included. The AIFMD was implemented
on 22 July 2013 with a one year transitional period for UK
registered AIF's. The Directive requires all AIF's to appoint an
Alternative Investment Fund Manager ("AIFM"). The Board is in the
process of making the necessary arrangements to appoint Jupiter
Unit Trust Managers Limited as AIFM to the Company and seek the
requisite authorisation from the Financial Conduct Authority prior
to the end of the transitional period being 22 July 2014. The Board
is also finalising negotiations to appoint a depository to the
Company. Shareholders can be assured that the Board will endeavour
to keep any additional operational costs to a minimum.
New reporting requirements
As a result of recent legislative changes to reporting
requirements, shareholders will note that a number of changes have
been made to this year's Annual Report & Accounts. These
include the provision of new Strategic Report and Directors'
Remuneration Policy as well as an updated Directors' Remuneration
Report. The new Strategic Report as set out on pages 8 to 14 of the
Annual Report replaces the Business Review and is designed to
enhance shareholders ability to assess how the directors have
performed their duty to promote the success of the Company over the
year. The new Directors' Remuneration Policy ("DRP") can be found
on page 25 of the Annual Report, in essence, the DRP sets out the
remuneration policy that will be adhered to by the Company for the
next three years. In addition to shareholders being asked to
approve the Directors' Remuneration Report (Resolution 2) at the
forthcoming Annual General Meeting, shareholders will also be asked
to approve the Directors' Remuneration Policy (Resolution 3).
Annual General Meeting
The Company's Annual General Meeting ("AGM")will be held on
Wednesday 2 April 2014 at the offices of Jupiter Asset Management
Limited, 1 Grosvenor Place, London SW1X 7JJ. Notice of the AGM,
containing full details of the business to be conducted at the
meeting, is set out on pages 53 to 55. In addition to the formal
business, the Investment Manager will provide a short 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 the Board and Investment
Manager.
Outlook
I recommend the manager's review in which Miles reflects on the
events that drove markets in the 12 months to 31 October. The
policy of holding long positions in US stock indices against a
short position in the euro generated positive returns. Corporate
bond holdings benefited from tightening credit spreads in the early
part of the year, but also saw some losses. In the whipsawing
markets generated by the fluctuating outlook for monetary policy,
markets' initial fear of tapering had a negative effect on returns.
The Company ended the period with a modest loss overall. Philip
wound down a number of positions towards the end of September in
order to allow Miles to implement his own strategy for the Company.
Miles combines value-driven security selection with strategic asset
allocation based on macroeconomic analysis, with a particular focus
on reducing volatility and preserving capital. This seems an
approach particularly suited to the uncertain times in which we
continue to find ourselves.
Gordon Campbell
Chairman
27 February 2014
Investment Manager's Review
For the year to 31 October 2013 the value of the Company's total
assets decreased by 0.5 per cent. compared to a gain of 0.5 per
cent. for its benchmark, the 3 month Sterling LIBOR Index. From the
Company's reconstruction on 3 November 2009 to 30 October 2013, the
value of total assets has increased by 9.3 per cent. compared to a
2.8 per cent. return for the benchmark.
Market review
"The Great Reflation" experiment by central bankers in the US
and Japan underpinned some sizeable returns in equity markets
during the period under review.
The Federal Reserve's "open-ended" asset purchase programme set
the tone early in the period. The US central bank broke from
orthodoxy when it decided to target a reduction of the unemployment
rate to about 6.5 per cent., even if this came at the risk of
above-target inflation. Then, in April the Bank of Japan folded to
the policy agenda of newly-elected Prime Minister Shinzo Abe by
announcing a massive quantitative easing programme with the aim of
driving inflation up to 2 per cent. through the injection of some
Yen140tn into the country's money supply over the following two
years. The news from Japan led to a surge in the domestic stock
market and buoyed stock markets around the world. Meanwhile, the
yen plummeted and bond markets in emerging markets and Europe were
bid up on expectation that cash would flee Japan in a hunt for
yield.
The frothy conditions proved to be short lived, however. The
Federal Reserve's Chairman Ben Bernanke neutralised the market's
revelry when he revealed that the central bank would consider
tapering its quantitative easing programme as soon as September.
The prospect of a shift in Fed policy led to quite a dramatic
change in mood, especially in bond markets where US Treasury bonds
sold off sharply and investors became concerned about the end of
the thirty year bull market. So severe was the rout in US treasury
bonds, it appeared that the Fed might lose control of yields to the
potential detriment of the US economic recovery. The associated
sell-off in emerging market stocks, bonds and currencies was
particularly punishing. It therefore came as some surprise when the
Fed decided not to taper its programme in September, although some
commentators wondered if the fraught negotiations surrounding the
US fiscal debt ceiling might have influenced the decision.
Nevertheless, the resolution to the debt ceiling debate (for the
time being, at least) and the prospect of easy Fed policy into 2014
led to a spike in asset prices at the end of the period.
In terms of global economic activity, it was a mixed picture.
The UK recovery was a bright spot, while parts of the eurozone saw
pockets of recovery towards the end of the period. The US economy
continued to recover, although data was mixed in the summer months,
while some of the major emerging markets economies experienced
cyclical weakness and pressures associated with higher borrowing
costs and weaker currencies. At a time when authorities in China
were attempting to curb speculation in the shadow banking system,
the local economy appeared to be particularly at risk.
Policy review
In the first half of the period, Philip's strategy of holding
long positions in US stock indices against a short position in the
euro added value to the Company. This was an expression of his
views about the divergent economic prospects of the US and eurozone
economic regions. Elsewhere, the Company's long corporate bond
holdings benefited from the tightening of credit spreads that
followed the Bank of Japan's announcement in April. However, Ben
Bernanke's statement in May had a largely negative effect on
several of the portfolio's key markets, which resulted in a modest
drop in the Company's asset value. The depreciation in the value of
the Norwegian krone against the euro was an impediment to growth,
as were losses in corporate bonds, Australian government bonds and
US stock indices. The Company benefited from the Fed's decision not
to taper QE in September and ended the period with a modest loss
overall.
In anticipation of his retirement at the end of October, Philip
wound down several positions, leaving the portfolio with a
significant amount of cash. Much of this cash is held as collateral
against the Company's derivative investment positions, which
represent a significant proportion of the Company's market
exposure.
Outlook
Rebuilding confidence in the financial system and kick-starting
economies after the worst financial crisis of our times has
required extraordinary monetary activism. Weaning investors and
borrowers off central bank largesse is a delicate balancing act;
everyone knows this abnormal situation cannot last indefinitely but
a considerable difference of opinion remains about how long the
process will take. The IMF said the normalisation of US monetary
policy would be 'unprecedented and complex' and pointed out that
containing longer-term interest rates and market volatility had
already proven to be a substantial challenge. This process could
leave emerging market debt particularly vulnerable as global
capital flows would revert to the dollar.
In Japan, the Abe administration's efforts to lift the country
out of deflation by creating asset inflation and higher wages
continues and, in our view, could transform the landscape for
Japan, which is where we have our largest exposure to shares.
Angela Merkel is no Shinzo Abe and the severe structural
problems in the eurozone have yet to be addressed. We think that
the disparity between the deteriorating fundamentals in France and
the optimistic pricing of its government bonds has yet to be
recognised by the market and offers an investment opportunity.
Miles Geldard
Fund Manager
Jupiter Asset Management Limited
27 February 2014
Investment Objective
The objective of the Company is to achieve absolute returns. The
Company aims to provide Geared Ordinary shareholders with capital
growth, with income as a secondary objective and to provide Zero
Dividend Preference shareholders with a predetermined final capital
entitlement on the Winding-Up Date.
Investment Policy
The investment policy of the Company is to invest in listed
equities and equity related securities (such as convertible
securities, preference shares, convertible unsecured loan stock,
warrants and other similar securities).
The Investment Manager ('Jupiter Asset Management Limited') is
not limited in the asset allocation of the Company's investment
portfolio between sectors, geographic regions or the types of
equities and equity related securities in which the Company may
invest, but instead the Investment Manager considers each potential
investment on its own merits. The Investment Manager focuses on the
sectors that he considers to be the most undervalued areas of the
market from time to time and the allocation of assets between
different sectors will be determined by the Investment Manager in
its absolute discretion.
In addition to equities, and equity related securities
(including derivatives), the types of investment and assets in
which the property of the Company may be invested include cash,
near cash, fixed interest securities, currency exchange
transactions, index linked securities, money market instruments
(MMIs) and deposits.
These instruments may be used for the purposes of both efficient
portfolio management* and, when it is considered to be appropriate
for investment purposes by the Investment Manager and the Board, to
adopt an investment strategy aimed at achieving positive returns
across market cycles with low levels of volatility. This strategy
will seek to take advantage of specific macroeconomic circumstances
and market pricing anomalies.
At times the portfolio may be concentrated in any one or a
combination of such assets and as well as holding physical long
positions the Investment Manager may create synthetic long and
short positions through the use of equity related securities.
The Investment Manager will seek to limit volatility through
diversified portfolio holdings and sector exposures, active
management of the Company's net and gross portfolio exposure to the
market, and through the use of derivatives.
The Company's investment portfolio is focused on companies
where, in the opinion of the Investment Manager, valuations are low
and growth in earnings or assets is not fully appreciated. The
Investment Manager seeks to identify companies within growth
industries which enjoy certain key characteristics, including an
imaginative, proven and incentivised management team and balance
sheet strength.
The Company manages an adequate spread of investment risk, with
no one investment making up more than 15% of the Total Assets of
the Company at the time of investment.
The Board has not set an objective of a specific Portfolio Yield
for the Company and the level of such yield is expected to vary
with the sectors and geographical regions to which the company's
portfolio is exposed at any given time. However, substantially all
distributable revenues that are generated from the Company's
investment portfolio are expected to be paid out in the form of
annual dividends.
It is the Company's stated policy that not more than 10%, in
aggregate, of Total Assets may be invested in other UK investment
companies unless such companies have stated investment policies to
invest no more than 15% of the Total Assets in other UK listed
investment companies (including listed investment trusts).
The Company may make use of short-term borrowings such as an
overdraft facility for liquidity and investment purposes in order
to gear the returns on the Company's investment portfolio but in
any event borrowings will not exceed, at any one time, 25% of Total
Assets without shareholder approval by ordinary resolution.
The Company may also hedge currency exposures. The Company may
also purchase unlisted securities (up to a maximum of 5% of Total
Assets).
Any material change in the investment policy of the Company
described above may only be made with the approval of Shareholders
by an ordinary resolution and the separate class approval of Geared
Ordinary shareholders.
*Efficient Portfolio Management refers to techniques and
instruments used with the view to reduce risks specific to a
Portfolio and also to generate additional capital or income for the
Company with a risk level that is consistent with the level
approved by the Board.
Benchmark Index
3 month sterling LIBOR calculated as at the first business day
of each calendar month.
Risks and uncertainties
The principal risk factors that may affect the Company and its
business can be divided into the following areas:
1. Investment Strategy and Share Price Movement
2. Foreign currency Movements
3. Interest Rates
4. Derivatives
5. Liquidity Risk
6. Gearing Risk
7. Discount to Net Asset Value
8. Regulatory Risk
9. Credit and Counterparty Risk
10. Loss of Key Personnel
11. Operational
12. Financial
The investment Manager's policies for managing the financial
risks are either summarised below or can be found in the Annual
Report & Accounts for the year ended 31 October 2013, (which
will be available short on the Company's website) and have been
applied throughout the year.
Policy
(a) Foreign Currency Risk
The Company may hedge against foreign currency movements
affecting the value of the investment portfolio including Futures
and Options where adverse movements are anticipated but otherwise
takes account of this risk when making investment decisions.
(b) Market Price Risk
By the very nature of its activities, the Company's investments
are exposed to market price fluctuations. The Company's exposure to
market price risk as at 31 October 2013 is represented by its
investments held on the Statement of Financial Position under the
heading "Investments held at Fair Value through Profit or Loss".
Further information on the investment portfolio and investment
policy is set out in the Manger's Review.
(c) Interest Rate Risk
Interest rate movements may affect:
a. The fair value of investment of fixed interest securities
b. The level of income receivable from interest-bearing
securities and cash at bank and on deposit
(d) Liquidity Risk
The Company's assets comprise mainly readily realisable
securities which can be sold to meet funding requirements if
necessary.
(e) Credit and counterparty risk
The failure of the counterparty to transactions (including
forward foreign exhchange and futures and options) to discharge its
obligations under that transaction could result in the Company
suffering a loss.
(f) Primary Financial Instruments
Fair values of financial assets and financial liabilities are
given in Note 15(f) to the Accounts
(g) Financial Assets and liabilities - full details are given in Note 15 (g) to the accounts
(h) Fair value hierarchy
The Company adopted the amendments to IFRS 7 "Financial
Instruments:Disclosure" effective from 1 January 2009 and full
details are given in Note 15 (h) to the accounts
(i) Movements in Level 3 investments
2013
GBP'000
At the beginning of the year 739
Movement during the year :
Movements in valuation (362)
_______
At the end of the year 377
_______
(i) Use of Derivatives
The Company may take short positions (using contracts for
difference) in respect of a small number of large capital
securities with the view to enhance the returns to shareholders and
manage risk of the portfolio.
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 October 2013
Year ended 31 October 2013 Year ended 31 October 2012
Revenue Return Capital Return Total Revenue Return Capital Return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments held
at
fair value through profit
or loss - 2,594 2,594 - 2,045 2,045
Foreign exchange
(loss)/gain - (3,468) (3,468) - 6,252 6,252
Income from investments 4,186 - 4,186 3,399 - 3,399
Interest 592 - 592 661 - 661
Total income 4,778 (874) 3,904 4,060 8,297 12,537
Investment management fee (1,748) - (1,748) (1,752) - (1,752)
Investment performance fee - - - - (9) (9)
Other expenses (374) - (374) (414) - (414)
Total expenses (2,122) - (2,122) (2,166) (9) (2,175)
Net return before finance
costs and taxation 2,656 (874) 1,782 1,894 8,288 10,182
Interest payable (1) - (1) 1 - 1
Finance costs of Zero
Dividend Preference
shares - (10,604) (10,604) - (9,944) (9,944)
Net return before taxation 2,655 (11,478) (8,823) 1,895 (1,656) 239
Taxation (896) (381) (1,277) (740) (10) (750)
Net return after taxation 1,759 (11,859) (10,100) 1,155 (1,666) (511)
Return per Geared Ordinary
share (pence) 0.81 (5.48) (4.67) 0.53 (0.77) (0.24)
The total column of this statement is the profit and loss 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.
No operations were acquired or discontinued in the year.
STATEMENT OF FINANCIAL POSITION
as at 31 October 2013
2013 2012
GBP'000 GBP'000
Non-current assets
Investments held at fair value through profit or loss 60,052 43,059
Current assets
Receivables 4,119 5,542
Open forward contracts 117,563 143,753
Cash and cash equivalents 171,481 189,119
293,163 338,414
Creditors: amounts falling due within one year (2,608) (1,787)
Open forward contracts (117,915) (145,875)
Net current assets 172,640 190,752
Total assets less current liabilities 232,692 233,811
Creditors: amounts falling due after more than one year
Zero Dividend Preference shares (163,917) (153,313)
Total net assets 68,775 80,498
Capital and reserves
Called up share capital 1,237 1,237
Share premium 26,321 26,321
Special reserve 30,530 30,530
Retained earnings 10,687 22,410
Total equity 68,775 80,498
Net Asset Value per Geared Ordinary share (pence) 31.79 37.21p
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 October 2013
Share Share Special Retained
Capital Premium Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 31 October 2013
31 October 2012 1,237 26,321 30,530 22,410 80,498
Net return for the year - - - (10,100) (10,100)
Dividend paid - - - (1,623) (1,623)
Balance at 31 October 2013 1,237 26,321 30,530 10,687 68,775
Share Share Special Retained
Capital Premium Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 31 October 2012
31 October 2011 1,237 26,321 30,530 24,868 82,956
Net return for the year - - - (511) (511)
Dividend paid - - - (1,947) (1,947)
Balance at 31 October 2012 1,237 26,321 30,530 22,410 80,498
CASH FLOW STATEMENT
for the year ended 31 October 2013
Year ended Year ended
31 October 31 October
2013 2012
GBP'000 GBP'000
Cash flows from operating activities
Purchases of investments (138,810) (79,890)
Sales of investments 120,457 133,932
Realised (loss)/gain on foreign
currency (3,468) 6,252
Investment income received 2,999 4,090
Deposit Interest received 591 658
Investment management fee paid (1,748) (1,729)
Performance fee paid (9) -
Other cash expenses (395) (398)
Change in open forward currency
contracts (1,769) 1,025
Payments from Contracts for Difference
(CFD) and Futures and Options
counterparty 6,124 12,745
Net cash inflow from operating
activities before finance costs
and taxation (16,028) 76,685
Interest received/(paid) (1) 1
Taxation 14 (1,171)
Net cash inflow from operating
activities (16,015) 75,515
Cash flows from financing activities
Dividend paid (1,623) (1,947)
Payments to subsidiary -- (290)
Increase in cash (17,638) 73,278
Change in cash and cash equivalents
Cash and cash equivalents at start
of year 189,119 115,841
Cash and cash equivalents at end
of year 171,481 189,119
NOTES:
1. Income
Year ended Year ended
31 October 31 October
2013 2012
GBP'000 GBP'000
Income from investments:
Dividends from overseas companies 189 178
Corporate Bond Interest 3,486 2,388
Income from government stocks 511 833
4,186 3,399
Other income:
Deposit interest 592 661
Total Income 4,778 4,060
Total income comprises
Dividends 189 178
Fixed Interest 3,997 3,221
Deposit interest 592 661
4,778 4,060
Income from investments:
Listed in the UK 2,518 1,498
Listed overseas 1,668 1,901
4,186 3,399
2. Reconciliation of Net return before finance costs and
taxation to net cash inflow from operating activities
2013 2012
GBP'000 GBP'000
Net return before finance costs and
taxation 1,782 10,182
Gain on fixed asset investments through
profit or loss (2,594) (2,045)
Loss on contracts for difference 314 (1,192)
Gain on futures & options 3,640 999
Purchases of investments (138,810) (79,890)
Sales of investments 120,457 133,932
Increase in open forward contract liability (1,769) 1,025
Decrease in prepayments, other debtors
and accrued income (1,191) 690
Decrease/(increase) in amount due from
contracts for difference and futures
& options counterparty 2,170 12,938
Increase in other creditors and accruals (27) 46
(16,028) 76,685
3. Related parties
Mr Richard Pavry is an employee of Jupiter Asset Management
Limited which receives investment management fees as detailed
below. Jupiter Administration Services Limited, a company within
the same group as Jupiter Asset Management Limited receives
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 12 months' notice by either party) for
a quarterly fee of 0.1875% of the Total Assets less current
liabilities of the Company excluding the value of any Jupiter
managed investments payable in arrears on 31 January, 30 April, 31
July and 31 October in each year. Management fees of GBP439,074
were outstanding as at 31 October 2013 (2012: GBP439,504).
Jupiter Asset Management Limited is also entitled to an
investment performance fee if Total Assets less current liabilities
(after adding back any dividends paid or performance fee accrued)
at the end of any given accounting period have increased over the
greatest of three 'high water marks', being:
(i) the Initial Total Assets;
(ii) the Total Assets on the last business day of a calculation
period in respect of which a performance fee was last paid (after
deduction of any performance fee paid to the Investment Manager in
respect of that period); and
(iii) the Total Assets on the last business day of the previous
calculation period (after deduction of any performance fee paid to
the Investment Manager in respect of that period) increased by the
total return on the Benchmark Index over the course of the
calculation period.
The Benchmark Index being the higher of:
(i) the annualised cost of the ZDP Share accrual expressed as a
percentage of Total Assets;
(ii) the Hurdle Rate on the ZDP Shares; and
(iii) 3 month sterling LIBOR calculated as at the first business
day of each calendar month.
In such circumstances, the performance fee will amount to 15% of
any such excess. The calculation of the total amount of any
performance fee will be adjusted for the repurchase or redemption
of Shares in any given accounting period and/or for the change in
any borrowings by the Company in any given accounting period.
The performance fee will be calculated by reference to the
Adjusted Total Asset Value as at the last day of the relevant
calculation period. The combined amount of any management and
performance fees payable in respect of any 12 month period will not
exceed 4.99% of the Net Asset Value of the Geared Ordinary shares
and the ZDP Shares (as at the last day of the relevant period) and,
to the extent any such fees would otherwise exceed 4.99% of such
Net Asset Value, they will be waived by the Investment Manager and
will not be carried forward.
There was no performance fee payable for the year ended 31
October 2013 (2012: GBP9,585).
The contract to provide secretarial, 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. As
at 31 October 2013 there was one such investment, East European
Food Fund representing 0.005% of total assets including cash.
(2012: one investment representing 0.004%).
4. Going Concern
The Company's business activities, capital structure and
borrowing facilities, together with the factors likely to affect
its future development, performance and position are set out in the
Manager's Review above and the Report of Directors which is
contained within the Annual Report & Accounts which will be
published shortly. In addition, Note 15 to the financial statements
includes the Company's objectives, policies and processes for
managing its capital; its financial risk management objectives;
details of its financial instruments; and its exposures to credit
risk and liquidity risk.
The Company's assets consist mainly of securities which are
readily realisable, its ongoing expenses are low relative to its
net assets and therefore the Directors consider that the Company
has appropriate financial resources to enable it to meet its
day-to-day working capital requirements.
The Directors review a rolling 12 month forecast and the
Company's list of investments at each meeting and they consider
that the Company has adequate resources to continue in operational
existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the annual
financial statements.
As described in the Chairman's statement above, the Company
reaches the end of its planned life in October 2014. However,
having consulted with the Investment Manager and also with the
Company's corporate broker, Cenkos Securities PLC, who have in turn
taken soundings from Shareholders, the Board currently expect that
the business of the Company will be continued as a going concern
beyond that date pursuant to reconstruction proposals which will be
recommended to shareholders during the course of the new financial
year. Since any proposals for the continuation or reconstruction of
the Company will necessarily require the prior approval of
Shareholders at an Extraordinary General Meeting there can be no
guarantee, at this stage, that any such proposals will be
implemented.
5. Directors' Responsibilities for the Financial Statements
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable United
Kingdom law and those International Financial Reporting Standards
('IFRS') as adopted by the European Union.
Under Company law the Directors must not approve the financial
statements unless they are satisfied that they present fairly the
financial position of the Company and the financial performance and
cash flows of the Company for that period. In preparing the
financial statements, the Directors are required to:
(a) select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
(b) present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
(c) provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance;
(d) state that the Company has complied with IFRS, subject to
any material departures disclosed and explained in the financial
statements; and
(e) make judgements and estimates that are reasonable and
prudent.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Company financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. The work carried out by the Auditor does not
include consideration of the maintenance and integrity of the
website and accordingly the Auditor accepts no responsibility for
any changes that have occurred to the financial statements when
they are presented on the website. Visitors to the website need to
be aware that legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors, who are listed on page 6 of the Annual Report
& Accounts, confirm to the best of their knowledge that:
(a) the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company; and
(b) the Manager's Review includes a fair view of the development
and performance of the business and the position of the Company
together with a description of the principal risks and
uncertainties that the Company faces.
So far as each of the Directors is aware at the time the report
is approved:
(a) there is no relevant audit information of which the
Company's auditors are not aware; and
(b) the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditors are aware of that
information.
By Order of the Board
G A Campbell
Chairman
27 February 2014
The Annual General Meeting of the Company has been convened for
Wednesday 2 April 2014 at 11.30am.
The above financial information does not constitute statutory
accounts as defined in section 434(3) of the Companies Act 2006 of
the Company. The statutory accounts for the year to 31 October 2012
have been delivered to the Registrar of Companies.
The Annual Report and Accounts are expected to be posted to all
registered shareholders shortly and copies may shortly be obtained
from the registered office of the Company at 1 Grosvenor Place,
London SW1X 7JJ or downloaded from the Company's section of Jupiter
Asset Management Limited's website (www.jupiteronline.com).
Monthly factsheets for Jupiter's investment trust clients are
available for download from www.jupiteronline.com and on request
from the Company Secretary.
Enquiries:
Richard Pavry
Jupiter Asset Management Limited, Company Secretary
020 7314 4822
27 February 2014
This information is provided by RNS
The company news service from the London Stock Exchange
END
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