EUROPEAN OPPORTUNITIES TRUST PLC 
By
Jupiter European Opportunities Trust PLC
Unaudited Results for the half year to 30 November 2009
This announcement of unaudited results for the six months to 30 November 2009
was approved by the Board of Directors on 28 January 2010.
CHAIRMAN'S STATEMENT
The recovery in equity markets, which began last March, continued throughout the
period under review. Thanks to your Company's exposure to mid-capitalisation and
smaller companies and to the positive impact of gearing, Net Asset Value ('NAV')
per share rose from 162.35p to 210.60p or by just under 30 per cent, compared
with an increase in our benchmark of just below 22 per cent. Over the twelve
months to 30 November last the NAV gain of 67 per cent. was well ahead of the
36.5 per cent. advance of the FTSE World Europe ex UK Total Return Index, our
benchmark, and the comparisons are also positive over three and five years too.
It was all very different both six and twelve months ago, when we had to declare
that we had fallen behind our benchmark, partly as a result of being geared into
a falling market. It was a torrid time for both your Board and for our
day-to-day Fund Manager, and we do not wish to go through that experience again,
and preferably not at all. To this end your manager has been working to reduce
our borrowings, such that our gearing ratio (borrowings expressed as a
percentage of gross assets) has recently dropped below 20 per cent. Back in
November 2008 it was approaching 40 per cent. You can find the details of
portfolio changes in Alex Darwall's Review below. As a result of recent
disposals the exposure to U.K. listed equities has fallen to 20 per cent, and
our borrowings are now wholly denominated in sterling, so that any future
sterling weakness should largely flow through to the benefit of our
shareholders.
The discount--the difference between the (lower) share price and the (higher)
NAV-- has remained fairly constant over the period and currently stands at
around 13 per cent. Your Board does not have a specific target for the discount
but has in the past taken the opportunity to buy shares for cancellation if the
disparity between share price and NAV appears to be unreasonably wide. No use
was made of this facility during the period under review.
Equity markets have risen 50 per cent or more from their March low points, and
of late have paused for breath. There has been much comment on how shares will
perform once the authorities have begun to cut back on the volume of
quantitative easing and other forms of monetary stimulus, and once interest
rates have begun to rise from current exceptionally low levels. Interestingly,
when rates were raised in Australia recently the market reacted positively. As
regards your Company, we believe that now is a good time to reduce both gearing
and portfolio risk and concentrate on those companies whose business models
should ensure their relative prosperity in what may turn out to be a more
challenging environment over the balance of your Company's financial year.
H.M. Priestley
Chairman
28 January 2010
MANAGER'S REVIEW
The Net Asset Value of the Company's Ordinary shares rose by 29.7 per cent.
during the six months to 30 November 2009. This compares with a 21.5 per cent.
rise, in sterling, of the Company's benchmark, the FTSE World Europe ex UK Total
Return Index.
The level of the Company's borrowings decreased to £35.0 million from £48.6
million over the period under review. Just as borrowings damaged performance in
the preceding period, in the period under review they improved returns.
Nevertheless, the board decided to use this recent strength to reduce the level
of gearing which, at the time of writing, amounts to £27 million compared to a
peak of £61.6 million in December 2008. The Company's trading subsidiary, JEOT
Securities Limited, made a positive return of £418,000.
The FTSE World (total return) index rose by 18.4 per cent. in sterling,
underperforming the European index. Emerging Markets have had a strong run, the
MSCI Latin America index returning 31.2 per cent. in Sterling terms (87.4 per
cent. year on year), as against Japan's Nikkei-225 which was only up 7.1 per
cent.. This strong performance reflects a key development - what economists
refer to as the 'decoupling' of emerging markets from the travails of the
developed markets.
After the extraordinary turbulence of our previous financial year, a return to
more 'normal' trading conditions was welcome. A number of interrelated factors
explain the significant rally in equity markets. Vital was the greater
confidence in the banking system - it did not implode as some commentators
feared. Allied to that was the effect of 'quantitative easing' ('QE'). This is a
modern term for an old concept: printing money. Its aim, inter alia, was to
boost asset prices. Indeed this is what it did: equity values rose. The other
great fear of commentators at the nadir of the banking crisis was protectionism.
This threat did not materialise. Moreover, it became evident that some of the
key emerging economies (notably China and Brazil) could grow strongly despite
the weakness in developed economies - decoupling.
Your Company's relatively good performance was due to a combination of stock
picking and gearing. Financial stocks (where the portfolio has always had a
below market average weighting) were the biggest positive contributors, most
notably Euler Hermes, the French credit insurance company and DnB NOR, the
Norwegian bank. Other significant positive contributors to performance included
Halfords, the UK retailer, and Vopak, the international oil and chemicals
storage business. The former surprised positively displaying counter-cyclical
characteristics. The latter also delivered good earnings surprises despite the
lower oil price. Demand for their storage services was strong even though oil
demand worldwide weakened. With the decision to reduce the Company's borrowings
inevitably sales outweighed purchases. Outright sales included two UK based
retailers: Halfords and Carphone Warehouse. Management teams in both cases are
superb. But valuation considerations and the UK-centric focus of their
businesses caused us to sell. Other important sales included Saft which we sold
on valuation grounds and Euler Hermes, where we believe business developments
are unlikely to live up to market expectations. We also reduced our exposure to
some of the bigger positions: CGG Veritas, Ingenico, ITS and DnB NOR. In all
cases the decision to reduce the Company's borrowings was a factor in lightening
positions.
Investment Outlook
Some of the threats and opportunities are easily identified: growth, the impact
of withdrawing stimulus packages, further banking emergencies and the political
response, sovereign debt crises, the threat of protectionism and the Green
movement. Economic growth is a major imponderable. The IMF forecasts global
economic growth of 3.1 per cent. in 2010 after a contraction of 1.1 per cent. in
2009. A key aspect is whether emerging economies continue to expand rapidly. The
IMF estimates that emerging and developing economies will grow 5.1 per cent. in
2010. The same forecaster expects 0.3 per cent. growth in the Euro economies in
2010, though this plays a limited part in our investment process. But there are
many other macro factors. Our focus, however, is not on macro forecasting.
Rather it is on picking companies that are well placed to weather these macro
vicissitudes. Thus we remain committed to companies that, typically, have strong
balance sheets, a global spread of businesses, flexible cost structures and
'special' products. We continue to believe that such an approach justifies a
reasonable degree of confidence.
Alex Darwall
Jupiter Asset Management Limited
28 January 2010
INTERIM MANAGEMENT REPORT
Related Party Transactions
Mr. Darwall is a director of Jupiter Asset Management Limited and Jupiter
Investment Management Group Limited whose subsidiaries, Jupiter Asset Management
Limited and Jupiter Administration Services Limited, receive investment
management and administration fees as set out below.
Jupiter Asset Management Limited is contracted to provide investment management
services to the Company (subject to termination by not less than 1 years' notice
by either party) for a quarterly fee of 0.1875 per cent. of the net assets of
the Group excluding the value of any Jupiter managed investments payable in
arrears on 31 May, 31 August, 30 November and the last calendar day of February.
The total fees payable under this agreement are shown in the Consolidated
Statement of Comprehensive Income.
Jupiter Asset Management Limited is also entitled to a performance fee which is
based on the out-performance of the lower of the price of an Ordinary share or
the Net Asset Value per Ordinary share over the total return on the Benchmark
Index, the FTSE World Europe ex UK Total Return Index in an accounting period.
Any performance fee payable will equal 15 per cent. of the amount by which the
increase in the lower of the price of an Ordinary share (plus any dividends per
Ordinary share paid during the period) or the Net Asset Value per Ordinary share
(plus any dividends per Ordinary share paid or payable and any accrual for
unpaid performance fees for the period) exceeds the higher of (a) the closing
price of an Ordinary share or the Net Asset Value per Ordinary share on the last
business day of the previous accounting period (whichever is the lower); (b) the
lower of the price of an Ordinary share or the Net Asset Value per Ordinary
share (as the case may be) on the last day of a period in respect of which a
performance fee was last paid: and (c) 100p. In each case the values of (a), (b)
and (c) are increased by the percentage by which the total return of the
Benchmark Index increases or decreases during the calculation period. The total
amount of any performance fee payable in respect of one accounting period is
limited to 7.5 per cent. of the Total Assets of the Company. The total fees
payable under this agreement are shown in the Consolidated Statement of
Comprehensive Income.
Jupiter Administration Services Limited is contracted to provide secretarial,
accounting and administrative services to the Company for an annual fee of
£62,977 adjusted each year in line with the Retail Price Index payable quarterly
(2008: £60,381).
The Company has invested from time to time in funds managed by Jupiter
Investment Management Group Limited or its subsidiaries. The only such holding
as at 30 November 2009 was East European Food Fund representing 0.2 per cent. of
total investments.
Risks and Uncertainties
The risks to the Company are foreign currency movements, market price movements,
interest rates, use of derivatives, liquidity risk, credit risk, the discount to
Net Asset Value and loss of investment trust status. A detailed explanation of
the Risks and Uncertainties facing the Company can be found in Note 14 on pages
37 to 41 of the Company's published report and accounts for the year to 31 May
2009.
Directors' Responsibility Statement
We the directors of Jupiter European Opportunities Trust PLC confirm to the best
of our knowledge:
(a)The condensed set of financial statements contained within the half-yearly
financial report has been prepared in accordance with the Accounting Standards
Board's statement 'Half-Yearly Financial Reports'; and
(b)The Chairman's Statement, Manager's Review and the Half Year Management
Report include a fair review of the information required by the Disclosure and
Transparency Rules 4.2.7R and 4.2.8R.
By Order of the Board
H.M. Priestley
Chairman
28 January 2010
Consolidated Statement of Comprehensive Income
for the six months to 30 November 2009 (unaudited)
30 November 2009 30 November 2008
Revenue Capital Revenue Capital
Return Return Total Return Return Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains / (losses) on
investments at fair
value through profit or - 39,584 39,584 - (81,866) (81,866)
loss (Note 2)
Foreign exchange losses on - (869) (869) - (2,579) (2,579)
loans
Other exchange gain / - 310 310 - (692) (692)
(loss)
Investment income 2,237 - 2,237 2,563 - 2,563
Dealing losses of - - - (952) - (952)
subsidiary
Foreign exchange gain by 7 - 7 3 - 3
subsidiary
Total income 2,244 39,025 41,269 1,614 (85,137) (83,523)
Investment management fee (758) - (758) (722) - (722)
Investment management fee
VAT
- - - 837 - 837
recovery
Performance fee VAT - - - - 280 280
recovery
Other expenses (189) - (189) (166) - (166)
Total expenses (947) - (947) (51) 280 229
Return before finance costs 1,297 39,025 40,322 1,563 (84,857) (83,294)
and tax
Finance costs (350) - (350) (1,564) - (1,564)
Return before taxation 947 39,025 39,972 (1) (84,857) (84,858)
Taxation (219) - (219) (190) - (190)
Return after taxation 728 39,025 39,753 (191) (84,857) (85,048)
Return per Ordinary share 0.90p 48.20p 49.10p (0.23)p (103.93)p (104.16)p
(Note 3)
The total column of this statement is the income statement of the Group prepared
in accordance with IFRS. The supplementary revenue return and capital return
columns are both prepared under guidance published by the Association of
Investment Companies ('AIC'). All items in the above statement derive from
continuing operations.
No operations were discontinued or acquired in the period.
The financial information does not constitute 'accounts' as defined in section
434 of the Companies Act 2006.
Consolidated Statement of Financial Position
30 November 2009 31 May 2009
(unaudited) (audited)
£'000 £'000
Non current assets
Investments held at fair value through profit
203,310 174,492
or loss
Current assets
Receivables 986 1,107
Cash at bank 1,733 6,280
2,719 7,387
Total assets 206,029 181,879
Current liabilities (35,507) (50,422)
Total assets less current liabilities 170,522 131,457
Capital and reserves
Called up share capital 810 810
Share premium 41,286 41,286
Special reserve 36,676 37,597
Capital redemption reserve 30 30
Retained earnings (Note 6) 91,720 51,734
Total equity 170,522 131,457
Net Asset Value per Ordinary share (Note 7) 210.60p 162.35p
Consolidated Statement of Changes in Equity
Capital
Share Share Special Redemption Retained
For the six months to 30 Capital Premium Reserve Reserve Earnings Total
November 2009
£'000 £'000 £'000 £'000 £'000 £'000
31 May 2009 810 41,286 36,676 30 52,655 131,457
Net profit for the period - - - - 39,753 39,753
2009 Special interim - - - - (688) (688)
dividend
Balance at 30 November 810 41,286 36,676 30 91,720 170,522
2009
Capital
Share Share Special Redemption Retained
For the six months to 30 Capital Premium Reserve Reserve Earnings Total
November 2008
£'000 £'000 £'000 £'000 £'000 £'000
31 May 2008 818 41,286 37,597 22 108,796 188,519
Ordinary share (7) - (816) 7 - (816)
cancellation
Net loss for the period - - - - (85,048) (85,048)
Balance at 30 November 811 41,286 36,781 29 23,748 102,655
2008
Consolidated Cash Flow Statement for the six months to 30 November 2009
(unaudited)
2009 2008
£'000 £'000
Cash flows from operating activities
Purchases of investments (31,007) (48,182)
Sales of investments 40,146 46,739
Realised gains/ (losses) on foreign currency 317 (689)
Investment income received 2,075 2,076
Interest received 14 121
Other cash receipts 111 -
Investment management fee paid (709) (890)
VAT recovery on investment management fee - 837
VAT recovery on investment performance fee - 280
Sales less purchases of dealing subsidiary - 10,747
Other cash expenses (206) (182)
Dividend paid (688) -
Cash inflow from operating activities before finance 10,053 10,857
costs and taxation
Finance costs (448) (1,577)
Taxation 405 (132)
Net cash inflow from operating activities 10,010 9,148
Financing activities
Ordinary shares cancelled - (816)
Short term loans received 88,197 107,932
Short term loans repaid (102,754) (114,998)
(Decrease) / increase in cash (4,547) 1,266
(Decrease) / increase in cash and cash equivalents
(4,547) 1,266
Cash and cash equivalents at start of period 6,280 2,149
Cash and cash equivalents at end of period 1,733 3,415
Notes to the Financial Statements
1.Accounting policies
The consolidated accounts comprise the unaudited financial results of the
Company and its subsidiary JEOT Securities Limited for the six months to 30
November 2009. The accounts are presented in pounds sterling, as this is the
functional currency of the Group.
The consolidated accounts have been prepared in accordance with International
Financial Reporting Standards (IFRS), which comprise standards and
interpretations approved by the International Accounting Standards Board (IASB)
and International Accounting Standards Committee (IASC), as adopted by the
European Union.
A summary of the principal accounting policies, all of which have been applied
consistently throughout the period, is set out below:
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business.
Revenue includes dividends from investments quoted ex-dividend on or before the
balance sheet date.
Deposit and other interest receivable is accounted for on an accruals basis.
Presentation of Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Statement of Comprehensive
Income. In accordance with the Company's status as a UK investment company under
section 833 of the Companies Act 2006, net capital returns may not be
distributed by way of dividend.
An analysis of retained earnings broken down into revenue items, which may be
distributed as dividends and capital items is given in note 6. The Company's
Articles prevent the distribution of capital profits. In arriving at this
breakdown, expenses have been presented as revenue items except for that part of
any Investment performance fee which is deemed by the Directors to relate to the
capital outperformance of the Company's investments. Any such amount is charged
to capital.
Investments
All investments are classified as held at fair value through profit or loss.
Changes in the fair value of investments held at fair value through profit or
loss and gains and losses on disposal are recognised in the statement of
comprehensive income as 'Gains on investments at fair value through profit or
loss'. The fair value of listed investments is based on their quoted bid market
price at the balance sheet date without any deduction for estimated future
selling costs. All purchases and sales are accounted for on a trade date basis.
2. Gains / (losses) on investments
Six months to Six months to
30 November 2009 30 November 2008
£'000 £'000
Net gains realised on sale of investments 7,866 1,462
Movement in investment holding gains 31,718 (83,328)
Gains / (losses) on investments 39,584 (81,866)
3. Return per Ordinary share
The return per Ordinary share figure is based on the net gain for the six months
of £39,753,000 (six months to 30 November 2008: Loss £85,048,000) and on
80,969,523 (six months to 30 November 2008: 81,644,504) Ordinary shares, being
the weighted average number of Ordinary shares in issue during the period.
The return per Ordinary share figure detailed above can be further analysed
between revenue and capital, as below.
Six months to Six months to
30 November 2009 30 November 2008
£'000 £'000
Net revenue profit 728 (191)
Net capital profit 39,025 (84,857)
Net total profit 39,753 (85,048)
Weighted average number of Ordinary shares 80,969,523 81,644,504
in issue during the period
Revenue return per Ordinary share 0.90p (0.23)p
Capital return per Ordinary share 48.20p (103.93)p
Total return per Ordinary share 49.10p (104.16)p
4. Transaction costs
During the period expenses were incurred in acquiring or disposing of
investments classified as fair value through profit or loss. These have been
expensed through capital and are included within gains / (losses) on investments
in the Statement of Comprehensive Income. The total costs were as follows:
Six months to Six months to
30 November 2009 30 November 2008
£'000 £,000
Purchases 74 141
Sales 55 83
129 224
5.Comparative information
The financial information contained in this interim report does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. The
financial information for the six months to 30 November 2009 and 30 November
2008 has not been audited.
The information for the year ended 31 May 2009 has been extracted from the
latest published audited financial statements. The audited financial statements
for the year ended 31 May 2009 have been filed with the Register of Companies.
The report of the auditors on those accounts contained no qualification or
statement under section 498(2) or (3) of the Companies Act 2006.
6. Retained earnings
The table below shows the movement in the retained earnings analysed between
revenue and capital items.
Revenue Capital Total
£'000 £'000 £,000
At 31 May 2009 3,839 48,816 52,655
Net return for the period 728 39,025 39,753
Dividend paid (688) - (688)
At 30 November 2009 3,879 87,841 91,720
7. 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 £170,522,000 (31 May 2009: £131,457,000) and on
80,969,523 (31 May 2009: 80,969,523) Ordinary shares, being the number of
Ordinary shares in issue at the period end.
The interim report will be sent to all shareholders and copies may be obtained
from the registered office of the Company at 1 Grosvenor Place, London SW1X 7JJ
BY ORDER OF THE BOARD
JUPITER ASSET
[HUG#1378394]
JUPITER EUROPEAN OPPORTUN TR : Half-yearly report
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