JEO.L Regulatory News (JEO)

Jupiter European Opportunities Trust PLC

Half Yearly Financial Report for the six months to 30 November 2017 (unaudited)

Financial Highlights

Capital Performance

Ordinary Share Performance

1 This document contains information based on the FTSE World Europe ex UK Total Return Index. 'FTSE®' is a trade mark owned by the

London Stock Exchange Plc and is used by FTSE International Limited ('FTSE') under licence. The FTSE World Europe ex UK Total Return Index is calculated by FTSE. FTSE does not sponsor, endorse or promote the product referred to in this document and is not in any way connected to it and does not accept any liability in relation to its issue, operation and trading. All copyright and database rights in the index values and constituent list vest in FTSE. 

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

Performance since launch

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

Chairman's Statement

It is with pleasure that I present my first Interim Report, for the six months to 30 November 2017, having taken over as Chairman of your Company following the retirement of Hugh Priestley at the Company's 2017 Annual General Meeting. During this period the Company was admitted to the FTSE 250 Index, a capitalisation-weighted index consisting of the 101st to the 350th largest companies listed on the London Stock Exchange. We have also welcomed Virginia Holmes as a new director on our board.

Investment Performance

Over the six months to 30 November 2017 the total return on the Net Asset Value per share of your Company was 2.7 per cent. This performance was ahead of the return on the Company's benchmark, the FTSE World Europe ex-UK Total Return Index, which increased by 2.1 per cent. over the same period. As at 31 January 2018 the Net Asset Value per share was 749.82p, a 3.4 per cent increase since the end of November 2017, and the middle market price per share on the London Stock Exchange was 755.00p, representing a modest premium to its net asset value.

The background to your Company's recent outperformance is considered in depth by our portfolio manager, Alexander Darwall, in his Investment Adviser's report overleaf and I will not seek to cover the same ground here other than to mention that this performance builds on the significant outperformance which the Company has enjoyed over the longer term. Since the Company's launch in November 2000 to 31 January 2018 the total return on the net asset value per share, with dividends added back, has been 726.9 per cent., which compares with a total return of 179.9 per cent. by the Company's benchmark over the same period.

Gearing

At the end of the period under review the gearing level on the Company's investment portfolio had reduced to 6.4 per cent., a lower level than has been the case at certain times and partly facilitated by using the proceeds of sale of the Company's significant holding in Syngenta, which was sold in a takeover of that company in May 2017, to reduce the Company's debt.

Our portfolio manager tends to increase gearing at times of perceived low valuations, while reducing it as markets recover. This approach has added sustained value over the course of your Company's history and we continue to encourage the portfolio manager to consider the use of gearing as a tactical tool to improve returns. The Company retains its loan facility which is drawable to a maximum amount of £135 million.

Outlook

While your investment adviser concentrates on identifying strong companies, with good management and market-leading advantages, rather than investing on the basis of macro-economic considerations, we cannot be immune from wider economic and market developments.

2017 saw a revival of European economic growth, albeit at a level below many other regions of the world, and a continued recovery in 2018 should be positive for European companies. There will continue to be uncertainties and challenges but your investment adviser has shown over time that the companies in which it invests produce long-term outperformance for your Company.

Andrew Sutch

Chairman

26 February 2018

Investment Adviser's Review

Performance in the period under review was broadly in line with the FTSE World Europe ex-UK Total Return Index, your Company's benchmark. The Net Asset Value of the Company's Ordinary shares returned 2.7 per cent. in sterling terms, while the benchmark rose by 2.1 per cent., during the six months to 30 November 2017. The Company's total borrowings were lower than at the start of the reporting period. At 30 November 2017 they were £60 million, representing gearing of 6.4 per cent.

The FTSE World Index was up by 4.8 per cent., sterling adjusted. The backdrop for equities has been good. Interest rates remain at extraordinarily low levels - the European Central Bank's (ECB) main refinancing rate has stayed at 0 per cent. - even though the authorities have signalled that they will rise. Indeed, the US Effective Federal Funds Rate rose to 1.3 per cent. by the end of 2017. Growth rates across many regions have improved. The US is clearly in a strong growth phase. US ports' activity in 2017 has increased at mid to high single digit rates, witness to the health of world trade. In Europe earnings growth is good. UBS, the investment bank, estimates that profits increased by 12.5 per cent. in 2017 and forecast a further 9-10 per cent. improvement in 2018. Low interest rates, excess capacity, strong cash generation and significant available funds in private equity explain the fertile environment for mergers and acquisitions. This in turn helped drive equity markets.

Most of the world markets - including America's S&P 500 Index, the MSCI Latin America Index, the MSCI AC Asia ex-Japan Index and the Japanese Nikkei-225 - performed better than Europe. Whilst Europe's growth rate and prospects have improved they remain mildly inferior to other regions of the world. The International Monetary Fund's latest forecasts (October 2017) are for 2.3 per cent. growth in the EU in 2017 and 2.1 per cent. in 2018; they forecast 3.6 per cent. and 3.7 per cent. world growth in 2017 and 2018 respectively. The US economy is likely to have grown at around 4 per cent. in 2017. There are three main reasons behind the divergence in outlook between Europe and the rest of the world. The first is tax. US tax policy is helping to boost the American economy; in Europe the trend to lower corporate taxes has stalled. Indeed there is a sense that this trend has reversed with the concomitant effect of depressing growth. The second is energy costs. Rising oil prices coupled with Europe's high-cost energy policies have accentuated the cost disadvantage for some companies of operating in Europe. Finally, Europe's political troubles continue. Indeed, these are likely to intensify before they abate. 'Brexit' poses questions for the European Union. Greater protectionism and an increasing role for the public sector are two likely responses. Both would have negative consequences for growth prospects.

It is satisfying that two of the biggest positive contributors to performance were companies whose share prices had fallen sharply in 2016. For Wirecard and NovoNordisk our decision to retain and increase these holdings after underperformance in 2016 was vindicated. Other significant contributors to outperformance included Grenke and Amadeus. The former, a German based leasing company, continues to flourish as the mainstream banks retreat from what they regard as non-core activities. Amadeus is the world's leading Global Distribution System, the business of processing bookings for the travel - mainly aviation - industry. Increasing complexity together with opportunities in new segments such as hotel bookings, have helped drive profitability. BioMerieux was another good performer. This French company is a leader in parts of the in vitro diagnostics industry. In particular it leads in the field of syndromic testing. For certain tests the syndromic method has advantages, chiefly much quicker diagnosis. Profits growth remains robust. Another significant positive contributor to performance was Umicore. The business, which is one of three global players in autocatalysis, has a leading position in some materials needed for batteries for electric vehicles. Its prospects depend on them retaining this leadership position and on their particular battery technologies prevailing. The positive contribution of Deutsche Boerse is remarkable. Despite the failed attempt to merge with the London Stock Exchange and the resignation of its CEO, the share price performed well. This is testament to the resilience of this leading exchange and the supportive regulatory trends that are likely to enhance their prospects. Whilst the list of 'winners' is diverse there is a common factor to all these companies. All have strong, differentiated products or services and all have profitability which reflects their ability to monetise successfully their strong, unique positions.

The portfolio suffered from the sharp fall in the shares prices of two stocks, Inmarsat and Provident Financial. Our decision to retain and increase the holding in Inmarsat has proved to be a poor one. However, we believe that the company's satellite offering is sufficiently differentiated and that in due course this will be reflected in an improved performance. Provident Financial announced a number of severe profits warnings in 2017. We were surprised by the significant challenges revealed by these announcements. Shares in Carnival, the world's largest cruise operator, performed poorly. However, we believe that concerns about the impact of hurricanes in the short term and overcapacity emerging in the longer term are misplaced. We believe that the business is well placed to benefit from increasing demand in many countries, not least China.

Of the outright sales, the most significant was that of Ingenico. It represented 2.3 per cent. of the portfolio at the start of the period under review. It was sold because we believe that other electronic payments companies have better growth prospects. Novozymes was sold on valuation grounds. Its prospects are improved by higher energy prices but chiefly it depends on its own innovation and effective management. The recent management record is slightly disappointing.

The position in Syngenta, the largest in the portfolio, was sold in the takeover of the company by ChemChina in May 2017. The substantial proceeds received were used in two ways. One was to reduce your Company's debt; and the other was investing in a number of new, small positions. The largest new investment was that of Intermediate Capital Group, constituting barely 1 per cent. of the portfolio at the period end. The company's principal business is providing private finance to small and medium sized companies. The scope of its addressable markets has expanded as the banks have retreated from certain segments. The fund raising success of the private equity funds bodes well for ICG's future. DoBank, Italy's largest independent servicer of non-performing loans (NPLs), is another company that we describe as an 'alternative financial'. The Italian banks are under pressure to address their non-performing debts and DoBank is well placed to benefit from this eventuality. Another new investment was Wartsila, the Finnish manufacturer of engines for power plants and ships. We believe that two developments will help drive their business in the longer term. One is the effect of increasing renewable power generation, resulting in a need for distributed, base load power generation. In the maritime business, Wartsila has good assets with which to pursue opportunities in ship automation.

Outlook

After a strong period for markets it is right to caution about prospects. The benign investment conditions can reverse suddenly. The ECB has indicated that it will reduce its 'quantitative easing' to more normal levels. This is likely to have an adverse effect on equity markets and expose European banks' debt problem. In addition anti-business sentiment could lead to damaging measures. The European Commission, for example, is toughening its antitrust conditions in a way that is likely to restrict corporate activity. Our portfolio is positioned to side step, as far as possible, these problems. Typically 'our' companies are capital light, operate globally, below the radar of politicians and have low levels of debt. We look for companies with sustainable advantages where the industry structure is favourable. The best situations are where changing consumer or customer demand goes hand in hand with regulatory or technological developments. Such great investment opportunities exist. We hope to find them in many different places: alternative financials (including digital payments, exchanges, debt collection, credit services); healthcare companies with compelling pharmacoeconomic offers; technology companies; and consumer businesses with supportive industry structures. There is no doubt that great change will present both challenges and opportunities. We remain confident that our investment process is appropriate for this period of great change and for this reason there is a degree of confidence in our outlook.

Alexander Darwall

Fund Manager

Jupiter Asset Management Limited

26 February 2018

Investment Portfolio as at 30 November 2017

Cross Holdings in other Investment Companies

As at 30 November 2017 and 31 May 2017, 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 listed closed-ended investment companies.

Interim Management Report

Related Party Transactions

During the first six months of the current financial year no transactions with related parties have taken place which have materially affected the financial position or performance of the Company. Details of related party transactions are contained in the Annual Report and Accounts of the Company for the year ended 31 May 2017.

Principal Risks and Uncertainties

The Company is exposed to the effect of variations in the price of its investments. A fall in the value of its portfolio will have an adverse effect on Shareholders' funds. It is not the aim of the Board to eliminate entirely the risk of capital loss, rather it is its aim to seek capital growth. Other key risks faced by the Company relate to foreign currency movements, interest rates, liquidity risk, gearing risk, the discount to Net Asset Value, regulatory risk, loss of key personnel, operational and financial risks. A detailed explanation of the Risks and Uncertainties facing the Company can be found in the Annual Report and Accounts for the year ended 31 May 2017.

Going Concern

The Half Yearly Financial Report has been prepared on a going concern basis. The Directors consider that this is the appropriate basis as they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In considering this, the Directors took into account the Company's investment objective, risk management policies and capital management policies, the diversified portfolio of readily realisable securities which can be used to meet short-term funding commitments and the ability of the Company to meet all of its liabilities and ongoing expenses. Thus the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Directors' Responsibility Statement

We, the Directors of Jupiter European Opportunities Trust PLC, confirm to the best of our knowledge that:

a) The condensed set of financial statements have been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports' and give a true and fair view of the assets, liabilities, financial position and profit of the Company for the period ended 30 November 2017;

b) The Chairman's Statement, the Investment Adviser's Review and the Interim Management Report include a fair review of the information required by Disclosure and Transparency Rule 4.2.7R; and

c) The Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R on related party transactions.

The Half Yearly Financial Report has not been audited or reviewed by the Company's auditors.

By Order of the Board

Andrew Sutch

Chairman

26 February 2018

Statement of Comprehensive Income

For the six months to 30 November 2017 (unaudited)

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.

The return after taxation is also the total comprehensive profit for the year.

All income is attributable to the equity holders of Jupiter European Opportunities 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 November 2017

Statement of Changes in Equity

For the six months to 30 November 2017

Cash Flow Statement

For the six months to 30 November 2017 (unaudited)

Notes to the Financial Statements

1. Accounting Policies

The Accounts comprise the unaudited financial results of the Company for the period to 30 November 2017. The functional and reporting currency of the Company is pound sterling because that is the currency of the prime economic environment in which the Company operates.

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

2. Gains on investments

3. Return per Ordinary share

4. Net Asset Value per Ordinary share

The Net Asset Value per Ordinary share is based on the net assets attributable to the Ordinary shareholders of £809,271,000 (31 May 2017: £795,012,000) and on 111,575,331 (31 May 2017: 111,575,331) Ordinary shares, being the number of Ordinary shares in issue at the period 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 receives investment management fees as set out below.

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 an annual fee of 0.75 per cent. of the total assets of the Company after deduction of the value of any Jupiter managed investments, payable quarterly in arrears.

The Management fee payable to JUTM for the period 1 June 2017 to 30 November 2017 was £3,281,000 (31 May 2017: £6,020,000) with £1,632,000 (31 May 2017: £1,712,000) outstanding at period end.

JUTM is also entitled to an investment performance fee which is based on the out-performance of the Net Asset Value per Ordinary share over the total return on the Benchmark Index, the FTSE World Europe ex UK Total Return Index in an accounting period. Any performance fee payable will equal 15 per cent of the amount by which the increase in the Net Asset Value per Ordinary share (plus any dividends per Ordinary share paid or payable and any accrual for unpaid performance fees for the period) exceeds the higher of (a) the Net Asset Value per Ordinary share on the last business day of the previous accounting period; (b) the Net Asset Value per Ordinary share on the last day of a period in respect of which a performance fee was last paid: and (c) 100p. In each case the values of (a), (b) and (c) are increased by the percentage by which the total return of the Benchmark Index increases or decreases during the calculation period. The total amount of any performance fee payable in respect of one accounting period is limited to 4.99 per cent of the Total Assets of the Company.

The Company has invested from time to time in funds managed by Jupiter Fund Management PLC or its subsidiaries. There was no such holding as at 30 November 2017 (31 May 2017: Nil). No investment management fee is payable by the Company to Jupiter Asset Management Limited in respect of the Company's holdings in investment trusts, open-ended funds and investment companies in respect of which Jupiter Fund Management PLC, or any subsidiary undertaking of Jupiter Fund Management PLC, receives fees as investment manager or investment adviser.

For further information, please contact:

Richard Pavry

Head of Investment Trusts

Jupiter Asset Management Limited, Company Secretary

investmentcompanies@jupiteram.com

020 3817 1000

26 February 2018