TIDMJSS
RNS Number : 7842Q
Jupiter Second Split Trust PLC
03 September 2014
Jupiter Second Split Trust PLC
Interim Management Statement for the three months ended 31 July
2014
The Board of Jupiter Second Split Trust PLC (the "Company")
announce its Interim Management Statement for the quarter ended 31
July 2014.
The following report relates to the performance of the Company's
investment portfolio in the three months leading up to 31 July
2014.
Investment Manager's Report for the Quarter Ended 31 July
2014
For the period from 1 May to 31 July 2014, the Company's Total
Assets have returned 1.0 per cent compared to a return of 0.1 per
cent from the Company's benchmark, 3 month sterling LIBOR.
Market review
In May, a drop in bond yield volatility alongside a relative
lack of supply contributed to yield compression in US Treasuries
while expectations of action by the European Central Bank (ECB)
also helped to push Eurozone peripheral bonds lower. European
shares rose to six-year highs following the Bank President's pledge
to ease monetary policy.
In June, central bank activity dominated the headlines. The ECB
announced a cut in benchmark interest rates to 0.15%, a negative
deposit rate and the provision of further liquidity to banks in a
bid to get credit flowing in the economy and combat low inflation.
It also began preparations for future purchases in the asset backed
security market to enhance the transmission mechanism for monetary
policy. Mario Draghi told reporters: "Are we finished? The answer
is no." Sovereign bond yields across the eurozone fell to record
lows. In contrast, speculation about when interest rates might rise
in the UK pushed sterling higher while dovish rhetoric from the
Federal Reserve underpinned gains in US and emerging market
equities and Japan's stock market continued to recover from its
falls earlier in the year.
In July, fears over Portugal's Banco Espírito Santo sparked a
sell-off in European credit markets after its Tier 1 capital ratio
fell below the regulatory minimum of 7% to 5%. The event seemed to
be an isolated case. The decision to bail-in subordinated debt
holders but not senior debt holders appeared to be somewhat
arbitrary. Western equities markets were weaker too, as investors
finally became a little more wary that counter sanctions from
Russia might affect growth prospects at the margin.
Portfolio review
Returns over the period under review came from a diverse range
of positions. Equities made a positive contribution, not only from
our Japanese holdings but also in China where we opened some new
positions in June. Our bond holdings including convertibles also
made useful contributed to returns. In July, our long
S&P500/short Russell 2000 position was a notable contributor as
investors used comments made by Janet Yellen as an excuse to take
profits from some markedly overvalued areas of the US market such
as biotech and social media.
In currencies, it is our view that sterling peaked in July
having been relatively strong for much of the year. Our largest
currency position is a short position in the South African rand
where the economy is caught between persistent inflation pressures
and weak growth exacerbated by labour unrest. In July, we initiated
a short position in the euro as we believe that repatriation flows
back into the banking system have peaked while yields are
insufficient to attract international investors given the
alternatives. Furthermore, the central bank may be inclined to
favour a weaker currency given the current economic weakness and
low inflation in the Eurozone.
Outlook
In our view the US economy is in good shape, especially when
compared with other regions but, as a consequence, the Fed appears
on track to begin tightening monetary policy. This might come at a
time when over half of US junk bonds are covenant-lite and yields
on those bonds are below 6% compared to above 23% at the end of
2008. Although default rates are low at present, corporate
behaviour has become less friendly to debt holders.
Our concern around the massive monetary interventions since the
2008 crisis, and the consequent compression of bond yields and the
distortion of risk pricing mechanisms, has caused us to maintain a
low risk profile for the Company since the manipulation of
government bond yields by central banks has, we think, given
certain markets a false sense of security. In our view, a period of
heightened volatility may be necessary to shake complacency and
re-price risk to a point where there is a larger margin of safety
in core financial assets, thus providing us an opportunity to
increase portfolio exposures.
Miles Geldard
Fund Manager, Jupiter Asset Management Limited
3 September 2014
Total Assets as at 31 July 2014: GBP234,704,795 (Capital
Only)
Shares in Issue on 31 July 2014:
432,723,586 Zero Dividend Preference shares
216,361,793 Geared Ordinary shares
Net Asset Value (p) Market Price (p) Premium/ (Discount)
------------------------------------------- -------------------- ----------------- --------------------
Geared Ordinary excluding income/expenses 28.83 26.25 (9)
------------------------------------------- -------------------- ----------------- --------------------
Geared Growth including income/expenses 30.25
------------------------------------------- -------------------- ----------------- --------------------
Packaged Units excluding income/expenses 108.48 105.25 (3)
------------------------------------------- -------------------- ----------------- --------------------
Packaged Units including income/expenses 109.90
------------------------------------------- -------------------- ----------------- --------------------
Zero Dividend Preference shares 39.82 39.88 -
------------------------------------------- -------------------- ----------------- --------------------
Underlying Currencies as a Percentage of Gross Currency
Exposure*
UK Sterling (base currency) 94%
----------------------------- -----
US Dollar 11%
----------------------------- -----
Euro (3)%
----------------------------- -----
Other (2)%
----------------------------- -----
100%
----------------------------- -----
*The fund is sterling based. This table aggregates physical and
synthetic exposures in the portfolio.
Country Allocation as a Percentage of Total Assets*
Long Short Long Short
---------------- ------ ------ --------- ---------
Bonds Bonds Equities Equities
---------------- ------ ------ --------- ---------
United Kingdom 27% 4% 1% 0%
---------------- ------ ------ --------- ---------
United States 2% 0% 1% 0%
---------------- ------ ------ --------- ---------
Australia 4% 0% 0% 0%
---------------- ------ ------ --------- ---------
Denmark 2% 0% 0% 0%
---------------- ------ ------ --------- ---------
Belgium 1% 0% 0% 0%
---------------- ------ ------ --------- ---------
Canada 0% 0% 1% 0%
---------------- ------ ------ --------- ---------
Brazil 3% 0% 0% 0%
---------------- ------ ------ --------- ---------
France 5% 4% 0% 0%
---------------- ------ ------ --------- ---------
Germany 2% 0% 0% 0%
---------------- ------ ------ --------- ---------
Netherlands 6% 0% 0% 0%
---------------- ------ ------ --------- ---------
Norway 2% 0% 0% 0%
---------------- ------ ------ --------- ---------
Switzerland 3% 0% 0% 0%
---------------- ------ ------ --------- ---------
Japan 0% 0% 3% 0%
---------------- ------ ------ --------- ---------
Supranational 2% 0% 0% 0%
---------------- ------ ------ --------- ---------
Others 5% 0% 1% 0%
---------------- ------ ------ --------- ---------
Total 64% 8% 7% 0%
---------------- ------ ------ --------- ---------
Top Ten Long Positions as a Percentage of Total Assets*
Company Country of Listing % of Total Assets
---------------------------------------------- -------------------- ------------------
Barclays Bank 14% Var Sub Perp United Kingdom 2.3
---------------------------------------------- -------------------- ------------------
Australia ( Commonwealth of )5.5% 21/12/2019 Australia 2.1
---------------------------------------------- -------------------- ------------------
European Investment Bank FRN 17/02/2020 United Kingdom 2.0
---------------------------------------------- -------------------- ------------------
ING Bank 3.875% 23/12/2016 Netherlands 2.0
---------------------------------------------- -------------------- ------------------
Stagecoach Group 5.75% 16/12/2016 United Kingdom 2.0
---------------------------------------------- -------------------- ------------------
London Stock Exchange Var 7/07/2016 United Kingdom 2.0
---------------------------------------------- -------------------- ------------------
National Australia Bank FRN 12/11/2016 Australia 2.0
---------------------------------------------- -------------------- ------------------
British Telecom 8.5% 7/12/2016 United Kingdom 1.9
---------------------------------------------- -------------------- ------------------
Royal Bank of Scotland Var 22/09/2021 United Kingdom 1.9
---------------------------------------------- -------------------- ------------------
AA Bond MTN 3.781% United Kingdom 1.9
---------------------------------------------- -------------------- ------------------
20.1
------------------------------------------------------------------- ------------------
*Some of this exposure is through derivatives. Exposure to other
UK listed investment companies is nil.
Comparative Performance to 31 July 2014
One Three One Last Since
----------------------------------------------------- ------ ------ ------- -------------- ---------------
Month Month Year Annual Report Reconstruction
(3 Nov 2009)
----------------------------------------------------- ------ ------ ------- -------------- ---------------
% % % % %
----------------------------------------------------- ------ ------ ------- -------------- ---------------
Total Assets* 0.6 1.0 0.8 0.9 10.2
----------------------------------------------------- ------ ------ ------- -------------- ---------------
Benchmark** 0.0 0.1 0.5 0.4 3.4
----------------------------------------------------- ------ ------ ------- -------------- ---------------
Geared Growth Share NAV 0.8 (1.0) (12.8) (9.3) (27.9)
----------------------------------------------------- ------ ------ ------- -------------- ---------------
Geared Growth Share NAV with dividends added back 0.8 (1.0) (10.4) (9.3) (17.7)
----------------------------------------------------- ------ ------ ------- -------------- ---------------
Geared Growth Share Price 8.0 1.4 (6.1) (15.0) (32.5)
----------------------------------------------------- ------ ------ ------- -------------- ---------------
Geared Growth Share Price with dividends added back 1.9 2.9 (1.2) (1.4) (24.1)
----------------------------------------------------- ------ ------ ------- -------------- ---------------
Sources:
* Jupiter Asset Management Limited ("Jupiter")
** The Company's benchmark index is 3 month sterling LIBOR
calculated as at the first business day of each calendar month.
Availability of Monthly Fact Sheets
Monthly fact sheets for the Company are available for download
from www.jupiteronline.com/SecondSplit and by post or fax on
request from the company secretarial department.
The Company's Geared Growth shares are listed on the London
Stock Exchange and the prices are published in the Financial Times
under `Investment Companies'.
The Net Asset Values of the Company's Geared Growth shares are
calculated weekly and can be viewed on the London Stock Exchange
website at www.londonstockexchange.com (under the heading 'Market
News').
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 New
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 contracts for
difference, 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 it 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
his 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, where 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 listed
investment companies unless such companies have stated investment
policies to invest no more than 15% of their 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 and 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.
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. The directors are considering various options
for the future of the Company are details of their recommendations
are expected to be announced in early September. A circular will be
sent to all shareholders at that time 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.
For further information, please contact:
Richard Pavry
Head of Investment Trusts
Jupiter Unit Trust Managers Limited
investmentcompanies@jupiter-group.co.uk
020 7314 4822
Alternatively you may contact Jupiter Unit Trust Managers
Limited on 0207 412 0703 and online from
www.jupiteronline.com/SecondSplit.
The Company's Registered office is at 1 Grosvenor Place, London
SW1X 7JJ.
This interim management statement has been prepared solely to
provide information to meet the requirements of the UK Listing
Authority's Disclosure and Transparency Rules.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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