23rd Dec 2005 12:53
Jupiter Second Enhanced Inc.Tst.PLC23 December 2005 JUPITER SECOND ENHANCED INCOME TRUST Plc Preliminary announcement of the audited results for the period ended 31stOctober 2005. CHAIRMAN'S STATEMENT In my annual Chairman's Statement it gives me great pleasure to present yourCompany's first financial statements for the period ended 31st October 2005. The net asset value of your Company's Geared Income shares rose by 18.5 percent. over the period under review from 39.60p per share at launch to 46.94p.This compares with the performance of the Company's benchmark, the FTSEAll-Share Index, which appreciated by 16.0 per cent. (in capital terms) over thesame period. After taking into account the dividends paid to Geared Incomeshares in respect of the period, their total return has been 26.2 per cent.,which compares with a total return on the FTSE All-Share of 20.3 per cent. overthe same period. The Company's ungeared packaged units (each comprising one Geared Income shareand one Zero Dividend Preference share) achieved an increased net asset value of11.9 per cent. since inception (and a total return of 15.0 per cent. aftertaking into account dividends declared in respect of the period). Your Company has been able to declare dividends totalling 3.05p per GearedIncome share for the period under review, which is above the estimated dividendof between 2.8p and 3.0p outlined in the launch Prospectus. It is anticipatedthat next year UK listed companies will provide strong dividend growth and willcontinue to provide opportunities for income generation, offering good prospectsfor dividend returns to shareholders. As outlined in the Manager's Review, whichfollows this Statement, there is a balance to be struck and investments will bemade not solely in relation to income but also with regard to sound financialmanagement by the companies in which we invest. In 2006 we hope to smooth thelevels of the Company's quarterly interim dividends to the extent practicable. As I reported in the Company's Interim Report, the Company was offered as arecommended rollover vehicle for the shareholders in Martin Currie EnhancedIncome Investment Trust plc at the end of its life on 30th June 2005. The offerreceived support from shareholders in the Martin Currie trust and, as a result,some £7.3m was rolled over into the Company. We issued approximately 13.3m newshares as a result of this rollover, thereby increasing the Company's liquidityon the London Stock Exchange. I would like to take this opportunity, on behalfof the Board, to welcome these new investors as shareholders in the Company. Wewill continue to seek such opportunities to expand the Company if it is thoughtthat it would be of benefit to our shareholders. Turning to the business of the Annual General Meeting we are seeking to renewpowers to buy back shares for cancellation. This can be a useful tool in bothenhancing the net asset value of Geared Income shares and/or, enhancing thecover on Zero Dividend Preference shares and managing the liquidity of bothclasses of shares on the London Stock Exchange. This power will only beexercised after taking into consideration the interests of both classes of theCompany's shares at the time that any such opportunity arises. As this is thefirst Annual General Meeting of the Company, all of the Directors are seekingelection at this meeting. In conclusion, the Company has performed well in its first year despite a numberof uncertainties in both the UK and Global markets concerning oil and gas pricesand sluggish economic growth. Your Board remains confident that the performanceof your Company can be sustained in 2006. Jimmy WestChairman23rd December 2005 MANAGER'S REVIEW The Company has performed well during the period under review declaring fourinterim dividends of 0.45p, 1.0p, 0.45p and 0.70p and a special dividend of0.45p amounting to a total dividend of 3.05p for the financial period. Revenuesafter tax for the period amounted to £1,899,000. Equities have performed substantially better than either cash or bonds over theyear. Within the equity market the strongest returns have been made in themid-cap stocks while smaller capitalisation companies have performed in linewith the market as a whole. Among the constituent sectors mining and oil havemade the strongest relative contribution to the All-Share's performance while inrelative terms the worst negative contribution was made by the telecom sector,closely followed by the banking sector. Market Review The UK stock market has made excellent progress during the first year of theCompany's life. The FTSE All-Share Index rose by 16.0 per cent. to 2,664.40during the period under review - a strong performance considering the weakeningeconomic picture, both in the UK and overseas. The UK economy has not performed well over the past year and the Chancellor hasbeen forced to halve his growth forecasts for the fiscal year ending 4th April2006 to just 1.75per cent. There has been some public dispute over the rootcause for the economy's poor performance but the price of fuel has undoubtedlybeen a factor as for much of the past six months crude oil has been priced above$60 a barrel. Other factors affecting the economy have been the lag effects ofthe interest rate rises in 2004 and higher levels of taxation. The global economic picture has also weakened, acting as a further drag on theUK's economic performance and investor sentiment. Of particular concern toinvestors over the year has been the increasing interest rate environment in theUS and the effect this will have on consumer spending. Despite these economic pressures, the UK stock market has made progress duringthe year. The market did suffer significant setbacks in April and October asconcerns about the global economic picture took hold. It is, however, notablethat on both occasions, investors used these corrections to buy back intoequities at more attractive levels. Since 31st October 2005 the FTSE 100 has shrugged off these UK economic worriesto climb above 5500 although the better performance has tended to be among thosecompanies with a high degree of international exposure. The oil and miningsectors, driven by the high commodity prices, have led the market. Meanwhile,consumer goods producers have suffered due to a higher cost base and the retailsector within the UK has suffered from the decline in the consumer's willingnessto spend, especially on credit. There are early signs that the worst of thecutback in consumer spending may have passed, spurred perhaps by recent strongerdata from the housing market, but their sales over Christmas will determinewhether this is actually the case. The stock market's strong performance has largely been driven by the continuedstrength in corporate balance sheets. Many companies have been reportingexcellent profits growth and have been using this cashflow to return cash toshareholders through increased dividend payments and to embark on acquisitions.The low cost of debt has also encouraged merger and acquisition activity fromprivate equity houses, seeking to buy good quality companies at attractiveprices. Meanwhile, a number of new companies have come to the market, albeitoffering limited dividend prospects at this stage. The forecast for dividend growth within the UK market is healthy and, despitehigher valuations, there remain attractive opportunities within higher yieldingstocks. Notable acquisitions were made in Vodafone, Diageo, BBA Group, Pearson, andPremier Farnell. Disposals made during the period included Premier Foods, BovisHomes Group, Raymarine and Gallaher Group. Outlook The current Treasury economic forecast for 2006 predicts that economic growthwill recover slightly from this year's levels before making more substantivegains in 2007. It appears that the intention is to slow significantly the growthof public expenditure rather than to introduce the substantial increases intaxation that some had predicted. The outlook for interest rates is probablybiased towards increases - the quarter point cut in August has not yet beenfollowed up, and with the housing market apparently strengthening as well asOPEC's declared satisfaction with a crude oil price above $50 a barrel, energyprices are unlikely to come down. These factors all point to rising rates. Despite these economic concerns, we are not bearish on the outlook for the UKstock market. While some companies will suffer from the downturn in economicgrowth, the overall trend for healthy profits growth remains in place. Equities, in our view, continue to look more attractive than other asset classes- cash, bonds and property - and within that, UK equities remain on attractivevaluations. We are likely, therefore, to see a continuation of the merger andacquisitions activity that has driven markets higher during the past year.Nonetheless through merger and acquisition activity by private equity houses,the tendency for companies with strong levels of free cashflow to be takenprivate is a frustration to those looking to generate income returns from thestock market. Dividend forecasts for the UK market remain strong and, therefore, theavailability of stocks with high levels of income distribution should remaingood. But we would maintain that simply seeking out those companies that payhigh dividends is not the route to success. Investors need to select businesseswith strong balance sheets, cash flow, quality managements and attractivevaluations to make money. While strong dividend growth is good news for income investors, we do believecompanies need to balance that with the need to reinvest in their ownbusinesses. As investors we have to be aware that the focus on growing dividendscould, in some cases, damage a business's longer term growth prospects. For manycompanies, however, it reflects the fact that outsourcing their operationsoverseas means that the requirement to reinvest to the same degree as in thepast, is simply not there. Tony NuttManagerJupiter Asset Management Limited Statement of Total Return (Incorporating the Revenue Account) for the period 17th August 2004 to 31st October 2005 Revenue Capital Total £'000 £'000 £'000 -------- -------- --------Realised gains on investments - 2,148 2,148Unrealised appreciation of investments - 4,867 4,867 -------- -------- --------Total capital gains on investments - 7,015 7,015Income 2,901 - 2,901Investment management fee (643) - (643)Investment performance fee - (560) (560)Other expenses (352) - (352) -------- -------- --------Return on ordinary activities before finance costsand taxation 1,906 6,455 8,361Interest payable (6) - (6) -------- -------- --------Return on ordinary activities before taxation 1,900 6,455 8,355Tax on ordinary activities (1) - (1) -------- -------- --------Return on ordinary activities after taxation 1,899 6,455 8,354Dividends in respect of equity shares (1,789) - (1,789)Other appropriations in respect of non-equityshares - (2,528) (2,528) -------- -------- --------Transfer to reserves 110 3,927 4,037 ======== ======== ========Return per Geared Income share 3.25p 6.73p 9.98p The revenue column of this statement is the profit and loss account of theCompany. All revenue and capital items in the above statement derive from continuingoperations. No operations were acquired or discontinued during the period. The financial information does not constitute 'accounts' as defined in section240 of the Companies Act 1985. The Company was incorporated on 17th August 2004 and its shares were listed onthe London Stock Exchange on 1st November 2004, on which date it commencedbusiness. Consequently, the Statement of Total Return above reflects the returnsfrom 1st November 2004 to 31st October 2005. Balance Sheet at 31st October 2005 £'000 ---------Fixed asset investments 69,220Investments ---------Current assets 133Debtors 1,544Cash at bank ---------Creditors: amounts falling due within one year 1,677 (1,814) ---------Net current liabilities (137) ---------Total assets less current liabilities 69,083 ---------Capital and reserves 1,256Called up share capital 7,180Share premium 54,082Special reserve (940)Capital reserve - realised 4,867Capital reserve - unrealised 2,528Redemption reserve 110Revenue reserveTotal shareholders' funds 69,083 =========Total shareholders' funds are attributable to: 29,487Equity shareholders 39,596Non-equity shareholders ________ 69,083 ---------Net asset value per share 46.94pGeared Income 63.03pZero Dividend Preference Cash Flow Statement for the period from 17th August 2004 to 31st October 2005 £'000 ---------Operating activities 2,028Net cash inflow from operating activities ---------Servicing of finance (6)Interest paid ---------Net cash outflow from servicing of finance (6) ---------Taxation (5)Net tax paid ---------Capital expenditure and financial investment (80,037)Purchase of fixed asset investments 18,395Sale of fixed asset investments ---------Net cash outflow from capital expenditure and financial investment (61,642)Equity dividends paid (1,349) ---------Net cash outflow before financing (60,974) ---------Financing 63,470Share issue (952)Cost of share issue ---------Net cash inflow from financing 62,518 ---------Increase in cash 1,544 ========= NOTES: 1. Income 17th August 2004 to 31st October 2005 £'000Income from investmentsUK dividend income (net) 2,618Dividends from overseas companies 68Bond interest 19 _______ 2,705Other incomeDeposit interest 188Underwriting commission 8 _______ Total income 2,901 ======Total income comprises:Dividends 2,686Interest 207Other income 8 _______ 2,901 ======Income from investmentsListed in the UK 2,705Listed overseas _______ 2,705 ====== 2. Reconciliation of consolidated operating profit to net cash inflow fromoperating activities Group £'000Net revenue before finance costs and taxation 1,906Increase in prepayments and accrued income (129)Increase in other creditors and accruals 811Performance fee charged to capital (560) ______ 2,028 3. Analysis of changes in net cash Cashflow 31stOctober 2005 £'000 £'000Cash:Cash at bank 1,544 1,544 Reconciliation of net cash flow to movement in net debt £'000Increase in cash for the year 1,544 4. Reconciliation of movements in shareholders' funds 31st October 2005 £'000New share capital subscribed 63,470Cost of share issue (952)Revenue return 1,899Dividends (1,789)Capital return 6,455 -----------Closing shareholders' funds 69,083 ----------- The preliminary announcement is prepared on the same basis as set out in thestatutory accounts of the period ended 31st October 2005 and was approved by theBoard of Directors on 23rd December 2005. The above financial information doesnot constitute statutory accounts as defined in section 240 of the Companies Act1985. The Auditors have reported on the statutory accounts for the period ended31st October 2005; their report was unqualified and did not contain statementsunder S237(2) or (3) of the Companies Act 1985. Statutory accounts for theperiod ended 31st December 2005 including an unqualified audit report will bedelivered to the Registrar of Companies before the 31st December 2005. The interim report will be sent to all registered shareholders and copies may beobtained from the registered office of the Company at 1 Grosvenor Place, London,SW1X 7JJ By order of the Board Jupiter Asset Management Limited Secretaries Enquiries:Richard PavryJupiter Asset Management Limited020 7412 0703 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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