Jupiter Financial Opportunities Fund. Full Report

Transcription

1 Jupiter Financial Opportunities Fund Full Report annual report for the year ended 30 April

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3 Jupiter Financial Opportunities Fund Full Report for the year ended 30 April 2010 Investment Objective To achieve long-term capital growth principally through investment in equities of financial sector companies on an international basis. Investment Policy To achieve long-term capital growth through investment in a concentrated international portfolio. The portfolio will principally comprise financial services companies and, to a lesser extent property related companies considered by the Manager to be undervalued and which exhibit favourable growth prospects arising from characteristics such as proven management or strong products or services. The portfolio will have an emphasis on companies based in the UK. The Manager has the power to use derivatives but it is intended that these will only be used for efficient portfolio management and not for investment purposes. Status The Fund operates under the Collective Investment Schemes Sourcebook (COLL) of the Financial Services Authority. The Fund is an authorised unit trust scheme under Section 237 of the Financial Services and Markets Act 2000 and is a UCITS scheme as defined by the COLL rules. It is in the Specialist Investment Management Association category. The Fund is a qualifying fund for inclusion within a stocks and shares Individual Savings Account (ISA). It is the Manager s intention to continue to manage the affairs of the Fund in order to meet the qualifying requirements as outlined in current legislation. Percentage change from launch to 30 April year 3 years 5 years 10 years Since launch* Percentage growth FTSE Financials Index Source: Financial Express, bid to bid, net income reinvested. *Launch date 2 June Warning: Jupiter Unit Trust Managers Limited is authorised and regulated by the Financial Services Authority and its registered address is 1 Grosvenor Place, London SW1X 7JJ. The value of an investment in a unit trust and the income from it can go down as well as up, it may be affected by exchange rate variations and you may not get back the amount invested. Initial charges are likely to have a greater proportionate effect on returns if investments are liquidated in the shorter term. Quoted yields are not guaranteed. Current tax levels and reliefs will depend on your individual circumstances and details are contained in the Key Features (incorporating the Simplified Prospectus). Past performance should not be seen as a guide to future performance. For your security we will record and randomly monitor all telephone calls. If you are unsure of the suitability of this investment please contact your Independent Financial Adviser. No material in this report should be interpreted as investment advice. 1

4 Jupiter Financial Opportunities Fund Manager s Report Performance Review For the year ended 30 April 2010 the total return on your units was 20.8%* compared with a total return of 35.8%* for the benchmark FTSE Financials Index. From the launch of the Fund on 2 June 1997 the total return on the units was 820.1%* compared with 48.4%* for the FTSE Financials Index. This equates to annual average returns of 18.7%* for the Fund and 3.1%* for the benchmark. Over the same period the Fund was ranked 1st out of 700 funds across all sectors*. *Source: Financial Express, bid to bid, net income reinvested. Market Review In the year under review, financials stocks recovered from the distressed levels seen in late 2008/early Western economies emerged from recession and growth in the Far East rebounded to pre-crisis levels. Improving conditions in both stock and debt markets enabled several blue chip banks to strengthen their capital positions. Stock markets were also supported by a general trend out of low yielding cash into higher yielding assets. Later in the period, however, returns for financial stocks were more muted. Sovereign debt problems in southern Europe proved difficult to resolve, underscoring the broader issue facing highly indebted countries in the West namely, the need to tackle government debt levels without threatening economic recovery. Given the scale of this challenge, market sentiment had become muted by the end of the accounting year. Investment Outlook Sovereign debt levels in the West remain a persistent problem. Fiscal measures to reduce this debt will almost certainly slow growth, particularly in Europe. The potential for interest rates to increase to cope with growing inflation pressures remains a longer-term concern. However, the stock market should find a measure of support while interest rates remain low and financial stocks are generally inexpensive. Additionally, economic growth momentum in the US and Far East continues to provide good opportunities for investment, while uncertainty remains in Europe. For US banks, there is good momentum in the decline in bad loans and some institutions have recapitalised to withstand quite severe stresses, yet valuations remain low. Philip Gibbs Jupiter Asset Management Limited Investment Adviser Guy de Blonay will be appointed Co-Manager of the Jupiter Financial Opportunities Fund, working alongside Philip Gibbs, on 1 June Policy Review The portfolio has largely been geared to the economic recovery during the period. Our preference has been for companies that offered exposure to emerging market growth and investment banks. The latter typically have lower capital constraints than commercial banks and participate in the revival in global capital market activity common to the early stages of economic recovery. We remained cautious about areas of the market however, such as commercial property and banks that had major funding and balance sheet issues. This included UK domestic banks which, while saved from full nationalisation, operate in an economy overburdened by high levels of public and private sector debt. 2

5 Responsible Stewardship Jupiter believes that responsible stewardship is an important issue for all shareholders who have a vital role in encouraging a higher level of corporate performance by adopting a positive approach to environmental, social and corporate governance engagement with companies. We believe companies with high standards of corporate responsibility, governance and sustainable business practices create an appropriate culture to enhance good investment performance. In addition to our Corporate Governance and Voting Policy, Jupiter publishes a biannual Voting and Engagement Report, which highlights issues we have raised with companies concerning corporate governance and sustainability. To view these go to Other Information This document contains information based on the FTSE Financials Index. FTSE is a trade mark jointly owned by the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited ( FTSE ) under licence. The FTSE Financials 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. Directors The Directors of Jupiter Unit Trust Managers Limited are: E H Bonham Carter (Chief Executive) G W Davidson (Joint Managing Director) P M Moore (Joint Managing Director) N Carter (appointed 2 October 2009) A Creedy J Crossley (appointed 2 October 2009) P Hall S Harvey S Hynes P Johnson (appointed 23 October 2009) A King R V Parker S Reynolds J C Stevenson (resigned 31 December 2009) A Wyllie 3

6 Comparative Tables Net Asset Values Date Net Asset Value of Fund Net Asset Value per unit Number of units in issue ,806, p 297,385, ,973, p 283,695, ,670, p 246,184, ,899, p 285,356, ,184,785, p 296,303,769 Unit Price Performance Calendar Year Highest offer Lowest bid p p p p p p p p p p to p p Income Record Calendar Year Pence per unit p p p p p to p Total Expense Ratio The annualised Total Expense Ratio of the Fund, based on the total expenses included within the accounts for the period as indicated below, is as follows: Expense Type Year to Year to Manager s periodic charge 1.50% 1.50% Other expenses 0.24% 0.24% Total expense ratio 1.74% 1.74% Portfolio Turnover Rate The Portfolio Turnover Rate (PTR) of the Fund, based on the figures included within the accounts for the period as indicated below, is as follows: Year to Year to Portfolio Turnover Rate % % The PTR provides an indication of the rate the Manager has bought and sold the underlying assets of the Fund during the period as indicated above. In general, the higher the PTR of a fund, the greater level of portfolio transaction costs will be incurred.

7 Portfolio Statement as at 30 April 2010 Holding Portfolio of investments# Market value % of Total net assets Cayman Islands 0.06% (0.00%) 2,298,304 Orchid Developments 689, Channel Islands 0.10% (0.09%) 3,039,438 Equity Partnership 577, ,389,051 The Ottoman Fund 597, China 4.03% (0.00%) 100,000,000 Bank of China 34,288, ,000,000 China Construction Bank 13,509, France 3.25% (5.39%) 850,000 BNP Paribas 38,555, Germany 0.00% (5.25%) Greece 0.00% (2.25%) Hong Kong 7.20% (0.00%) 9,258,000 Sun Hung Kai Properties 85,273, Norway 7.85% (4.87%) 12,000,000 DnB NOR 92,984, Russia 2.09% (0.00%) 14,000,000 Sberbank of Russia 24,753, Switzerland 3.87% (8.79%) 900,000 Credit Suisse 27,445, ,000 Zurich Financial Services 18,396, Turkey 1.63% (0.00%) 6,000,000 Garanti Bankasi 19,264, United Kingdom 5.83% (17.94%) 3,307,623 Argo 446, ,347 Aurora Investment Trust 2,015, ,900,000 Barclays 33,838, ,000,000 HSBC Holdings (London listed) 13,426, ,292,148 Jupiter Second Split Trust 14,059, ,082,227 Paternoster* r 5,232, United States 19.67% (3.18%) 5,000,000 Bank of America 59,633, ,000,000 Citigroup 11,874, ,000 Goldman Sachs 41,792, ,750,000 JP Morgan Chase 78,927, ,000,000 Morgan Stanley Dean Witter 40,856,

8 Portfolio Statement continued Holding Portfolio of investments# Market value % of Total net assets Derivatives 0.10% (0.00%) 13,250,000 Barclays Contract for difference 470, ,260 Danske Bank Contract for difference (1,030) 500,000 Deutsche Bank Contract for difference 217, ,509 Erste Bank Contract for difference (1,716) 3,650,000 HSBC Holdings (London listed) Contract for difference 120, ,260 Juske Bank Contract for difference 9,331 Raiffeisen International Bank Contract for difference 5,674 2,250,000 Standard Chartered Contract for difference 337, ,487 Sydbank Contract for difference (2,047) 1,000,000 UBS AG Contract for difference 6,056 Forward Foreign Currency Contracts (0.10%) (0.00%) Bought Sterling 100,000,000 : Sold USD $154,050,000 (537,256) (0.05) Bought USD $153,357,000 : Sold Sterling 100,000,000 84, Bought USD $693,000 : Sold Sterling 452, Bought USD $228,924,000 : Sold Sterling 150,000,000 (637,367) (0.06) Portfolio of investments 658,501, Net other assets 526,283, Net assets 1,184,785, All holdings are ordinary shares or stock units unless otherwise stated. #The figures in brackets show allocations as at 30 April Represents an investment in a Jupiter Investment Management Group Limited product. *Represents an unquoted security. r Represents an unapproved security. 6

9 Top 20 Purchases and Sales for the year ended 30 April 2010 Purchases Cost JP Morgan Chase 263,660,175 Bank Of America 206,989,148 BNP Paribas 181,434,387 HSBC Holdings (London listed) 164,581,263 Deutsche Bank 141,081,405 Goldman Sachs 130,080,058 Morgan Stanley 125,855,118 Société Générale 115,832,091 Credit Suisse 115,720,357 Citigroup 109,958,979 Muenchener Ruecker 106,029,749 Barclays 101,675,229 Allianz 98,411,241 Bank of China 98,243,674 Sun Hung Kai Properties 84,478,831 Banco Santander 75,559,036 Wells Fargo 74,199,743 Prudential 69,930,040 Zurich Financial 63,034,014 KBC Bkvs Hdg 61,954,740 Total top 20 purchases 2,388,709,278 Remaining purchases 604,280,010 Total purchases 2,992,989,288 Sales Proceeds HSBC Holdings (London listed) 245,480,591 BNP Paribas 216,883,087 JP Morgan Chase 194,469,326 Bank Of America 171,071,878 Deutsche Bank 137,942,437 Muenchener Ruecker 133,732,023 Goldman Sachs 125,083,808 Credit Suisse 113,864,534 Zurich Financial 110,784,229 Société Générale 110,687,121 Prudential 102,416,981 Allianz 97,393,586 Citigroup 89,241,463 Banco Santander 87,479,962 Morgan Stanley 85,521,398 Barclays 85,521,061 Wells Fargo 79,412,065 Standard Chartered 75,108,481 KBC Bkvs Hdg 72,433,176 Bank of China 69,005,624 Total top 20 sales 2,403,532,831 Remaining sales 618,306,634 Total sales 3,021,839,465 7

10 Statement of Total Return for the year ended 30 April 2010 Notes Year to Year to Income Net capital gains 3 207,284,738 90,545,378 Revenue 4 17,896,329 24,232,620 Expenses 5 (21,101,520) (12,994,817) Finance costs: Interest 7 (612,965) (1,829,417) Net (expense)/revenue before taxation (3,818,156) 9,408,386 Taxation 6 (1,450,634) (174,025) Net (expense)/revenue after taxation (5,268,790) 9,234,361 Total return before distributions 202,015,948 99,779,739 Finance costs: Distributions 7 55,637 (9,228,396) Change in net assets attributable to unitholders from investment activities 202,071,585 90,551,343 Statement of Change in Net Assets Attributable to Unitholders for the year ended 30 April 2010 Notes Year to Year to Opening net assets attributable to unitholders 943,899, ,670,329 Amounts received on issue of units 343,542, ,162,141 Amounts paid on cancellation of units (151,281,016) (49,395,815) Assets transferred under a Scheme of Arrangement to the Jupiter Absolute Return Fund and the Jupiter International Financials Fund 15 (153,216,376) 39,044, ,766,326 Stamp Duty Reserve Tax (232,727) (92,768) Unclaimed distributions 2(d) 2,730 4,326 Change in net assets attributable to unitholders from investment activities (see statement of total return above) 202,071,585 90,551,343 Closing net assets attributable to unitholders 1,184,785, ,899,556 8

11 Balance Sheet as at 30 April 2010 Notes Assets Investment assets 659,596, ,784,850 Debtors 8 22,960, ,215,705 Short term deposits 346,021, ,974,956 Cash and bank balances 266,034,057 6,224,692 Total other assets 635,015, ,415,353 Total assets 1,294,612,251 1,422,200,203 Liabilities Investment liabilities (1,094,371) Creditors 9 (95,411,098) (469,804,978) Bank overdrafts (13,320,895) (5,955,994) Distribution payable on income units (2,539,675) Total other liabilities (108,731,993) (478,300,647) Total liabilities (109,826,364) (478,300,647) Net assets attributable to unitholders 1,184,785, ,899,556 Directors Statement Jupiter Financial Opportunities Fund This report has been prepared in accordance with the requirements of the Financial Services Authority s Collective Investment Schemes Sourcebook and the Statement of Recommended Practice issued by the Investment Management Association. Directors: Paula Moore, Spencer Reynolds Jupiter Unit Trust Managers Limited London 17 June

12 Notes to the Financial Statements for the year ended 30 April Accounting Policies (a) Basis of Accounting The financial statements have been prepared on the historical cost basis, as modified by the revaluation of investments, and in accordance with the Statement of Recommended Practice for Authorised Funds (SORP) issued by the Investment Management Association (IMA) in November Previously the requirements of the SORP issued by the IMA in December 2005 had been applied. As a result of this change certain items have been restated in the Statement of Total Return as set out below. The reanalysis has been treated as a change in accounting policy and accordingly the comparative figures have been restated. The restatements did not change either the total return or net assets attributable to Unitholders in either the current or preceding year. Currency gains Currency gains of 36,696,956 ( : gains of 72,305,227) which were previously shown separately have now been included in net capital gains. Transaction charges Transaction charges of 22,216 ( : 18,656) which would have previously been included in expenses are now included in net capital gains. To remain consistent with current accounting practices and the requirements of the SORP, the term Income is now generally used to encompass both revenue and capital gains/(losses). Dividends, interest, fees and equivalent items previously referred to as Income in the Statement of Total Return are now referred to as Revenue. Note however, that any reference to distribution or dividend income allocated to unitholders, or references to income units are unaffected by this change and will still be referred to as income in the report and financial statements and in all other literature. (b) Revenue All dividends from companies declared ex-dividend during the year ended 30 April 2010 are included in revenue, net of any attributable tax. Interest on any debt securities is recognised on an effective interest rate basis. Bank interest and interest on short-term deposits are accrued up to the year end date. Any VAT refunds relating to registration fees have been accounted for on a receipts basis. Underwriting commission is taken to revenue and recognised when the issue takes place, except where the Fund is required to take up all or some of the shares underwritten, in which case an appropriate proportion of the commission received is deducted from the cost of the shares. Special dividends are reviewed on a case by case basis when determining if the dividend is to be treated as revenue or capital. The tax accounting treatment follows the treatment of the principal amount. (c) Expenses All expenses, other than those relating to the purchase and sale of investments and any Stamp Duty Reserve Tax, are charged against the revenue of the Fund. All of the Fund s expenses are recognised on an accruals basis. (d) Valuation of Investments The investments of the Fund have been valued using bid market values ruling on international stock exchanges at 12 noon on 30 April 2010, being the last valuation point of the year. Market value is defined by the SORP as fair value which is generally the bid value of each security. Where a stock is unlisted or where there is a non liquid market, a valuation for this stock has been obtained from market makers where possible, and suspended stocks are normally valued at their suspension price. However, where the Manager believes that these prices do not reflect a fair value, or where no reliable price exists for a security, it is valued at a price which in the opinion of the Manager reflects a fair and reasonable price for that investment. The Contracts for Difference held in the portfolio are valued based on the price of the underlying security or index which they are purchased to reflect. See page 19. (e) Foreign Exchange Transactions in foreign currencies are translated into Sterling at the rates ruling at the dates of the transactions. Assets and liabilities expressed in foreign currencies are translated at the rates ruling at 12 noon on 30 April 2010, being the last valuation point of the year. 10

13 Notes to the Financial Statements continued (f) Taxation Corporation Tax is provided at 20% on revenue, other than franked UK dividends and overseas dividends received after 1 July 2009, after deduction of expenses. Where overseas tax has been deducted from overseas income that tax can, in some instances, be set off against Corporation Tax payable, by way of double taxation relief. The charge for Tax is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred Tax is provided using the liability method on all timing differences, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred Tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the Deferred Tax can be offset. Stamp Duty Reserve Tax, if any, suffered on surrender of units is deducted from capital. 2. Distribution Policies (a) Basis of Distribution All of the net revenue available for distribution at the end of the final accounting period will be distributed to unitholders as a dividend distribution. In order to conduct a controlled dividend flow to unitholders, interim distributions may be made at the Manager s discretion, up to a maximum of the distributable revenue available for the period. The interim and final distribution dates in respect of this Fund are summarised in Note 2(b). Should expenses and taxation together exceed revenue, there will be no distribution and the shortfall will be met from capital. If, in respect of a particular accounting period, the average income allocation to unitholders (disregarding, for this purpose, any units held by the Manager or Trustee or their associates) would be less than 25, the Manager reserves the right (with the agreement of the Trustee) not to make any income allocation and, in such an event, the amount of net revenue remaining for that period will be credited to capital and reflected in the value of units. (b) Distribution dates Net revenue, if any, will be distributed to unitholders as a dividend distribution, semi-annually on 31 December (interim) and 30 June (final) in respect of the accounting periods ending 31 October (interim) and 30 April (final) respectively. (c) Stock Dividends The ordinary element of stock dividends is treated as revenue and forms part of any distribution. In the case of an enhanced stock dividend, the value of the enhancement is treated as capital and does not form part of any distribution. (d) Unclaimed Distributions These sums have been credited to the capital property of the Fund during the year and represent unclaimed distributions which have remained unclaimed by unitholders for over six years. 11

14 Notes to the Financial Statements continued 3. Net capital gains The net gains on investments during the year comprise: Currency gains 36,696,956 72,305,227 Transaction charges (22,216) (18,656) Gains/(losses) on non-derivative securities 232,274,848 (13,232,357) (Losses)/gains over forward foreign currency contracts (Note 13) (13,377,832) Losses on contracts for difference (Note 13) (21,284,626) Losses on SWAP contracts (Note 13) (27,002,392) 31,491,164 Net capital gains 207,284,738 90,545, Revenue UK dividends 5,461,203 2,560,954 Overseas dividends 11,278,871 7,993,101 Bank interest 22,102 5,732,032 Interest earned on VAT reclaim 62,784 Interest received from HM Revenue & Customs 68,782 Revenue on contracts for difference (Note 13) 455,113 Deposit interest 679,040 Stock dividends 210,500 Interest on debt securities 7,604,467 Total revenue 17,896,329 24,232,620 12

15 Notes to the Financial Statements continued 5. Expenses Payable to the Manager, associates of the Manager and agents of either of them: Manager s periodic charge 18,172,784 11,731,132 Registration fees 2,423,038 1,564,151 VAT reclaim on registration fees, net of associated recovery costs (635,330) 20,595,822 12,659,953 Payable to the Trustee, associates of the Trustee and agents of either of them: Trustee s fee 255, ,436 Safe custody fees 204,412 43, , ,510 Other expenses: Audit fee 10,575 10,266 Financial Services Authority fee Charges on ADR dividend receipts 543 Professional fees on withholding tax reclaims 35,026 49,322 45,795 60,354 Total expenses 21,101,520 12,994,817 13

16 Notes to the Financial Statements continued 6. Taxation (a) Analysis of charge in the year: Corporation Tax 1,340,780 Overseas tax 1,461, ,357 Repayment of Norwegian withholding tax (587,332) Double tax relief (1,340,780) Overseas tax credits (11,348) Total current tax (Note 6.(b)) 1,450, ,025 (b) Factors affecting current tax charge for the year: The tax assessed for the year is higher than the standard rate of Corporation Tax in the UK for an authorised unit trust. The differences are explained below: Net (expense)/revenue before taxation (3,818,156) 9,408,386 Corporation Tax at 20% (763,631) 1,881,677 Effects of: Revenue not subject to taxation (2,693,552) (554,291) Taxable revenue adjusted for recoverable overseas tax 2,270 13,394 Current year expenses not utilised 3,553,423 Overseas tax 1,461, ,357 Tax relief on overseas tax suffered (98,510) Repayment of Norwegian withholding tax (587,332) Overseas tax credits (11,348) Double tax relief (1,340,780) Current tax charge for the year (Note 6.(a)) 1,450, ,025 Authorised unit trusts are exempt from tax on capital gains, therefore any capital return is not included in the above reconciliation. (c) Provision for Deferred Tax At 30 April 2010 there is a potential Deferred Tax asset of 3,553,423 ( : nil) in relation surplus management expenses. It is unlikely the Fund will generate sufficient taxable profits in the future to utilise this amount and therefore no Deferred Tax asset has been recognised in the year. As a result of changes in the Finance Act 2009, Eligible Unrelieved Foreign Tax ( EUFT ) was abolished with effect from 1 July 2009 and as such no unrecognised Deferred Tax asset in relation to EUFT exists at the year end. As at 30 April 2009, after offset against accrued revenue taxable on receipt, there was an unrecognised Deferred Tax asset of 4,989,346 in relation to EUFT. No Deferred Tax asset was recognised at the time as it was considered unlikely the Fund would generate sufficient taxable profits in the future to utilise this asset. 14

17 Notes to the Financial Statements continued 7. Finance Costs Distributions and Interest The distributions take account of amounts received on the issue of units and deducted on the cancellation of units and comprise: Interim distribution 6,896,537 Final distribution 2,539, ,436,212 Deduct: Amounts received on issue of units (56,125) (399,019) Add: Amounts paid on cancellation of units ,203 Net distribution for the year (55,637) 9,228,396 Interest 612,965 1,829,417 Total finance costs 557,328 11,057,813 Reconciliation of net (expense)/revenue after taxation to Distributions: Net (expense)/revenue after taxation for the year (5,268,790) 9,234,361 Net movement in revenue account 19,070 (5,965) Transfer from capital to cover revenue deficit 5,194,083 Net distribution for the year (55,637) 9,228,396 There was insufficient revenue to pay either an interim or a final distribution in respect of the period under review. 8. Debtors Accrued revenue 3,984,794 1,373,290 Amounts receivable for issue of units 515,994 2,479,361 Amounts receivable on derivative contracts 294,135 Corporation tax recoverable 162,000 Currency sales awaiting settlement 4,557, ,377,423 Overseas tax recoverable 1,322,917 1,823,631 Sales awaiting settlement 12,284,954 Total debtors 22,960, ,215,705 15

18 Notes to the Financial Statements continued 9. Creditors Amounts payable for cancellation of units 6,236,089 Amounts payable on derivative contracts 23,924,789 Currency purchases awaiting settlement 4,550, ,486,629 Other accrued expenses 621,664 20,474 Purchases awaiting settlement 60,066, ,288,919 Stamp Duty Reserve Tax accrued 11,759 8,956 Total creditors 95,411, ,804, Contingent Liabilities and Commitments The Fund has no contingent liabilities or commitments at the balance sheet date ( : nil). 11. Related Party Transactions Jupiter Unit Trust Managers Limited (JUTM), as Manager, and The Royal Bank of Scotland plc, as Trustee, are related parties in respect of their dealings with the Fund. JUTM acts as principal in respect of all transactions of units in the Fund. The aggregate monies received through issue and paid on cancellation are disclosed in the Statement of Change in Net Assets Attributable to Unitholders. Any amounts due to or from JUTM at the end of the accounting year are disclosed in Notes 8 (debtors) and 9 (creditors). Amounts payable to JUTM in respect of fund administration and The Royal Bank of Scotland plc in respect of trusteeship are disclosed in Note 5 (expenses). At the year end 349,059 was due to JUTM and 4,973 was due to the Royal Bank of Scotland plc. These amounts are included in other accrued expenses in Note Contingent Asset Following the ruling on Denkavit s case with the European Court of Justice regarding taxation withheld on overseas dividends, the Manager has taken steps to make claims with certain European Tax Authorities for repayment of taxation suffered by the Fund on dividend income. During the accounting year to 30 April 2009 the Manager received and recognised a repayment of 587,332 in respect of taxation withheld by the Norwegian Tax Authority for the calendar years 2004 to A further claim to the Norwegian Tax Authority in respect of the calendar year 2008 has been made. However, due to changes in regulations with respect to Norway, there is no guarantee that the taxation withheld by the Norwegian Tax Authority for 2008 will be received and it is not possible to estimate the potential amount that may be received by the Fund, if any. In addition to the claims with the Norwegian Tax Authority, the Manager has outstanding claims with other European Tax Authorities. Again, due to uncertainty regarding the likely success of the claims, it is not possible to estimate the potential amount of overseas taxation that may be received by the Fund, if any. Therefore, the financial statements presented for the year ended 30 April 2010 do not reflect any further amounts that may be received. 16

19 Notes to the Financial Statements continued 13. Financial Instruments and Derivatives In pursuing its investment objectives the Fund holds a number of financial instruments. These comprise securities and other investments, cash balances, short term fixed deposits, bank overdrafts and debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, amounts receivable for issues and payable for cancellations, debtors for accrued revenue and any derivative transactions. The Fund may enter into derivative transactions, the purpose of which will only be for efficient management of the Fund and not for investment purposes. The Fund has little exposure to credit, liquidity or cash flow risk. The risks it faces from its financial instruments are market price, foreign currency, interest rate and counterparty risk. The Manager reviews policies for managing these risks in pursuance of the Investment Objective and Policy (as set out on page 1) and they are summarised later. Adherence to investment guidelines and to investment and borrowing powers set out in the Trust Deed, Scheme Particulars and in the rules of the Collective Investment Schemes Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the Manager s Report and Portfolio Statement. Market Price Risk Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Fund might suffer through holding market positions in the face of price movements. The Manager regularly considers the asset allocation of the portfolio in order to minimise the risk associated with particular markets or industry sectors whilst continuing to follow the Investment Objective and Policy (as set out on page 1). Foreign Currency Risk A substantial proportion of the net assets of the Fund is denominated in currencies other than Sterling, with the effect that the balance sheet and total return can be significantly affected by currency movements. Currency Net foreign currency assets Net foreign currency assets Monetary exposures Non-monetary exposures Total Monetary exposures Non-monetary exposures Euro (11,207,763) 38,776,934 27,569, ,059, ,059,439 Canadian Dollar 122,787, ,787,815 0 Danish Krone 186,886 (3,077) 183,809 0 Hong Kong Dollar 672, ,070, ,743,758 0 Norwegian Kroner 1,964,502 92,984,023 94,948,525 45,987,613 45,987,613 Russian Ruble 21,285 21,285 0 Swiss Franc (1,879,865) 45,848,221 43,968,356 79,274,425 79,274,425 Turkish Lira 3,195,991 19,264,518 22,460,509 0 US Dollar 164,270, ,200, ,471, ,807,125 (305,374,830) 18,432,295 Total 17

20 Notes to the Financial Statements continued Interest Rate Risk The Fund holds various cash positions, any change to the interest rates relevant for particular positions may result in either income increasing or decreasing. Interest Rate Risk Profile of Financial Assets and Financial Liabilities The interest rate risk profile of the Fund s financial assets and liabilities at 30 April 2010 was: Currency Floating Rate financial assets Fixed Rate financial assets Financial assets not carrying interest Total Euro Canadian Dollar Danish Krone Hong Kong Dollar Norwegian Kroner Russian Ruble Swiss Franc Turkish Lira US Dollar Sterling Total 46,442,090 15,766, ,958,853 40,866, ,034, ,021, ,000, ,021,409 48,111, , ,743,758 94,948,525 21,285 47,034,703 22,460, ,149,615 76,900, ,556,785 94,553, ,787, , ,743,758 94,948,525 21,285 47,034,703 22,460, ,108, ,766,934 1,294,612, Euro Norwegian Kroner Swiss Franc US Dollar Sterling Total 32,168 6,192,524 6,224, ,774, ,200, ,974, ,853,299 45,987, ,182,740 30,017, ,959, ,000, ,853,299 45,987, ,182, ,824, ,351,903 1,422,200,203 Currency Floating Rate financial liabilities Financial liabilities not carrying interest Total Euro Danish Krone Swiss Franc US Dollar Sterling Total 13,320,895 13,320,895 66,984,197 3,077 3,066,347 (149,362,633) 175,814,481 96,505,469 66,984,197 3,077 3,066,347 (149,362,633) 189,135, ,826, Euro Swiss Franc US Dollar Sterling Total 5,955,994 5,955,994 36,793,860 23,908, ,392,353 76,250, ,344,653 36,793,860 23,908, ,392,353 82,206, ,300,647 18

21 Notes to the Financial Statements continued There are no material amounts of non interest-bearing financial assets, other than equities, which do not have maturity dates. The floating rate financial assets and liabilities include: Bank balances and overdrafts that bear interest. Up to 22 July 2009 interest on Sterling bank balances were calculated at the current Bank of England base rate minus 0.75% limited to 0.00%. Since 23 July 2009 interest rates on Sterling bank balances have become more variable and may alter on a daily basis in accordance with the rates supplied by the custodian. Overdraft interest is calculated at the current Bank of England base rate plus 1.00%. Interest on any overseas bank balances is determined by reference to rates supplied by the custodian. Counterparty Risk Counterparty risk, is the risk that a third party organisation (counterparty) does not pay out on a contract, or other trade or transaction when this is due to the Fund. The majority of instruments held by the Fund are traded on recognised exchanges on a delivery versus payment basis, thus eliminating exposure to counterparty risk. However, some transactions entered into by the Fund will be on Over the Counter markets which will expose the Fund to the risk that the counterparty may default on its obligations to perform under the relevant contract. The Manager will seek to reduce such risk by only entering into transactions with counterparties that it believes to have a high credit rating at the time the transaction is entered into, and by ensuring that formal legal agreements covering the terms of the contract are entered into in advance. In certain circumstances however, the Manager may be unable to enforce or rely on rights and obligations arising under such agreements. In the event of bankruptcy or insolvency of the counterparty, the Fund may only have the rights of a general creditor and could therefore experience delays in liquidating the position and may incur significant losses compared to the value of the transaction in the portfolio. Use of Derivatives For the efficient management of the Fund, the fund manager entered into Contracts for Difference (CFD s) with the aim of gaining short term exposure to a company s stock at a lower cost than directly holding the shares. In this case the seller of the contract agrees to pay the buyer the difference between the value at the time of purchase and the value when the contract is ended, assuming the share price has risen during this time, (if the share price has fallen the buyer pays the seller). This has resulted in net realised and unrealised losses of 21,284,626 to the Fund in the year under review. It is appropriate to treat 455,113 as revenue as this amount consists of dividends received as a result of holding these contracts. The fund manager has also made use of forward foreign currency contracts in order to hedge out some of the currency exposure in the Fund. This resulted in net realised and unrealised losses of 13,377,832 to the Fund during the year under review. In addition, the fund manager made use of SWAP contracts which resulted in net realised losses to the Fund of 27,002,392 to hedge the exposure to the Fund s UK and European bank holdings. The derivative contracts outstanding at the year end are itemised on page 6. Fair Value of Financial Assets and Financial Liabilities There is no material difference between the value of the financial assets and liabilities, as shown in the balance sheet, and their fair value. 19

22 Notes to the Financial Statements continued 14. Portfolio Transaction Costs Analysis of total purchase costs Purchases in year before transaction costs 2,986,285,790 2,249,012,419 Commissions 4,082,267 2,629,131 Taxes and other charges 2,621,231 3,232,231 Total purchase costs 6,703,498 5,861,362 Gross purchases total 2,992,989,288 2,254,873,781 Analysis of total sale costs Gross sales in year before transaction costs 3,025,975,576 2,282,334,609 Commissions (3,879,018) (2,396,586) Taxes and other charges (257,093) (135,259) Total sale costs (4,136,111) (2,531,845) Total sales net of transaction costs 3,021,839,465 2,279,802, Scheme of Arrangement Assets of the Fund amounting to 153,216,376 were transferred to the Jupiter Absolute Return Fund and the Jupiter International Financials Fund on 14 December These assets were transferred under a Scheme of Arrangement, following an election from unitholders resulting in some or all of the value of their holdings in Jupiter Financial Opportunities Fund being transferred to the two new funds. Units of an equivalent value in the Jupiter Financial Opportunities Fund were cancelled on the same date. 16. Unit Price Movement since the Balance Sheet date Since the last dealing day of the year on 30 April 2010 the Fund s quoted bid price has fallen from p to p as at 11 June 2010, a fall of 6.86%. 20

23 Statement of Manager s and Trustee s responsibilities in relation to the financial statements of the Scheme The Financial Services Authority s Collective Investment Schemes Sourcebook, as amended (the Sourcebook) requires the Manager to prepare financial statements for each annual accounting period which give a true and fair view of the financial affairs of the Scheme and of its revenue and expenditure for the period. In preparing the financial statements the Manager is required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; comply with the disclosure requirements of the Statement of Recommended Practice for Authorised Funds; follow applicable accounting standards; and keep proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements. The Manager is responsible for the management of the Scheme in accordance with the Sourcebook and the Scheme s Trust Deed and Prospectus. The Manager is also responsible for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Trustee is responsible for the safekeeping of all the property of the Scheme (other than tangible moveable property) which is entrusted to it and for the collection of revenue that arises from that property. It is the duty of the Trustee to take reasonable care to ensure that the Scheme is managed in accordance with the Sourcebook and the Scheme s Trust Deed and Prospectus, in relation to the pricing of, and dealings in, units in the Scheme; the application of revenue of the Scheme; and the investment and borrowing powers of the Scheme. A copy of the Report of the Trustee is set out below. Report of the Trustee Jupiter Financial Opportunities Fund Having carried out such procedures as we considered necessary to discharge our responsibilities as Trustee of the Scheme, it is our opinion, based on information available to us and explanations provided, that, in all material respects, the Manager: has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Scheme s units and the application of the Scheme s revenue in accordance with the Sourcebook and the Scheme s Trust Deed and Prospectus; and has observed the investment and borrowing powers and restrictions applicable to the Scheme. The Royal Bank of Scotland plc Trustee & Depositary Services London 17 June

24 Independent Auditors Report to the Unitholders of the Jupiter Financial Opportunities Fund We have audited the Fund s financial statements for the year ended 30 April 2010 which comprise the Statement of Total Return, Statement of Change in Net Assets Attributable to Unitholders, Balance Sheet and related notes 1 to 16. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the unitholders of the Fund, as a body, pursuant to Paragraph of the rules of the Collective Investment Schemes Sourcebook of the Financial Services Authority. Our audit work has been undertaken so that we might state to the unitholders those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund and the unitholders as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Manager, Trustee and Auditors The Manager s responsibilities for preparing the Annual Report and the financial statements in accordance with the rules of the Collective Investment Schemes Sourcebook of the Financial Services Authority, the Trust Deed and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Manager s Responsibilities in relation to the financial statements. The Trustee is required to take reasonable care to ensure compliance by the Manager with all relevant requirements. Our responsibility is to audit the financial statements in accordance with UK legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view, and are properly prepared in accordance with the Statement of Recommended Practice relating to Authorised Funds, the rules of the Collective Investment Schemes Sourcebook of the Financial Services Authority and the Trust Deed. We also report to you whether, in our opinion, the Report of the Manager is consistent with the financial statements, whether the Manager has not kept proper accounting records for the Fund or whether the financial statements are not in agreement with those records, and whether we have received all the information and explanations which, to the best of our knowledge and belief, we require for our audit. We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Investment Objective, Investment Policy, Status, Manager s Report, Responsible Stewardship, Other Information, Directors, Comparative Tables, Portfolio Statement, Top 20 Purchases and Sales, Statement of Manager s and Trustee s Responsibilities and the Report of the Trustee. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Manager in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Fund s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. 22

25 Independent Auditors Report to the Unitholders of the Jupiter Financial Opportunities Fund continued Opinion In our opinion: the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the financial position of the Fund as at 30 April 2010 and of the net expense and net gains on the scheme property of the Fund for the year then ended; the financial statements have been properly prepared in accordance with the Statement of Recommended Practice relating to Authorised Funds, the rules of the Collective Investment Schemes Sourcebook of the Financial Services Authority and the Trust Deed; the Report of the Manager is consistent with the financial statements; there is nothing to indicate that proper accounting records have not been kept or that the financial statements are not in agreement with those records; and we have received all the information and explanations which, to the best of our knowledge and belief, we require for our audit. Ernst & Young LLP Registered Auditor Edinburgh 17 June

26 Manager, Registrar and Administrator Jupiter Unit Trust Managers Limited 32 Tower View Kings Hill West Malling Kent ME19 4JA Tel: Fax: Registered Address: 1 Grosvenor Place, London SW1X 7JJ. Authorised and regulated by the Financial Services Authority. Trustee The Royal Bank of Scotland plc Trustee and Depositary Services Ground Floor 15 Bishopsgate London EC2P 2AP Authorised and regulated by the Financial Services Authority. Investment Adviser Jupiter Asset Management Limited 1 Grosvenor Place London SW1X 7JJ Authorised and regulated by the Financial Services Authority. Auditors Ernst & Young LLP Ten George Street Edinburgh EH2 2DZ It is the intention of Jupiter Unit Trust Managers Limited to make this Report & Accounts available on their website. The maintenance and integrity of the Jupiter Unit Trust Managers Limited website is the responsibility of the Directors; the work carried out by the auditors of the Jupiter Financial Opportunities Fund does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. 24

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28 LF026a (57502) Jupiter Unit Trust Managers Limited, PO Box 300, West Malling, Kent ME19 4YY Tel: Fax: Authorised and regulated by the Financial Services Authority whose address is 25 The North Colonnade, Canary Wharf, London E14 5HS