Jupiter Second Split has announced its interim results. Over the six months to the end of April 2014, the value of its portfolio was barely changed – off by 0.1%. As the zero dividend preference share NAV grew, so the net asset value of the geared ordinary shares fell – by 8.3% during this six month period. The statement explains this as follows “The effect of gearing is that in rising markets the asset value of the geared ordinary shares benefits from any outperformance of the Company’s investment portfolio over and above the cost of the fixed entitlements of the Company’s Zero Dividend Preference shares. Conversely, when the Company’s total assets fall, the Geared Ordinary shares suffer to the extent of any shortfall between the return on the Company’s investment portfolio and the cost of the fixed entitlements of the Company’s Zero Dividend Preference shares” but the problem the geared ordinary shareholders have had is that markets have risen but the asset value has not.
Miles Geldard’s manager’s report says the portfolio started off with (by implication) too much cash, lost money to dealing costs, made money by shorting the Australian dollar and the South Africa rand, lost money by being long Japanese equities, lost money by being short US, UK, French and Italian bonds, but made money by being short US small cap. and long US large cap. The manager says he thinks equities look attractive relative to bonds but had a net 59% of the fund in bonds and just 9% in equities at the end of April. He has shorted the pound vs. the US dollar as he thinks the US recovery is more deep rooted than the UK one. This trade has lost money so far and only has a few months left to pay off.
The zeros are repayable at the end of October. the Board say reconstruction proposals may be put to shareholders of Jupiter Second Split in advance of this but they will be offered an exit for cash.