The Jupiter Global Fund - Jupiter Asset Management

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the jupiter global fund Jupiter New Europe ■■Jupiter New Europe Schedule of Investments as at 30 September 2012 (continued) Quantity Description Fair Value € Fair Value as a Percentage of Net Assets % Transferable securities and money market instruments admitted to an official exchange listing Equities Turkey 10,044,601 18.41 315,000 Enka Insaat 627,393 1.15 1,210,000 Garanti Bankasi 3,969,693 7.28 600,000 KOC Holding 1,859,804 3.41 220,000 Tofas Turk Otomobil Fabrikasi 859,286 1.57 125,000 Turkiye Halk Bankasi 753,093 1.38 490,000 Turkiye IS Bankasi ‘C’ 1,206,199 2.21 232,000 Ulker Biskuvi Sanayi 769,133 1.41 Total Equities 53,324,091 97.74 Total transferable securities and money market instruments admitted to an official exchange listing 53,324,091 97.74 Other Net Assets 1,233,876 2.26 Net Assets 54,557,967 100.00 The accompanying notes form an integral part of these financial statements. 60
the jupiter global fund Jupiter India Select ■■Jupiter India Select Review of Portfolio as at 30 September 2012 Performance NAV 30.09.12 30.09.11 % Change Class L US Dollar Shares USD 122.66 USD 124.97 (1.85)% Class L Euro Shares EUR 9.87 EUR 9.63 2.49% Class L Sterling Shares GBP 9.36 GBP 9.90 (5.45)% Market Review At the start of the period under review, global risk aversion undermined emerging market performance, affecting India badly. Poor domestic economic figures relating to weakening growth and inflation added to the country’s woes and political wrangling compounded pressure on the market. As 2012 arrived, both the Indian equity market and the rupee staged strong rallies. The central bank signalled a more accommodative stance through liquidity measures which included the relaxation of the cash reserve ratio from 6.0% to 5.5%, a move which it was hoped would encourage greater lending. The start of the second quarter bore witness to an unexpected move by the central bank, namely a 50 basis point cut in interest rates. However, the impact of the cut was overshadowed by S&P’s decision the same month to downgrade India’s sovereign rating outlook from ‘stable’ to ‘negative’. Indian equities continued to fall in May on the back of pervasive negative sentiment arising from the ongoing eurozone crisis, weaker numbers from the US and China and disappointing domestic economic data and average market returns over the summer period were negligible. August saw good rains throughout the country and a return to normal historical levels for the monsoon which was delayed earlier this year. The Indian government commenced a feverish bout of policymaking in early September, opening up the retail and aviation sectors to foreign investors and reducing diesel subsidies. Key decisions were also taken regarding pension and insurance reform. This precipitated a significant rally in Indian equities, lifting many of the stocks held in the portfolio, which outperformed for the month. Policy Review For the year to 30 September 2012, the Fund returned -1.8%, compared to 7.5% for its benchmark, the MSCI India index in US dollar terms. In terms of sectors, our overweight position in consumer goods detracted from performance and stock-wise, HSIL and Opto Circuits made poor returns. The latter – a manufacturer of medical monitoring equipment and stents suffered a share-price correction of almost 18% in August due to a negative credit rating on one of its debt lines. The management team is taking steps to decrease the company’s high level of working capital and is setting up new manufacturing facilities in Malaysia. However we are confident that the company does not have cash flow problems and is well placed to enjoy strong growth going forward. Conditions have been extremely challenging for investors in India in the past year. In our view, however, the relatively poor performance of the equity market for the majority of period under review belies the corporate health of many of India’s companies, most of which published decent results at the end of the first half of 2012. Sectors have suffered across the board: there has been no ‘safe place’ to hide, but our insistence on being underweight in Basic Materials, Technology and Oil & Gas paid some dividends. Our preference for investing in small cap companies detracted from the Fund’s performance in the year under review but we will be maintaining these positions as the underlying fundamentals are still compelling and we are confident that, in the longer term, these holdings will make good returns for the Fund as they have done before. Investment Outlook After a lengthy period of inactivity, the Indian government has finally started to enact much-needed reforms. Markets have reacted positively to the changes, which have included opening up both the multi-brand retail and the airline sectors to foreign direct investment. The government has also increased diesel prices and capped LPG subsidies, all of which should ease the fiscal deficit. A decision on the scrapping of short-term capital gains tax on stocks is imminent and, if approved, will have a hugely positive impact on the market. The ruling party does not have a political majority but in our view this does not present a problem because the opposition is too fragmented to rock the boat. A coalition partner withdrew after the government began implementing reforms and it is possible that they may issue a vote of no confidence when Parliament reconvenes in November but in our view that will only hasten the pace of reform in the preceding period. It is important to keep in mind that although India is relatively insulated from major events on the global economic scene, its fate is still linked to the global investment climate and investor sentiment but we are feeling more optimistic than we were a few months ago as we see these policy reforms as concrete steps to tackle the deficit reduction and improve the investment climate. Avinash Vazirani 30 October 2012 61
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