Final Results

JUPITER SECOND ENHANCED INCOME TRUST PLC Preliminary announcement of the audited results for the year ended 31st October 2007 CHAIRMAN'S STATEMENT I am pleased to report that your Company enjoyed another year of positive returns. The total assets less current liabilities of your Company rose by 7.2 per cent. during the year to 31st October 2007. By comparison the return on the Company's benchmark index, the FTSE All-Share, was 10.0 per cent (in capital terms). The Net Asset Value of the Company's Geared Income shares rose by 6.9 per cent. during the year under review. Taking the dividend payments into account, the Company provided Geared Income shareholders with a total return of 12.6 per cent., which compares with a total return on the FTSE All-Share Index of 13.9 per cent. over the same period. The Zero Dividend Preference shares saw an increase in their Net Asset Value of 7.5 per cent. over the year under review from 67.75p to 72.82p. The Zero Dividend Preference shares have also continued to attract a modest premium rating on the London Stock Exchange during the period relative to their accrued capital entitlement under the Company's Articles of Association. The Packaged Units are not geared by the Company's split capital structure since they each comprise one Geared Income share and one Zero Dividend Preference share. The return on the Net Asset Value of the Packaged Units was 7.2 per cent. over the period. Revenues and Dividends Revenues after tax for the period amounted to £2,625,000 (which compares with £2,412,000 in the previous financial year). As anticipated in the Interim Report, I am pleased to confirm that your Company has been able to increase the total dividend to 3.65p in the year under review from the 3.15p paid in respect of the year to 31st October 2006. This represents a 15.9 per cent. increase on last year and equates to a yield of 6.6 per cent. on the middle market price of the Geared Income shares of 55.0p as at 31st October 2007. It is hoped by your Board that the Company will be in a position to continue at least to maintain the dividend payments to shareholders year on year, subject to unforeseen circumstances. New Interim Management Statements Under the Listing Rules of the London Stock Exchange, all listed companies are now required to publish quarterly `Interim Management Statements' to shareholders. Your Company's statements will include a report from the Investment Manager; an updated Net Asset Value for the Company's shares together with historical performance statistics relative to the Company's benchmark index; a list of the Company's ten largest portfolio holdings; the level of gearing and details of any major investment changes which have taken place during the quarter under review. The Company's Interim Management Statements will be announced to the London Stock Exchange through the Regulatory News Service and will also be published on the Investment Manager's website, www.jupiteronline.co.uk. Much of this information is also included in the Company's monthly fact sheets, which are available by email or post on request from the Company Secretary. It is to be hoped that shareholders will find such information useful in monitoring their investment in the Company. Share Buy Back Powers At the AGM your Board is seeking to renew its powers to buy back shares for cancellation. This can be a useful tool for enhancing the Net Asset Value of the Geared Income shares and/or enhancing the cover on Zero Dividend Preference shares in certain circumstances. The repurchase of shares will only be undertaken after taking into consideration the interests of both classes of the Company's shares at the time that the opportunity arises. VAT Recovery Following a ruling by the European Court of Justice, HM Revenue and Customs has recently accepted that VAT will no longer be charged on investment management fees. For the Company it should also be possible to recover some of the VAT paid in the past on management fees. However, the amount repayable is subject to a number of legal and procedural considerations which currently are under review by the Directors. Approximately half of any recovery of VAT will be treated as distributable revenues, with the balance treated as a capital receipt which will be reflected in the Company's published net asset values when agreement has been reached on the amounts involved. The total amount recoverable is currently estimated at not less than 0.5p per Geared Income Share. Outlook I commend to you the Manager's Review, which outlines the performance of the Company's portfolio in some detail. The Company faces a difficult period where the increasing unavailability and cost of borrowing is likely to reduce economic growth rates in Western economies while creating volatility in bond and equity markets. Nevertheless, your Manager will continue to seek income where it is to be found. The Company is well placed to take opportunities in the market. Jimmy West Chairman 19th February 2008 MANAGER'S REVIEW The company has declared four interim dividends of 0.80p, 0.80p, 0.80p and 1.25p during the period under review, amounting to a total of 3.65p. This represents a satisfactory increase of over 15.9 per cent. on the dividend yield in the previous year which was obtained against increasingly difficult market conditions and a background of rising interest rates. Market Review During the period under review, equity and bond markets grew progressively more concerned with unacknowledged risks in that part of the credit market relating to subprime mortgages in the US along with the prospects for inflation and rising interest rates. These concerns were played out against a background of continuing strong global growth and, until June, vibrant private equity activity. The Bank of England increased rates from 5.0 per cent. at the beginning of the period to 5.75 per cent. at the end, citing a lack of spare capacity in the economy along with rising inflationary pressures. Although your Company performed reasonably well during the period under review relative to comparable investment companies, it nevertheless underperformed its benchmark, the FTSE All-Share Index. This can be attributed largely to its minimal exposure to mining stocks, the only sector to perform strongly in an otherwise dull or declining market. To put this in context, quality mining stocks accounted for over one third of the rise in the FTSE All-Share Index during the period and approaching one half (44 per cent.) of the rise in the FTSE 100 Index. Furthermore, these stocks offer some of the lowest dividend yields in the main market and are not ideal candidates for an income-generating portfolio. As the summer progressed, the extent to which loans had been securitised became apparent. In the three years to summer 2007, over 70 per cent. of US mortgages were securitised. Moral hazard was always likely to rise when lenders know that they are going to sell on their loans immediately. When these complex packaged loans were given comforting `AAA' credit ratings they proved irresistible to many investors. Rapid advances in credit markets had led investors to believe that risk was being more widely spread, whereas risk was actually being distorted and the true level of gearing disguised. Rising default rates for US subprime mortgages precipitated concerns over the credibility of the credit ratings given to securities backed by these assets. This soon fed through to a re-pricing of all asset-backed securities including those backed by credit card repayments and even high-quality, mortgage-backed securities in other countries including the UK. Banks soon had to decide whether to provide extra short-term liquidity to structured investment vehicles or bring the assets backing the paper back onto their own balance sheets. The extra demand for short-term liquidity meant that banks, in general, became reluctant to lend to each other. This pushed up short- term money market interest rates internationally. Stock markets experienced a degree of volatility not seen for over four years. Outlook Although central banks have moved to support financial markets in a number of ways, including cutting interest rates in the US and the UK (in December), interbank rates have remained much higher because of uncertainty about the possible scale and distribution of losses. The net effect has been that the real cost of borrowing for companies, homeowners and consumers has risen to its highest level for many years. The US consumer accounts for perhaps three-quarters of the US economy, which in turn accounts for 25-30 per cent. of world demand. With the US residential housing market likely to be flat (at best) and home equity harder to tap, the US consumer appears to have no alternative but to retrench with saving and spending funded in the old fashioned way, i.e. from income rather than asset prices. As a consequence, the world economy is likely to grow at its slowest rate for five years. That said, many of the wealthiest economies should be in a good position to cope with higher borrowing costs, higher fuel costs and moribund housing markets because companies remain highly profitable, unemployment remains low and world trade is buoyant. Set against this, the main risks remain the obvious ones: a greater than expected deterioration in housing markets, the inflationary impact of rising commodity prices and worsening turmoil in financial markets. Tighter credit conditions will continue to lead to a re- pricing of risk with the knock-on effect of greater volatility in equity markets. Central banks, however, are likely to take whatever steps are necessary to ensure there is no downturn in the world economy. Economic growth in the UK will be weaker too, although still reasonably robust. Nevertheless, it will take some time to work through the credit crunch. At the time of writing, we are still in the disclosure period where the market discovers the extent of bad debts and who holds them. The UK banks' annual reporting season starts in February and it seems reasonable to expect them to use this time to be clear about their positions, restore confidence and pave the way for a return to more normal lending conditions. Many of your Company's holdings are well positioned for further growth. For example, telecoms like BT and Vodafone offer attractive and growing dividend yields at a time when traditional higher dividend providers are having a tough time (banks) or are expensive (utilities). Transport companies like FirstGroup have a mix of businesses which remain economically robust. Intermediate Capital's ability to lend off its very strong balance sheet gives this mezzanine financier a strong competitive advantage now that credit markets have all but shut down, while elevated oil prices should benefit oil companies. We continue with our policy of holding companies with strong balance sheets. The good news is that the health of UK balance sheets is much better than it was in the early 1990s. We can expect moderate earnings growth and above inflation, single digit dividend growth next year. That is quite acceptable in an environment of weaker economic growth. Anthony Nutt Fund Manager Jupiter Asset Management Limited 19th February 2008 INCOME STATEMENT for the year ended 31st October 2007 Year ended Year ended 31st October 2007 31st October 2006 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Realised gains on investments held at fair value through profit and loss - 7,180 7,180 - 5,405 5,405 Unrealised appreciation of investments held at fair value through profit and loss - (1,718) (1,718) - 8,496 8,496 Income 3,861 - 3,861 3,558 - 3,558 ______ ______ ______ ______ ______ ______ Gross return 3,861 5,462 9,323 3,558 13,901 17,459 Investment management fee (846) - (846) (797) - (797) Investment performance fee - - - - (1,651) (1,651) Other expenses (369) - (369) (348) - (348) ______ ______ ______ ______ ______ ______ Net return on ordinary activities before finance costs and taxation 2,646 5,462 8,108 2,413 12,250 14,663 Finance costs (1) (3,187) (3,188) (1) (2,966) (2,967) ______ ______ ______ ______ ______ ______ Net return on ordinary activities before taxation 2,645 2,275 4,920 2,412 9,284 11,696 Tax on ordinary activities (20) - (20) - - - ______ ______ ______ ______ ______ ______ Net return on ordinary activities after tax 2,625 2,275 4,900 2,412 9,284 11,696 ====== ====== ====== ====== ====== ====== Net return per Geared Income share 4.18p 3.62p 7.80p 3.84p 14.78p 18.62p ====== ====== ====== ====== ====== ====== The total column of this statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period. A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement. BALANCE SHEET at 31st October 2007 2007 2006 £'000 £'000 Fixed asset investments Investments at fair value through profit and loss 83,672 80,783 ______ ______ Current assets Debtors 297 216 Cash at bank 4,616 3,282 ______ ______ 4,913 3,498 Creditors: amounts falling due within one year (276) (1,891) ______ ______ Net current assets 4,637 1,607 ______ ______ Total assets less current liabilities 88,309 82,390 Creditors: amounts falling due after more than one year Zero Dividend Preference shares (45,749) (42,562) _______ _______ Total net assets 42,560 39,828 _______ _______ Capital and reserves 628 628 Called up share capital Share premium 3,141 3,141 Special reserve 21,681 21,681 Capital reserve - realised 3,841 (152) Capital reserve - unrealised 11,609 13,327 Revenue reserve 1,660 1,203 ______ ______ Total shareholders' funds 42,560 39,828 ===== ===== Net Asset Value per Geared Income share 67.75p 63.40p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 31st October 2007 Capital Capital Share Share Special Reserve Reserve Revenue Capital Premium Reserve Realised Unrealised Reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 For the year ended 31st October 2007 Balance at 1st November 628 3,141 21,681 (152) 13,327 1,203 39,828 2006 Net profit for the year - - - 3,993 (1,718) 2,625 4,900 Dividends paid and declared 4th interim dividend for - - - - - (660) (660) period ended 31st October 2006 1st interim dividend for - - - - - (503) (503) year ended 31st October 2007 2nd interim dividend for - - - - - (503) (503) year ended 31st October 2007 3rd interim dividend for - - - - - (502) (502) year ended 31st October 2007 ______ _____ _____ ______ ______ _______ _____ Balance at 31st October 628 3,141 21,681 3,841 11,609 1,660 42,560 2007 ______ _____ _____ ______ ______ _______ _____ For the year ended 31st October 2006 Balance at 1st November 628 3,141 21,681 (940) 4,831 550 29,891 2005 Net profit for the year - - - 788 8,496 2,412 11,696 Dividends paid and declared 4th interim dividend for - - - - - (440) (440) period ended 31st October 2005 1st interim dividend for - - - - - (377) (377) year ended 31st October 2006 2nd interim dividend for - - - - - (471) (471) year ended 31st October 2006 3rd interim dividend for - - - - - (471) (471) year ended 31st October 2006 ______ _____ _____ ______ ______ _______ _____ Balance at 31st October 628 3,141 21,681 (152) 13,327 1,203 39,828 2006 ______ _____ _____ ______ ______ _______ _____ CASH FLOW STATEMENT for the year ended 31st October 2007 2007 2006 £'000 £'000 £'000 £'000 Operating activities Net cash inflow from operating activities 954 1,797 Servicing of finance Interest paid (1) (1) Taxation Net tax paid (24) (1) _______ _______ Capital expenditure and financial investment 929 1,795 Purchase of investments (31,843) (23,372) Sale of investments 34,416 25,111 _______ _______ Net cash inflow from capital expenditure and 2,573 1,739 financial investment Equity dividends paid (2,168) (1,759) _______ _______ Net cash inflow before financing 1,334 1,775 Financing Cost of share issue - (37) _______ _______ Net cash outflow from financing - (37) _______ _______ Increase in cash 1,334 1,738 NOTES: 1. Income 2007 2006 £'000 £'000 Income from investments UK dividend income (net) 3,333 3,274 Dividends from overseas companies 271 89 Bond interest 95 108 _______ _______ 3,699 3,471 Other income Deposit interest 162 69 Underwriting commission - 18 _______ _______ Total income 3,861 3,558 ====== ====== Total income comprises: Dividends 3,604 3,363 Interest 257 177 Other income - 18 _______ _______ 3,861 3,558 ====== ====== Income from investments Listed in the UK 3,656 3,438 Listed overseas 43 33 _______ _______ 3,699 3,471 ====== ====== 2. Reconciliation of operating profit to net cash inflow from operating activities 31st October 2007 31st October 2006 £'000 £'000 Net income before finance costs and taxation 8,108 14,663 Gains on investments (5,462) (13,901) Increase in prepayments and accrued income (77) (82) (Decrease)/increase in accruals and other (1,615) 1,117 creditors ______ ______ 954 1,797 3. Analysis of changes in net funds 1st November 2006 Cashflow Non cash 31st October movements 2007 £'000 £'000 £'000 £'000 Cash at bank 3,282 1,334 - 4,616 Zero Dividend Preference liability (42,562) - (3,187) (45,749) _______ _______ _______ _______ (39,280) 1,334 (3,187) (41,133) ====== ====== ====== ====== Reconciliation of net cash flow to movement in net funds 2007 2006 £'000 £'000 Increase in cash for the year 1,334 1,738 Net debt at beginning of year (39,280) (38,052) Increase in Zero Dividend Preference liability (3,187) (2,966) ______ _____ Net debt at end of year 41,133 (39,280) The preliminary announcement is prepared on the same basis as set out in the statutory accounts of the year ended 31st October 2007 and was approved by the Board of Directors on 19th February 2008. The above financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. Statutory accounts for the year ended 31st October 2006 have been delivered to the Registrar of Companies. The auditors report on those accounts was unqualified and did not contain statements under S237(2) or (3) of the Companies Act 1985. Statutory accounts for the year ended 31st October 2007 including an unqualified audit report and containing no statements under S237(2) or (3) of the Companies Act 1985 will be delivered to the Registrar of Companies in due course. The annual report will be sent to all registered shareholders and copies may be obtained 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 Pavry Jupiter Asset Management Limited 020 7412 0703 Jenny Thompson Jupiter Asset Management Limited 020 7314 5565

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