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Jupiter EmergingFrnt (JEFI)

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Friday 11 January, 2019

Jupiter EmergingFrnt

Annual Results

RNS Number : 9173M
Jupiter Emerging & Frontier Inc.Tst
11 January 2019

Jupiter Emerging & Frontier Income Trust plc (the 'Company')

Legal Entity Identifier: 213800RLXLM87NO26S30


Annual Results for the period to 15 May 2017 to 30 September 2018 (Audited)



This announcement contains regulated information


Financial Highlights


Capital Performance



30 September



Total assets less current liabilities (£'000)




Ordinary Share Performance





30 September

15 May






Net asset value (pence)/Issue price (pence)




Net asset value total return with dividends added back




(pence)/Issue price (pence)*




Middle market price (pence)/Issue price (pence)




MSCI Emerging Markets Index (Net Total Return) in Sterling




Premium to net asset value (%)*




Total dividends declared and paid during the period (pence)




Ongoing charges figure (%) excluding finance costs*








*Alternative performance measure






Chairman's Statement


I am pleased to present the first report and audited accounts for Jupiter Emerging & Frontier Income Trust PLC (the "Company"). This covers the period since launch on 15 May 2017 to 30 September 2018, reflecting the decision taken at flotation to select an initial accounting period significantly longer than 12 months. As at 30 September 2018 the Company had investments of £101.5 million and net assets attributable to shareholders of £91.5 million.


For the first portion of the period under review global stock markets rose, sitting at near record levels towards the end of 2017, aided by tax reforms in the United States. 2018 has, however, been a different story, with world markets displaying signs of nervousness, reflecting in part geo-political tensions and, perhaps, a feeling that after an extended bull run all good things have to come to an end. Your Company has little direct exposure to the technology sector and the 'gig economy', but to adapt a phrase which has been employed to explain the interlinkage of world capital markets "When Apple and Amazon sneeze, the world catches a cold". Thus the stocks in which the Company invests suffered as concerns about excessive valuations in the developed world led to a widespread sell-off in emerging markets generally. Yet, as our Investment Adviser describes in more detail, most of the companies in which we invest continue to perform well and the stream of dividends we receive is in line with our expectations.


Our investment performance

During the period under review the Company's share price and NAV (with dividends added back) returned 3.0% and 2.3%, respectively. This compares with a total return of 6.6% for our benchmark, the MSCI Emerging Markets Index. Although we do not attempt in any way to track our benchmark, we accept this is a somewhat underwhelming result for our first reporting period and reflects in the main the very challenging circumstances which have confronted the markets in which we invest during recent months.


As at 30 September 2018 the Net Asset Value per share was 98p, a 1.7% decrease since launch, and the middle market price per share on the London Stock Exchange was 99p, representing a premium to net asset value of 1%.


Your Company's recent performance is considered in more detail by our portfolio managers, Ross Teverson and Charlie Sunnucks, in their Investment Adviser's report.



Gearing is defined as the ratio of a company's debt less cash held compared to its equity capital, expressed as a percentage. The effect of gearing is that, in rising markets, the company tends to benefit from any growth of the Company's investment portfolio above the cost of payment of the prior ranking entitlements of any lenders and other creditors. Conversely, in falling markets the company suffers more if its investment portfolio underperforms the cost of those prior entitlements.


The Company currently has access to a flexible loan facility with Scotiabank Europe plc for amounts up to £20 million. The ability to borrow in this way is seen as a clear advantage enjoyed by investment trusts as compared with open ended investment vehicles such as unit trusts. As at 30 September 2018 the Company's net gearing level, being the amount of drawn down bank debt, less the cash held on the balance sheet, was 11%.


The Board of Directors ('the Board') reviews the Company's gearing on a regular basis. The current maximum has been set at 20% of the Company's Net Asset Value (calculated at the time of borrowing) and we encourage the Investment Adviser to use the gearing facility and the Company's cash reserves in order to enhance returns for shareholders.



The Board's policy is to pay a semi-annual dividend in June and December of each year. A total of 4 pence in two interim dividends of 2 pence each have been paid to date and we have declared a third interim dividend, payable on 18 January 2019, of 2.2 pence a share, exceeding the projections set out in the Company's prospectus last year, which envisaged a total dividend of 6 pence for our first reporting period. These distributions have been fully covered by earnings.


Discount and premium management

The Company's total asset base is currently at the lower end of the minimum size preferred by many institutional and wealth management investors. The Board and the Investment Adviser are committed to growing the Company over time. Our shares have traded since launch predominantly at a small premium to net asset value and this has enabled us to undertake a number of small secondary issues. Market conditions have not, in the opinion of the Board, been conducive to a major capital raising exercise, albeit this remains our longer term goal.


The Board remains committed to its stated policy of using share buybacks and new issues of shares with the intention of ensuring that, in normal market conditions, the market price of the Company's shares will track close to their underlying Net Asset Value. The Board continues to believe that this commitment to the active management of discount and premium will provide materially improved liquidity for both buyers and sellers of the Company's shares.


During the period under review the Company has issued a total of 3.1 million shares through its ongoing placing programme. At the annual redemption point in June there were no redemption requests in relation to shares by means of placing those shares with other buyers in the market.


PRIIPS key information documents

We are required by EU regulations introduced at the beginning of 2018 to provide investors with a key information document ("KID") which includes performance projections which are the product of prescribed calculations based on the Company's past performance. Whilst the content and format of the KID cannot be amended under the applicable EU regulations, the Board is one of many voices that makes no secret of its view that these projections are neither an appropriate nor a helpful way to assess the Company's prospects. For those shareholders interested to learn more on this issue, I refer them to an excellent article published by our industry association, the AIC, under the title "Burn before reading".


We continue to steer shareholders in the direction of the comprehensive information set out in these final accounts, along with the monthly fact sheets and daily net asset value announcements. Together with a link to Ed Marten's third party research coverage of the Company, these documents are published at


Annual General Meeting

The Company's Annual General Meeting will be held on Wednesday, 27 February 2019 at 11:30 a.m. at the offices of Jupiter Asset Management Limited, The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ.


In addition to the formal business, the Fund Manager will provide a short presentation to shareholders on the performance of the Company over the past year as well as an outlook for the future. The Board would welcome your attendance at the Annual General Meeting as it provides shareholders with an opportunity to ask questions of the Board and Investment Adviser.



Our portfolio managers' approach is to concentrate on identifying companies enjoying positive change that is under-appreciated by the market, as distinct from being driven by macro-economic considerations.


The current volatility of world markets has highlighted the importance of being selective and our managers have already shown themselves to be adept at identifying suitable investment opportunities. As I have said before, the Board has great confidence in the Investment Adviser's ability to navigate its way through the choppy waters currently presented by emerging and frontier markets. All of the directors continue to be significant shareholders in the Company and, in addition to our undertaking to invest all of our first two years' net earnings in the Company's shares, we have been purchasing in excess of that commitment, reflecting our faith in the Company and its investment strategy.


John Scott


11 January 2019



Investment Adviser's Review


Market review

Over the period, the MSCI Emerging Markets Index returned 6.6% in sterling terms. MSCI country benchmark returns for key markets were as follows: China +16.5%; India +2.3%; Brazil -9.2%; and Russia +21.5%.


Emerging Market equities broadly throughout most of 2017 and beginning of 2018 performed strongly, with a rally largely led by Chinese stocks. These gains were subsequently given up, as concerns over rising US-China trade tensions, Russian sanctions and the potential impact of higher US interest rates weighed on valuations. In addition, there has been a relatively high degree of political uncertainty over the period, with recent national elections in Turkey, Mexico, Columbia, Pakistan, Brazil and upcoming elections in India, Sri Lanka and Nigeria, all creating further volatility.


In terms of sector performance, firms positively exposed to energy and materials have led the market. The outperformance of these sectors reflects what has broadly been a continued recovery in the price of commodities. Collectively, the fund has 9.0% invested across these two sectors, relative to its index 16% weight. As these areas of the market are typically more exposed to cyclical variation than fundamental change, the fund's exposure will likely remain limited.



Over the period, the portfolio delivered a NAV total return (including the two 2p dividends paid) of 2.3% (using the launch price of 100p as a base), while the trust delivered a total price return of +3.0% - both figures lagged the MSCI Emerging Markets benchmark (+6.6%).


The weaker than benchmark performance has largely been due to several headwinds. Notably, the weak performance of emerging market small caps and frontier markets; returning only +1.0% and +1.2% respectively. While the return from these areas of the market has been disappointing over recent history, we continue to believe that some of the most attractive bottom-up opportunities globally are within these areas. Moreover, investing beyond emerging market large caps provides scope to deliver greater geographical and sector diversification; a characteristic which should over time deliver lower levels of volatility.


In terms of individual stock performance, return dispersion has been high. Chroma ATE has been the most material positive contributor to returns. The Taiwanese electronics company sells into a diverse range of industries including semiconductors, electronic vehicle batteries, solar, LED and 3D sensors. Chroma's strong share price performance has been driven by better-than-expected earnings and positive management guidance.


Other positive contributors included Salmones Camanchaca, a Chilean Salmon producer. The firm has recently invested in a number of projects, which in our view will deliver an attractive return on investment. Moreover, the firm's low level of leverage provides it flexibility to invest into further new projects, and there is scope for organic growth as management improve the efficiency of existing facilities.


The trust's holding in Cambodian entertainment and gaming operator NagaCorp also performed well over the period. The company is based in the capital - Phnom Phen, but only caters to foreign tourists, (mostly from South East Asia and China). Structurally the business continues to benefit from rising tourism in Cambodia, a trend supported by increasing direct flight routes into Chinese cities. Moreover, at a company level, rising utilisation at Naga 2 (a recent extension) and renovation within Naga 1 mean that there is still scope for further organic growth.


The position that most materially detracted from performance was Ascendis Health in South Africa. The firm is a company that has made several European acquisitions in recent years and we believe these acquisitions will generate significant value for Ascendis shareholders over time. However, the Steinhoff scandal, which bears no relation to Ascendis at all, has made domestic South African investors highly sceptical of any company making overseas acquisitions. As such, the stock has undergone a derating, which we view as temporary and unjustified.


Another detractor was Bizlink, a Taiwan based wire-harness producer. The firm is a beneficiary from a structural rise of electric vehicle demand, with clients including Tesla. The significant decline in the share price has been a combination of Tesla supply chain concerns and margin pressure due to a rise in operating expenditure not matched by sales growth during one quarter. We have continued to communicate with management and believe that the investment case remains attractive, which should be better reflected in the valuation as the company delivers on earnings growth.



During the period there have been a number of position changes within the portfolio. These include exiting the position in State Bank India (SBI), and investing in Pakistan bank UBL; as well as exiting Dali Foods and investing in Bestway International.


UBL was added to the portfolio after a period of share price weakness created an attractive opportunity to establish a position in a business that is well-positioned to benefit from positive structural change in the Pakistan banking sector. Relative to other emerging markets, the penetration of financial services remains low in Pakistan, but this is beginning to change, as policy makers are targeting a higher level of financial inclusion. UBL stands out amongst Pakistani banks in that its superior scale, combined with a strong management team, have supported a level of profitability comfortably in excess of its cost of equity. Its strong balance sheet allows the bank to pay substantial dividends while, at the same time, also growing its loan book. The experience of more mature markets, such as Indonesia, suggest that a combination of good structural growth prospects and a strongly profitable banking franchise can deliver high returns over time, as a market develops. The position was part financed by exiting State Bank of India, as we are keen to manage the overall fund exposure to banks, and relative to SBI we had more confidence in the investment case of UBL.


The other new position - Bestway Global - produces outdoor inflatable leisure products, (inflatable jacuzzi, inflatable paddle boards, inflatable swimming pools). The firm's market continues to grow, supported by new application development for inflatable products and fast rising demand in Asia. Moreover, within this market Bestway operates in a duopoly, where scale benefits make it highly competitive and their earnings growth is supplemented by an expanding margin delivered by positive product mix change. At the time of investment, the firm's share price had materially sold off due to Chinese trade relationship concerns. However, as nearly all global manufacturing of inflatable leisure products is within China, any future tariff on these products would have a very limited effect on the firm's outlook given the lack of alternative sourcing globally. The position was partly funded by the exit of Dali Foods. Dali is a Chinese snack and beverage brand/producer, and its strong relative stock price had lifted the valuation beyond where we felt change was meaningfully underappreciated. Additionally, the trust seeks to diversify single country exposure, and selecting Dali as a source of funds has meant that that the overall China weight within the fund remains balanced.



The recent sharp falls in the Argentinian peso and Turkish lira, and the knock-on effect on other emerging market currencies, have spooked markets. Importantly, however, we have always sought to avoid companies with a foreign exchange debt mismatch, meaning they have borrowed in US dollars but receive revenue in their local currency. The fundamental strength of the companies in the portfolio remains, in our view, as sound as they were before the current turmoil.


The last few months have been painful for the fund and its investors. Global economic factors have had a significant impact on emerging market returns this year; however, these factors are often difficult if not impossible to predict. We believe our expertise lies in finding opportunities where an element of change is underappreciated by the market, but during periods where the market is preoccupied with bigger picture concerns, such fundamental stock characteristics will often continue to go overlooked.


When we look at emerging markets from the bottom-up we don't have any difficulty in finding interesting opportunities and stocks are having to compete to get into the portfolio. We therefore remain comfortable maintaining around 10% gearing in the trust - a level which we have described to our investors as a "typical" level of gearing and one which we feel is appropriate unless valuations become either stretched (at which point we would reduce gearing) or depressed (at which point we would consider up to 20% gearing).


The recent market volatility has highlighted the importance of being selective when seeking out investment opportunities. Some large companies, most notably those that are widely perceived to be high quality, continue to be very highly valued by the market, even after the recent falls. This is one of the reasons that our approach places an emphasis on medium-sized and smaller companies, where we believe some of the best long-term opportunities can be found. The companies we invest in have generally delivered strong earnings growth and, given the recent fall in markets, share price valuations now looking compelling to us both in a historical context and relative to developed markets.


Ross Teverson and Charles Sunnucks

Fund Managers

Jupiter Asset Management Limited

Investment Adviser

11 January 2019



List of Investments as at 30 September 2018




30 September 2018










Country of Listing



Corp Inmobiliaria Vesta




NWS Holdings

Hong Kong



Samsung Electronics Preference




Wilson Sons, BDR




Grit Real Estate Income Group





Hong Kong



MMC Norilsk Nickel, ADR




Sberbank of Russia Preference








Hindustan Petroleum




Moneta Money Bank

Czech Republic



Itau Unibanco Holding




Ginko International




Taiwan Semiconductor Manufacturing




Chroma ATE




Saudi Telecom (Merrill Lynch) warrant 12/02/2020




Air Arabia

United Arab Emirates



Hyundai Motor Preference








Sands China

Hong Kong



LSR Group, GDR




Emaar Malls

United Arab Emirates



Almacenes Exito








SEPLAT Petroleum Development




Access Bank




Hon Hai Precision Industry




NetEase, ADR

Hong Kong



Detsky Mir




Salmones Camanchaca




Huayu Automotive Systems (HSBC) warrant





United Kingdom



Merida Industry




MTN Group

South Africa



United Bank




Pico Far East Holdings

Hong Kong



Hollysys Automation Technologies

Virgin Islands, British



Bizlink Holdings




Vietnam Dairy Products (HSBC) warrant





United Kingdom



Bank of Georgia Group

United Kingdom



Jaya Real Property




John Keells Holdings

Sri Lanka



Pavilion Real Estate Investment Trust1




Ascendis Health

South Africa



Sphera Franchise Group




Indus Motor




Anadolu Hayat Emeklilik




Bestway Global

Hong Kong











1 Listed closed-ended investment company.






Cross Holdings in other Investment Companies

As at 30 September 2018, 1.3% of the Company's total assets were invested in the securities of other listed closed-ended investment companies.


It is the Company's stated policy that its exposure to other closed-ended listed investment companies should not be permitted to exceed 10% of total assets.



Strategic Report


Strategic Review

The Strategic Report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.


The Strategic Report seeks to provide shareholders with the relevant information to enable them to assess the performance of the Directors of the Company during the period under review.


Business and Status

During the period 15 May 2017 to 30 September 2018 the Company carried on business as an investment trust with its principal activity being portfolio investment. The Company has been approved by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the eligibility conditions of sections 1158 and 1159 of the Corporation Tax Act 2010 ('CTA 2010') and the ongoing requirements for approved companies as detailed in Chapter 3 of Part 2 of the Investment Trust (Approved Company) (Tax) Regulations 2011.


In the opinion of the Directors, the Company has conducted its affairs in the appropriate manner to retain its status as an investment trust.


The Company is an investment company within the meaning of section 833 of the Companies Act 2006.


The Company is not a close company within the meaning of the provisions of the CTA 2010 and has no employees.


The Company was incorporated in England & Wales on 4 April 2017.


Reviews of the Company's activities are included in the Chairman's Statement and Investment Adviser's Review.


There has been no significant change in the activities of the Company during the period to 30 September 2018 and the Directors anticipate that the Company will continue to operate in the same manner during the current financial year.


Investment Objective

The Company's investment objective is to achieve capital growth and income, both over the long term, through investment predominantly in companies exposed directly or indirectly to Emerging Markets and Frontier Markets worldwide.


Investment Policy

The Company will invest at least 70% of Total Assets in companies that, at the time of investment, have their registered offices or principal places of business in Emerging Markets or Frontier Markets, or which exercise a material part of their economic activities in Emerging Markets and/or Frontier Markets, and which are considered by the Investment Manager to be undervalued or otherwise to offer good prospects for capital growth.


The Company may invest up to 25% of Total Assets in companies that, at the time of investment, have their registered offices or principal places of business in, or which exercise a material part of their economic activities in, Frontier Markets (calculated at the time of investment).


The Company may invest up to 5% of Total Assets in unquoted companies (calculated at the time of investment).


The Company will invest no more than 10% of Total Assets in any single holding (calculated at the time of investment).


Investment Restrictions

The Company will at all times invest and manage its assets with the objective of spreading risk in accordance with its published investment policy.


The Company will not invest more than 10% of its Total Assets in other listed closed ended investment funds (as defined in the Listing Rules).


Benchmark Index

The Company's benchmark index is the MSCI Emerging Markets Index (Total Return) in sterling.



Gearing is defined as the ratio of a company's debt less cash held compared to its equity capital, expressed as a percentage. The effect of gearing is that, in rising markets, the Company tends to benefit from any growth of the Company's investment portfolio above the cost of payment of the prior ranking entitlements of any lenders and other creditors. Conversely, in falling markets the Company suffers more if it's investment portfolio underperforms the cost of those prior entitlements.


The Company may deploy gearing of up to 20% of Net Asset Value (calculated at the time of borrowing) to seek to enhance longterm capital growth and income returns and for the purpose of capital flexibility. The Company's gearing is expected to primarily comprise bank borrowings but may include the use of derivative instruments and such other methods as the Board may determine.


Loan Facility

In order to improve the potential for capital returns to shareholders the Company has, with effect from 5 July 2017, negotiated a flexible loan facility with Scotiabank (Ireland) Designated Activity Company ('Scotiabank') for up to £20 million.


The ability to borrow in this way is seen as a clear advantage enjoyed by investment trusts as compared with open ended investment vehicles such as unit trusts.


The Directors consider it a priority that the Company's level of gearing should be maintained at appropriate levels with sufficient flexibility to enable the Company to adapt at short notice to changes in market conditions. The Board reviews the Company's level of gearing on a regular basis.


Use of Derivatives

The Company may invest in derivative financial instruments comprising options, futures and contracts for difference for investment, hedging and efficient portfolio management, as more fully described in the investment policy. There is a risk that the use of such instruments will not achieve the goals desired. Also, the use of swaps, contracts for difference and other derivative contracts entered into by private agreements may create a counterparty risk for the Company. This risk is mitigated by the fact that the counterparties must be institutions subject to prudential supervision and that the counterparty risk on a single entity must be limited in accordance with the individual restrictions.


Currency Hedging

The Company's accounts are maintained in Sterling while investments and revenues are likely to be denominated and quoted in currencies other than Sterling. Although it is not the Company's present intention to do so, the Company may, where appropriate and economic to do so, employ a policy of hedging against fluctuations in the rate of exchange between Sterling and other currencies in which its investments are denominated.


Dividend Policy

The Company will target an annualised dividend yield of a minimum of 4% at launch (based on the Issue Price). Due to the flexibility afforded by the investment trust structure, the Company will have the scope to build a revenue reserve, potentially allowing for progressive dividend payments. It is intended that the Company will build up revenue reserves over time so as to enable the Board to smooth the level of future interim dividend payments where practicable. However, in accordance with regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011, the Company will not (except to the extent permitted by those regulations) retain more than 15% of its income (as calculated for UK tax purposes) in respect of an accounting period.


Annual Redemption Facility

The Company has a redemption facility through which Shareholders will be entitled to request the redemption of all or part of their holding of Ordinary Shares as at 30 June on an annual basis. The Board have absolute discretion to operate the annual redemption facility on any given Redemption Point and to accept or decline in whole or part any Redemption Request.


Key Performance Indicators

At their quarterly Board meetings the Directors consider a number of performance indicators to help assess the Company's success in achieving its objectives. The key performance indicators used to measure the performance of the Company over time are as follows:


·      Net Asset Value changes;

·      The premium or discount of share price to Net Asset Value over time;

·      A comparison of the absolute and relative performance of the Ordinary share price and the Net Asset Value per share relative to the return on the Company's Benchmark Index and of our peers; and

·      Ordinary Share price movement.


Share Capital

The Board has authority to issue up to 200 million Ordinary Shares and/or C Shares in aggregate in the period from First Admission until the first annual general meeting ('AGM') of the Company. Shareholders' preemption rights over this unissued share capital have been disapplied so that the Board will not be obliged to offer any new Ordinary Shares or C Shares to Shareholders on a pro rata basis. No Ordinary Shares will be issued at a price less than the (cum-income) Net Asset Value per existing Ordinary Share at the time of their issue. C Shares (if any) issued pursuant to this authority will be issued at £1.00 per C Share.


Investors should note that the issuance of new Ordinary Shares and/or C Shares is entirely at the discretion of the Board, and no expectation or reliance should be placed on such discretion being exercised on any one or more occasions or as to the proportion of new Ordinary Shares and/or C Shares that may be issued.


90 million Ordinary Shares were issued on initial offering on 15 May 2017. A further 3,093,000 Ordinary Shares have been issued during the period post launch 15 May 2017 to 30 September 2018. As at 30 September 2018, the Company's issued share capital is 93,093,000 Ordinary Shares.


No C shares were issued between the period 15 May 2017 and 30 September 2018.


Discount management

The Company may seek to address any significant discount to NAV at which its Ordinary Shares may be trading by purchasing its own Ordinary Shares in the market on an ad hoc basis.


The Board has the authority to make market purchases of up to 14.99% of the Ordinary Shares in issue on First Admission.


The initial authority to make market purchases expires on the earlier of the conclusion of the first AGM of the Company and the date 18 months after the date on which the resolution was passed. It is intended that a renewal will be sought from Shareholders at each AGM of the Company. Purchases of Ordinary Shares will be made within guidelines established from time to time by the Board. Any purchase of Ordinary Shares would be made only out of the available cash resources of the Company. Ordinary Shares purchased by the Company may be held in treasury or cancelled.


Under the Listing Rules, the maximum price that may currently be paid by the Company on the repurchase of any Ordinary Shares is 105% of the average of the middle market quotations for the Ordinary shares for the five business days immediately preceding the date of repurchase. The minimum price will be the nominal value of the Ordinary shares. The Board is proposing that its authority to repurchase up to approximately 14.99% of its issued share capital be renewed at the AGM. The new authority to repurchase will last until the conclusion of the AGM of the Company in 2020 (unless renewed earlier). Any repurchase made will be at the discretion of the Board in light of prevailing market conditions and within guidelines set from time to time by the Board, the Companies Act, the Listing Rules and the Market Abuse Regulation.


No Ordinary Shares were bought back during the period 15 May 2017 to 30 September 2018.


Treasury Shares

In accordance with the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the 'Regulations') which came into force on 1 December 2003 any Ordinary Shares repurchased, pursuant to the above authority, may be held in treasury. These Ordinary Shares may subsequently be cancelled or sold for cash. This would give the Company the ability to reissue shares quickly and cost effectively and provide the Company with additional flexibility in the management of its capital.


As at 30 September 2018, there were no Ordinary Shares held in Treasury.



The Company has no employees and most of its day to day responsibilities are delegated to Jupiter Asset Management Limited ('JAM'), which acts as the Company's Investment Adviser and Company Secretary. J.P. Morgan Europe Limited ('JPMEL') acts as the Company's Depositary and the Company has entered into an outsourcing arrangement with J.P. Morgan Chase Bank N.A. ('JPMCB') as Custodian and for the provision of accounting and administrative services.


Although JAM is named as the Company Secretary, JPMEL provides administrative support to the Company Secretary as part of its formal mandate to provide broader fund administration services to the Company.


Viability Statement

In accordance with provision C.2.2 of the UK Corporate Governance Code as issued by the Financial Reporting Council ('FRC') in April 2016, the Board has assessed the viability of the Company over the next three years. The Company's investment objective is to achieve long-term capital growth and the Board regards the Company's shares as a long-term investment. Three years is considered a reasonable period for investment in equities and is appropriate for the composition of the Company's portfolio.


In carrying out its assessment, the Board has considered the Company's business model including its investment objective and investment policy as well as the principal risks and uncertainties that may affect the Company as detailed below.


The Board has noted that:

·      The Company holds a liquid portfolio invested predominantly in listed equities; and

·      No significant increase to ongoing charges or operational expenses is anticipated.


The Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three years.


Principal Risks and Uncertainties

The Board has undertaken a robust review of the principal risks and uncertainties that may affect the Company and its business which are described below:


Investment policy and process - Inappropriate investment policies and processes may result in under performance against the prescribed Benchmark Index and the Company's peer group. The Board manages these risks by ensuring a diversification of investments and regularly reviewing the portfolio asset allocation and investment process.


Investment Strategy and Share Price Movement - The Company is exposed to the effect of variations in the price of its investments. A fall in the value of its portfolio will have an adverse effect on shareholders' funds. It is not the aim of the Board to eliminate entirely the risk of capital loss, rather it is its aim to seek capital growth. The Board reviews the Company's investment strategy and the risk of adverse share price movements at its quarterly board meetings taking into account the economic climate, market conditions and other factors that may have an effect on the sectors in which the Company invests.


Liquidity Risk - The Company may invest in securities that have a very limited market which will affect the ability of the Investment Adviser to dispose of securities when it is no longer felt that they offer the potential for future returns. Likewise the Company's shares may experience liquidity problems when shareholders are unable to realise their investment in the Company because there is a lack of demand for the Company's shares. At its quarterly meetings the Board considers the current liquidity in the Company's investments when setting restrictions on the Company's exposure. The Board also reviews, on a quarterly basis, the Company's buy back programme and in doing so is mindful of the liquidity in the Company's shares.


Gearing Risk - The Company's gearing can impact the Company's performance by accelerating the decline in value of the Company's net assets at a time when the Company's portfolio is declining. Conversely gearing can have the effect of accelerating the increase in the value of the Company's net assets at a time when the Company's portfolio is rising. The Company's level of gearing is under constant review by the Board who take into account the economic environment and market conditions when reviewing the level.


Discount to Net Asset Value - A discount in the price at which the Company's shares trade to Net Asset Value would mean that shareholders would be unable to realise the true underlying value of their investment. As detailed in the Prospectus of the Company, the Board currently has the authority to purchase the Company's Ordinary Shares as a method of controlling the discount to Net Asset Value and enhancing shareholder value. Shareholder approval will be sought to renew this authority at the first (and every subsequent) AGM of the Company.


Regulatory Risk - The Company operates in a complex regulatory environment and faces a number of regulatory risks. A breach of section 1158 of the CTA 2010 could result in the Company being subject to capital gains tax on portfolio movements. Breaches of other regulations such as the UKLA Listing rules, could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers such as the Investment Adviser could also lead to reputational damage or loss. The Board relies on the services of its Company Secretary, JAM, and its professional advisers to ensure compliance with, amongst other regulations, the Companies Act 2006, the UKLA Listing Rules, the FCA's Disclosure and Transparency Rules and the Alternative Investment Fund Managers Directive. The Investment Adviser is contractually obliged to ensure that its conduct of business confirms to applicable laws and regulations.


Credit and Counterparty Risk - The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.


Loss of Key Personnel - The day-to-day management of the Company has been delegated to the Investment Adviser. Loss of the Investment Adviser's key staff members could affect investment return. The Board is aware that JAM recognises the importance of its employees to the success of its business. Its remuneration policy is designed to be market competitive in order to motivate and retain staff and succession planning is regularly reviewed. The Board also believes that suitable alternative experienced personnel could be employed to manage the Company's portfolio in the event of an emergency.


Operational - Failure of the core accounting systems, or a disastrous disruption to the Investment Adviser's business or that of the administration provider, JPMCB, could lead to an inability to provide accurate reporting and monitoring.


Financial - Inadequate financial controls could result in misappropriation of assets, loss of income and debtor receipts and inaccurate reporting of Net Asset Value per share. The Board annually reviews the Investment Adviser's report on its internal controls and procedures.



As at 30 September 2018 the Board comprises one female and three male Directors.


Employees, Environmental, Social and Human Rights issues

The Company has no employees as the Board has delegated the day to day management and administration functions to JUTM, JAM and other third parties. There are therefore no disclosures to be made in respect of employees.


The Board has noted its Investment Adviser's policy on Environmental, Social and Human Rights issues as detailed below:


The Investment Adviser considers various factors when evaluating potential investments. While an investee company's policy towards its environmental and social responsibility, including with regard to human rights, is considered as part of the overall assessment of risk and suitability for the portfolio, the Investment Adviser does not necessarily decide to, or not to, make an investment on environmental and social grounds alone.


Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations as its day to day management and administration functions have been outsourced to third parties and it neither owns physical assets or property nor has employees of its own. It therefore does not have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report on Directors' Reports) Regulations 2013.


For and on behalf of the Board

John Scott


11 January 2019



Statement of Directors' Responsibilities


The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards ("IFRS") as adopted by the European Union.


Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the return or loss of the Company for that period.


In preparing those financial statements, the Directors are required to:


(a) select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;


(b) present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;


(c) provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance;


(d) state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and


(e) make judgements and estimates that are reasonable and prudent.


The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website The work carried out by the Auditor does not include consideration of the maintenance and integrity of the website and accordingly the Auditor accepts no responsibility for any changes that have occurred to the financial statements when they are presented on the website.


The financial statements are published on, which is a website maintained by Jupiter Asset Management Limited.


Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.


Each of the Directors, confirms to the best of their knowledge that:


(a) the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;


(b) the report includes a fair view of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces; and


(c) that in the opinion of the Board, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy.


So far as each Director is aware at the time the report is approved:


(a) there is no relevant audit information of which the Company's auditors are unaware; and


(b) the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.


For and on behalf of the Board

John Scott


11 January 2019



Statement of Comprehensive Income for the period from 15 May 2017 to 30 September 2018




Period ended 30 September 2018









Loss on investments held at fair value through profit or loss




Foreign exchange gain on loan




Other exchange gain








Total income/(loss)




Investment management fee




Other expenses




Total expenses




Net return/(loss) before finance costs and taxation




Finance costs




Return/(loss) on ordinary activities before taxation








Net return/(loss) after taxation*




Return/(loss) per Ordinary share





* There is no other comprehensive income and therefore the 'Net return/(loss) after taxation' is the total comprehensive income for the period.


The total column of this statement is the income statement of the Company, prepared in accordance with IFRS.


The supplementary revenue return and capital return columns are both prepared under guidance produced by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations.



Statement of Financial Position as at 30 September 2018






Non current assets


Investments held at fair value through profit or loss


Current assets


Other receivables


Cash and cash equivalents




Total assets


Current liabilities


Other payables


Total assets less current liabilities


Capital and reserves


Called up share capital


Share premium


Special reserve


Retained earnings


Total equity shareholders' funds


Net Asset Value per Ordinary share



Approved by the Board of Directors and authorised for issue on 11 January 2019 and signed on its behalf by:


John Scott



Company registration number 10708991



Statement of Changes in Equity for the period from 15 May 2017 to 30 September 2018













Period from launch on 15 May 2017






to 30 September 2018






Balance at 15 May 2017






Net profit for the period






Initial offering






Ordinary share issue






Expenses in relation to share issue






Transfer of reserves






Dividends declared and paid**






Balance at 30 September 2018







*  Special Reserve was constituted following a transfer from the Share Premium reserve and can also be used to pay dividends.

** Dividends paid during the period were paid out of revenue reserves which form part of retained earnings.



Cash Flow Statement for the period from 15 May 2017 to 30 September 2018







Cash flows from operating activities


Dividends received (gross)


Investment management fee paid


Other cash expenses


Net cash inflow from operating activities before taxation and interest


Interest paid


Overseas tax incurred


Net cash inflow from operating activities


Cash flows from investing activities


Purchases of investments


Sales of investments


Net cash outflow from investing activities


Cash flows from financing activities


Initial offering


Ordinary shares issued


Expenses in relation to share issue


Equity dividends paid


Net drawdown of loan


Net cash inflow from financing activities


Increase in cash


Change in cash and cash equivalents


Cash and cash equivalents at start of period


Realised gain on foreign currency


Cash and cash equivalents at end of period




Notes to the Accounts


1. Accounting Policies

The Accounts comprise the financial results of the Company for the period from 15 May 2017 to 30 September 2018. The Accounts are presented in pounds sterling, as this is the functional currency of the Company. The Accounts were authorised for issue in accordance with a resolution of the directors on 11 January 2019. All values are rounded to the nearest thousand pounds (£'000) except where indicated.


The Accounts have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC), as adopted by the European Union (EU), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.


Where presentational guidance set out in the Statement of Recommended Practice (SORP) for Investment Trusts issued by the Association of Investment Companies (AIC) in November 2014 is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.


The Company adopts the going concern basis in the preparation of the financial statements:


(a) Income

Dividends from investments are recognised when the investment is quoted ex-dividend on or before the date of the Statement of Financial Position.


Dividends receivable from equity shares are taken to the revenue return column of the Statement of Comprehensive Income.


Special dividends are reviewed on a case by case basis to determine if the dividend is to be treated as revenue or capital.


(b) Presentation of Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the Association of Investment Companies (AIC), supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the statement.


Investment Management fees and finance costs are charged 75% to capital and 25% to revenue.


All other operational costs including administration expenses (but with the exception of any Transaction handling charges which are charged to capital) are charged to revenue.


(c) Investments

Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at the fair value, being the consideration given.


All investments are classified as held at fair value through profit or loss. All investments are measured at fair value with changes in their fair value recognised in the Statement of Comprehensive Income in the period in which they arise. The fair value of listed investments is based on their quoted bid price at the reporting date without any deduction for estimated future selling costs.


Foreign exchange gains and losses on fair value through profit or loss investments are included within the changes in the fair value of the investment.


For investments that are not actively traded and/or where active stock exchange quoted bid prices are not available, fair value is determined by reference to a variety of valuation techniques. These techniques may draw, without limitation, on one or more of: the latest arm's length traded prices for the instrument concerned; financial modelling based on other observable market data; independent broker research; or the published accounts relating to the issuer of the investment concerned.


(d) Cash and cash equivalents

Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to insignificant risks of changes in value.


(e) Foreign currencies

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At the date of each Statement of Financial Position, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the Statement of Comprehensive Income within the revenue or capital column depending on the nature of the underlying item.


(f) Borrowing and finance costs

Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs and subsequently measured at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Statement of Comprehensive Income using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.


Finance costs are recognised in the Statement of Comprehensive Income in the period in which they are incurred. All finance costs are charged 75% to capital and 25% to revenue of the Statement of Comprehensive Income.


(g) Expenses

Expenses are accounted for on an accruals basis. Management fees are charged 75% to capital and 25% to revenue with all other expenses are charged fully to the revenue column of the Statement of Comprehensive Income. Expenses which are incidental to the purchase or sale of an investment are charged to capital, along with any foreign exchange gains and losses.


(h) Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.


The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the date of the Statement of Financial Position.


Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised.


Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation of capital gains.


(i) Ongoing Charges Figure

The Ongoing Charges Figure (OCF) is calculated as the ratio of the total ongoing charges to the average net asset value of the Company over the period. The OCF is made up of the Investment Management fee and other operating costs deducted from the Company during the period, except for those payments that are explicitly excluded.


(j) Reserves

Share Capital

This reserve is the nominal value of the shares in issue.


Share Premium

The share premium may be used for the payment of share issue costs.


Special Reserve

The special reserve may be used to finance the Company's share buyback facility.


The special reserve may also be used to fund the distribution of profits to investors via dividend payments.


Retained Earnings

Capital reserve

The capital reserve is not available for the payments of dividends.


The following are accounted for in this reserve:


·      Gains and losses on the realisation of investments,


·      Changes in fair value of investments held at the period end,


·      Transaction costs,


·      Foreign currency difference.


Revenue Reserve

The revenue profit or loss for the period is taken to or from this reserve.


The revenue reserve may be used to fund the distribution of profits to investors via dividend payments.


(k) Accounting developments

At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue. They are not yet effective, and have not been early adopted. They are not expected to have a material impact:


·     IFRS 9 - Financial Instruments (effective for annual periods beginning on or after 1 January 2018). The adoption of IFRS 9 is unlikely to have a material impact on the Company's financial assets or financial liabilities, which will continue to be classified as fair value through profit or loss and held at amortised cost respectively.


·     IFRS 15 - Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018). The adoption of IFRS 15 is unlikely to have a material impact on the Company's financial statements as presented for the period, as the company's income is predominantly dividend income and fair value gains, which are not accounted for under IFRS 15.


·     Amendments to IFRS 9 - Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1 January 2019).


2. Significant accounting judgements, estimates and assumptions

The preparation of the Company's financial statements on occasion requires management to make judgements, estimates and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the current and future periods, depending on circumstance.


Management do not believe that any accounting judgements, estimates or assumptions have had a significant impact on this set of financial statements.


3. Income



Period ended


30 September 2018



Income from investments


Dividends from United Kingdom registered companies


Dividends from overseas companies


Total income



4. Investment management fee



Period ended 31 March 2018









Investment management fee






5. Earnings per Ordinary share


The earnings per Ordinary share figure is based on the net return for the period of £3,664,000 and on 92,452,015 Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.


The return per share figure detailed above can be further analysed between revenue and capital, as below.



Period ended


30 September 2018



Net revenue return


Net capital loss


Net total return




Weighted average number of Ordinary shares in issue


during the period


Revenue return per Ordinary share


Capital return per Ordinary share


Total return per Ordinary share




6. Related parties

Jupiter Unit Trust Managers Limited ('JUTM'), the Alternative Investment Fund Manager, is a company within the same group as Jupiter Asset Management Limited, the Investment Adviser. JUTM receives an investment management fee as set out below.


JUTM is contracted to provide investment management services to the Company (subject to termination by not less than twelve months' notice by either party) for an annual fee of 0.75% of the total assets of the Company after deduction of the value of any Jupiter managed investments, payable quarterly in arrears.


The Management fee payable to JUTM for the period 15 May 2017 to 30 September 2018 was £1,011,000 with £172,000 outstanding at period end.


No investment management fee is payable by the Company to Jupiter Asset Management Limited in respect of the Company's holdings in investment trusts, open-ended funds and investment companies in respect of which Jupiter Investment Management Group Limited, or any subsidiary undertaking of Jupiter Investment Management Group Limited, receives fees as investment manager or investment adviser.


7. Contingent assets, liabilities and capital commitments

The Company holds an outstanding commitment to purchase shares in Saudi Telecom, Huayu Automotive Systems, and Vietnam Dairy Products through warrants (for further detail see List of Investments).


8. Post balance sheet event

Since the period end no additional Ordinary shares have been issued.



Availability of the Annual Report & Accounts

The Annual Report & Accounts will shortly be available on Company's website


A copy of the Annual Report & Accounts will also be submitted to the National Storage Mechanism and will soon be available for inspection at



For further information, please contact:


Richard Pavry

Head of Investment Trusts

Jupiter Asset Management Limited, Company Secretary

[email protected]

020 7314 4822





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