TIDMJEFI
RNS Number : 9998Z
Jupiter Emerging & Frontier Inc.Tst
28 January 2022
28 January 2022
JUPITER EMERGING & FRONTIER INCOME TRUST PLC
RESULTS FOR THE YEARED 30 SEPTEMBER 2021
Legal Entity Identifier: 213800RLXLM87NO26S30
Jupiter Emerging & Frontier Income Trust PLC ("JEFI" or the
"Company") today announces its audited results for the year ended
30 September 2021.
Financial highlights
-- Share price total return of 31.5% and Net Asset Value ("NAV")
total return of 28.6%, compared to 13.3% return for the benchmark,
the MSCI Emerging Markets (Total Return) Index in Sterling.
-- Dividends of 4.45p declared for year under review, slightly
higher than previous year (2020: 4.4p).
Portfolio highlights
-- Exposure to frontier markets and smaller companies and
underweight position in China were positive drivers of relative
performance.
-- Largest single country exposure to Taiwan led to
outperformance with continued strength in technology stocks.
-- Significant positive contributors to performance were from a
broad range of sectors and markets: Brazilian port operator Wilson
Sons, Indian refiner and fuel marketing business Hindustan
Petroleum (HPCL), and Mediatek, the Taiwanese chip designer.
-- Relative performance bolstered by zero weighting to Alibaba,
one of the largest benchmark constituents .
-- Second and third quarter earnings announcements from holdings
mostly characterised by impressive year-on-year earnings growth,
strengthening the Company's revenue outlook.
-- Four new positions established during the year: Latin
American online travel agent Despegar, Egyptian bank Credit
Agricole Egypt, Taiwanese chip designer Elan, and China Medical
System.
Since the year end, the Board has announced its intention to put
forward proposals to amend the Redemption Facility by restricting
the number of shares that can be redeemed to 20% and to move from
an annual facility to one which will be offered once every three
years, starting in June 2024. This follows a consultation with
shareholders and is in response to the Redemption Facility
resulting in a significant reduction in the size of JEFIT's capital
base in the past year.
John Scott, Chairman, said:
"JEFIT is a vehicle which provides investors with a route to
many of the world's less accessible markets, while offering an
attractive yield by way of dividends, and your Board applauds the
recovery in our fortunes achieved by our Investment Adviser in
2021. Nonetheless, strong nerves are still required as the world
comes to terms with the likelihood that COVID-19 and its
descendants will be with us for some time.
"In many ways, most of the factors which contributed to this
strong performance were the same factors which contributed to the
underperformance in the previous year, and, in this context, the
Investment Adviser should be applauded for holding his nerve
through some of the most turbulent equity market conditions in
living memory."
Commenting on the market outlook, Ross Teverson, Fund Manager of
JEFI, said:
"The Company's exposure to frontier markets and smaller
companies was positive for relative performance, as was the
underperformance of China, where the portfolio has a much lower
weighting than the benchmark. We have long held the view that
China's weighting in the Company's benchmark represents a high
level of single- country risk for an asset class as diverse as
emerging markets.
"There has already been a significant recovery in the Company's
revenue outlook, driven by a resumption of dividend payments by
those companies that temporarily halted payouts at the height of
the pandemic and by an improved earnings outlook for many of our
holdings. We remain positive on the outlook for earnings and
dividends at both a Company and an asset class level in 2022.
"In a world where the valuations for many asset classes look
high relative to history, the opposite continues to hold true for
most companies and sectors within emerging and frontier markets,
despite the potential for strong long-term growth. As investors
continue to look past the impact of the pandemic, we expect that
the scope for operational recovery and rerating from attractive
valuations will be positive for stock performance."
The full results statement is below.
For further information please contact
Jupiter:
Magnus Spence
investmentcompanies@jupiteram.com
+44 (0)20 3817 1000
Media contact:
Powerscourt
jupiter@powerscourt-group.com
+44 (0) 20 7250 1446
About JEFI
-- JEFI aims to achieve long-term capital growth and income
through investment predominantly in companies exposed directly or
indirectly to Emerging Markets and Frontier Markets worldwide.
-- JEFI focuses on investing in companies that are undergoing
positive change that has not yet been appreciated by the
market.
-- The Company's benchmark is the MSCI Emerging Markets Index
(Total Return) in Sterling, but JEFI is not restricted to investing
in constituent companies of the benchmark.
-- JEFI's fund manager is Ross Teverson, Head of Strategy, Emerging Markets at Jupiter.
Jupiter Emerging & Frontier Income Trust plc (the
'Company')
Legal Entity Identifier: 213800RLXLM87NO26S30
Annual Financial Results for the year ended 30 September
2021
Financial Highlights for the year ended 30 September 2021
Capital Performance 30 September 30 September
2021 2020 % change
Total assets less current liabilities
(GBP'000) 65,106 75,131 -13.3
Ordinary Share Performance 30 September 30 September
2021 2020 % change
Net asset value (pence) 108.88 87.91 +23.9
Net asset value with dividends paid
during FY'21
added back (pence) 113.08 87.91 +28.6
Middle market price (pence) 101.00 80.00 +26.3
Middle market price with dividends
paid during FY'21
added back (pence) 105.20 80.00 +31.5
MSCI Emerging Markets Index (Total
Return) in sterling 682.84 602.50 +13.3
Discount to net asset value (%) (7.2) (9.0) -
Total dividends paid during the year
(pence) 4.20 5.80 -27.6
Total dividends declared during the
year 4.45 4.40 +1.1
Ongoing charges figure (%) excluding
finance costs 1.39 1.35 +3.0%
Dividends declared for the year under
review
From launch to 30 September 2020 Rate Payment date
Interim dividend 1.2p 17 April 2020
Interim dividend 1.2p 3 July 2020
Interim dividend 1.0p 25 September 2020
Interim dividend 1.0p 30 December 2020
For the year to 30 September 2021 Rate Payment date
Interim dividend 1.0p 26 March 2021
Interim dividend 1.0p 25 June 2021
Interim dividend 1.2p 24 September 2021
Interim dividend 1.25p 30 December 2021
Chairman's Statement
I present to you the Annual Report and audited accounts for
Jupiter Emerging & Frontier Income Trust PLC ("JEFIT", or the
"Company") for the twelve months ended 30 September 2021.
In last year's annual report I noted that, in the context of a
tough period of investment performance for the Company's portfolio,
despite those challenges we looked to the future with "cautious
optimism" and that we retained full confidence in the approach of
the Fund Manager, Ross Teverson, and his team. Such faith proved to
be well-founded this year.
Although the past year has been a good one for investors in the
markets where we invest, the last twelve months have seen plenty of
disruption to the smooth passage of equity returns. Beginning with
the arrival of effective Covid-19 vaccines, raising hopes that 2021
would see an end to the pandemic, reality soon dawned. The rapid
spread of the highly contagious Delta variant meant that, while
life did indeed return to something closer to 'normal', it rapidly
became clear that Covid-19 would be with us in some form for the
foreseeable future and the disruption caused by Omicron is a
reminder that the pandemic is by no means behind us. The economic
disruption this causes, not least in China, which is still
attempting to pursue a 'zero Covid' policy, took some of the wind
out of the market's sails this year.
Away from Covid-19, but staying in China, there have been timely
reminders of the role that politicians can play in the fortunes of
equity markets. As the Chinese government began a new wave of
regulatory crackdowns on various sectors, most notably internet
platforms and private education firms, investors were reminded of
the central control exerted by Beijing on private enterprises. Any
talk of the 'end of capitalism' in China seems misplaced, however,
as the private sector remains a central plank of the Chinese
Government's plans to deliver on its 'common prosperity' pledges to
raise living standards and create a more even distribution of
wealth.
As a business looking to invest in the opportunities available
across the full spectrum of emerging and frontier markets, we
recognise that the asset class is about much more than China alone.
That remains true (the Company has significantly less exposure in
aggregate to mainland China and Hong Kong than our benchmark), but
China has continued to dominate the headlines. Perhaps not for the
right reasons, it did so yet again in September, as the imminent
financial collapse of real estate giant Evergrande threatened a
debt crisis that had echoes of earlier crises in the West. At the
time of writing the Evergrande saga remains unresolved.
Investment performance
During the period under review, the Company's share price and
Net Asset Value ("NAV") with dividends paid added back returned
31.5% and 28.6%, respectively. This compares with a total return of
13.3% for our benchmark, the MSCI Emerging Markets Index (Total
Return). To a considerable extent, we have made up the
underperformance suffered in 2020, when our markets sold off
strongly in the early days of Covid-19.
The Company's recent investment performance is considered in
detail in the Investment Adviser's Review. In summary, however, the
principal factors driving the strong absolute and relative
performance this year were a recovery in global equity markets
following the roll out of vaccination programmes in developed
countries, an underweight position in China, an allocation to
smaller companies and frontier markets, as well as maintaining a
reasonable level of gearing in the portfolio throughout the year.
In many ways, most of the factors which contributed to this strong
performance were the same factors which contributed to the
underperformance in the previous year and, in this context, the
Fund Manager should be applauded for holding his nerve through some
of the most turbulent equity market conditions in living
memory.
Gearing
The Company has access to a flexible loan facility with
Scotiabank Europe plc for amounts of up to GBP11m. As at 30
September 2021, the Company's net gearing level, based on the
amount of drawn down bank debt, less cash held on the balance
sheet, was 9.3%. Gearing remains very cheap and therefore we use
leverage in the portfolio to enhance shareholder returns. The
current cost of borrowing is 1.3% which compares favourably with a
portfolio that yields in excess of 4.0% and provides the potential
for capital gain in rising markets, as well as enhancing our
earnings. The counterpoint is that in falling markets the presence
of borrowings will exacerbate capital losses.
The Board reviews the Company's gearing on a regular basis. The
current maximum has been set at 20% of the Company's net assets and
we will continue to encourage the Investment Adviser to use the
borrowing facility and the Company's cash reserves, since we
believe this will enhance future returns for shareholders.
Dividends
The Company pays four dividends a year. The first of these, an
interim dividend of 1 penny per share, was paid on 26 March 2021.
On 25 June 2021, the Board paid a second interim dividend of 1
penny per share which was followed by a dividend payment of 1.2p
per share on 24th September 2021 and a fourth interim dividend
payment of 1.25p per share which was paid on 30 December 2021. As a
result, total dividends for the year were 4.45p per share, slightly
higher than the total distributions of last year.
Discount and premium management
Shareholders will be aware that, at the discretion of the Board,
the Company offers a redemption facility, whereby once a year
investors have the opportunity to redeem their shares at close to
NAV. In earlier years, redemptions have been at a modest level, but
this year shareholders representing approximately 30% of JEFIT's
register notified us of their wish to redeem. All of these requests
were met and, as a result, an amount of GBP29.6m was returned to
redeeming shareholders. The effect of these redemptions is that the
net assets of the Company have fallen in the year and stood at
GBP65.1m as at 30th September 2021. This is clearly a disappointing
outcome, particularly in the context of the excellent NAV and share
price performance which has been seen in the past twelve
months.
Your Board recognises that this shrinkage makes the size of the
Company smaller than is desirable for an investment trust. We have
therefore undertaken a consultation exercise with our larger
shareholders to assist us in our review of the redemption facility
which, as we have experienced in the past year, can result in a
significant reduction in the size of JEFIT's capital base. On the
basis of the views expressed to us by shareholders, your Board
recently announced that it intends to put forward proposals to
amend the redemption facility by restricting the number of shares
that can be redeemed to 20% and to move from an annual facility to
one which will be offered once every three years, starting in June
2024. Shareholders will also be offered a continuation vote when
considering the proposed changes to the redemption facility and
further continuation votes will be held on a triennial basis from
June 2024.
Annual General Meeting
The Company's Annual General Meeting ("AGM") will be held on
Monday, 28 March 2022 at 3:00pm at the offices of Jupiter Asset
Management Limited, The Zig Zag Building, 70 Victoria Street,
London SW1E 6SQ.
PRIIPs Key Information Documents
Notwithstanding the UK's departure from the European Union, we
are required 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
historical performance. Whilst the content and format of the KID
cannot be amended under the applicable regulations, the Board does
not believe that these projections are an appropriate or helpful
way to assess JEFIT's prospects.
Accordingly, the Board urges shareholders also to consider the
comprehensive information set out in both the Company's Half Yearly
Financial Report and Annual Report & Accounts, together with
the monthly fact sheets and Company announcements (including daily
NAV announcements), when considering an investment in the Company's
shares. These documents are available on the Company's website at
www.jupiteram.com/JEFI.
Outlook
The opportunities for the Company's Investment Adviser to seek
attractive companies are as strong as ever. A strategy designed to
capitalise upon underappreciated positive change should be an
excellent fit for an environment where so much is changing, and
many big issues (e.g., Covid-19, climate change, events in China,
wider geopolitics) can distract markets from what is really
happening on the ground with individual companies.
Just as a difficult year of investment performance should be no
cause to panic and change a fundamentally sound investment
strategy, so too is a strong year of performance no reason for
complacency. While nearly 10 billion doses of Covid-19 vaccines
have been administered, meaning that perhaps half the world's
population has now received two doses, the arrival at the end of
2021 of the highly infectious Omicron variant is serving to remind
us that the battle is by no means over.
JEFIT is a vehicle which provides investors with a route to many
of the world's less accessible markets, while offering an
attractive yield by way of dividends, and your Board applauds the
recovery in our fortunes achieved by our Investment Adviser in
2021. Nonetheless, strong nerves are still required as the world
comes to terms with the likelihood that Covid-19 and its
descendants will be with us for some time and as we adapt to this
reality there will be bumps in the road, especially in the markets
where we invest.
John Scott
Chairman
28 January 2022
Investment Adviser's Review
Market review
During the financial year to September 2021, the Company's
portfolio staged a strong recovery. Over the period, the
portfolio's return of 28.6% was significantly ahead of the
Company's benchmark, the MSCI Emerging Markets Index, which ended
the period up 13.3%. The Company's exposure to frontier markets and
smaller companies was positive for relative performance, as was the
underperformance of China, where the portfolio has a much lower
weighting than the benchmark.
Over the period, MSCI benchmark returns for key markets were as
follows: China -11.1%; Taiwan 38.7%; India 44.0%; MSCI Frontier
Markets 25.7%; Mexico 48.0%; Russia 54.9%; and Brazil 15.2%.
Emerging and frontier market equities generally performed well,
with the Chinese market being a notable exception. Taiwan, which is
one of the Company's largest single country exposure, outperformed
the asset class on continued strength in the technology sector.
Some of the markets where sentiment had been most impacted by the
pandemic, such as Mexico and India, also performed strongly over
the period.
China's underperformance over the period can be explained by
several factors. Having been seen as a relative safe haven during
the pandemic, the valuations of some Chinese companies had become
quite stretched by October 2020. The resultant lack of valuation
support, combined with heightened regulatory scrutiny of large
private firms and growing concerns over property sector
indebtedness, came together to weigh heavily on Chinese equities.
We have long held the view that China's weighting in the Company's
MSCI Emerging Market benchmark represents a high level of single-
country risk for an asset class as diverse as emerging markets.
During the second half of the Company's financial year, some of
the "reopening" enthusiasm that buoyed smaller emerging and
frontier markets towards the end of 2020, waned. This was in part
due to slower vaccination progress relative to developed markets
and only a nascent resumption of tourism activity in markets such
as Georgia, Turkey and Kenya. However, it is encouraging to see
that vaccine rollouts accelerated during the second half of 2021
and tourist arrivals in most markets continued to recover.
It was pleasing to see that second and third quarter earnings
announcements from the Company's holdings were in most cases
characterised by impressive year-on-year earnings growth.
Significantly, the Company's revenue outlook has continued to
strengthen. When Bank of Georgia announced an interim dividend
(which accompanied a better-than-expected second quarter earnings
release), this marked a complete return to dividends by the
Company's bank sector holdings.
Performance
Significant positive contributors to performance over the period
included stocks from across a broad range of sectors and markets.
Brazilian port operator, Wilson Sons, Indian refiner and fuel
marketing business, Hindustan Petroleum (HPCL), and Taiwanese chip
designer, Mediatek, all delivered strong share price returns.
Wilson Sons has been owned in the portfolio since JEFIT listed
in 2017. Working together with our Stewardship Team, we have
previously engaged with the Chairman and believe that management
quality is high. Despite owning excellent port assets and having
potential for structural growth in earnings as international trade
volumes and cabotage expand over time, Wilson Sons' stock has long
appeared undervalued. However, the firm recently announced that it
would move to a Brazilian main listing structure (replacing the
current depository receipt structure), which has driven a re-rating
of the company's valuation towards a multiple that better reflects
its strong competitive position and growth potential.
HPCL, which owns and operates refineries, gas pipelines and
service stations across India, has demonstrated strong operational
resilience throughout the pandemic. Better-than-expected earnings
delivery, combined with share buybacks and a significant
year-on-year increase in dividend payments drove strong share price
performance over the period. We believe that HPCL is a good example
of why it is important to engage with and analyse companies
operating in sectors with higher ESG risk, rather than working on
the basis of exclusions. While some might reasonably question the
long- term future of fuel retailing, a closer examination of HPCL's
business reveals that the company, as a supplier of city gas and
LPG, has a key role to play in India's energy transition.
Management is also working to leverage HPCL's extensive network of
fuel stations for non-fuel retail opportunities and electric
vehicle charging.
Mediatek has continued to deliver very strong operational
performance, in terms of both sales and margins. The company's new
fifth generation (5G) handset chipsets have been positively
received by customers and these should drive a sustained uplift in
margins for the company as 5G adoption becomes more widespread.
Additionally, Mediatek continues to expand into non-mobile product
areas: It is already the largest supplier of ARM-based processors
for Google's Chromebook, custom designs chips for Amazon's Echo and
is in the process of developing chips for advanced
driver-assistance systems (ADAS) in cars.
Not owning Alibaba (one of the largest constituents in the
Company's MSCI Emerging Markets benchmark) was also a positive
driver of the portfolio's relative performance. The suspension of
the keenly anticipated initial public offering of Alibaba's
subsidiary, ANT Financial, and heightened antitrust scrutiny of the
entire Chinese internet sector weighed on sentiment towards the
stock.
Detractors from relative performance included GRIT Real Estate
and China Medical System. GRIT is a leading pan-African real estate
company, which mainly leases properties to multinational tenants on
a hard-currency basis. Throughout the course of a normal economic
cycle, GRIT could be considered a very resilient business. However,
the pandemic proved to be particularly challenging for the company,
as it has over 20% exposure to the hospitality sector (tenants
include Lux, Clubmed and Beachcomber) and a similar exposure to
retail. The need to defer rental collections on several hotels
concerned investors, particularly as it led to a downward
adjustment in appraised property values. However, rental payments
from these tenants are resuming, as tourist arrivals begin to
recover, and the outlook for 2022 appears to be materially better
than 2021.
The share price of China Medical Systems (a new position
discussed below under "Activity") was weak during the third quarter
of 2021, along with the rest of the Chinese pharmaceutical sector.
However, the company delivered strong interim results and we view
the business as being much better positioned to navigate regulatory
uncertainty than peers.
Activity
During the period, positions in Ginko (a Taiwanese contact lens
maker), John Keells (a Sri Lankan conglomerate), and Banorte (a
Mexican bank) were exited. New positions were established in
Despegar (the leading Latin American online travel agent), Credit
Agricole Egypt (an Egyptian bank), Elan (a Taiwanese chip
designer), and China Medical System.
The position in Ginko was sold as a combination of a recovered
valuation but also intensifying competition in new digital
marketing channels, led us to the view that there were more
attractive opportunities elsewhere. The holding in John Keells was
also disposed of as Sri Lanka's challenging fiscal position made
the currency vulnerable, potentially overwhelming the positive
stock-specific investment case we had identified. Banorte was
exited after a period of strong relative performance, as the
valuation had become less attractive relative to our other bank
sector holdings.
We view Credit Agricole Egypt (CAE) as a good example of the
type of opportunity that the trust structure enables us to capture.
The stock's liquidity is reasonable but not high enough to meet the
threshold for most open-ended emerging market funds. Consequently,
the stock is overlooked by many foreign investors and its valuation
appears low relative to similar banks across emerging and frontier
markets. CAE has a strong retail franchise, a highly regarded
digital strategy and is well positioned to benefit from rising
financial inclusion in Egypt. Despite the pandemic, CAE has
continued to achieve a high level of profitability, loan growth has
remained in positive year-on-year territory, and its capital
position has strengthened.
The position in Despegar was initiated after quarterly results
showed that the business was beginning to recover from the impact
of Covid-19 and we are of the view that the company's strong
competitive position in a structurally growing industry is not
reflected in valuations. While Despegar does not pay dividends yet,
the high net cash position and history of dividend payments by its
largest shareholder (Expedia), and buybacks on the part of US peer,
Booking Holdings, suggest meaningful shareholder returns are likely
in future.
Elan, which was purchased in early 2021, designs and sells chips
that enable touch screen functionality and fingerprint recognition
in notebook PCs and other devices. In the coming years, penetration
of both features should increase substantially from today's level
of just over 30 per cent. Elan has a clear lead in this market,
which we expect it to maintain, given that the company is very
close to major platforms, particularly Microsoft and Google.
The general weakness in the Hong Kong and Chinese equity markets
created what we saw as opportunities in certain stocks, such as
China Medical System (CMS). CMS partners with overseas
pharmaceutical companies to market drugs in China (partners include
AstraZeneca and India's Sun Pharma). The company has consistently
achieved high returns on capital and has a clear policy of paying
out 40% of earnings as a dividend. In our view, CMS scores very
well on capital management, which, along with management alignment
and environmental and social risk mitigation, is one of the three
areas we focus on when considering Environmental, Social and
Governance ("ESG") attributes of a company. Furthermore, we believe
that the company's valuation does not fully reflect the potential
for CMS to continue delivering high earnings growth on the back of
its expanding pipeline of new products.
Outlook
We continue to see a combination of improving operational
performance and valuations that are low relative to history for
many of the portfolio's holdings. Despite the recovery we have so
far seen, valuations for many of JEFIT's holdings remain at a level
that, in our view, does not fully reflect their growth
potential.
While many smaller emerging and frontier markets remain a long
way behind developed markets and China in terms of their vaccine
programmes, there was a marked acceleration in vaccinations during
the second half of 2021, which bodes well for a continued recovery
in economic activity in 2022.
In a world where the valuations for many asset classes look high
relative to history, the opposite continues to hold true for most
companies and sectors within emerging and frontier markets, despite
the potential for strong long-term growth. As investors continue to
look past the impact of the pandemic, we expect that the scope for
operational recovery and re-rating from attractive valuations will
be positive for stock performance.
There has already been a significant recovery in the Company's
revenue outlook, driven by a resumption of dividend payments by
those companies that temporarily halted payouts at the height of
the pandemic and by an improved earnings outlook for many of our
holdings. We remain positive on the outlook for earnings and
dividends at both a Company and an asset class level in 2022.
Consensus dividend forecasts imply a strong level of dividend
growth, with forecasts for the portfolio's holdings suggesting a
forward-looking portfolio yield of around 5.6%, which compares to a
12-month trailing dividend yield of 4.8%.
Gearing in the trust (loan value as a percentage of net asset
value) currently stands at just below 10%, which compares to a
guided range of 0% to 20%. Given where valuations are currently, we
consider it appropriate to maintain this level of gearing in the
trust.
Ross Teverson
Fund Manager
Jupiter Asset Management Limited
Investment Adviser
28 January 2022
List of Investments as at 30 September 2021
Market Percentage
value of
Company Country of Listing GBP'000 portfolio
Samsung Electronics Preference Republic of Korea 3,220 4.5
Hindustan Petroleum India 3,097 4.3
MediaTek Taiwan 2,843 4.0
Taiwan Semiconductor Manufacturing,
ADR Taiwan 2,753 3.9
Wilson Sons, BDR Brazil 2,569 3.6
NetEase Hong Kong* 2,531 3.6
Corp. Inmobiliaria Vesta Mexico 2,505 3.5
Sberbank of Russia Preference Russia 2,448 3.4
NWS Holdings Hong Kong* 2,414 3.4
Hon Hai Precision Industry Taiwan 2,186 3.1
KCB Group Kenya 2,139 3.0
Bank of Georgia Group United Kingdom* 2,104 2.9
MMC Norilsk Nickel, ADR Russia 1,987 2.8
Bolsa Mexicana de Valores Mexico 1,786 2.5
Bizlink Holding Taiwan 1,735 2.4
Want Want China Holdings Hong Kong* 1,697 2.4
Coca-Cola Icecek Turkey 1,691 2.4
Chroma ATE Taiwan 1,581 2.2
Kunlun Energy Hong Kong* 1,555 2.2
SK Hynix Republic of Korea 1,531 2.2
Bestway Global Holding(+) Hong Kong* 1,510 2.1
Emaar Malls United Arab Emirates 1,496 2. 1
United Bank Pakistan 1,476 2.1
Elan Microelectronics Taiwan 1,345 1.9
SEPLAT Petroleum United Kingdom* 1,337 1.9
Integrated Diagnostics Holdings United Kingdom* 1,331 1.9
Embassy Office Parks REIT India 1,293 1.8
China Medical System Holdings Hong Kong* 1,255 1.8
M.Video Russia 1,215 1.7
Orbia Advance Mexico 1,209 1.7
Purcari Wineries Romania 1,154 1.6
Greatview Aseptic Packaging Hong Kong* 1,069 1.5
Indus Motor Pakistan 1,041 1.5
Luk Fook Holdings International Hong Kong* 902 1.3
Consun Pharmaceutical Group Hong Kong* 882 1.2
Vietnam Dairy Products (HSBC
Bank) Warrant 19/11/2021 Vietnam 881 1.2
Credit Agricole Egypt Egypt 856 1.2
Despegar.com US 854 1.2
Agesa Hayat ve Emeklilik Turkey 853 1.2
Jaya Real Property Indonesia 836 1.2
Grit Real Estate Income Group United Kingdom* 753 1.1
Obour Land For Food Industries Egypt 692 1.0
Sphera Franchise Group Romania 639 0.9
Pico Far East Holdings Hong Kong* 557 0.8
Salmones Camanchaca Chile 546 0.8
Guaranty Trust Holding Nigeria 509 0.7
SEPLAT Petroleum Nigeria 198 0.3
------------------------------------- ---------------------- -------- -----------
Total Investments 71,061 100.0
------------------------------------------------------------- -------- -----------
(+) Suspended security as at 30 September 2021 and subsequently
delisted following acquisition.
* Hong Kong and the United Kingdom are classified as developed
markets but the portfolio holdings listed in these markets operate
predominantly in emerging and/or frontier markets.
As at 30 September 2021 none of the Company's Total Assets was
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 exceed
10% of Total Assets.
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 year 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 year to 30 September 2021 and the Directors
expect 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).
In accordance with the requirements of the Financial Conduct
Authority, any material changes in the principal investment
policies and restrictions of the Company would only be made with
the approval of shareholders by ordinary resolution.
Benchmark Index
The Company's benchmark index is the MSCI Emerging Markets Index
(Total Return) in sterling.
Gearing
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 may deploy gearing of up to 20% of Net Asset Value
(calculated at the time of borrowing) to seek to enhance long-term
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
The Company's loan facility with Scotiabank Europe PLC, which
expired in September 2021, was renewed by the Board for a further
six months to March 2022.
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 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 currently targets an annualised dividend yield of a
minimum of 4% of NAV. Due to the flexibility afforded by the
investment trust structure, the Company has the scope to build a
revenue reserve, potentially allowing for progressive dividend
payments. It is intended that the Company can 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
are 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 has 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.
As explained in the Chairman's statement, the Board intends to
put forward proposals to amend the redemption facility by
restricting the number of shares that can be redeemed to 20% of
issued share capital and to move from an annual facility to one
which will be offered every three years, starting June 2024.
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 discount or premium of share price to Net Asset Value;
-- 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;
-- Ordinary share price movement;
-- Dividend yield; and
-- The Company's ongoing charges ratio.
Discount management
The Board reviews the level of the discount or premium between
the middle market price of the Company's Ordinary shares and their
Net Asset Value on a regular basis.
The Company will issue shares when there is sufficient demand.
Such issuances will always be at a price which is in excess of the
Net Asset Value. No shares were issued during the year under
review.
At the Annual General Meeting ("AGM") held on 5 March 2021, the
Company was granted the power to purchase its Ordinary shares and
either cancel or hold them in treasury as a method of controlling
the discount to net asset value and enhancing shareholder
value.
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 should be renewed at the 2021 AGM. The new authority to
repurchase will last until the conclusion of the AGM of the Company
in 2022 (unless renewed earlier). Any repurchases 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 and the Listing Rules.
As a result of the annual redemption facility, on 15 July 2021
the Company repurchased 4,607,803 Ordinary shares for
cancellation.
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. The
latter option 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 2021, there were no Ordinary shares held in
Treasury.
Management
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 36 of the Code of Corporate
Governance as issued by the Association of Investment Companies in
February 2019 (the "AIC Code"), the Board has assessed the
prospects of the Company over a period longer than the twelve
months required by the 'Going Concern' provision. The Board
assessed proposed changes to the redemption facility and the
introduction of a triennial continuation vote, as described in the
Chairman's Statement. Following discussions with major shareholders
it is the view of the Board that these changes will support the
ongoing viability of the Company. 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 and income
growth and the Board regards the Company's shares as a long-term
investment. Given that the Company was launched in 2017 the Board
is of the opinion that three years is currently the appropriate
period on which to base the viability of the Company. It is
expected that, as the Company builds a longer record, the viability
statement will cover a five year period.
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 and emerging risks and
uncertainties that may affect the Company as detailed below.
In addition, the Board has considered the reporting produced by
the Jupiter Investment Risk Team concerning a number of potential
future scenarios resulting from the Covid-19 pandemic. The Board
continues to monitor income and expense forecasts for the Company.
The Board continually re-assesses the operational resilience which
was first tested and proven effective during the onset of
Covid-19.
The Board has noted that:
-- The Company holds a liquid portfolio invested listed equities;
-- The investment management fee is the most significant expense
of the Company. It is charged as a percentage of the portfolio
value and so would reduce if the market value of the portfolio
were to fall. The remaining expenses are more modest in value
and are predicable in nature.
-- The Board is satisfied that Jupiter and the Company's other
key third-party service providers maintain suitable processes
and controls to ensure that they can continue to provide their
services to the Company in spite of the Covid-19 pandemic.
The Board has therefore 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 and Emerging Risks and Uncertainties
The Directors confirm that they have carried out a robust
assessment of the emerging and principal risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity. Most of these risks are market
related and are similar to those of other investment trusts
investing primarily in listed markets. The Audit Committee reviews
the Company's risk control summary at each meeting, and as part of
this process, gives consideration to identifying emerging risks.
Any emerging risks that are identified, and are considered to be of
significance will be recorded on the Company's risk control summary
with any mitigations. In carrying out this assessment,
consideration is being given to the market and the impact from the
Covid-19 outbreak and any climate related risks which may impact on
the investments held by the Company.
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 its
aim is 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 buyback 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 underlying value of
their investment. As approved by shareholders at the 2021 AGM, 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 forthcoming AGM (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 FCA's 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 is responsible
for ensuring the Company's compliance with, amongst other
regulations, the Companies Act 2006, the FCA's Listing Rules, the
FCA's Disclosure and Transparency Rules and the Alternative
Investment Fund Managers Directive. In order to ensure that the
Company remains compliant, the Board directly and via the Audit
Committee receives regular updates from the Investment Adviser and
the Company's other key service providers. 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.
Covid-19 - During the Covid-19 pandemic the Board requested that
the Investment Adviser increase the frequency of its monitoring of
key suppliers to ensure the safety of working conditions and
continuity of operational functions. The Board decided to increase
its monitoring of the portfolio and is in more frequent discussion
with the investment adviser.
Enterprise risk is reviewed twice a year, taking into its remit
emerging risks as they become immediate, whilst still maintaining a
long-term perspective where they are evolving at a fast rate.
Directors
As at 30 September 2021 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 party service providers. There are therefore no
disclosures to be made in respect of employees.
Integration of ESG considerations into the Investment Adviser's
Investment Process
JAM has a 30 year record of integrating ESG factors into the
investment process. Its Governance and Sustainability team
leverages its relationships with partner organisations such as the
UN Principles for Responsible Investment ("UN PRI"), the Investor
Forum and Institutional Investors Group on Climate Change ("IIGCC")
and regularly engages with these and other industry bodies to
ensure it remains at the forefront of ESG integration. Where
relevant, lessons learned are disseminated across JAM's wider
investment team via its Stewardship Committee.
JAM considers stewardship to be an integral component of its
investment process. Typically, JAM does not seek to exclude
companies based on headline risk factors, disclosures or practices,
instead believing that engagement aimed at enhancing long- term
outcomes for investors requires a more rigorous and nuanced
approach. Moreover, the Investment Adviser is of the view that
compelling opportunities can arise in companies where there is
evidence of positive change in the areas of environmental and
social risk mitigation and governance practices, but where the
market may be yet to reflect this in investee company share
prices.
Modern Slavery Act
The Modern Slavery Act 2015 requires certain companies to
prepare a slavery and human trafficking statement. As the Company
has no employees and does not supply goods and services, it is not
required to make such a statement.
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.
Section 172 Statement
Under Section 172 ("S172") of the Companies Act 2006, the
Directors have a duty to act in good faith and to promote the
success of the Company for the benefit of its shareholders as a
whole. This includes taking into consideration the likely
consequences of their decisions on the long term and on the
Company's stakeholders, such as its shareholders, employees and
suppliers, while acting fairly between shareholders.
The Directors must also consider the impact of the Company's
decisions on the environment, the community and its reputation for
maintaining high standards of business conduct.
The Company ensures that the Directors are able to discharge
this duty by, amongst other things, providing them with relevant
information and training on their duties. The Company also ensures
that information pertaining to its stakeholders is provided, as
required, to the Directors as part of the information presented in
regular Board meetings in order that stakeholder considerations can
be factored into the Board's decision making. The Directors'
responsibilities are also set out in the schedule of Matters
Reserved for the Board and the terms of reference of its
committees, both of which are reviewed regularly by the Board. At
all times the Directors can access as a Board, or individually,
advice from its professional advisers including the Company
Secretary and independent external advisers.
The Company's investment objective, to achieve capital growth
and income over the long term, supports the Directors' statutory
obligations to consider the long term consequences of the Company's
decisions. How the long-term focus of the Company is achieved is
set out in more detail where the Investment Adviser's approach to
environmental, social and governance issues is explained in the
section entitled Integration of ESG considerations into the
Investment Adviser's Investment Process. This approach is
fundamental to the Company achieving long-term success for the
benefit of all of its stakeholders.
The Company's investment objective is to achieve capital growth
and income through investment in companies exposed directly or
indirectly to Emerging and Frontier markets worldwide.
The Company is also aware of its own potential impact on the
environment and has a number of practical policies in place to
reduce that impact.
Examples include the use and sharing of electronic documents by
the Board rather than printing documentation and the provision of
electronic copies of the annual report and accounts which are
available to shareholders and others on the Company website. Where
physical copies of the annual and half yearly financial reports are
made, they use materials and processes designed to both minimise
the environmental impact and to maximise the recycling
potential.
Engagement with suppliers, customers and others and the effect
on principal decisions
The Shareholders - The shareholders of the Company are both
institutional and retail.
The Board believes that shareholders have a vital role in
encouraging a higher level of corporate performance and is
committed to listening to the views of its shareholders and giving
useful and timely information by providing open and accessible
channels of communication including those listed below.
The AGM - The Company encourages participation from shareholders
at its AGMs where they can communicate directly with the Directors
and Investment Adviser. A short presentation by the Investment
Adviser on the performance of the Company over the past year, as
well as an outlook for the future will be made available on the
Company's website in advance of the AGM.
Online Information - The Company website contains the Annual and
Half Yearly Financial Report along with monthly factsheets and
commentaries from the Investment Adviser. The daily NAV per share,
monthly top ten portfolio listings and other regulatory
announcements can be found on the regulatory news service of the
London Stock Exchange.
Shareholder Communications
Shareholders can raise issues or concerns at any time by writing
to the Chairman or the Senior Independent Director at the
Registered Office.
The Investment Adviser
The investment management function is critical to the long-term
success of the Company. The Board and the Investment Adviser
maintain an open and constructive relationship, with meetings
taking place a minimum of four times per annum, with monthly
updates and additional meetings as circumstances require. The Audit
Committee meets at least twice a year and as part of its role
considers the internal controls put in place by the Investment
Adviser.
The day to day responsibilities of the Company are delegated to
the Investment Adviser which as the key service provider supplies
investment management, administration and company secretarial
services. The Investment Adviser oversees the activities of the
Company's other third-party suppliers on behalf of the Company and
maintains open and collaborative relationships to maintain quality,
efficiency and cost control through regular communication with
dedicated members of the Investment Adviser's operational teams.
The Board regularly reviews reports from its Investment Adviser,
the AIFM, the depositary, the Company broker, the investor
relations research provider and the Independent Auditors.
These provide vital information concerning changes in market
practice or regulation which affect the Company and assist the
Board in its decision making process. Representatives from these
providers attend Company Board meetings and give presentations on a
regular basis enabling in depth discussions concerning both their
findings and their performance.
Other Third-Party Service Providers
As an externally managed investment company with no employees or
physical assets, the principal stakeholders of the Company are its
shareholders, Investment Adviser, AIFM, depositary, custodian,
administrator and registrar. The continuance, or otherwise, of
engagement of key third-party service providers are principal
decisions taken by the Board every year.
Principal Decisions
The Directors take into account the S172 considerations in all
material decisions of the Company. Examples of this can be seen as
follows.
-- During 2021, the Board appointed Marten & Co. to provide
marketing services with a view to increasing the retail investor
base. Marten & Co. target retail investors and investor
platforms as well as some smaller regional IFAs and wealth managers
that were not previously targeted by the Company. The Board agreed
that Marten & Co.'s retail marketing experience will be
beneficial in the pursuit of growing the Company's retail investor
base.
-- The annual redemption facility resulted in a total of
25,670,791 Ordinary shares being submitted by shareholders,
representing 30 per cent of the issued share capital of the
Company. As explained in the Chairman's statement, the Board
intends to put forward proposals to amend the redemption facility
by restricting the number of shares that can be redeemed to 20% and
to move from an annual facility to one which will be offered every
three years, starting June 2024.
-- The Company's loan facility with Scotiabank Europe PLC, which
expired in September 2021, was renewed by the Board for a further
six months.
In Summary
The structure of the Board and its various committees and the
decisions it makes are underpinned by the duties of the Directors
under S172 on all matters. The Board firmly believes that the
sustainable long-term success of the Company depends upon taking
into account the interests of all the Company's key
stakeholders.
For and on behalf of the Board
John Scott
Chairman
28 January 2022
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable United
Kingdom law and International Financial Reporting Standards
('IFRS') in conformity with the Companies Act 2006.
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 IFRS in conformity with the Companies Act
2006 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 in conformity
with the Companies Act 2006, 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 www.jupiteram.com/JEFI. 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
www.jupiteram.com/JEFI, 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 IFRS
in conformity with the Companies Act 2006, give a true and
fair view of the assets, liabilities, financial position
and profit or loss of the Company;
(b) the Strategic Report and Report of the Directors include
a fair view of the development and performance of the Company
together with a description of the principal and emerging
risks and uncertainties that the Company faces; and
(c) in their opinion, 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 required of a company
director to make themselves aware of any relevant audit
information and to establish that the company's Auditors
are aware of that information.
By order of the Board
John Scott
Chairman
28 January 2022
Statement of Comprehensive Income for the year ended 30 September
2021
2021 2020
Revenue Capital Revenue Capital
Return Return Total Return Return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain/(loss) on investments
held at fair
value through profit or
loss - 19,334 19,334 - (12,550) (12,550)
Foreign exchange gain on
loan - 524 524 - 527 527
Other exchange loss - (47) (47) - (189) (189)
Investment income 4,829 - 4,829 4,477 - 4,477
Other income - - - 3 - 3
Total investment income 4,829 19,811 24,640 4,480 (12,212) (7,732)
----------------------------- -------- --------- --------- -------- ----------- -----------
Investment management fee (147) (441) (588) (149) (447) (596)
Other expenses (564) (15) (579) (536) (13) (549)
----------------------------- -------- --------- --------- -------- ----------- -----------
Total expenses (711) (456) (1,167) (685) (460) (1,145)
----------------------------- -------- --------- --------- -------- ----------- -----------
Net return/(loss) before
finance costs and taxation 4,118 19,355 23,473 3,795 (12,672) (8,877)
----------------------------- -------- --------- --------- -------- ----------- -----------
Finance costs (35) (106) (141) (70) (211) (281)
----------------------------- -------- --------- --------- -------- ----------- -----------
Net return/(loss) before
taxation 4,083 19,249 23,332 3,725 (12,883) (9,158)
----------------------------- -------- --------- --------- -------- ----------- -----------
Taxation (457) (60) (517) (419) 77 (342)
----------------------------- -------- --------- --------- -------- ----------- -----------
Net return/(loss) after
taxation* 3,626 19,189 22,815 3,306 (12,806) (9,500)
----------------------------- -------- --------- --------- -------- ----------- -----------
Return/(loss) per Ordinary
share 4.59p 24.31p 28.90p 3.71p (14.39)p (10.68)p
----------------------------- -------- --------- --------- -------- ----------- -----------
* 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 in conformity with
the Companies Act 2006.
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 2021
2021 2020
GBP'000 GBP'000
Non current assets
Investments held at fair value
through profit or loss 71,061 85,302
Current assets
Other receivables 478 584
Cash and cash equivalents 940 66
Total Current Assets 1,148 650
Total assets 72,479 85,952
---------------------------------------- --------- ----------
Current liabilities
Other payables (7,373) (10,821)
---------------------------------------- --------- ----------
Total assets less current liabilities 65,106 75,131
---------------------------------------- --------- ----------
Capital and reserves
Called up share capital 598 855
Share premium 4,019 4,019
Special reserve 85,704 85,704
Capital redemption reserve 343 86
Retained earnings (25,558) (15,533)
Total equity shareholders' funds 65,106 75,131
---------------------------------------- --------- ----------
Net Asset Value per Ordinary share 108.88p 87.91p
---------------------------------------- --------- ----------
The financial statements were approved by the Board of Directors
and authorised for issue on 28 January 2022 and signed on its
behalf by:
John Scott
Chairman
Statement of Changes in Equity for the year ended 30 September 2021
Capital
Share Share Special Redemption Retained
For the year ended Capital Premium Reserve* Reserve Earnings Total
30 September 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 September
2020 855 4,019 85,704 86 (15,533) 75,131
Net profit for the
year - - - - 22,815 22,815
Repurchase of Ordinary
Shares for cancellation (257) - - 257 (29,559) (29,559)
Dividends declared
and paid** - - - - (3,281) (3,281)
-------------------------- -------- -------- --------- ----------- ----------- -----------
Balance at 30 September
2021 598 4,019 85,704 343 (25,558) 65,106
-------------------------- -------- -------- --------- ----------- ----------- -----------
Capital
Share Share Special Redemption Retained
For the year ended Capital Premium Reserve* Reserve Earnings Total
30 September 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 September
2019 901 4,019 85,704 40 3,204 93,868
Net loss for the year - - - - (9,500) (9,500)
Repurchase of Ordinary
shares for cancellation (46) - - 46 (4,059) (4,059)
Dividends declared
and paid** - - - - (5,178) (5,178)
-------------------------- -------- -------- --------- ------------------- ---------- ----------
Balance at 30 September
2020 855 4,019 85,704 86 (15,533) 75,131
-------------------------- -------- -------- --------- ------------------- ---------- ----------
* 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.
Statement of Cash Flows for the year ended 30 September 2021
2021 2020
GBP'000 GBP'000
Cash flows from operating
activities
Dividends received (gross) 5,186 4,203
Deposit interest received - 3
Investment management fee
paid (607) (632)
Other cash expenses (616) (470)
------------------------------------------- ---------- ----------
Net cash inflow from operating
activities before taxation
and interest 3,963 3,104
------------------------------------------- ---------- ----------
Interest paid (119) (278)
Overseas tax incurred (517) (419)
------------------------------------------- ---------- ----------
Net cash inflow from operating
activities 3,327 2,407
------------------------------------------- ---------- ----------
Cash flows from investing
activities
Purchases of investments (26,140) (23,676)
Sales of investments 59,521 31,420
------------------------------------------- ---------- ----------
Net cash inflow from investing
activities 33,381 7,744
------------------------------------------- ---------- ----------
Cash flows from financing
activities
Repurchase of Ordinary shares
for
cancellation (29,559) (4,059)
Equity dividends paid (3,281) (5,178)
Repayment of loan (2,947) (1,203)
------------------------------------------- ---------- ----------
Net cash outflow from financing
activities (35,787) (10,440)
------------------------------------------- ---------- ----------
Increase/ (decrease) in cash 921 (289)
------------------------------------------- ---------- ----------
Change in cash and cash equivalents
------------------------------------------ ---------- ----------
Cash and cash equivalents
at start of year 66 544
Realised loss on foreign currency (47) (189)
------------------------------------------- ---------- ----------
Cash and cash equivalents
at end of year 940 66
------------------------------------------- ---------- ----------
Notes to the Accounts
1. Accounting Policies
The Accounts comprise the financial results of the company for
the year to 30 September 2021. 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 21 January 2022. All values are rounded to the
nearest thousand pounds (GBP'000) except where indicated.
The accounts have been prepared in accordance with International
Financial Reporting Standards in conformity with the Companies Act
2006.
Where presentational guidance set out in the Statement of
Recommended Practice ("SORP") for Investment Trusts issued by the
Association of Investment Companies ("AIC") in October 2019 is
consistent with the requirements of IFRS in conformity with the
Companies Act 2006, the directors have sought to prepare the
financial statements on a basis compliant with the recommendations
of the SORP.
The Directors also considered the proposed changes to the
redemption facility, as described in the Chairman's Statement, and
following discussions with major shareholders it is the Director's
view that the Company will continue as a going concern.
The Company is engaged in a single segment of business, being
that of an investment trust company and consequently no business
segmental analysis is provided.
(a) Income
Dividends from investments are recognised when the investment is
quoted ex-dividend or when the right to income has been
established. Dividends received from equity shares are taken to the
revenue return column, except special dividends, which are reviewed
on a case by case basis to determine if the dividend is to be
treated as revenue or capital.
Deposit and other interest receivable are accounted for on an
accruals basis. These are classified within operating activities in
the Statement of Cash flows.
(b) Presentation of Statement of Comprehensive Income
In order to better reflect the activities of an investment trust
company and in accordance with supplementary guidance issued by the
AIC, the Statement of Comprehensive Income is presented with items
of a revenue and capital nature in two columns.
Investment management fees and finance costs are charged 75% to
capital and 25% 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 (FVTPL). 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 translated 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 translation 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 year in which they arise.
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 charged fully to the revenue column, except for expenses
which are incidental to the purchase of sale of an investment which
are charged to capital.
(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
year. 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 year. The OCF is made up of the Investment
Management fee and other operating costs deducted from the Company
during the year, excluding finance costs and performance fees.
(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.
For shares issued from treasury, the share premium is the
element over and above the weighted average cost of the shares.
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.
Capital Redemption Reserve
The capital redemption reserve is used for the transfer of the
nominal value of shares which are repurchased for cancellation from
share capital.
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 year-end,
-- Transaction costs,
-- Foreign currency difference,
-- The costs of purchasing Ordinary share capital.
Revenue Reserve
The revenue profit or loss for the year 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 the financial statements, the
following amendment to the IFRS Standards and Interpretations was
assessed to be relevant and is effective for annual periods
beginning on or after 1 January 2020:
IFRIC 23: Uncertainty over Income Tax Treatments
IFRIC 23 has not had an effect on the measurement or disclosure
of amounts recognised within the financial statements of the
Company.
Standards issued but not yet effective
At the date of authorisation of the financial statements, the
following standards and interpretations were assessed to be
relevant and are all effective for annual periods beginning on or
after 1 January 2021:
-- IFRS 9, IAS 39 and IFRS 7 Amendments: Interest Rate Benchmark
Reform. These will be effective for the financial statements
for the year ending 30 September 2021. With LIBOR expected
to be discontinued for new loans after the end of 2021,
a new reference rate will be implemented upon renewal of
the loan facility in 2022.
-- Reference to the Conceptual Framework - Amendments to IFRS
3. Effective for annual reporting periods beginning on or
after 1 January 2022.
-- Classification of Liabilities as Current or Noncurrent -
Amendments to IAS 1. Effective for annual reporting periods
beginning on or after 1 January 2023.
-- Definition of Accounting Estimates - Amendments to IAS 8.
Effective for annual reporting periods beginning on or after
1 January 2023.
-- Disclosure of Accounting Policies - Amendments to IAS 1
and IFRS Practice Statement 2. Effective for annual reporting
periods beginning on or after 1 January 2023.
-- Deferred Tax related to Assets and Liabilities arising from
a Single Transaction - Amendments to IAS 12. Effective for
annual reporting periods beginning on or after 1 January
2023.
There are no accounting standards, amendments, or
interpretations effective in the year and issued but not effective,
that have or will have material impact on these financial
statements. Furthermore, the Company has not early adopted any such
standards, amendments, and interpretations to existing standards
prior to their effective date.
2. Significant accounting judgements, estimates and assumptions
The Board has not applied any significant accounting judgements
to this set of Financial Statements or those of the prior period
other than the allocation of special dividends received between
revenue and capital.
This allocation is dependent upon the underlying reason for the
payment. Examples of capital events which would result in the
dividend being allocated to capital is a return of capital to
shareholders or proceeds from the disposal of assets. Examples of
revenue events which would result in the dividend being allocated
to revenue are the distribution of excess or exceptional profits in
the year. The circumstances are reviewed by the Investment Adviser
making recommendations to the Board who determine the appropriate
allocation.
The Board make no other significant accounting estimates.
3. Income
2021 2020
GBP'000 GBP'000
Income from investments
Dividends from United Kingdom registered
companies 41 55
Dividends from overseas companies 4,788 4,415
Scrip dividends - 7
------------------------------------------ -------- --------
Total Investment Income 4,829 4,477
------------------------------------------ -------- --------
Other income
Deposit interest - 3
------------------------------------------ -------- --------
4,829 4,480
------------------------------------------ -------- --------
Special dividends received in the year amounted to GBP0.05m
(2020: GBP0.04m) allocated to revenue and GBP0.794,m (2020: GBPnil)
allocated to capital.
4. Investment management fee
2021 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fee 147 441 588 149 447 596
---------------------- ------------ ------------- ------------ --------------- ------------- ------------
147 441 588 149 447 596
---------------------- ------------ ------------- ------------ --------------- ------------- ------------
5. Ongoing Charges
2021 2020
GBP'000 GBP'000
Investment management fees (GBP'000) 588 596
Other expenses (GBP'000) 579 549
Total expenses (excluding finance
costs) (GBP'000) 1,167 1,145
Average net assets (GBP) 83,942,225 84,399,393
Ongoing charges % 1.39 1.35
-------------------------------------- ----------- -----------
6. Earnings/(loss) per Ordinary share
The earnings per ordinary share is based on the net return for
the year of GBP22,815,000 (2020: Loss: GBP9,500,000) and on
78,924,394 (2020: 89,015,445) Ordinary shares, being the weighted
average number of Ordinary shares in issue during the year.
The return/(loss) per share figure detailed above can be further
analysed between revenue and capital, as below.
2021 2020
GBP'000 GBP'000
Net revenue return 3,626 3,306
Net capital (loss)/return 19,189 (12,806)
------------------------------------- ---------------------- ----------------------
Net total (loss)/return 22,815 (9,500)
------------------------------------- ---------------------- ----------------------
Weighted average number of Ordinary
shares in issue
during the year 78,924,394 89,015,445
Revenue return per Ordinary share 4.59p 3.71p
Capital return/(loss) per Ordinary
share 24.31p (14.39)p
------------------------------------- ---------------------- ----------------------
Total return/(loss) per Ordinary
share 28.90p (10.68)p
------------------------------------- ---------------------- ----------------------
7. Net asset value per Ordinary share
The net asset value per Ordinary share is based on the net
assets attributable to the equity shareholders of
GBP65,106,000 (2020: GBP75,131,000) and on 59,794,380 (2020:
85,465,171) Ordinary shares, being the number of Ordinary shares in
issue at the year end.
8. 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 1 October 2020
to 30 September 2021 was GBP588,000 (year to 30 September 2020:
GBP596,000) with GBP123,000 outstanding at year end (year to 30
September 2020: GBP142,000).
9. Contingent assets, liabilities and capital commitments
There were no contingent liabilities or capital commitments
outstanding as at 30 September 2021 and 30 September 2020.
10. Post balance sheet event
On 22 November 2021 the Company announced a fourth interim
dividend of 1.25p per Ordinary share which was paid on 30 December
2021.
11. Annual Results
This Annual Results announcement does not constitute the
Company's statutory accounts for the years ended 30 September 2020
and 30 September 2021 but is derived from those accounts. Statutory
accounts for the year ended 30 September 2020 have been delivered
to the Registrar of Companies. The statutory accounts for the year
ended 30 September 2020 and the year ended 30 September 2021 both
received an audit report which was unqualified and did not include
a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not include
statements under Section 498 of the Companies Act 2006
respectively. The statutory accounts for the year ended 30 June
2021 have not yet been delivered to the Registrar of Companies and
will be delivered following the Annual General Meeting.
The Annual General Meeting of the Company will be held on 28
March 2022 at 3:00pm.
A copy of the Annual Report & Accounts will shortly be
submitted to the National Storage Mechanism and will soon be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report & Accounts will also be available for
download from the Company's section of Jupiter Asset Management's
website www.jupiteram.com/JEFI
The Annual Report & Accounts will shortly be posted to those
registered shareholders who have elected to receive a hard
copy.
For further information, please contact:
Magnus Spence
Head of Investment Trusts and Alternatives
Jupiter Asset Management Limited, Company Secretary
020 3817 1325
28 January 2022
[END]
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(END) Dow Jones Newswires
January 28, 2022 06:50 ET (11:50 GMT)
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