JEFI.L Regulatory News (JEFI)

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

Legal Entity Identifier: 213800RLXLM87NO26S30

Annual Results for the year ended 30 September 2019 (Audited)

Financial Highlights

* The Ongoing charges figure for the prior period, is annualised due to the period being greater than 12 months.

† The period from launch covers 15 May 2017 to 30 September 2018; three interim dividends were paid to cover the long first account period.

Chairman's Statement

I am pleased to present the Annual Report and audited accounts for Jupiter Emerging & Frontier Income Trust PLC ("JEFIT", or the "Company") for the year ended 30 September 2019.

It has been a difficult year for investors in emerging market equities, which faced several headwinds during the period. The continuing trade dispute between the US and China worsened, with each side imposing higher tariffs on an ever wider range of products. By the end of August 2019, the Trump administration was threatening to impose tariffs on virtually all Chinese imports into the US.

The resulting slowdown in global trade adversely affected economic activity, particularly in the manufacturing sector, undermining cyclically-sensitive commodities, such as oil. With the outlook for the global economy weakening, central banks in both the developed and developing worlds cut interest rates, in some cases to levels that were negative.

One notable feature of the year was the persistent flow of money out of actively managed funds within the emerging market equity universe and into passive funds, such as index trackers. Partly as a result of this shift, large cap stocks outperformed the mid- and small-cap sections of emerging market indices, a development which was not helpful to our investment style. Nonetheless, our results have been very satisfactory.

Our investment performance

During the year, the Company's share price and Net Asset Value ('NAV') - with dividends added back - returned +4.0% and +10.5%, respectively. This compares with a total return of +3.7% for our benchmark, the MSCI Emerging Markets Net Total Return Index. It is a great tribute to our Investment Adviser that JEFIT's NAV outperformed our benchmark index by a significant margin; shareholders will be aware that our Investment Adviser deliberately runs the Company with a high 'active share', meaning that our portfolio has little overlap with our benchmark index.

As at 30 September 2019 the NAV per share was 104.2p, a 4.2% increase since launch, in addition to which distributions totaling 8.4 pence per share have been paid to shareholders. The middle market price per share on the London Stock Exchange on 30 September 2019 was 98.6p, representing a discount to net asset value of 5.4%. Your Board is naturally disappointed that after some 18 months of trading predominantly at a premium, the share price should have moved to a discount to NAV and we continue to monitor this position; at the time of writing the discount had narrowed to 4.4%.

The Company's strong recent performance is considered in more detail in the Investment Advisers Review.

Gearing

Gearing is defined as the ratio of a company's long-term debt less cash held, compared to its equity capital, expressed as a percentage. The effect of gearing is that, in rising markets, the Company should benefit from any growth of our investment portfolio above the cost of debt. Conversely, in falling markets the Company suffers more if its investment portfolio underperforms.

The ability to borrow is seen as a clear advantage enjoyed by investment trusts as compared with open ended investment vehicles such as unit trusts. This is especially the case in an era of historically low interest rates. The Company currently has access to a flexible loan facility with Scotiabank Europe plc for amounts up to £28 million. As at 30 September 2019 the Company's net gearing level, based on the amount of drawn down bank debt, less the cash held on the balance sheet, was 12%.

The Board reviews JEFIT's gearing on a regular basis. The current maximum has been set at 20% of the Company's total assets and we encourage the Investment Adviser to use the gearing facility and the Company's cash reserves in order to enhance returns for shareholders.

Dividends

The Board's policy is to pay a semi-annual interim dividend in January and July of each year. An interim dividend of 2.2p was paid on 5 July 2019, a further interim dividend of 2.4p was declared on 10 December 2019 and will be paid to shareholders on 17 January 2020. The distributions have been fully covered by earnings.

Total dividends arising from the financial year have therefore been 4.6p per share, representing an increase of 9.5% over the distributions of 4.2p per share for the comparable period last year.

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 and, since its formation in 2017, has issued 4 million additional shares at a premium to NAV. Our shares have traded for most of the year at a small discount to NAV, which currently precludes the issue of any additional shares.

During the period under review the Company issued a total of 0.95 million shares through its placing programme and bought back 3.97 million shares at the annual redemption point in June 2019.

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 NAV. 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.

Annual General Meeting

The Company's Annual General Meeting ('AGM') will be held on Wednesday, 26 February 2020 at 12:00 noon 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 Investment Adviser 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 AGM as it provides shareholders with an opportunity to ask questions of the Board and Investment Adviser.

Outlook

The Investment Adviser's approach is to concentrate on identifying well-managed companies in less established markets which are often under-appreciated by international investors, as distinct from being driven by macro-economic considerations. The volatility of world markets over the course of this year has highlighted the importance of being selective and the Investment Adviser has shown that it is highly adept at identifying suitable investment opportunities.

As I have said before, your Board has great confidence in the Investment Adviser's ability to make its way through the challenges currently presented by emerging and frontier markets and the increases in both earnings and the NAV per share achieved in the year under review support this view. The markets into which the Company invests are both complex and volatile; very often their performance and valuation can be significant affected by events which are taking place a long way from the company or country involved. As this report goes to press, tensions in the Middle East have significantly increased and while JEFIT has a low level of direct exposure to the countries in that region, many of our holdings further afield have been affected as, fearing a further escalation of hostilities, the nerves of investors are tested on a world-wide basis.

In relation to Brexit the Directors have considered the adverse impact of potential changes in law, regulation and taxation and the matter of foreign exchange exposure. Although there are a number of potential risks associated with the process, they do not believe that this represents a material threat to the Company's strategy and business model, nor do they believe that the Investment Manager would be materially impeded in achieving the Company's investment objective. But your Board recognises that the complexity of Brexit, the uncertainties it has already generated and the current lack of detail on the process all present the Company with additional risks. Under certain circumstances, these could be supportive to the Investment Manager in achieving the Company's objectives, but there are other outcomes which could prove to be malign. Monitoring the Brexit process and its implications for JEFIT remains a priority for the Directors and our Investment Adviser.

To me, this illustrates the need for a highly skilled fund manager and preferably one who - to use a well-known phrase - "puts his money where his mouth is". I take great comfort from the fact that Ross Teverson is a significant shareholder in the Company and increased his shareholding during the course of the year under review. Likewise, all of the Directors - who invested their first two years of fees in JEFIT shares - continue to be holders of these shares and since expiry of that commitment on the second anniversary of the Company's flotation there have been additional purchases by Board members. This underlines our confidence in the Investment Adviser's ability to make its way through the challenges currently confronting those who invest in emerging and frontier markets. The increases achieved during the year under review in both earnings and NAV per share support this view. 

Our shares are providing a yield of some 4.7% and, having now been in business for nearly 3 years, we have better visibility on the quantum, timing and security of our income stream. This provides your Board with the confidence to move to the payment of quarterly dividends with effect from the current financial year. Once the interim dividend for the 2018/19 financial year of 2.4 pence per share has been paid to shareholders on 17 January 2020, it is our intention to adopt a system of four approximately equal dividends annually, to be paid in January, April, July and October.

John Scott

Chairman

13 January 2020

Investment Adviser's Review

Market review

For the financial year ended 30 September 2019, the Company's NAV total return (with dividends added back) of 10.5% exceeded that of its benchmark, the MSCI Emerging Markets Net Total Return Index, which returned 3.7%. The NAV return outpaced that of the benchmark despite an asset allocation heavily skewed towards smaller companies, which underperformed over the period. By contrast, the Company's frontier market exposure proved to be a positive driver of performance, as frontier market gains exceeded those of emerging markets. NAV volatility remained below that of the benchmark, a consistent feature of the Company.

Over the period, trade tensions between the US and China, as well as elections in markets from Argentina to India, generated volatility within emerging and frontier markets. We have experienced several false dawns in the ongoing US-China trade dispute, and we have seen that a single tweet by President Trump on the topic can trigger large swings in markets. Given that we are unable to claim any great insight into how US-China negotiations might play out, we have avoided trying to pre-empt developments on this front, preferring as always to stick to stock selection, rather than taking a top-down view. It is worth noting, however, that our bottom-up-driven approach to portfolio construction has led to a portfolio that has a significantly lower weighting in Chinese companies compared to the benchmark and most other emerging market funds.

During the period, investors' confidence in the Turkish economy began to recover and the Turkish Lira regained some of the ground it lost in the previous year. In India, Narendra Modi's re-election as Prime Minister, and a subsequent reduction in corporate tax rates, were taken positively. By contrast, international investors retreated from Argentina when it became apparent that economic reformer, Mauricio Macri, would lose to a more popularist and potentially fiscally profligate Alberto Fernandez. The Company avoided the fallout in Argentina, as we have no direct exposure to the country.

Towards the end of the Company's financial year, Hong Kong and Chile made the headlines because of mass protest movements and sporadic violence. These are both markets where we have relatively low exposure; in Chile we hold only one stock, Salmones Camanchaca (which as an exporter of salmon should be relatively immune from domestic issues), while our Hong Kong-listed holdings are either wholly or predominantly China businesses.

The volatility that characterised markets for much of the period belied the strong and consistent operational performance delivered by many emerging and frontier market companies. Most of the companies that we hold in the portfolio continued to deliver year-over-year earnings growth during the period.

Performance

Positive contributors to performance included Taiwan chip designer, Mediatek, Indian refiner and fuel marketing company, HPCL, Taiwan electrical component supplier, Bizlink and East African bank, KCB. Detractors from performance included South African health and wellness products company, Ascendis, and Bank of Georgia.

Mediatek was one of the best performing holdings in the portfolio over the period, rising by over 55% in sterling terms. As the world's number two mobile phone chipset designer after Qualcomm, the company is very well positioned to capitalise on rising demand for 5G handsets. Our recent discussions with the company and other firms within the technology sector lead us to expect that sales and margins should both rise materially for Mediatek in 2020 on the back of new products, higher average selling prices and better volumes.

For HPCL, our long-term investment thesis is premised on increasing profitability and good growth prospects across multiple divisions, including refining, pipelines, branded lubricants and fuel retailing. Strong performance over the period was driven by several factors, including the cuts to Indian corporate tax rates, announced by the government in September of this year. HPCL will see a material benefit, as its tax rate will fall from 35% to 25% under new rules. Additionally, expectations of improving refining margins and the potential sale of stakes in domestic refining and marketing businesses to international buyers helped attract new buyers into the stock.

Bizlink, which supplies wire harnesses to Tesla and laptop PC docking stations to Dell, recovered strongly after a weak start to 2018, as investors came to appreciate the potential for continued revenue growth across its IT and auto product divisions, as well as scope for margin expansion, as product mix improves. We remain positive on the outlook for Bizlink, given meaningful barriers to entry for its key products and structural demand growth in the end markets served by the Company.

KCB is a retail and commercial banking group, which holds a leading position in Kenya and has operations across several East African countries. The company is well-positioned to benefit from rising financial inclusion in Kenya and has enjoyed strong growth in mobile banking revenue in recent years. For much of the past three-year period, however, the stock languished at close to historic low valuation levels because the introduction of interest rate caps dampened sentiment towards the sector. This has changed with the recent repeal of rate capping legislation in the country and Kenyan and financial stocks, including KCB, have begun to rerate.

Weakness in the share price of Ascendis, which sells healthcare products across Europe and Africa and distributes medical equipment to hospitals, was caused by a general aversion amongst South African domestic investors towards companies that have made European acquisitions. This negative sentiment was compounded by lower-than- expected cash generation for some divisions and the forced selling of shares by a significant shareholder of Ascendis. This year, changes have been made at board level and a new CEO has been appointed. Our conversations with the new Chairman and CEO have been encouraging and there appears to be a credible strategy in place for turning around the company's fortunes.

Bank of Georgia's share price fell over the year, despite the company delivering good earnings growth and we took the opportunity to add on weakness. Bank of Georgia is well-positioned to benefit from rising financial product penetration in a country that has been delivering an ambitious reform agenda. The stock was weak over 2019 due to a combination of Turkey contagion concerns and discussions for a limit on consumer lending in Georgia. Ongoing conversations with management, along with solid results from the company, give us confidence that the Georgian banking system remains robust and that changes to banking regulation are far less restrictive than previously feared. In addition to what we believe is an attractive valuation, governance at the bank is good, with most of the management team's remuneration in the form of long-vesting equity.

Activity

During the year, several positions were exited, including Cambodian gaming business and hotel operator, Naga Corp, African telecom operator, MTN, and Chinese automation equipment maker, Hollysys. Naga, MTN and Hollysys had been held by the Company since 2017 and these sales were not driven by any fundamental concerns for these businesses (each of which has delivered good operational performance) but by opportunity cost, as we identified new target holdings that we considered to be higher conviction ideas, including Orbia in Mexico, Porto Seguro in Brazil and SK Hynix in South Korea.

Orbia (a producer of fluorspar, petrochemicals and irrigation systems) is moving from being a simple commodities business to a vertically integrated producer of speciality products and solutions, which should lead to less cyclicality, higher sustainable returns and, therefore, an improved valuation rating.

Porto Seguro is a Brazilian general insurer, which currently has quite a high reliance on auto insurance (around 50% of the company's earnings). We believe that there are significant changes occurring that the market is yet to price in. Firstly, there is potential for auto insurance revenue to recover from last year's very low base, as auto sales pick up. Moreover, the company is diversifying into other areas including P&C and life, which we expect will lead to a rerating of the company's shares over the next 2-3 years.

SK Hynix is one of the world's leading manufacturers of memory chips used in PCs, mobile phones and servers. We believe that a combination of structurally rising demand for memory chips and an industry that is now far more consolidated than in prior cycles should lead to higher sustainable returns for the company. Moreover, management of SK Hynix have committed to paying 40-50% of free cash flow out as dividends, which is a significant positive change in its shareholder returns policy.

Outlook

We continue to believe that emerging and frontier market equities have some of the most compelling bottom-up opportunities of any asset class. We remain mindful of the fact that further developments in US- China trade talks and ongoing unrest in Hong Kong will continue to influence investor sentiment. However, what we consider to be more important is that at a portfolio level, operational progress remains broadly encouraging throughout, even in markets where economic activity has weakened.

We remain comfortable maintaining around 10% gearing in the Company - a level which we have described 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).

We continue to seek investment opportunities in companies where there is evidence of positive change that is not yet reflected in valuations, and we believe that current market environment provides a considerable number of such opportunities. And we maintain the view that some of the best long-term opportunities are to be found amongst emerging market mid- and small-cap companies and within frontier markets.

Ross Teverson and Charles Sunnucks

Fund Managers

Jupiter Asset Management Limited

Investment Adviser

13 January 2020

List of Investments as at 30 September 2019

Cross Holdings in other Investment Companies

As at 30 September 2019, 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 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 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 2019 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).

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

In order to improve the potential for capital returns to shareholders the Company has, with effect from 27 September 2019, negotiated a flexible loan facility with Scotiabank Europe plc ('Scotiabank') for up to £28 million, with a maturity date of 25 September 2020.

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% of NAV. 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;

• Ordinary share price movement; and

• Dividend yield.

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.

At the Annual General Meeting ('AGM') held on 27 February 2019, 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 2020 AGM. The new authority to repurchase will last until the conclusion of the AGM of the Company in 2021 (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, the Listing Rules and Model Code.

As a result of the annual redemption facility, on 12 July 2019 the Company repurchased 3,971,266 Ordinary shares for cancellation at a discount of 3.65%.

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 2019, 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 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 and income growth and the Board regards the Company's shares as a long-term investment. Given that JEFI 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 risks and uncertainties that may affect the Company as detailed below.

The Board has noted that:

·; the Company has maintained a consistent performance and broadly consistent share price discount to NAV

·; 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.

Principle 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.

Directors

As at 30 September 2019 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:

Integration of Environmental, Social and Governance (ESG) considerations into the Investment Adviser's Investment Process

Jupiter Asset Management Limited ('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's Global Emerging Markets team considers stewardship to be an integral component of its investment process. Typically, the team 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.

For and on behalf of the Board

John Scott

Chairman

13 January 2020

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 www.jupiteram.com/JEFI. The work carried out by the Auditors does not include consideration of the maintenance and integrity of the website and accordingly the Auditors accept 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 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.

John Scott

Chairman

13 January 2020

* 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.

The financial statements were approved by the Board of Directors and authorised for issue on 13 January 2020 and signed on its behalf by:

John Scott

Chairman

Company registration number 10708991

* 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.

Notes to the Accounts

1. Accounting Policies

The Accounts comprise the financial results of the Company for the year to 30 September 2019. The prior period is longer than 12 months and as a result will not be directly comparable. 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 13 January 2020. 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 or when the right to income has been established. Dividends receivable 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.

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

Deposit and other interest receivable are accounted for on an accruals basis. These are classified within operating activities in the Cash Flow Statement.

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 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.

(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 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 year in which they arise.

All finance costs are charged 75% to capital and 25% to revenue.

(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 or 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.

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 year-end,

·; Transaction costs,

·; Foreign currency difference, and

·; 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

The following standards, amendments applicable to the Company.

IFRS 9 - Financial Instruments

In the current period the Company has adopted IFRS 9 Financial Instruments on its effective date of 1 April 2018. The Portfolio continues to be held at FVTPL. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement and introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is not applicable to items that have already been derecognised at 1 April 2018, the date of initial application.

Receivables that were previously measured at amortised cost under IAS 39 and are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. Therefore, such instruments continue to be measured at amortised cost under IFRS 9.

The classification of financial liabilities under IFRS 9 remains broadly the same as under IAS 39. The main impact on measurement from the classification of liabilities under IFRS 9 relates to the element of gains or losses for financial liabilities designated at fair value through profit or loss attributable to changes in credit risk. The Company has not designated any financial liabilities at fair value through profit or loss therefore this requirement has not had an impact on the Company.

IFRS 9 requires the Company to record expected credit losses on all of its receivables, either on a 12 month or lifetime basis. As the company has limited exposure to credit risk, this amendment has not had a material impact on the Financial Statements as the company only holds receivables with no financing component that have maturities of 12 months or less. This requirement has not significantly changed the carrying amounts of the Company's Financial Assets under IFRS 9.

The Company's portfolio continues to be held at fair value through profit or loss. Comparative figures for the year ended 30 September 2018 have not been restated and are still accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

IFRS 15 - Revenue from Contracts with Customers

The Company adopted IFRS 15 Revenue from Contracts with Customers on its effective date of 1 April 2018. IFRS 15 replaces IAS 18 Revenue and establishes a five-step model to account for revenue arising from contracts with customers. In addition, guidance on interest and dividend income have been moved from IAS 18 to IFRS 9 without significant changes to the requirements. Therefore, there was no impact of adopting IFRS 15 for the Company.

Standards issued but not yet effective

There are no standards or amendments to standards not yet effective that are relevant to the Company and should be disclosed.

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

4. Investment management fee

5. Ongoing Charges

* The Ongoing charges figure for the prior period is annualised due to the period being greater than 12 months.

6. Earnings per Ordinary share

The earnings per Ordinary share figure is based on the net return for the year/period of £9,612,000 (2018: Return: £3,664,000) and on 92,834,572 (2018: 92,452,015) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year/period.

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

7. 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 2018 to 30 September 2019 was £691,000 (15 May 2017 to 30 September 2018 (£1,011,000) with £178,000 outstanding at year end (15 May 2017 to 30 September 2018: £172,000).

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.

8. Contingent assets, liabilities and capital commitments

There were no contingent liabilities or capital commitments outstanding as at 30 September 2019 (2018: The Company held an outstanding commitment to purchase share in Saudi Telecom, Huayu Automotive Systems, and Vietnam Dairy Products through warrants).

9. Post balance sheet event

Since the year 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 www.jupiteram.com/JEFI.

A copy of the Annual Report & Accounts will also be submitted to the National Storage Mechanism and will soon be available for inspection at www.morningstar.co.uk/uk/NSM.

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 1000

14 January 2020

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