jupiter merlin funds

Jupiter Merlin Funds

3

JUPITER MERLIN FUNDS

Contents

Contents

Investment Objectives 4

Management, Administration and Auditors 5

Directors 6

Chairman’s Review 7

Report of the Independent Auditors 8

Statement of Net Assets 10

Statement of Operations 11

Statement of Changes In Net Assets 12

Statement of Changes In Shares Issued 13

Statistical Information 14

Schedules of Investments

• Jupiter Merlin Funds – Jupiter Managed European Portfolio 15

• Jupiter Merlin Funds – Jupiter Merlin International Balanced Portfolio 17

• Jupiter Merlin Funds – Jupiter Merlin International Equities Portfolio 19

Notes to the Financial Statements 21

Notice of Meeting 25

Proxy Form

4


Investment Objectives

Jupiter Merlin Funds –

Jupiter Managed European Portfolio

(‘Jupiter Managed European Portfolio’)*

The investment objective of Jupiter Managed European Portfolio is to achieve long-term capital growth.


Jupiter Merlin International Balanced Portfolio

(‘Jupiter Merlin International Balanced Portfolio’)*

The investment objective of Jupiter Merlin International Balanced Portfolio is to achieve long-term capital growth with income.


Jupiter Merlin International Equities Portfolio

(‘Jupiter Merlin International Equities Portfolio’)*

The investment objective of Jupiter Merlin International Equities Portfolio is to achieve long-term capital growth.

*Launched on 9 September 2008.

5


Management, Administration and Auditors

Management, Administration and Auditors ■

Directors Jonathan Carey (Chairman)Jacques ElvingerPatrick ZurstrassenGarth Lorimer Turner

Registered Office HSBC Securities Services (Luxembourg) S.A. Until 30 April 2009:40, avenue Monterey, L-2163 Luxembourg

From 30 April 2009:16, Boulevard d’Avranches, L-1160 LuxembourgBP 413

Administrator, Custodian,

Paying Agent & Registrar

HSBC Securities Services (Luxembourg) S.A. Until 30 April 2009:40, avenue Monterey, L-2163 Luxembourg

From 30 April 2009:16, Boulevard d’Avranches, L-1160 LuxembourgBP 413

Management Company RBS (Luxembourg) S.A. 33, rue de Gasperich – Building B L-5826 Hesperange Luxembourg

Independent Auditors Ernst & Young S.A. 7, Parc d’Activité SyrdallL-5365 MunsbachLuxembourg

Legal Advisers Elvinger Hoss & Prussen2, Place Winston ChurchillL-1340Luxembourg

Investment Adviser Jupiter Asset Management Limited1 Grosvenor PlaceLondon SW1X 7JJUnited Kingdom

Authorised and regulated by the Financial Services Authority

Investment Manager Jupiter Asset Management (Bermuda) LimitedCumberland House3rd Floor, 1 Victoria StreetHamilton HM11Bermuda

Licensed to conduct investment business in or from Bermuda by the Bermuda Monetary Authority

6


Directors

Directors ■

Jonathan Carey (Chairman) Jonathan Carey (British) is the Group Executive Deputy Chairman of Jupiter Investment Management Holdings Limited (‘JIMH’), a position he has held since June 2007. Prior to this, he was the Joint Group Chief Executive of Jupiter Investment Management Group Limited (previously named Jupiter International Group PLC), a position he held from May 2000. He has been Chairman of the Investment Manager since May 2000. He is a Director of several other investment companies and funds.

Jacques Elvinger Jacques Elvinger is a partner of the Luxembourg law firm of Elvinger Hoss & Prussen.

Patrick Zurstrassen Patrick Zurstrassen is a Managing-Partner of Finor Luxembourg Sca.

Garth Lorimer Turner Garth Lorimer Turner (British) is a Managing Director of Jupiter Asset Management (Bermuda) Limited. Mr Lorimer Turner is a Solicitor of the Supreme Court of England & Wales, a Solicitor of the Supreme Court of Hong Kong and a Bermuda Barrister & Attorney. He is a Director of several investment companies and funds.

7


Chairman’s Review

Chairman’s Review ■

Dear Shareholder,

One year on from the bankruptcy of Lehman Brothers and the subsequent financial meltdown, equity markets have staged one of the greatest rallies in living memory. Over the last six months to the end of September, the FTSE World index has returned almost 30%.

Last autumn, the global economy was suffering from the fallout of the financial crisis after governments all over the world rushed to support their banking systems and prevent systemic collapse. Export-oriented countries such as Germany, Japan and China saw their economies contract sharply as orders dried up.

Despite a relief rally in December as governments in the US, UK and Europe cut rates, financial markets began the New Year in turmoil. Banks on both sides of the Atlantic came under heavy selling pressure. The US and UK authorities were pushed into a second round of bail-outs and corporate credit markets remained dysfunctional.

Equities hit their low in March as the full force of the financial failures impacted on economies. Even the healthiest of companies faced difficulties in financing their working capital and trade requirements, while consumers retrenched. With the investment banks no longer active as major market makers and a large amount of cash sitting on the sidelines, equity markets were understandably volatile.

Despite the general gloom, we then witnessed one of the most substantial rallies ever seen in equity markets. It was based to an extent on subsiding fears of a collapse in the financial system, a slowdown in forced de-leveraging and evidence of the slowing pace of economic deterioration.

As economic news continued to surprise on the upside, stock markets gathered momentum. However, the rally was led by indebted cyclical stocks which made it difficult for cautious investors to participate. Emerging markets that had seen the greatest falls in indices now saw the greatest rises.

At the same time, countries such as Hungary approached the World Bank for assistance while others had their debt ratings downgraded. Equities paused for breath in May and June as the summer doldrums set in.

By July, however, markets had begun a new leg upwards amid further evidence that the downturn was decelerating in many parts of the world. This came alongside more optimistic economic assessments from the IMF and G7.

Economic data revealed that the economies of Germany and France had unexpectedly grown by 0.4% in the second quarter of the year. In the US, the housing market appeared to have found a floor after a three year downward spiral.

As the global economy recovered, the US dollar weakened as investors took on more risk. At the same time, the gold price rose as concerns about the effects of government stimulus packages on paper currencies persisted.

The US, Germany and France may be technically out of recession, but it remains to be seen for how long, once the initial stimulatory effects of government intervention begin to wear off. Governments have also run up major budget deficits and these will have to be reduced. Public spending cuts and tax rises mean that economic growth in Western economies is likely to be muted for the next couple of years. Such an environment is likely to favour defensive growth companies that trade on lower valuations with attractive dividend yields supported by strong cash flows.

Jonathan Carey

Chairman

4 December 2009


Report of the Independent Auditors

8

Report of the Independent Auditors ■


Report of the Independent Auditors

9

10


Statement of Net Assets

Statement of Net Assets ■ as at 30 September 2009

Notes

Combined

€

Jupiter Merlin

Managed

European

Portfolio

€

Jupiter Merlin

International

Balanced

Portfolio

€

Jupiter Merlin

International

Equities

Portfolio

€

Investments

Investments in securities at cost 141,992,755 47,979,775 52,410,031 41,602,949

Unrealised appreciation 15,352,719 6,736,641 5,382,962 3,233,116

Investments in securities at fair value 2.d 157,345,474 54,716,416 57,792,993 44,836,065

Other Assets

Cash and short-term deposits 3,600,334 759,554 1,264,009 1,576,771

Due from brokers 4,052,302 – 4,052,302 –

Subscriptions receivable 1,341,256 577,936 238,002 525,318

Accounts receivable and accrued income 624,922 42,743 470,226 111,953

Other Assets 9,618,814 1,380,233 6,024,539 2,214,042

Total Assets 166,964,288 56,096,649 63,817,532 47,050,107

Liabilities

Due to brokers 4,069,993 – 4,069,993 –

Due to shareholders 482,446 413,448 1,368 67,630

Investment Management fees payable 4 260,642 93,096 90,062 77,484

Accounts payable and accrued expenses 166,802 68,549 48,885 49,368

Total Liabilities 4,979,883 575,093 4,210,308 194,482

Net Assets 161,984,405 55,521,556 59,607,224 46,855,625

The accompanying notes form an integral part of these financial statements.

11


Statement of Operations

Statement of Operations ■ for the period from 4 June 2008 (date of incorporation) to 30 September 2009

Notes

Combined

€

Jupiter Merlin

Managed

European

Portfolio

€

Jupiter Merlin

International

Balanced

Portfolio

€

Jupiter Merlin

International

Equities

Portfolio

€

Income

Income from investments 2.e 1,273,760 503,336 558,373 212,051

Deposit interest 2.e 231,674 63,454 78,158 90,062

Management fee rebates 2.g, 4 647,884 369,099 138,542 140,243

Other Income 98,085 42,767 25,734 29,584

Total Income 2,251,403 978,656 800,807 471,940

Expenses 2.f

Investment management fees 4 2,249,687 1,014,950 539,593 695,144

Administration and custodian fees 6 112,077 46,973 29,984 35,120

Management company fees 5 90,305 39,253 23,660 27,392

Other expenses 88,473 41,818 18,125 28,530

Printing and professional fees 82,368 32,931 23,196 26,241

Taxe d’abonnement 8 60,093 25,330 16,225 18,538

Registration fees 46,109 21,566 10,459 14,084

Directors’ fees 7 39,838 18,231 9,218 12,389

Bank charges and interest 2,802 1,218 740 844

Total Expenses 2,771,752 1,242,270 671,200 858,282

Net Operating (Loss) / Income for the Period (520,349) (263,614) 129,607 (386,342)


12


Statement of Changes in Net Assets

Statement of Changes in Net Assets ■ for the period from 4 June 2008 (date of incorporation) to 30 September 2009

Notes

Combined

€

Jupiter Merlin

Managed

European

Portfolio

€

Jupiter Merlin

International

Balanced

Portfolio

€

Jupiter Merlin

International

Equities

Portfolio

€

Net operating (loss) / income for the period (520,349) (263,614) 129,607 (386,342)

Net realised (losses) / gains on:

Investments in securities 2.d (3,325,403) (3,274,149) 874,168 (925,422)

Foreign exchange transactions 2.c (1,222,436) 32,182 (584,298) (670,320)

Net realised (loss) / gain (5,068,188) (3,505,581) 419,477 (1,982,084)

Net change in unrealised appreciation on:

Investments in securities 15,352,719 6,736,641 5,382,962 3,233,116

Increase in Net Assets from operations 10,284,531 3,231,060 5,802,439 1,251,032

Capital Transactions

Received on issue of Shares 219,671,105 75,504,469 94,576,430 49,590,206

Paid on redemptions of Shares (67,971,231) (23,213,973) (40,771,645) (3,985,613)

Total increase in Net Assets for the period 161,984,405 55,521,556 59,607,224 46,855,625

Net Assets

Beginning of period – – – –

End of period 161,984,405 55,521,556 59,607,224 46,855,625


13


Statement of Changes in Shares Issued

Statement of Changes in Shares Issued ■

for the period from 4 June 2008 (date of incorporation) to 30 September 2009

Jupiter Merlin

Managed

European

Portfolio

€

Jupiter Merlin

International

Balanced

Portfolio

€

Jupiter Merlin

International

Equities

Portfolio

€

Class E EUR

Shares outstanding, beginning of period – – –

Shares issued 322,670 87,367 193,144

Shares redeemed (108,446) (10,457) (6,819)

Shares outstanding, end of period 214,224 76,910 186,325

Class L EUR


Shares issued – 7,552,322 416,186

Shares redeemed – (3,969,017) (280,975)

Shares outstanding, end of period – 3,583,305 135,211

Class L USD


Shares issued – 300,765 7,408

Shares redeemed – – –

Shares outstanding, end of period – 300,765 7,408

Class L GBP


Shares issued – 257,381 129,111

Shares redeemed – (5,357) (19)

Shares outstanding, end of period – 252,024 129,092


14


Statistical Information

Statistical Information ■ as at 30 September 2009

Jupiter Merlin

Managed

European

Portfolio

€

Jupiter Merlin

International

Balanced

Portfolio

€

Jupiter Merlin

International

Equities

Portfolio

€

Number of Shares outstanding:

Class E Shares (EUR) 214,224 76,910 186,325

Class L Shares (EUR) – 3,583,305 135,211

Class L Shares (USD) – 300,765 7,408

Class L Shares (GBP) – 252,024 129,092

Total Net Assets:

Class E Shares (EUR) EUR 55,521,556 EUR 18,627,264 EUR 43,690,828

Class L Shares (EUR) – EUR 34,973,389 EUR 1,275,838

Class L Shares (USD) – USD 4,082,932 USD 94,359

Class L Shares (GBP) – GBP 2,936,653 GBP 1,667,326

Net Asset Value per Share:

Class E Shares (EUR) EUR 259.18 EUR 242.20 EUR 234.49

Class L Shares (EUR) – EUR 9.76 EUR 9.44

Class L Shares (USD) – USD 13.58 USD 12.74

Class L Shares (GBP) – GBP 11.65 GBP 12.92

15

Performance

NAV 30.09.09

Date of

inception* % Change

Class E (€) €259.18 €250.00 3.67%

*Inception date 9 September 2008.

Total Expense Ratio (TER):

Class E (€): 1.70%


Schedule of Investments

In the 12 months to 30 September 2009, Jupiter Managed European Portfolio returned 3.67% compared with +0.6% for its benchmark, the FTSE World Europe index in euro terms.

At launch, market conditions were volatile. As a result, funds were selected with a cautious bias. This aided performance following the near collapse of the banking system and financial crisis. However, the same defensive qualities of the holdings later dragged on performance as the market began to recover, led by highly-leveraged cyclical stocks.

Review

In the aftermath of the Lehman Brothers’ collapse in September 2008, the eurozone economy contracted dramatically. Export-driven countries such as Germany saw sharp cutbacks in orders as companies began de-stocking and cutting costs. The European Central Bank slashed interest rates, eventually taking them to 1%.

As winter approached, the region slipped into recession and concern mounted about the fate of Western European banks that had lent money to Eastern Europe. Countries such as Hungary had to apply to the IMF for loans, while those whose prosperity had been driven by house prices such as Spain and Ireland struggled with property crashes.

In January and February, markets remained extremely volatile after a second round of banking bailouts. Finance ministers of the G20 met to decide how best to tackle the global downturn and agreed to a package of stimulus measures and more money for the IMF.

Amid the gloom in early March, markets found a low and from there rallied hard, driven by economic surprises such as better than expected, but still poor, housing and consumer confidence data. In May and June, European markets paused for breath. By then, there were fewer macroeconomic surprises to sustain the market which had, in some cases, been pricing in a very optimistic V-shaped recovery. Domestically-generated economic growth in Europe remained weak and, in June, the eurozone inflation rate turned negative.

Equity markets reignited in late July, driven by an improvement in lead indicators and better than expected quarterly results. The subsequent optimism filtered through into a weaker dollar and further gains in emerging markets as investors took on more risk. Interbank lending spreads narrowed and results from the start of the Q2 reporting season proved better than expected.

In the market, cyclical stocks were once again in fashion. Retailers, miners, autos, banks and other financials were among the best performing sectors. The surge continued into August as several countries reported that they had emerged from recession. But while economic data improved, there remained little evidence of an increase in underlying demand. A lot of cash continued to sit on the sidelines.

Data showed that the German and French economies had each expanded by 0.4% in the second quarter. European manufacturing orders turned the corner and US house prices appeared to have found a floor after three years in a downward spiral. September proved to be a month of rights issues with many companies rushing to raise money as the appetite for risk improved.

Outlook

After months of strong performance in the markets, it is difficult to say where we go from here. The most important factor is that policy makers are showing no sign of flagging in their commitment to stimulating growth. European equities should continue to be relatively stable while the market believes that this commitment remains in place and that global interest rates will remain low for a prolonged period, despite the risk of inflation.

The ECB remains very comfortable with the idea of keeping the policy rate low for a long period, especially given the euro’s appreciation against the dollar which continues to hurt European exporters. The ECB estimates that the eurozone economy will expand by 0.2% in 2010 compared with consensus estimates of 0.7%.

Jupiter Managed European Portfolio ■

Managers report for the period from 4 June 2008 to 30 September 2009

16



Jupiter Managed European Portfolio ■ Schedule of Investments as at 30 September 2009

Quantity

Description

Transferable securities and money market instruments

admitted to an official exchange listing

Fair

Value

€

Fair

Value as a

Percentage

of Net Assets

%

Germany 9,856,190 17.75

9,083,060 Schroder European Alpha Plus 9,856,190 17.75

Ireland 10,223,596 18.41

49,857 Odey Pan European Fund 10,223,596 18.41

Luxembourg 20,773,575 37.42

942,066 The Jupiter Global Fund – Jupiter European Growth Fund* 10,569,977 19.04

903,773 The Jupiter Global Fund – Jupiter European Opportunities Fund* 10,203,598 18.38

United Kingdom 13,863,055 24.97

10,402,684 Jupiter European Income Fund* 4,563,290 8.22

2,584,113 Neptune European Opportunities Fund 9,299,765 16.75

Total transferable securities and money market instruments

admitted to an official exchange listing54,716,416 98.55

Other Net Assets 805,140 1.45

Net Assets 55,521,556 100.00

*Related Party Fund


17



Introduction

Finding adequate words to describe the oscillations in financial markets and economies over the last year is a challenging task indeed. ‘Utterly unprecedented’ almost suffices. The causes of the current crisis (note use of the present tense here) are well documented. However, those two words also neatly summarise the responses of the authorities; the present day economic situation, the resultant global economic imbalances and the record setting reactions of asset markets, both down and then the more recent bounce back up. No historical comparison provides the perfect analogy to where we are today. Three periods of financial history do bear consideration though. There are similarities to elements of the Great Depression, the mid 1970s and the two lost decades of recent Japanese financial history. Which path our economies ultimately follow is still unclear; a fresh uncharted course is quite possible. The consequences of the recent past will be felt by many future generations. Whilst naturally it is tempting to focus on the negative, there will be an equal, if not greater, number of positive developments and investment opportunities. All in all, as already noted; ‘utterly unprecedented’!

However, future investment opportunities may be very different from those experienced in the last few decades. Time horizons and geographic focus need to be extended. The days of leverage-driven, laissez-faire capitalism in the West are likely to be consigned to the history books. Regulators will do what they were always supposed to – regulate. This is no bad thing. Historically, too many poorly managed, inefficient consumers of scarce resources were kept afloat by 40 years of American bailouts and two decades of cheap money. For now the official liquidity tap remains in full flow; when totalled, the aggregate of global monetary and fiscal stimulus combined with recent pure ‘bailouts’ amounts to incomprehensible amounts of money. These policies have to end at some stage. At that point we will find out if sustainable economic growth results. Regardless of what happens some economies are at a tipping-point. The leaders of emerging markets now realise that their export driven growth models are flawed. Development of domestic growth is now the priority. In the West, deflationary factors remain today but we are very alive to the fact that many trillions of dollars have been pumped into the economic system. Inflation is lurking in the background and at some stage will re-appear.

Strategy

The fund was launched at a time when we were very mindful of capital preservation and we therefore constructed a portfolio around a core of conservatively managed long term holdings which we thought would hold up reasonably well if markets continued to fall. It did not take long for our strategy to be put to the test as Lehman Brothers went bust on 15 September 2008. The fund held up well at a time when risky assets were priced for a global depression. In March 2009 financial markets breathed a huge sigh of relief as it became increasingly clear that the world was not about to end. A globally co-ordinated stimulus response was now on the way and we needed to take the appropriate action. In April and early May we reduced our weighting to Sovereign bonds and cash in favour of those managers and regions that we thought would do best in a more favourable environment, whilst broadly maintaining the high quality emphasis of the portfolio. We increased the weighting to our incumbent Asian fund and introduced our favoured Latin American fund. We also invested a significant proportion of the fund into some very attractively positioned corporate bond funds. The strategy has worked well so far.

Outlook

From where we sit today we are not utterly convinced that the world has yet turned the corner, therefore the lower risk approach of our existing managers currently appeals. Our philosophy has always been one of capital preservation in tough times, whilst maintaining the ability to profit when situations improve. This mindset has served our clients reasonably well in the recent past. We are still in a situation with little certainty. Our investments are liquid and we retain plenty of flexibility should it be required.

Jupiter Merlin International Balanced Portfolio ■


Performance

NAV 30.09.09

Date of

inception* % Change

Class E (€) €242.20 €250.00 -3.12%

Class L (€) €9.76 €10.00 -2.40%

Class L (US$) $13.58 $10.00 35.80%

Class L (£) £11.65 £10.00 16.50%



Class E (€): 2.16%Class L (€): 1.18%Class L (US$): 1.53%Class L (£): 1.40%

18



Quantity

Description



Fair

Value

€

Fair

Value as a

Percentage

of Net Assets

%

Ireland 9,394,377 15.76

324,000 Findlay Park American Smaller Companies Fund 8,177,027 13.72

140,000 Findlay Park Latin American Fund 1,217,350 2.04


250,200 Blackrock Gold and General Fund 3,021,038 5.07

1,000,000 CF Morant Wright Japan Fund 2,139,598 3.59

2,854,500 First State Asia Pacific Leaders B Fund 9,139,985 15.33

11,000,000 INVESCO Perpetual Monthly Income Plus Fund 11,259,860 18.89

1,600,000 Jupiter European Special Situation Fund* 3,650,950 6.13

3,000,000 Jupiter Japan Income Fund* 1,612,741 2.71

3,600,000 Jupiter North American Income Fund* 2,011,708 3.37

15,000,000 Jupiter Strategic Bond Fund* 8,779,311 14.73

10,400,000 M&G Strategic Corporate Bond Fund 6,783,425 11.38



Other Net Assets 1,814,231 3.04

Net Assets 59,607,224 100.00

*Related Party Fund


Jupiter Merlin International Balanced Portfolio ■ Schedule of Investments as at 30 September 2009

19

Introduction

Finding adequate words to describe the oscillations in financial markets and economies over the last year is a challenging task indeed. ‘Utterly unprecedented’ almost suffices. The causes of the current crisis (note use of the present tense here) are well documented. However, those two words also neatly summarise the responses of the authorities; the present day economic situation, the resultant global economic imbalances and the record setting reactions of asset markets, both down and then the more recent bounce back up. No historical comparison provides the perfect analogy to where we are today, although three periods of financial history do bear consideration. There are similarities to elements of the Great Depression, the mid 1970s and the two lost decades of recent Japanese financial history. Which path our economies ultimately follow is still unclear; a fresh uncharted course is quite possible and the consequences of the recent past will be felt by many future generations. Whilst naturally it is tempting to focus on the negative, there will be an equal, if not greater, number of positive developments and investment opportunities. All in all, as already noted; ‘utterly unprecedented’!

Future investment opportunities may be very different from those experienced in the last few decades. Time horizons and geographic focus need to be extended. The days of leverage-driven, laissez-faire capitalism in the West are likely to be consigned to the history books. Regulators will do what they were always supposed to – regulate. This is no bad thing. Historically, too many poorly managed, inefficient consumers of scarce resources were kept afloat by 40 years of American bailouts and two decades of cheap money. For now the official liquidity tap remains in full flow; when totalled, the aggregate of global monetary and fiscal stimulus combined with recent pure ‘bailouts’ amounts to incomprehensible amounts of money. These policies have to end at some stage and at that point we will then find out if sustainable economic growth results. Regardless of what happens some economies are at a tipping-point. The leaders of emerging markets now realise that their export driven growth models are flawed. Development of domestic growth is now the priority. In the West, deflationary factors remain today but we are very alive to the fact that many trillions of dollars have been pumped into the economic system. Inflation is lurking in the background and at some stage will re-appear.

Strategy

The fund was launched at a time when we were very mindful of capital preservation and we therefore constructed a portfolio around a core of conservatively managed long term holdings which we thought would hold up reasonably well if markets continued to fall. It did not take long for our strategy to be put to the test as Lehman Brothers went bust on 15 September 2008. The fund held up well at a time when risky assets were priced for a global depression. In March 2009 financial markets breathed a huge sigh of relief as it became increasingly clear that the world was not about to end. A globally co-ordinated stimulus response was now on the way and we needed to take the appropriate action. In April and early May we reduced our cash weighting in favour of those managers and regions that we thought would do best in a more favourable economic climate, whilst broadly maintaining the high quality emphasis of the portfolio. We increased the weighting to our incumbent Asian fund and introduced our favoured Latin American fund. More latterly we have added a small position in a Technology fund; a sector which we have avoided since the year 2000. For obvious reasons Technology investing will hold many nightmares for investors, consequently it is universally under-owned. The companies on the whole are fundamentally strong and with forthcoming replacement cycles and billions of new consumers in emerging markets, the future is relatively bright.

Outlook

From where we sit today we are not utterly convinced that the world has yet turned the corner, therefore the lower risk approach of our existing managers currently appeals. Our philosophy has always been one of capital preservation in tough times, whilst maintaining the ability to profit when situations improve. This mindset has served our clients reasonably well in the recent past. We are still in a situation with little certainty. Our investments are liquid and we retain plenty of flexibility should it be required.

Jupiter Merlin International Equities Portfolio ■




Performance

NAV 30.09.09

Date of

inception* % Change

Class E (€) €234.49 €250.00 -6.20%

Class L (€) €9.44 €10.00 -5.60%

Class L (US$) $12.74 $10.00 27.40%

Class L (£) £12.92 £10.00 29.20%



Class E (€): 2.05%Class L (€): 1.21%Class L (US$): 0.43%Class L (£): 1.42%

20



Jupiter Merlin International Equities Portfolio ■ Schedule of Investments as at 30 September 2009

Quantity

Description



Fair

Value

€

Fair

Value as a

Percentage

of Net Assets

%

Ireland 14,773,148 31.53

333,000 Findlay Park American Smaller Companies Fund 8,404,166 17.94

275,000 Findlay Park Latin American Fund 2,391,223 5.10

142,000 First State Asian Equity Plus Fund 2,707,491 5.78

175,000 Polar Capital Global Technology Fund 1,270,268 2.71


1,178,000 AXA Framlington American Growth Fund 2,338,187 4.99

382,600 Blackrock Gold & General Fund 4,619,701 9.86

430,000 CF Morant Wright Japan B Fund 920,027 1.96

2,431,000 First State Asia Pacific Leaders B Fund 7,783,956 16.61

400,000 INVESCO Perpetual Income Fund 4,929,369 10.52

845,000 Jupiter European Special Situation Fund* 1,928,158 4.12

2,598,000 Jupiter Japan Income Fund* 1,396,634 2.98

11,000,000 Jupiter North American Income Fund* 6,146,885 13.12



Other Net Assets 2,019,560 4.31

Net Assets 46,855,625 100.00

*Related Party Fund


21


Notes to the Financial Statements

Notes to the Financial Statements ■


1. General Information

Jupiter Merlin Funds (the ‘Company’) is an open-ended investment company which qualifies as an undertaking for collective investment in transferable securities (UCITS) under part I of the law of 20 December 2002 regarding undertakings for collective investment. It was incorporated in Luxembourg as a société d’investissement à capital variable (SICAV) on 4 June 2008 for an unlimited duration.

The Company may issue multiple classes of Shares in several Funds (the ‘Funds’). A separate pool of assets and liabilities is maintained for each Fund and is invested in accordance with the investment objective applicable to the relevant Fund. All liabilities attributable to a particular Fund are binding solely upon that Fund.

As at 30 September 2009, the Company comprises the following Funds:

Jupiter Merlin Funds – Jupiter Managed European Portfolio (launched on 9 September 2008)•

Jupiter Merlin Funds – Jupiter Merlin International Balanced Portfolio (launched on 9 September 2008)•

Jupiter Merlin Funds – Jupiter Merlin International Equities Portfolio (launched on 9 September 2008)•

The Company currently offers Class L and E Shares for sale in all the Funds. Class E Shares is reserved for certain Institutional Investors, Class L is available for subscription by Retail Investors.

The principal investment objective of each Fund is to achieve long-term capital appreciation and the generation of income will not be an overriding consideration in determining investment policy. Unless a Class is identified as a ‘Distributing Fund’ or a dividend policy is otherwise specified in the relevant Information Sheet, all Classes of all Funds have an accumulation policy and, consequently, no dividends will be paid.

As at 30 September 2009, the Funds’ Share Classes have the following distribution policy:

Jupiter Merlin Funds – Jupiter Managed European Portfolio•

– Class E EUR: Accumulation of income

Jupiter Merlin Funds – Jupiter Merlin International Balanced Portfolio• Jupiter Merlin Funds – Jupiter Merlin International Equities Portfolio

– Class E EUR, Class L EUR and Class L USD: Accumulation of income

– Class L GBP: Annual dividend with automatic reinvestment by default

During the year, Funds of the Company merged with sub-funds of other investment funds. Details of these mergers are shown below:

Date of

merger

Absorbing

Funds

Total Net Assets

transferred

Subscription

price per share

3 July 2009 Jupiter Merlin – International Equity Fund

EUR 2,838,674 Class L Shares (EUR) – € 8.52;

3 July 2009 Jupiter Merlin – International Balanced Fund

EUR 68,052,075 Class L Shares (EUR) – € 9.09

22





2. Summary of Significant Accounting Policies

a) Basis of preparation

The financial statements have been prepared in conformity with Luxembourg generally accepted accounting principles applicable to investment funds.

b) Financial Statements

Financial statements are presented for each Fund in the base currency of the Fund and the combined Statement of Net Assets, Statement of Operations and Statement of Changes in Net Assets are presented in Euro, based on the exchange rate ruling at the date of these financial statements.

c) Foreign currency translation

Assets and liabilities denominated in currencies other than the Fund’s base currency are translated into that base currency at exchange rates ruling at the date of these financial statements. Transactions occurring during the period in currencies other than the base currency are translated at rates of exchange ruling at the transaction dates. The exchange rates used for the financial statements as at 30 September 2009 are as follows:

EUR/USD: 0.68413

EUR/GBP: 1.09421

d) Investments

Securities are initially recognised at cost, being the fair value of the consideration given.

Securities listed on an official stock exchange or dealt in on any regulated market are valued at the last available price.

Closed-ended funds are valued at their last available price. Units or shares in open-ended investment funds are valued at their last available net asset value. Wherever practicable, the last available net asset value is deemed to include the net asset value calculated on the same Valuation Day for any Underlying Fund which itself has a valuation point at or before the Company’s Valuation Point at 1pm Luxembourg time.

In the event that any of the securities held by the Company’s portfolio on the relevant day are not listed on any stock exchange or dealt in on any regulated market or if, with respect to securities listed on any stock exchange or dealt in on any other regulated market, the basis of the price as determined above is not representative of the fair market value of the relevant securities, the value of such securities will be determined based on the reasonably foreseeable sales price determined prudently and in good faith by the Directors of the Company.

Gains or losses arising on the disposal of investments are calculated by reference to the net sales proceeds and the average cost attributable to those investments.

All purchases and sales of securities are recognised on the trade date, i.e. the date a Fund commits to purchase or sell the security.

e) Income

Interest income is recognised as the interest accrues unless collectibility is in doubt.

Dividend income is recognised when the right to receive the dividend is established, on the ex-date.

Income is shown net of withholding taxes.

f) Expenses

Expenses are accounted for on an accrual basis. Expenses are charged to the Statement of Operations except for expenses incurred on the acquisition of an investment which are included within the cost of that investment. Expenses arising on the disposal of investments are deducted from the disposal proceeds.

g) Management fee rebates

Management fee rebates from related party funds accrue on a monthly basis.

Management fee rebates from third party funds are recognised on a cash receipts basis.

h) Dividends payable

Dividends payable by the Company are recorded on the ex-date.

i) Net Asset Value per Share

The Net Asset Value per Share is calculated by dividing the net assets of the relevant Class of Shares in a Fund included in the Statement of Net Assets by the number of Shares of the relevant class in that Fund in issue at the period end.

j) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in Luxembourg requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

23



3. Overdraft Credit Facility

On 14 July 2009, the Company (acting on behalf of the Funds) has arranged an uncommitted multi-currency overdraft facility (the ‘Facility’) with HSBC Bank Plc (as Lender, the ‘Bank’). The Bank makes available to the Funds the Facility in an aggregate amount equal to the lesser of:

USD 10,000,000 (for Jupiter Managed European Portfolio) and USD 5,000,000 (for each of Jupiter Merlin International Balanced Portfolio • and Jupiter Merlin International Equities Portfolio); and

10% of NVAC from time to time (the ‘Limit’). NVAC is the value of the Eligible Assets less the aggregate amount of the Funds’ outstanding • indebtedness (including, but not limited to, the borrowings under the agreement) and other liabilities, in each case, in USD as determined by the Bank from time to time. The Eligible Assets comprise of credit balances on an Account and any other asset that has been deposited by the Borrower into custody with the Custodian (provided that the maximum value of a holding in one asset shall be 20% of NAV).

The aggregate amount of drawings under the Facility shall not at any time exceed the Limit.

The overdraft balance bears interest at a rate of LIBOR + 1.5% per annum. In addition, each of the Funds pay the Bank a fee of USD 1,000 per annum, paid in advance on the date of agreement and each anniversary date of the agreement.

The Facility has no fixed term and are secured by all existing security (if any) and any future security held by the Bank. The Bank reviews the terms and availability of the facility and the credit position of the Funds from time to time and at least on an annual basis.

4. Investment Management Fees

The Management Company appointed Jupiter Asset Management (Bermuda) Limited (‘JAMB’) as Investment Manager to provide certain administrative and management services.

The Investment Management Fee is accrued at each Valuation Point and is calculated and paid monthly in arrears. The fee charged and applicable to each Class of Shares is set below:

Jupiter Managed European Portfolio, Jupiter Merlin International Balanced Portfolio, Jupiter Merlin International Equities Portfolio:

Class L Shares 1.5%•

Class E Shares 2.0%•

Where a Fund invests in other funds managed by the same Investment Manager as the Company, the Fund will not be subject to additional management fees. These related management fee reimbursements, if any, are included in ‘Management fee rebates.’

For the period, none of the Funds are entitled to accrue a performance fee on any of the Classes of Shares.

5. Management Company Fee

On 20 June 2008, the Management Company, RBS (Luxembourg) S.A. was appointed in order to meet the requirements of the UCITS III (Undertakings for Collective Investment in Transferable Securities) Directive 85/611/EEC of 20 December 1985. The list of the Funds managed by the Management Company may be obtained, on simple request, at the registered office of the Management Company.

The Management Company is responsible on a day-to-day basis, under the supervision of the Directors of the Company, for providing administration, marketing and investment management services in respect of all Funds.

The Management Company delegates its investment management duties to Jupiter Asset Management (Bermuda) Limited, the investment manager of the Funds.

HSBC Securities Services (Luxembourg) S.A. has been appointed to perform central administration duties for the Company pursuant to a delegation of such duties to it by the Management Company.

RBS (Luxembourg) S.A. is entitled for the provision of the Management Company services rendered to the Company, to receive the following fee per annum based on the assets attributable to each Fund with an overall minimum annual fee for the Company of €10,000 per Fund.



Net Asset Value Fee

€0 – €100,000,000 0.075%

€100,000,000 – €200,000,000 0.06%

€200,000,000 and above 0.05%

24

6. Administration and Custodian Fees

HSBC Securities Services (Luxembourg) S.A. (‘HSBC’) as administrator and custodian is entitled to receive fees in accordance with market practice in Luxembourg. This fee is calculated on the basis of the Net Asset Value of each Fund. Such fee does not include normal banking and brokerage fees and commissions on transactions relating to the assets and liabilities of the Fund or any reasonable out-of pocket expenses incurred in connection with the Company and chargeable to the Company.

HSBC is entitled to receive the following fees per annum based on the Net Asset Value of each Fund as transfer agent, depositary bank, and administration fees.

Custodian fees charged per annum are based on the assets of the country of the underlying fund together with certain transaction charges based on the number of transactions in a particular country.

7. Directors’ Fees, Expenses and Interests

Mr. Jonathan Carey is a Director of the Investment Manager and has an interest in the Investment Management Agreement.

Mr. Garth Lorimer Turner is the Managing Director of the Investment Manager, and also has an interest in the Invesment Management Agreement.

Mr. Jacques Elvinger is a partner of the Luxembourg law firm of Elvinger Hoss & Prussen, which provides legal services to the Company.

Each Director is entitled to receive an annual fee of €15,000. Directors affiliated with the Investment Manager, Mr. Carey and Mr. Lorimer Turner, have waived their fees as at 30 September 2009. From 1 October 2009 all Directors are entitled to receive an annual fee of €15,000. In addition, all Directors are entitled to reimbursement by the Company of any expenses directly incurred in the execution of their duties as Directors.

8. Taxe d’abonnement

The Company is liable in Luxembourg to a tax (taxe d’abonnement), such tax being payable quarterly and calculated on the Net Asset Value of the Company at the end of the relevant calendar quarter. The taxe d’abonnement is levied at a rate of 0.01% per annum on Funds or Classes reserved to Institutional Investors (Class E) and at 0.05% per annum on other Funds or Classes (Class L). Under current law and practice, the Company is not liable to Luxembourg taxes on income or capital gains, nor are dividends paid by the Company liable to any Luxembourg withholding tax.

Interest, dividends and capital gains on securities may be subject to withholding or capital gains taxes in certain countries.

9. Expense Reimbursements

The Investment Manager has agreed to bear the expenses of each Class L above a certain limit stated below (based on total administrative expenses excluding performance and management fees, if any, as a percentage of average net assets):

Jupiter Managed European Portfolio 0.28%•

Jupiter Merlin International Balanced Portfolio 0.23%•

Jupiter Merlin International Equities Portfolio 0.23%•

Data Protection Disclosure

(not forming part of the Notes to the Financial Statements)

The Board of Directors of the Company has been informed by HSBC Securities Services (Luxembourg) S.A. (‘HSBC’), the custodian and administrative agent of the Company, that in the context of outsourcing certain activities of HSBC, personal data of the Company’s shareholders contained in the Company’s share register might be transferred to other countries, including countries outside the Europe Union, where there may be less stringent data protection laws.

HSBC has provided written assurances that all steps have been taken with the Luxembourg authorities to obtain permission to make such a transfer of personal data and that in such context HSBC has taken appropriate steps to protect the confidentiality of such data and it will monitor compliance herewith by its service provider on an ad hoc basis.





Net Asset Value

Transfer

Agency Fee

Depository

Bank

Administration

Fee

€0 – €100,000,000 0.02% 0.01% 0.05%

€100,000,000 – €500,000,000 0.015% 0.01% 0.04%

€500,000,000 and above 0.01% 0.01% 0.03%

25


Notice of Meeting

Jupiter Merlin Funds ■ (a société d’investissement à capital variable incorporated in, and under the law of, the Grand Duchy of Luxembourg with number B 139.274)

Notice of Meeting of Annual General Meeting of Shareholders

NOTICE is hereby given to the shareholders in Jupiter Merlin Funds that the ANNUAL GENERAL MEETING of Jupiter Merlin Funds will be held at its registered office at 16, Boulevard d’Avranches, L-1160 Luxembourg at 10.30 am (Luxembourg time) on 8 January 2010 for the purpose of considering and voting upon the following matters:

AGENDA

1 Acceptance of the Chairman’s Statement and Report of the Auditors and approval of the financial statements for the year ended 30 September 2009.

2 Dividend distribution.

3 Discharge of the Board of Directors.

4 Re-election of the following as Directors: Jonathan Carey, Jacques Elvinger, Garth Lorimer Turner, Patrick Zurstrassen.

5 Re-election of Auditor.

6 Approval of Directors’ fees of 60,000 Euro net from 1 January 2010 to 31 December 2010.

7 Ratification of the change of address of the registered office.

By Order of the Board of Directors

4 December 2009

Registered office:16, Boulevard d’AvranchesL-1160 Luxembourg

Notes:

1 If you cannot be personally present at the Annual General Meeting, please sign and date the enclosed form of proxy and return it to the administrator, HSBC Securities Services (Luxembourg) S.A., 16, Boulevard d’Avranches, L-1160 Luxembourg. To be valid, forms of proxy must be received by 6 January 2010. Completion and return of a form of proxy will not prevent a Shareholder from attending the meeting and voting in person.

2 Under Luxembourg law, there is no quorum requirement at the Annual General Meeting and to be validly passed, the resolutions require approval of a majority of the votes cast (whether in person or by proxy).

3 The Annual Report (which includes the Chairman’s Statement, the Report of the Auditors and the financial statements) are available to Shareholders at the registered office of the Company, the Custodian and from every Paying Agent and Distributor and are also available at www.jupiterinternational.com


Form of Proxy

PLEASE COMPLETE IN BLOCK CAPITALS

I/We

of

Account no:

being a shareholder in Jupiter Merlin Funds hereby appoint the Chairman of the meeting or (see note iv) the following person:

to be

my/our proxy to vote on my/our behalf on the resolutions to be proposed at the Annual General Meeting of the Company to be held at 10.30 am (Luxembourg time) on 8 January 2010 at 16, Boulevard d’Avranches, L-1160 Luxembourg and at any adjournment thereof. My/our proxy shall vote on the resolutions to be proposed at the Annual General Meeting as indicated below or in the absence of any such indication, my/our proxy shall vote or abstain as he thinks fit.

Please indicate with an ‘X’ in the spaces below how you wish your votes to be cast at the Annual General Meeting. Subject to any

voting instructions so given, the proxy will vote on the resolution and such other business as may properly come before the meeting

as he/she may think fit. Resolution For Against

Report and accounts

Dividend distribution

Discharge of Directors

Re-election of Directors

Re-election of Auditor

Approval of Directors’ fees

Ratification of the change of address of the registered office

Notes:

(i) If there is more than one shareholder, the signature of any one holder will be sufficient but the names of ALL joint shareholders should be included in full.

(ii) Proxies need not be a shareholder. Completion and return of a form of proxy will not prevent a shareholder from attending the meeting and voting in person.

(iii) An instrument appointing a proxy must be in writing under the hand of the appointor or attorney authorised in writing, or if the appointor is a corporation, either under its seal or under the hand of the officer, attorney or other person authorised to sign it.

(iv) Shareholders wishing to appoint their own proxy, should cross out the words ‘the Chairman of the meeting or’ and then insert the name of their proxy. Any alteration should be initialled by the persons who sign this form.

(v) To be valid, this form of proxy must reach the office of HSBC Securities Services (Luxembourg) S.A., 16, Boulevard d’Avranches, L-1160 Luxembourg, no later than the close of business (Luxembourg time) 48 hours prior to the meeting.

Dated this day of 2009

Signature(s) of shareholder(s)

Jupiter Merlin Funds ■ (a société d’investissement à capital variable incorporated in, and under the law of, the Grand Duchy of Luxembourg with number B 139.274)

Form of Proxy for use at the Annual General Meeting of Shareholders in Jupiter Merlin Funds to be held on 8 January 2010

jupiter merlin funds

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