JUKG.L Regulatory News (JUKG)

Jupiter UK Growth Investment Trust plc (the 'Company')

Legal Entity Identifier: 549300QSBKGE8ZO08A97

Annual Report & Accounts for the year ended 30 June 2020

Chairman's statement

At 30 June 2020 the company had total assets under management of £31m, compared with £54m at the beginning of our financial year. The net asset value total return for our financial year to 30 June 2020 was -27.9% compared with the total return on the company's benchmark, the FTSE All- Share Total Return Index, of -13.0%. This unacceptably poor performance was caused in part by the impact of Covid-19 in the third quarter of our financial year, when in the space of just 32 days between February 19 and March 23 the FTSE All-Share Total Return Index fell by -33.9%.

The market sell-off was however compounded by further instances of poor stock selection and risk management within the company's portfolio. These were the same shortcomings which had prompted the board in February to appoint Richard Buxton from Merian Global Investors as the new lead fund manager of the company. Unfortunately, by the time he was able to take effective control of the company's portfolio, the damage to the company's asset value had already been done.

In our Interim Statement released in March of this year I wrote that "we would keep our management arrangements under review over the coming months while the economic and market backdrop evolves and to remain cognisant of our reduced market capitalisation". While the stock market has recovered some of its losses incurred in February and March, the economic outlook remains uncertain. Our market capitalisation remains very low and is currently £28m. I wrote in our interim statement that such a size fell well below the minimum size generally considered investable by wealth managers and other prospective investors.

Having discussed this issue with our advisers, Numis, the directors announced on 28 September that we had come to the conclusion that in the wake of these further losses we are no longer likely to be able to grow the company in its present form by attracting significant new investors in the foreseeable future. We have advised Jupiter of this opinion, which they have accepted. The board has therefore been considering what are now the best options for the future of the company and its shareholders.

We currently believe that the best option is to liquidate the company so that shareholders will have the option to receive cash or, if possible, the ability to roll over their investment into another investment vehicle; subsequently the accounts have been prepared on a basis other than a going concern. Your board is discussing options with its advisers and establishing the interest of investment managers in offering rollover options. We would also welcome any suggestions that shareholders may have regarding the future of the company. Shareholders can submit suggestions by email to jukg.shareholder@jpmorgan.com.

The board would hope to be in a position to update shareholders not later than our Annual General Meeting in November. It is intended that a circular be issued to shareholders in due course outlining the full details of recommended proposals. The circular will also include a notice for a general meeting of the company, enabling resolutions to be proposed and voted on by shareholders.

Market background

After ratcheting steadily higher over the second half of 2019, the UK equity market fell very sharply over the first quarter of 2020 as the Covid-19 outbreak spread beyond China, being declared a full-scale global pandemic by the World Health Organisation on 23 March. The draconian measures implemented to control the spread of the virus raised fears that the global economy was facing a severe recession. By the end of March, UK economic activity had ground to a virtual standstill.

After losing around a quarter of their value over the first three months of 2020, UK equities started to rebound in the second quarter. The rally was driven by unprecedented levels of monetary and fiscal support from central banks and governments, which acted swiftly to support both companies and many self-employed. Nevertheless, at the time of writing the FTSE All-Share Total Return Index remains some 20% lower than it was at its peak in February.

Performance review

The performance of the company in our last financial year was very poor, with our share price and NAV (with dividends added back) falling by -30.6% and -27.9% respectively compared with a fall of -13.0% in the FTSE All-Share Total Return Index. While the performance in the first half was satisfactory, with our NAV rising by 7.8% against 5.5% for the index, the performance on our mainly domestically focused portfolio in the second half was badly hit as the impact of COVID 19 became more widely felt. During our third quarter to 31 March 2020 the NAV per share fell by -38.9% compared with a fall of 25.1% for the index. The performance in our last quarter, following the arrival of Richard Buxton as our fund manager, was satisfactory, moving largely in line with the index. That has continued into the current financial year. It was not enough however to make up for the earlier underperformance. More detailed information regarding the performance of our portfolio is set out in the investment adviser's review.

Management arrangements

On 18 February 2020 the board announced that it had reached an agreement with Jupiter for Richard Buxton to assume lead fund management responsibility for the company. This followed the announcement by the board on 4 October 2019 that the company had decided to review its investment strategy following a sustained period of poor performance. This was a comprehensive exercise which considered various alternatives, including the adoption of an alternative manager from within Jupiter, the appointment of another fund management company as investment manager and the liquidation of the company together with a rollover into another listed investment company.

The conclusion to appoint Richard Buxton followed the announcement by Jupiter on 17 February 2020 regarding its proposed acquisition of Merian. At the board's request plans were made to transition the portfolio so that it aligned with Merian's UK Alpha strategy, even though he had still formally to join Jupiter. For a variety of reasons, it was not possible to put this arrangement in place before early April, meaning that day to day management of the portfolio was with the Jupiter Transition Management Team ('TMT') throughout the period of market disruption.

The proposed acquisition of Merian was approved by Jupiter's shareholders at its Annual General Meeting on 21 May 2020 and Richard formally became the lead fund manager of the company with effect from 26 May 2020, in place of the TMT who managed the company's investment portfolio in the interim period from 18 February to 25 May 2020. Merian's UK Alpha strategy utilises a high-conviction approach typically holding 30‑40 stocks, combining fundamental research with a patient, long‑term time horizon and has generated a strong long-term performance record consistent with the company's investment objective and policy.

Richard Buxton joined Merian as head of UK equities and manager of the Merian UK Alpha Fund in 2013. Richard was previously at Schroders, where he managed the Schroder UK Alpha Plus Fund and the Schroder UK Growth Fund plc, an investment trust. Prior to Schroders he spent more than a decade at Baring Asset Management, having commenced his investment career in 1985 at Brown Shipley Asset Management.

There was no change to the investment objective or policy as a result of the change of lead fund manager. The company's investment objective is to deliver capital appreciation from holding a portfolio of predominantly listed investments. While there are no specific individual stock, sector, geographical or market capitalisation limitations or weightings applicable, the manager invests principally in companies which are listed in and/or which undertake a significant proportion of their business in the United Kingdom.

As part of these new arrangements, the board agreed with Jupiter that the company would not be charged a base management fee for the period from 1 January 2020 to 31 December 2020. Based on the net asset value at 30 June 2020 this is an estimated saving of approximately £151,000 over the 12-month period of the agreement.

As described above the board has decided as a consequence of its diminished size and growth prospects to recommend liquidation of the company. I should emphasise that this decision is not a reflection on the management of the portfolio by Richard Buxton and his team.

Dividend

A resolution to declare a final dividend of 5.0p per share will be proposed at the annual general meeting ('AGM') in November 2020 and if approved by shareholders will be payable on 30 November 2020 to shareholders shown on the register of shareholders on 6 November 2020. The ex-dividend date is 5 November 2020. The dividend for the previous financial year was 8.5p per share.

While the board has in the past stated its ambition to maintain the dividend at the level paid in the preceding financial year, there has clearly been a radical and material change in the company's circumstances which the directors believe warrants a change in the dividend for the financial year to 30th June. The economic disruption caused by Covid-19 has led to a significant reduction in the expected investment income from a number of companies in our portfolio and if the proposal to liquidate the company is approved, this will be the final dividend that the company will pay.

Having discussed a number of alternatives for determining an appropriate level of dividend, the board judges that in the circumstances it is most sensible to base it broadly on the amount of investment income we have received, net of the company's attributable expenses. This amounts to £745,744 or 4.96p per share based on 15,021,896 shares as at 30 June 2020. After buybacks since year end, this amounts to £745,744 or  5.08p per share based on 14,675,854 shares as at 18 September 2020, which has been rounded down to arrive at the 5.0p per share dividend which the board is now recommending.

While we do have revenue reserves of £1.1m. which could have been used to cover a higher dividend payment, as some other trusts have done in response to the pandemic, the board's view is that in the light of the potential liquidation in a few months' time, the fairest outcome is to retain the revenue reserves in the company's balance sheet so that in due course they can be distributed to shareholders either as cash or as capital to be rolled over into another investment vehicle, in line with the choice that shareholders themselves decide.

Gearing

During the year the company had access to a flexible loan facility with Scotiabank Europe Plc for amounts up to £22 million, with a commitment of £12 million. While this facility was used to a modest extent in the earlier part of our financial year, it has not been used in recent months. This facility expired on 24 September 2020 and has not been renewed in light of the company's plans to liquidate.

Discount and premium management

The board's stated policy is to use share buybacks and new issues of shares to ensure that, in normal market conditions, the market price of its shares will closely track the net asset value per share. The commitment to active management of discount and premium is designed to produce improved liquidity for both buyers and sellers of the company's shares. During the 12 months to 30 June 2020, the company repurchased a total of 1,844,176 shares then 346,042 shares to 18 September 2020 bringing the total number of shares now held in Treasury to 15,045,824.

Annual General Meeting

It is intended that the company's AGM will be held at 12 noon on 19 November 2020 at the offices of Jupiter Asset Management Limited, The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ. In consideration of the wellbeing of the company's shareholders and in light of Government guidance around social distancing, shareholders will not be permitted to attend the AGM this year. In order to comply with relevant legal requirements, the AGM will be convened with the minimum necessary quorum. Only the statutory and formal business required by law will be conducted at the AGM and there will be no presentations. In light of these restrictions, shareholders can submit any questions by email to Magnus.Spence@ jupiteram.com. Subject to confidentiality, we will respond to any questions submitted either directly or by publishing our response on the company's website.

Please refer to the Notice of the AGM contained in the annual report and accounts for full details on how to vote and how to communicate any questions that would usually be raised at the meeting. Shareholders are strongly encouraged to nominate the 'Chairman of the meeting' as their proxy rather than any other person who will not be permitted to attend.

Please also note that we have removed paper from the voting process to reduce further the environmental impact of the company. Electronic proxy voting is now available and shareholders can also submit voting instructions using the web-based voting facility at www.signalshares.com or, for institutional shareholders, at www.proxymity.io. If you have not already registered with Signal Shares you will need your investor code, which can be found on your share certificate. Once registered you will be able to vote immediately by selecting 'proxy voting' from the menu.

If you require any assistance with electronic voting or wish to receive a hard copy proxy form, please contact the company's registrars, Link Asset Services whose contact information is provided in the annual report and accounts. Notice of the AGM, containing full details of the business to be conducted at the meeting, is set out in the annual report and accounts. Your attention is also drawn to the report of the directors contained in the annual report and accounts where various resolutions relating to special business are explained.

Outlook

While the swift action of governments and central banks to mitigate the economic damage of the pandemic may have avoided a liquidity crisis, the threat to the financial health of both business and individuals remains. An effective and widely available vaccine to Covid-19 remains some months away, despite promising results in a number of trials. Coupled with continuing international tensions, and uncertainty over whether the UK and EU can agree a mutually beneficial trade deal before the end of the year, the outlook for the economy and markets is more muted and unpredictable than usual.

The outlook for this company is sadly clear however. If approved by shareholders, the proposed liquidation of Jupiter UK Growth will bring the life of this company to an end after more than 48 years. The company has been struggling for a number of years to establish a relevant and sustainable future for itself in a changing and competitive market environment. The board's view until now has always been that, given a period of consistently superior performance and effective marketing of its investment approach, attracting new sources of demand to bring the company up to a viable size, while a tough challenge, was not an insuperable one.

In the event, despite our initial high hopes, the performance of the company since 2016 has not been nearly good enough to justify that faith, or to generate new demand for the shares, while recent events have cruelly conspired to prevent us testing the ability of our new fund manager to reverse that trend. It is a matter of great regret to the board that, despite our best efforts over many months, we are no longer able to justify continuing with the new arrangements and have instead to recommend the liquidation of the company.

Tom H Bartlam

Chairman

13 October 2020

Financial Highlights for the year ended 30 June 2020

Capital performance

*As a function of the closing middle market price of an ordinary share at the relevant financial year end

Dividends declared for the period under review

Fifteen Year History to 30 June 2020

*Adjusted for five for one stock split in 2013.

** Total assets increased pursuant to the rollover of Jupiter Dividend & Growth Trust PLC

Investment adviser's review

Market background

It has been an extraordinary 12 months for global equity markets, and of course one of significant change for the company, with the appointment of Richard Buxton as the new lead fund manager.

In the first half of the year, equity market performance globally had been encouraging as US-China tensions appeared to be abating with the agreement of a "phase one" trade deal while global central banks took action to reduce interest rates. The UK had been a relatively strong performer in this context, reflecting the Brexit deal agreed by Prime Minister Johnson in October and his subsequent re-election in December with an 80-seat majority. The latter event proved particularly supportive for more domestically-focused UK stocks, with the removal of uncertainty and the avoidance of a Jeremy Corbyn government driving a meaningful rally in the FTSE-250 Index and an increase in consumer confidence. Following the turn of the calendar year, to an extent, some of this enthusiasm for UK domestically-focused stocks diminished as the newly formed Conservative majority government began to set out a vision for the UK's future trading relationship with the EU that was more limited than that previously proposed by the UK government and which some in the market had expected.

However, by far the most material event in markets, the economy and society was the spread of the Covid-19 virus in early 2020. Global markets had remained relatively robust in January and early February despite the lockdown of the Chinese city of Wuhan in late January. However, with the emergence of the virus in Europe and the rapid spread of Covid-19-related deaths in Northern Italy, markets began to drop significantly in late February. At the trough in mid-March, the FTSE All Share Index was down 35.9% from the 2020 peak while the S&P 500 Index was down 33.9%. This represented one of the most rapidly forming bear markets in history as governments took unprecedented action to restrict the movements of their citizens in order to slow the spread of the virus. By early April, almost half of the world's population was under some kind of government restriction on their activity, with almost 1.5bn under strict lockdown conditions.

The rapid emergence of the pandemic and the economic effects of the lockdowns implemented brought forth an unprecedented fiscal and monetary response from global governments. The IMF estimated that $9trn of global fiscal stimulus has been announced since the onset of the Covid-19 crisis, while central bank base rates have tumbled with the US rate now at 0%-0.25% and the UK base rate at 0.1%. Reflecting this extraordinary support, markets rallied significantly with the S&P 500 Index up 38.57% by the end of June from the trough in March and the STOXX Europe 600 up 28.85%.

Globally, markets continue to struggle to balance the support provided by governments against the ongoing impacts of Covid-19, with a particular focus on the improvement in economic activity expected as governments tentatively unlock their societies and on the adverse developments in unemployment that may emerge as government income support schemes are curtailed. Sector performance continues to be substantially affected by divergent vulnerabilities to the virus, with those less affected (such as technology, healthcare and consumer staples) showing strong performance and those substantially affected (aerospace, leisure travel) continuing to struggle. Against this backdrop, the UK has been a relatively weaker performer with the FTSE All Share Index down 13% in the past year. In part, this reflected the market's sectoral focus on oil and gas, financials and energy and in part the ongoing Brexit process, where the two parties still struggle to reach agreement on a future trade relationship. Notably, it has been a particularly challenging environment for cash returns to shareholders, with UK company dividends down 57% in the second quarter of the calendar year 2020 relative to the same period in 2019, which has weakened the yield support for many UK company share prices.

Performance review

Overall it was a very challenging year for the portfolio with the company's share price falling by 33.6% and NAV by 30.6% (both with dividends paid added back), a substantial underperformance relative to the FTSE All Share Index which fell by 13% on a total return basis. Over the year, performance was very volatile with the company's shares up 11.7% in the first six months of the year, ahead of the FTSE All Share Index up 5.5%, and then substantially underperforming in March. Overall, prior to the transition of manager in early April, the company's shares were down 39.9% since the start of the year, relative to the FTSE All Share down 22.4%. Since the transition of manager until 30 June 2020, the company's shares have outperformed the index by 1.71%, increasing by 13.89% overall.

Performance prior to the manager transition

Prior to the transition in manager, the company had been positioned for a recovery in UK domestic valuations as political uncertainty diminished and confidence returned, and more generally for a positive turn in the global economy as US-China relations normalised and the benefit of reduced interest rates was felt. This positioning however proved to be highly problematic as Covid-19 took effect depressing the valuations and earnings of cyclically exposed companies and smaller companies globally.

Over the course of the year prior to April, the principal detractors from performance were those companies most exposed to the effects of Covid-19 such as those in the leisure, consumer aerospace and financial sectors. Cineworld was the worst performer in the portfolio during the period as to lockdowns resulted in the closure of all of its cinemas in the UK and US. Additional concerns about its high debt burden were exacerbated by the proposed acquisition of the Canadian chain Cineplex which drove the share price down 85% during the period. The company's exposure to the wider aerospace sector through aero and auto manufacturer Melrose and airline IAG were also significant detractors as airlines were either required to ground their fleets or did so in response to a collapse in customer volumes. The company has remained a shareholder in both of these businesses due to their strong market positions and positive progress in securing incremental liquidity.

Performance was also adversely affected by the company's holdings in ITV, Taylor Wimpey and DFS, all of which suffered from lockdown restrictions and from a broader significant reduction in consumer confidence. ITV was forced to cease production of new content at its studios, it lost the opportunity to broadcast sporting events such as this summer's cancelled European Football Championship and also suffered from a material reduction of advertising spending by other adversely-affected sectors. Both Taylor Wimpey and DFS were forced to close their manufacturing sites and sales facilities. As providers of products heavily reliant on consumer discretionary incomes, both suffered from market scepticism regarding their near-term prospects. The company has retained a holding in Taylor Wimpey reflecting its strong market position, rapid reopening, remarkably strong consumer demand and support from very low interest rates and government action on stamp duty.

The company's significant holdings in the UK domestic financial sector, which had performed strongly earlier in the year, were also substantial detractors to returns. Here, Arrow Global, a purchaser of defaulted consumer debt, was among the worst performers as pre-existing market concerns regarding leverage met with market scepticism regarding the quality of the assets in a broader macroeconomic downturn. The company's holdings in Lloyds Banking Group, RBS and Virgin Money also detracted as the regulator required banks to halt dividend payments while concerns rose about earnings and asset quality as interest rates fall and unemployment rises. The company has retained a holding Lloyds Banking Group, reflecting its strong market position and high quality management, and Barclays, where significant exposure to capital markets activity and the US market provide some offset to low interest rates and UK domestic difficulties.

Lastly, prior to the onset of the pandemic, the company's holding in Sirius Minerals had already adversely impacted performance. Sirius had been seeking to raise $500 million of high yield bond financing from the debt market to unlock a $2.5bn facility from JPMorgan that would have seen the project through to completion. The company announced however that it would not be able to proceed with this offering, which left it with insufficient financing to develop the project. The company was subject to a 5.5p per share offer from Anglo American in January, which was accepted.

Reflecting the wider market, positive contributions to returns were provided by the company's holdings in technology and growth stocks and overseas stocks, while underweights or void positions in significantly challenged sectors and businesses (oil and gas, HSBC) also provided relative support. The leading performer in the portfolio was Avast, the UK-listed consumer cybersecurity provider. The company was already enjoying a strong year prior to the pandemic as progress in winning new customers and rolling out new products helped to drive strong operational performance. It was also a significant beneficiary of the crisis as those working from home sought additional protection from cyber threats. Relative support was also provided by the company's holdings in Yum China, Manchester United and Ferrari, all listed overseas. These stocks benefitted from being substantially non-sterling earners during a period in which the pound fell against most global currencies. Having been the first country to be affected by Covid-19, China pursued a very restrictive but regionally-focused and relatively short-lived lockdown. This allowed the country to reopen with confidence earlier than others and consumer activity recovered strongly, of which Yum China was a beneficiary. Although play had not restarted by the beginning of April, Manchester United's significant commercial, sponsorship and broadcasting revenues were largely unaffected by Covid-19, with talks at the time ongoing to recommence the season later in the year. Lastly, Ferrari's strong forward order book coupled with its focus on ultra-high net worth customers saw the shares perform relatively strongly.

Performance post manager transition

Since the transition in manager, the company's net asset value has modestly outperformed the market. The company's blend of growth and value holdings has allowed it to benefit both from strong recovery among value stocks as government support flowed and societies began to unlock, while also benefiting from growth holdings which have continued to show strong operational momentum during the period and performed well during periods of risk-off sentiment.

The company's shareholding in Drax has been the largest positive contributor, supported by its ability to maintain its dividend (a rare feat in the prevailing market context) and confirmation of its EBITDA guidance. Another strong performer was GVC which, having performed very poorly on the Covid-19-related disruption, was able to bounce back following a trading update on 6 April which outlined solid revenues and measures to reduce costs and cash outflows and increase liquidity. The company's continued holding in Barclays has allowed it to benefit from a recovery in the share price on the back of very strong operational performance in its investment bank as Covid-19-related disruption in markets translated into very robust trading volumes.

Among more growth-oriented stocks, Experian continued to perform strongly as demand for its credit data and analytical products remained undiminished by Covid-19. In addition, the company was able to continue to pay dividends during the period. The company's holding in Sage also performed well, reflecting its significant base of subscription contracts and relatively modest Covid-19-related disruption.

The most significant detractor in the company's portfolio was travel retail specialist SSP Group. This business was very materially challenged by Covid-19 disruption as it exclusively operates at travel-related sites, particularly airports. In June the business provided an update to the market to the effect that trading during the lockdown period had been even worse than expected in March, but that progress on reducing rent, salary and working capital related outflows had been better than expected. This was accompanied by confirmation that the business had over £750m of available cash and liquidity. SSP Group has an attractive market position and brands, effective management and significant liquidity having already raised cash from shareholders, and we look forward to a strong recovery once Covid-19-related travel disruption diminishes.

Also significantly disrupted by Covid-19, Whitbread was a material detractor to performance. Alongside interim results in May the business announced a c.£1bn rights issue in which the company participated. Although the rights issue was partly defensive, to protect the group against significant outflows during lockdown due to its high fixed cost base, it was also explicitly designed to allow the business to be in a strong position once unlocking begins in earnest to take advantage of opportunities which may arise as other hotel competitors fall into difficulty or sites become available.

Current strategy and positioning

It is only fair to point out that the strategy to which the company is now aligned also underperformed during the February-March sell-off, albeit not to the same degree as the previous strategy. The UK Alpha strategy, while much more focused on large cap stocks, nevertheless was not exposed to more defensive sectors such as tobacco or consumer staples and did have some similar exposure to both financial stocks and travel-related companies.

The downturn induced by lockdowns is without precedent, but equally so has been the response of both central banks and governments. Provision of liquidity, ensuring access to credit, direct support to companies, employees and households - all are designed to preserve as much potential demand and supply as possible as economies emerge from lockdown.

We know these measures cannot possibly return us immediately to the status quo ante of 2019. Unemployment will rise and precautionary savings with it. The recovery from the suspension of economic activity will be a bumpy one. Capacity will be lost or curtailed to match weaker demand. But governments will use fiscal policy and spending on infrastructure to try to support activity. Moreover, our focus is on those companies which - whether cyclical or less so - can emerge from this in a stronger position to take market share.

We are encouraged by recent conversations with companies which suggest that despite much weaker revenues in the next couple of years, they still anticipate being able to regain previous levels of margin through cost-cutting, restructuring or renegotiating with suppliers. While fully expecting the recovery to be an uneven one, we are confident there is money to be made from backing long-term winners through shorter-term headwinds.

Accordingly, the portfolio remains positioned to benefit from improving economic conditions and is not defensively orientated. While the stability of revenues at tobacco and consumer staples companies is attractive in tough times, valuations reflect this - and they are not without their own challenges. We maintain exposure to selective growth stocks such as Experian, Fidelity National Information Services and growth / turnaround company Sage, with a preference for pharmaceutical and healthcare stocks over consumer staples.

Our industrial exposure is through mining stocks, engineer Weir, packaging company DS Smith, materials group CRH and turnaround specialist Melrose, who are currently working on improving returns from their acquisition of GKN.

Consumer exposure (excluding travel) is selective: retailers Tesco, Next and Pets at Home, alongside gaming company GVC. Proven management or situations turned around where there is scope for the strong to get stronger in a tough environment. Two of our travel stocks - SSP Group and Whitbread - have strengthened their balance sheets in order to do likewise: emerge in a stronger competitive position against weaker competitors.

Financials holdings are focused on Barclays and Lloyds Banking, both trading at significant discounts to book value, together with savings-orientated stocks Prudential and St James's Place.

Richard Buxton

Jupiter Asset Management Limited

Investment adviser

13 October 2020

Investment Portfolio as at 30 June 2020

† Unquoted

Cross holdings in other Investment Companies

As at 30 June 2020, none of the company's total assets were invested in other listed closed-ended investment funds. It is the company's stated policy that no more than 10%, in aggregate, of the company's total assets may be invested in the securities of other listed closed-ended investment funds (including listed investment trusts) other than those which themselves have stated investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds. The company does not anticipate that the investment adviser will make any new investments in other collective investment schemes, investment companies or investment trusts.

Classification of investments as at 30 June 2020

Strategic review

The strategic review seeks to provide shareholders with relevant information to enable them to assess the performance of the directors of the company during the period under review. This report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.

Business and status and future developments

The company was incorporated in England & Wales and launched on 1 January 1972. During the year it carried on business as an investment trust with its principal activity being portfolio investment. There has been no significant change in the activities of the company during the year to 30 June 2020.

The company is a public limited company domiciled in the United Kingdom and is an investment company within the meaning of section 833 of the Companies Act 2006. The company has been approved by HM Revenue & Customs ('HMRC') 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 and the ongoing requirements for approved companies, as detailed in Chapter 3 of Part 2 of the Investment Trust (Approved Company) (Tax) Regulations 2011.

The company is not a close company within the meaning of the provisions of the Corporation Tax Act 2010. In the opinion of the directors, the company continues to conduct its affairs in the appropriate manner to retain its status as an investment trust.

As noted in the Chairman's statement above, in the wake of further losses incurred and the reduced market capitalisation of the company, the board has come to the conclusion that they are no longer likely to be able to grow the company in its present form by attracting significant new investors in the foreseeable future. Following the announcement on 28 September 2020, the board has therefore been considering the best options for the future of the company and its shareholders and currently believe that the best option is to liquidate the company so that shareholders will have the option to receive cash or, if possible, the ability to roll over their investment into another investment vehicle.

Investment objective and strategy

There has been no change to the company's investment objective, that being to concentrate on capital appreciation from holding predominantly listed investments. While there are no specific individual stock, sector, geographical or market capitalisation limitations or weightings applicable, the manager will invest principally in companies which are listed in and/or which undertake a significant proportion of their business in the United Kingdom.

Dividend policy

While the board has in the past stated its ambition to maintain the dividend at the level paid in the preceding financial year, there has clearly been a radical and material change in the company's circumstances which the directors believe warrants a change in the dividend for the financial year to 30 June 2020. The economic disruption caused by Covid-19 has led to a significant reduction in the expected investment income from a number of companies in our portfolio and if the proposal to liquidate the company is approved, this year's dividend will be the final dividend that the company will pay.

Having discussed a number of alternatives for determining an appropriate level of dividend, the board judges that in the circumstances it is most sensible to base it broadly on the amount of investment income received, net of the company's attributable expenses. The board is recommending payment of a final dividend of 5.0p per share to shareholders for approval at this year's AGM. The net revenue received after tax during the year was £745,744, equivalent to 5.08p per share as at 18 September 2020. The dividend payment is therefore 100% covered by net revenue for the financial year.

While the company does have revenue reserves of £1.1m which could have been used to cover a higher dividend payment, as some other investment trusts have done in response to the pandemics, the board's view is that in the light of the potential liquidation in a few months' time, the fairest outcome is to retain the revenue reserves in the company's balance sheet so that in due course they can be distributed to shareholders either as cash or as capital to be rolled over into another investment vehicle.

Loan facility and gearing

In order to improve the potential for capital returns to shareholders, the company had access to a flexible loan facility with Scotiabank Europe plc for amounts up to £22 million, with a commitment of £12 million. The finance costs shown in the statement of comprehensive income are in respect of the costs incurrent for non-utilisation of the facility, up to the commitment amount, during the year to the end of the loan term.

The facility expired on 24 September 2020 and has not been renewed.

Short positions

The company has the flexibility to take short positions (using contracts for difference) in respect of a small number of larger capital securities. The directors have set limits to the overall exposures and performance is monitored on a regular basis. During the year to 30 June 2020 no short positions were initiated or outstanding.

Performance review

At their quarterly board meetings the directors consider a number of performance indicators in order for them to assess the company's progress towards its objectives. The key performance indicators used to measure the performance of the company over time include:

· Net asset value ('NAV') changes over time;

· Ordinary share price movement;

· The performance of the ordinary share price and NAV relative to the benchmark;

· Changes in the discount to NAV over varying periods;

· Performance versus the company's peer group;

· The dividend yield and level of revenue cover.

A history of the net asset values, the price of the ordinary shares and the benchmark index are shown on the monthly factsheets which can be viewed on the investment adviser's website www.jupiter.com/JUKG and which are available from the company secretary.

Discount to the net asset value

The board's stated policy is to use share buybacks and new issues of shares to ensure that, in normal market conditions, the market price of its shares will closely track the net asset value per share. The commitment to active management of discount and premium is designed to produce improved liquidity for both buyers and sellers of the company's shares. During the 12 months to 30 June 2020, the company repurchased a total of 1,844,176 shares for holding in treasury during the year under review at an average discount of 4.52%.

Benchmark index

The company's investment portfolio is not constructed in order to track the performance of a benchmark and will typically differ significantly in composition from the most commonly used UK market indices. When reporting and reviewing performance the board uses the FTSE All-Share Total Return Index as its primary benchmark.

Management

The company has no employees and most of its day to day responsibilities are delegated to Jupiter Asset Management Limited ('JAM'), which act as the company's investment adviser and company secretary. Further details of the company's arrangement with JAM and the Alternative Investment Fund Manager ('AIFM'), Jupiter Unit Trust Managers Limited ('JUTM') can be found in the notes to the annual report and accounts. JAM and JUTM are part of the Jupiter Group which comprises Jupiter Fund Management PLC and all of its subsidiaries ('Jupiter').

J.P. Morgan Europe Limited ('JPMEL') acts as the company's depositary. The company has also entered into an outsourcing arrangement with J.P. Morgan Chase Bank N.A. ('JPMCB') 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.

Principal risks

The principal and emerging risk factors that may affect the company and its business can be divided into the following areas:

Investment policy and process

Inappropriate investment policies and processes may result in underperformance 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. In addition, certain investment restrictions have been set and these are monitored as appropriate.

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. There can be no assurances that depreciation in the value of the company's investments will not occur, but the board seeks to reduce that risk.

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. Further details of the management of this risk can be found in the notes to the annual report and accounts.

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 the investment adviser 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 risk

Failure of the core accounting systems, or a disastrous disruption to the investment adviser's business or that of the administration provider, could lead to an inability to provide accurate reporting and monitoring. The board regularly reviews the investment adviser's and the administrator's statements on their business continuity planning.

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.

Emerging risks and uncertainties

Covid-19

The outbreak of the Covid-19 pandemic poses additional risks to the company beyond the risks described under market risks above. They include liquidity risks to markets, risks associated with the maintenance of the current dividend policy and business continuity risks for the investment adviser. Each of these risks is being assessed on a day to day basis by the investment adviser.

Regulatory risk

The company operates in a complex regulatory environment and faces a number of regulatory risks. A breach of section 1158 of the Corporation Tax Act 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 monitors regulatory risks at its quarterly board meetings and relies on the services of its company secretary, investment adviser 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 conforms to applicable laws and regulations.

Interest rates

The company has exposure to cash which generates interest through interest bearing accounts. The board is mindful of interest rates when reviewing the company's exposure to cash.

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. The directors have powers granted to them at the last AGM to purchase ordinary shares as a method of controlling the discount to net asset value and enhancing shareholder value.

Gearing risk

The company's gearing can impact the company's performance by accelerating the decline in value of the company's total 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 total assets at a time when the company's portfolio is rising. At its quarterly meetings the board is mindful of the outlook for equity markets when reviewing the company's gearing.

Economic Risk

The board reviews the company's investment strategy on a regular basis, taking into account the economic climate and impact of share price fluctuations in UK equities.

Enterprise risk is reviewed twice a year, taking into its remit emerging risks as they become immediate, whist still maintaining a long-term perspective where they are evolving at a fast rate. Monitoring the Brexit process and its implications for the company remains a priority for the directors and our investment adviser bearing in mind that the company seeks to invest principally in companies which are listed in and/or undertake a significant proportion of their business in the UK.

Employees, environmental, social and human rights issues

The company has no employees as the board has delegated the day to day management and administration functions to JUTM, JAM and other third-party suppliers. There are therefore no disclosures to be made in respect of employees.

The board has noted the investment adviser's policy on environmental, social and human rights issues as detailed below:

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

Integration of environmental, social and governance ('ESG') considerations into the investment adviser's investment process

JAM has a 30 year record of integrating ESG factors into the investment process. Its Governance and Sustainability team leverages its relationships with partner organisations such as the UN Principles for Responsible Investment (UN PRI), the Investor Forum and Institutional Investors Group on Climate Change (IIGCC) and regularly engages with these and other industry bodies to ensure it remains at the forefront of ESG integration. Where relevant, lessons learned are disseminated across JAM's wider investment team via its Stewardship Committee.

The investment adviser fully endorses the principles of the UN Global Compact and would expect investee companies to meet its criteria, although accepts that engagement with companies may demonstrate that past failings are being addressed. There are companies within our investment universe in which we would never invest as they are unlikely to meet our responsible investment criteria. Companies may be listed in London but operate in geographies where we are uncomfortable about assurances regarding working practices, ethical behaviour or levels of disclosure. Unmanageable conflicts of interest between owner-managers and minority shareholders would be another example. For other companies, we may factor in a higher cost of capital or lower valuation to reflect financial or reputational risks arising from our responsible business analysis. This may also be reflected in lower position sizes in holdings.

Modern slavery

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, 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 and Directors' Reports) Regulations 2013.

Viability statement

In accordance with Provision 36 of the Code of Corporate Governance as issued by the Association of Investment Companies in February 2019 (the 'AIC Code'), the board has considered the longer term prospects for the company.

In assessing the viability of the company the board has considered the reduced market capitalisation of the company and the size threshold below which the company would be considered uneconomic or unviable; the company's performance and its attractiveness to investors in the current environment. The board has concluded that it is unlikely to be able to grow the company in its present form by attracting significant new investors in the forseeable future. The board currently believe that the best option is to liquidate the company so that shareholders will have the option to receive cash or, if possible, the ability to roll over their investment into another investment vehicle. Consequently, the period assessed for the purpose of the statement is to the proposed liquidation date.

As part of its assessment of the viability of the company, the board has considered the liquidity of the company's portfolio to ensure that it will be able to meet its liabilities as they fall due. The board notes that as part of the new arrangements agreed with Jupiter during the financial year, the company will not be charged a base management fee for the period 1 January 2020 to 31 December 2020 and no significant increase to ongoing charges or operational expenses is expected. The board also notes that the level of gearing in the company is nil and the loan facility held by the company to September 2020 has not been renewed. The board has considered the principal and emerging risks and uncertainties which may affect the company as detailed in the annual report and accounts including a review of the operational resiliency of the company's key service providers in response to Covid-19.

Having considered these factors, the board has concluded that there is a reasonable expectation that the company will be able to continue in operation to the proposed liquidation date and meet its liabilities as they fall due over the next year.

Section 172 statement

Under section 172 of the Companies Act 2006, the directors have a duty to act in good faith and to promote the success of the company for the benefit of its shareholders as a whole. This includes taking into consideration the likely consequences of their decisions in the long term and on the company's stakeholders such as its shareholders, employees and suppliers, while acting fairly between shareholders. The directors must also consider the impact of the company's decisions on the environment, the community and its reputation for maintaining high standards of business conduct.

The company's service providers facilitate the directors' ability to discharge this duty by, amongst other things, providing them with relevant information and training on their duties. The company also ensures that information pertaining to its stakeholders is provided, as required, to the directors as part of the information presented in regular board meetings in order that stakeholder considerations can be factored into the board's decision making. The directors' responsibilities are also set out in the schedule of matters reserved for the board and the terms of reference of its committees, both of which are reviewed regularly by the board. At all times the directors can access as a board, or individually, advice from its professional advisers including the company secretary and independent external advisers.

The company's investment objective, to achieve capital growth over the long term, supports the directors' statutory obligations to consider the long term consequences of the company's decisions.

The company does not have employees but the board is fully aware of its responsibilities in overseeing the investment manager with respect to the stewardship of the underlying assets which underpins commitment to wider stakeholders.

The company's biggest environmental impact is not through operations but its investments. The investment manager is delegated to consider material environmental issues and the board will examine these issues as part of its wider oversight duties.

Engagement with suppliers, customers and others and the effect on principal decisions

The Shareholders - The shareholders of the company are both institutional and retail and details of those with substantial shareholdings are detailed in the annual report and accounts. The board is committed to listening to the views of its shareholders and giving useful and timely information by providing open and accessible channels of communication including those listed below.

The AGM - The company encourages participation from shareholders at its AGMs where they can communicate directly with the directors and investment adviser. In view of the alternative arrangements for the AGM this year as a result of Covid-19, shareholders are invited to submit any questions in advance of the AGM to Magnus.Spence@ jupiteram.com. Subject to confidentiality, we will respond to any questions submitted either direct or by publishing our response on the company's website. All views of the shareholders will be taken into consideration and action taken where appropriate.

Online information - The company website contains the annual and half yearly financial report along with monthly factsheets and commentaries from the investment adviser. The daily NAV per share, monthly top ten portfolio listings, dividend announcements and various regulatory announcements can be found on the regulatory news service of the London Stock Exchange.

Shareholder communications

Shareholders can raise issues or concerns at any time by writing to the Chairman at the registered office. Further details about how the board incorporates the views of the company's shareholders in its decision making process can be found in the UK stewardship code and the exercise of voting powers section in the annual report and accounts. Further information about how the board ensures that each director develops an understanding of the views of the company's shareholders and can be found in corporate governance statement in the annual report and accounts.

The investment adviser

The board and the investment adviser maintain an open and constructive relationship, with meetings taking place a minimum of four times per annum with monthly updates and additional meetings as circumstances require. During the year, additional meetings were held with the investment adviser to discuss transitional management arrangements prior to Richard Buxton assuming lead fund management responsibility for the portfolio and to discuss the portfolio with Mr Buxton on his appointment. The audit committee meets at least twice a year and as part of its role considers the internal controls put in place by the investment adviser. The 'Management of the company' section in the annual report and accounts details the board's consideration of the investment adviser's performance, its terms of appointment and their annual assessment of its continued stewardship of the portfolio and its oversight of the administrative functions.

The day to day responsibilities of the company are delegated to the investment adviser who is the key service provider and supplies investment management, administration and company secretarial services. The investment adviser oversees the activities of the company's other third-party suppliers on behalf of the company and maintains open and collaborative relationships to maintain quality, efficiency and cost control through regular communication with dedicated members of the investment adviser's operational teams. The board regularly reviews reports from its investment adviser, the AIFM, the depositary, the company broker, the investor relations research provider and the auditor. These provide vital information concerning changes in market practice or regulation which affect the company and assist the board in its decision-making process. Representatives from these providers attend company board meetings and give presentations on a regular basis enabling in depth discussions concerning both their findings and their performance.

Other third-party service providers

As an externally managed investment company with no employees or physical assets, the principal stakeholders of the company are its shareholders, investment adviser, AIFM, depositary, custodian, administrator and registrar. The continuance, or otherwise, of engagement of key third-party service providers are principal decisions taken by the board, with the support of its management engagement committee.

Principal decisions

The directors take into account s172 considerations in all material decisions of the company. Examples of this can be seen as follows:

· On 4 October 2019, the board announced that it had decided to review the company's investment strategy following a period of poor performance. This was a comprehensive exercise which considered various alternatives, including the adoption of an alternative manager from within Jupiter, the appointment of another fund management company as investment manager and the liquidation of the company together with a rollover into another listed investment company. As part of this process, the board engaged extensively with its professional advisers and discussed the potential impact of all proposals on the company's stakeholders.

· At the conclusion of this review, the board reached an agreement with Jupiter, for Richard Buxton to assume lead fund management responsibility for the company following shareholder approval of Jupiter's proposed acquisition of Merian. It was agreed that the company's portfolio would be managed in line with the UK Alpha strategy which has generated a strong long-term performance record consistent with the company's investment objective and policy

· Under the new arrangements agreed with Jupiter, the board agreed with Jupiter that the company would not be charged a base management fee for the period from 1 January 2020 to 31 December 2020.

· In light of the Covid-19 pandemic and measures taken to contain the outbreak, Jupiter advised that there would be a delay in seeking shareholder approval for the Merian acquisition at Jupiter's AGM, thereby delaying Mr Buxton's appointment as lead fund manager. Taking into consideration the potential impact of this delay on the company's stakeholders, the board agreed with Jupiter that a transitional management team comprising senior members of Jupiter's investment team and led by Stephen Pearson, the Chief Investment Officer of Jupiter, would assume responsibility for the investment management of the company and fully transitioned the company's investment portfolio to align with the UK Alpha strategy in advance of Richard's appointment, which took place in May 2020.

· Taking into consideration the rise in status of Covid-19 to a pandemic and the transition of portfolio management arrangements as described above, the board increased its monitoring of the portfolio and held more frequent discussions with the investment adviser to discuss portfolio performance, discount management, and oversight of key suppliers to ensure the safety of working conditions and continuity of operational functions.

· Notwithstanding the appointment of a new lead fund manager, the board kept the company's management arrangements under review while the economic and market backdrop evolved over the course of the year and remained cognisant of the company's reduced market capitalisation. Having consulted with its advisors, the board came to the conclusion that it was no longer likely that it would be possible to grow the company in its present form by attracting significant new investors. The board advised shareholders on 28 September 2020 that it was considering options for the future of the company and currently believes that the best option is to liquidate the company so that shareholders will have the option to receive cash or, if possible, the ability to roll over their investment into another investment vehicle. The board is discussing options with its advisers and welcomes any suggestions from shareholders regarding the future of the company. Shareholders can submit suggestions to jukg.shareholder@jpmorgan.com 

In summary

The structure of the board and its various committees and the decisions it makes are underpinned by the duties of the directors under s172 on all matters. The board firmly believes in taking into account the interests of all the company's key stakeholders.

For and on behalf of the board:

Tom H Bartlam

Chairman

13 October 2020

Statement of directors' responsibilities in relation to the financial statements

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 the 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 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 company 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.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website www.jupiteram.com/JUKG.

The work carried out by the auditor does not include consideration of the maintenance and integrity of the website and accordingly the auditor accepts no responsibility for any changes that have occurred to the financial statements when they are presented on the website.

The financial statements are published on www.jupiteram.com/JUKG 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.

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 of the directors is aware at the time the report is approved:

(a) there is no relevant audit information of which the company's auditors are not aware; 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 auditor is aware of that information.

By order of the board

Tom H Bartlam

Chairman

13 October 2020

Statement of comprehensive income for the year ended 30 June 2020

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 AIC. All items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the year.

All net income is attributable to the equity holders of Jupiter UK Growth Investment Trust PLC. There are no minority interests.

Statement of financial position as at 30 June 2020

* Under the company's articles of association any dividends are distributed only from the revenue reserve

Statement of changes in equity for the year ended 30 June 2020

*Dividends paid during the period were paid out of revenue reserves.

Statement of cash flow for the year ended 30 June 2020

Notes to the Accounts for the year ended 30 June 2020

1. Accounting policies

The accounts comprise the financial results of the company for the year to 30 June 2020. 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 October 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).

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for Investment Trusts issued by the AIC 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.

As described in the Chairman's statement above, in the wake of further losses incurred and the reduced market capitalisation of the company, the board has come to the conclusion that they are no longer likely to be able to grow the company in its present form by attracting significant new investors in the foreseeable future. The board has therefore been considering the best options for the future of the company and its shareholders and currently believe that the best option is to liquidate the company so that shareholders will have the option to receive cash or, if possible, the ability to roll over their investment into another investment vehicle. These options will be subject to shareholder approval. As a result of the above conclusion the directors' have concluded that it is no longer appropriate for these financial statements to be prepared on a going concern basis. As such, these financial statements have been prepared on a basis other than the going concern basis and, in accordance with IAS 1, the company has made an assessment of the carrying value of its assets and have concluded that the carrying value of its assets are reflective of their recoverable amount. The company's investments which were previously classified as non-current assets have now been classified as current assets.

A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is set out below:

(a) Income recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business.

Revenue includes dividends from investments quoted ex-dividend on or before the date of the statement of financial position.

Dividends receivable from equity shares are taken to the revenue return column of the statement of comprehensive income.

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

Deposit and other interest receivable, expenses and interest payable are accounted for on an accruals basis. These are classified within operating activities in the statement of cash flow.

Underwriting commission is taken to income and recognised when the issue takes place, except where the company is required to take up all or some of the shares underwritten, in which case an appropriate proportion of the commission received is deducted from the cost of those shares.

(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. In accordance with the company's articles of association, net capital returns may not be distributed by way of dividend.

An analysis of retained earnings broken down into revenue (distributable) items and capital (non-distributable) items is given in the notes to the annual report and accounts. Investment management fees and finance costs are charged 75% to capital and 25% to revenue. All other operational costs including administration expenses (but with the exception of any investment performance fees which are charged to capital) are charged to revenue.

(c) Basis of valuation of investments

Investments are recognised and derecognised on a trade date where a purchase and 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 cost, being the consideration given.

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

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

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) Finance costs

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

(e) 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. 

(f) Bank interest

Bank interest is recognised in the statement of comprehensive income in the period in which it is incurred. Bank interest is directly charged 25% to revenue and 75% to capital.

(g) 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 net profit or loss for the year, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity.

(h) Treasury shares

In accordance with the relevant provisions of the Companies Act 2006 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. On reissue of these shares the profit element is allocated to share premium.

The company may hold in treasury any of its ordinary shares that it purchases pursuant to the share buyback authority granted by shareholders.

(i) 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.

(j) Accounting developments

At the date of authorization of the financial statements, the following amendment to the IFRS standards and interpretations was assessed to be relevant and is effective for annual periods beginning or or after 1 January 2019:

· IFRIC 23: Uncertainty over Income Tax Treatments

IFRIC 23 has not had an effect on the measurement or disclosure of amounts recognized within the financial statements of the company.

At the date of authorisation of the financial statements, the following standards and interpretations were assessed to be relevant and are all effective for annual periods beginning on or after 1 January 2020:

· IFRS 9, IAS 39 and IFRS 7 Amendments: Interest Rate Benchmark Reform.

The directors expect that the adoption of the standards listed above will have either no impact or that any impact will not be material on the financial statements of the company in future periods.

At 30 June 2020, the company had net current assets of £30,455,000 (30 June 2019: £49,402,000). The directors have a reasonable expectation that the company has sufficient resources to continue in operational existence until any liquidation date and for the company to meet its objectives and measure performance against them. The directors considered the Covid-19 pandemic and the impact this may have on the company, noting in particular that, in addition to its net current assets the company holds a portfolio of largely liquid assets that, if required, can be sold to maintain adequate cash balances to meet its expected cash flows. The directors also reviewed scenarios of a significant drop in value of the assets and noted that they will still be significantly higher than liabilities. They have also confirmed the resiliency of the company's key service providers and are satisfied that their contingency plans and working arrangements are sustainable. The board has established a framework of prudent and effective controls, performed periodically by the audit committee, which enable risks to be assessed and managed.

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 significant accounting judgements have been applied to this set of financial statements other than the allocations between capital and revenue. This allocation is based on an average of long term historic NAV capital returns.

3. Income

4. Investment management fee

5. Other administrative expenses

6. Dividends

Set out below is the estimated total dividend payable in respect of the financial year under review, and based on the shares in issue as at the reporting date which is the basis on which the requirements of Section 1158 of the Corporate Tax Act 2010 are considered.

7. Earnings per ordinary share

The earnings per ordinary share figure is based on the net loss for the year of £12,902,000 (2019 net loss: £7,829,000) and on 15,790,045 (2019: 18,198,496) ordinary shares, being the weighted average number of ordinary shares in issue during the year excluding shares held in treasury. There were no events in which the shareholders' ownership of the company was reduced due to the issuance of new shares. Diluted and undiluted earnings per share are therefore the same.

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

8. Net asset value per ordinary share

The net asset value per ordinary share is based on the net assets attributable to the equity shareholders of £30,455,454 (2019: £49,402,103) and on 15,021,896 (2019: 16,866,072) ordinary shares, being the number of ordinary shares in issue at the year end, excluding ordinary shares held in treasury.

9. Arrangements with 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 ('JAM') the investment adviser. JUTM is contracted to provide investment management services to the company, subject to termination by not less than twelve months' notice by either party.

JUTM receives an investment management fee as set out below. The management fee payable to JUTM in respect of the period 1 July 2019 to 30 June 2020 was £119,550 with £nil outstanding at period end.

The management fee payable to JUTM is 0.50% of adjusted net assets (being net assets before deducting or making provision for any performance fee which may be due and after deduction of the value of any Jupiter managed investments). This fee will be further reduced to 0.45% to the extent that the company's adjusted net assets come to exceed £150 million and will be reduced further still to 0.40% to the extent that the company's adjusted net assets exceed £250 million.

On 18 February 2020, the board announced that it had reached agreement with Jupiter for Richard Buxton to assume lead fund management responsibility for the company. The base management fee charged to the company will continue to calculate as set out above. However, as part of these new arrangements the board has agreed with Jupiter that the company will not be charged a base management fee for the period from 1 January 2020 to 31 December 2020.

JUTM is also entitled to an investment performance fee which is based on the out-performance of the net asset value per ordinary share over the total return on the benchmark index (being the total return on the FTSE All-Share Index) in each accounting period. No performance fee was payable to JUTM in respect of the year ended 30 June 2020.

Any performance fee payable per ordinary share will equal 15% of the amount by which the increase in the adjusted net asset value per ordinary share (being the net asset value per ordinary share adjusted by adding back any accrual for unpaid performance fee and any dividends paid or payable by reference to the calculation period in question) exceeds the higher of:

1) in respect of each subsequent calculation period, the net asset value per ordinary share on the last calculation date of the immediately preceding calculation period, as increased or decreased by the percentage by which the total return of the benchmark index increases or decreases during the calculation period plus 2%;

2) if applicable, the net asset value per ordinary share on the last calculation date by reference to which a performance fee was paid (such calculation date not being before 30 June 2016), increased or decreased by the total return of the benchmark index increases or decreases during the calculation period plus 2%; and

3) the estimated net asset value per ordinary share on Friday, 29 July 2016 (being 285.80p).

In respect of the calculation period ending 30 June 2017, the turbulent market conditions in the immediate aftermath of the Brexit referendum resulted in an estimated NAV per share of 265.12p as at 30 June 2016. Rather than adopt this NAV as the new high watermark for the then current and subsequent calculation periods for the purposes of any performance fee accrual, the board agreed with the manager on 26 September 2016 that it would be appropriate to adopt the higher estimated NAV of 285.80p as at 29 July 2016 as its new high watermark for these purposes.

The aggregate of any base management and performance fees payable to JUTM in respect of any one calculation period is limited to 2% of the adjusted net assets of the company on the relevant calculation date.

No management fee is payable by the company to JAM in respect of the company's holdings in investment trusts, open-ended funds and investment companies in respect of which Jupiter Fund Management PLC, or any subsidiary undertaking of Jupiter Fund Management PLC, receives fees as investment manager or investment adviser. During the period there were no such investments.

There are no transactions with the directors other than the remuneration paid to them as disclosed in the directors' remuneration report and the beneficial interests of the directors in the ordinary shares of the company.

10. Contingent liabilities and capital commitments

As at 30 June 2020 and 30 June 2019 there were no contingent liabilities or capital commitments.

11. Post statement of financial position event

Since the year end an additional 346,042 ordinary shares were repurchased to be held in treasury for prices between 177p and 193p per share.

12. Post balance sheet events

If approved by the shareholders the company will be liquidated before the next financial year end.

The board advised shareholders on 28 September 2020 that it was considering options for the future of the company and currently believes that the best option is to liquidate the company so that shareholders will have the option to receive cash or, if possible, the ability to rollover their investment into another investment vehicle.

The board hopes to be in a position to update shareholders not later than the Annual General Meeting in November. It is intended that a circular be issued to shareholders in due course outlining the full details of recommended proposals. The circular will also include a notice for a general meeting of the company, enabling resolutions to be proposed and voted on by shareholders.

Availability of Annual Report

A copy of the Annual Report & Accounts will shortly be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual Report & Accounts will also be available for download from the company's section of Jupiter Asset Management's website www.jupiteronline.com/JUKG.

Hard copies of the Annual Report & Accounts will also be available upon request from the registered office of the Company at The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ.

For further information, please contact:

Magnus Spence

Head of Investment Trusts and Alternatives

Jupiter Asset Management Limited, Company Secretary

investmentcompanies@jupiteram.com

020 3817 1000

14 October 2020

www.jupiteram.com/JUKG