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 2018

This announcement contains regulated information

Chairman's Statement

It is with pleasure that I present the annual report for Jupiter UK Growth Investment Trust PLC for the year to 30 June 2018. As at 30 June 2018 the company had total assets under management of £82 million, an increase of 50% since the same period last year. This increase has arisen principally as a result of the rollover of assets from former shareholders in the Jupiter Dividend and Growth Trust on 30 November 2017 which resulted in the issue of £24.6 million in new shares. We welcome these new shareholders.

During the twelve months the total return on the net asset value of your company's shares was 4.0% (with dividends added back). This compares with an increase in the company's benchmark index, the total return on the FTSE All Share index, of 9.0%.

The background to the performance of your company over the course of the financial year is discussed in detail by Steve Davies in his investment adviser's review. It is fair to say that the short term performance of the trust has been somewhat disappointing, with a number of positive gains, especially from M&A activity, being offset by other core positions, despite compelling logic in some cases, remaining out of favour with investors.

With Brexit D-Day approaching, and the political dynamics surrounding the negotiations with the EU still complex and volatile, the domestic sectors of the UK stock market remain deeply unpopular with international investors. As this is the sector in which our manager concentrates most of his firepower, this has not been the easiest period in which to be managing a UK growth and recovery portfolio. In addition the strategic decision to have limited exposure to the resources sector has proved particularly costly.

However, the succession of recent bids for companies which are in the portfolio indicates that the manager's valuation methods are well calibrated to identify undervalued stocks. Other corporates can see bargain value in those businesses even if a myopic market does not. Additionally it is important also to keep recent performance in perspective. As events turned out, the trust was poorly positioned going into the referendum in June 2016, but in the two and a bit years since the company's portfolio has performed broadly in line with its benchmark index.

Dividend

An interim dividend of 7p per share (unchanged on 2017) will be paid on 23 November 2018 to shareholders shown on the register of shareholders on 19 October 2018. The board has stated its ambition at a minimum to maintain the dividend at the level paid in the preceding financial year and, if justified by performance, to grow it over time.

Gearing

'Gearing' may be defined as the ratio of a company's loan facility to its equity capital, expressed as a percentage. Its effect is generally to amplify gains and losses in the investment portfolio. The ability to use gearing to enhance returns is widely recognised as one of the advantages enjoyed by investment companies over open-ended funds.

The directors consider it a priority that the company's level of gearing should be maintained at appropriate levels with sufficient flexibility to enable the portfolio manager to adapt at short notice to changes in market conditions. The board reviews the company's level of gearing on a regular basis. The current maximum that has been set is 20% of the company's total assets.

The company currently has access to a flexible loan facility with Scotiabank Europe plc for amounts up to £17 million. As at 30 June 2018 the company's gearing level was 9% and as at 14 September 2018 it was 8%. This reflects our view that this has not been the right environment in which to move to a stance of aggressive gearing.

Discount and premium management

The board and the investment adviser are committed to growing the company over time, recognising that the company's total asset base is currently at the lower end of the minimum size preferred for prospective investment by many institutional and wealth management investors. Superior investment performance remains central to the achievement of that objective.

The board remains committed to its stated policy of using share buy backs 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 board believes that this commitment to active management of discount and premium produces improved liquidity for

both buyers and sellers of the company's shares.

During the 12 months to 30 June 2018, the company repurchased a total of 2,216,496 shares. As a result the shares of the company have continued to trade close to net asset value. The company has issued no Ordinary shares from treasury during the year. Our trust is the only one in the UK All Companies sector to offer a zero discount commitment.

Shareholders should note there can be no guarantee that any liquidity management policy implemented by the board will necessarily have its desired effect. The making and timing of share buy backs and the new issuance of shares are subject to a number of legal and regulatory regulations and, subject to these, will remain at the discretion of the board.

Rollover of Jupiter Dividend & Growth Trust PLC

As mentioned in my interim report in March, on 30 November 2017 we welcomed a large number of new shareholders who acquired shares in the company following the liquidation and rollover of Jupiter Dividend & Growth Trust PLC, a split capital investment trust which reached the end of its fixed life on that date. The issue of £24.6 million in new shares at 315p per share increased the company's net assets to £66.7 million (as at 31 December), representing an important step towards our stated objective of growing the company's asset base to £150 million and beyond. The proceeds of the rollover were invested by our portfolio manager in line with the company's stated investment objectives and policies soon after receipt.

A copy of the circular to shareholders in Jupiter Dividend & Growth Trust PLC and also the prospectus which we published of your company at the time may be found on our website at www.jupiteram.com/JUKG.

Board composition

Following last year's rollover of Jupiter Dividend & Growth Trust PLC, we appointed Keith Bray as a director and we welcome him to the board. Recent corporate governance changes stipulate that directors who have served more than nine years can no longer be deemed independent. However, in my view one needs to balance the need to refresh the composition of the board from time to time with the advantage of retaining directors with relevant and sometimes longstanding experience. All the current directors are offering themselves for re-election at the AGM.

Key information documents

We are required by new EU regulations introduced at the beginning of 2018 to provide investors with a key information document ("KID") which includes performance projections which are the product of prescribed calculations based on the company's past performance. Whilst the content and format of the KID cannot be amended under EU regulations, the board does not believe that these projections are an appropriate or helpful way to assess the company's future prospects. The principle of using history to project future performance is clearly at odds with the regulatory mantra that "past performance is no guide to future performance".

Accordingly, the board urges shareholders also to consider the more comprehensive information set out in the company's interim and full annual report and accounts, together with the monthly fact sheets and daily net asset value announcements, when considering an investment in the company's shares. These documents, together with a link to Edison's third party research coverage of the company, are published at www.jupiteram.com/JUKG.

Annual General Meeting

The company's AGM will be held at 12 pm on 14 November 2018 at the offices of Jupiter Asset Management Limited at The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ. Notice of the AGM, containing full details of the business to be conducted at the meeting, is set out in the annual report & accounts. Your attention is also drawn to the report of the directors contained in the annual report & accounts where various resolutions relating to special business are explained.

In addition to the formal business, Steve Davies will provide a presentation to shareholders on the performance of the company over the past year as well as the outlook for the future. The board would welcome your attendance at the AGM as it provides all shareholders, including our new investors, with an opportunity to ask questions of both the board and portfolio manager.

Outlook

While we are far from complacent about recent performance, we have given the manager a mandate to run a concentrated high conviction portfolio of predominantly UK stocks with a growth and recovery bias. Disciplined concentrated investment strategies often require patience for their full potential to be realised. We retain our confidence that this strategy should deliver superior results over time. The board continues to monitor performance closely however and has made it clear that it expects performance to improve once the current environment of uncertainty over the UK's future lifts.

Tom H Bartlam

Chairman

20 September 2018

Financial Highlights

Capital performance

*With effect from 30 November 2017 Jupiter Dividend & Growth Trust PLC was wound up and the shareholder offered the option of rolling their holdings in Jupiter UK Growth Investment Trust PLC resulting in £24,645,874 being received into the company.

Ordinary share performance

Revenue performance

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

Dividends declared during the period under review

Fifteen Year History to 30 June 2018

* Prior to 2005, financial information has been prepared under UK GAAP. From 2005 all information is prepared under IFRS.

* *Adjusted for five for one stock split in 2013.

Investment Adviser's Review

Market background

Sentiment towards the UK from global investors deteriorated through much of the period under review. Allocations to the UK, as measured by BAML's Global Fund Manager Survey, were the worst they have been since 2008, when the UK's banking system was on the verge of collapsing. In a sense, that attitude is perfectly understandable given the political and economic uncertainty affecting the UK, which has had a real impact on the earnings of some companies. UK profit warnings hit a two-year high at the start of 2018, with the pressures of rising costs and weakening demand among the likely causes. The low valuations of some stocks in the UK market has resulted in a notable pick-up in M&A activity, of which the company's portfolio was a beneficiary as discussed below.

Performance review

Over the twelve months to 30 June 2018 the company's share price returned 5.0% and NAV returned 4.0% (both including dividends) compared to a total return of 9.0% for the FTSE All-Share Index.

In the period under review, a notable positive contribution came from Thomas Cook, which benefited from good demand over the summer of 2017, with bookings up significantly and strong demand across all major markets. The summer of 2018 was more challenging, particularly because of the very hot weather which reduced demand for overseas holidays.

Sirius Minerals, the trust's largest individual holding as at June 2018, has had a volatile 12 months, performing poorly in the latter months of 2017 and then recovering more recently. The company has made significant progress in securing new supply agreements with a variety of global agricultural companies and is now moving towards completing the second and final stage of its financing requirements in early 2019. Raising in excess of $3bn for such a project is not a straightforward exercise and the total capital requirements have recently been increased in order to provide greater certainty to potential lenders. We still see huge upside in the project and the completion of this financing round would represent a major step forward towards realising this.

Mergers and acquisitions became a major theme in the portfolio in late 2017 and throughout the first six months of 2018, with the company's portfolio benefiting from an unusual number of deals affecting stocks in the portfolio.

GKN's share price benefited from a bid approach from Melrose, which culminated in March with GKN shareholders voting in favour of Melrose's approach. I have been actively engaging with the management team since September 2017, arguing for a more aggressive focus on costs and cashflow, and a reappraisal of the group's structure. This is a good demonstration of how we can enhance shareholder value through such engagement.

Shares in CityFibre performed well as it was announced that the company is set to be bought by a Goldman Sachs-backed consortium in a £538 million deal, at a 90% premium to the prevailing pre-bid share price.

ZPG, which operates the Zoopla and Prime Location property portals and the uSwitch utility comparison site, was another notable positive stock contributor. The company received an offer of 490p a share from Silver Lake Partners, a US tech-focused private equity group. This was a premium of around 40% to the prevailing share price and was also slightly ahead of our own price target for the stock, which is calculated on a two-year basis.

Virgin Money was another strong performer, with the board recommending an all-share offer from CYBG, the owner of Clydesdale Bank and Yorkshire Bank, which values Virgin Money at £1.7 billion. We can see plenty of strategic logic for putting the two businesses together, although there is some integration risk in the combination, not least from an IT perspective in the light of recent issues at TSB.

During the period under review Inmarsat was the subject of an approach from the US satellite business EchoStar. Inmarsat has recently been investing significantly in developing the next generation of satellites and rolling out in-flight connectivity to various airline customers, which has depressed cashflow in the near term and has seen the share price fall markedly since 2016. The board of Inmarsat rejected the initial offer from EchoStar and an improved offer, noting that they believed both bids significantly undervalued Inmarsat and its standalone prospects. I was supportive of this decision and, although no successful bid was made, the approach has resulted in a rally in the Inmarsat share price and renewed market focus on the business.

Despite the general negativity, the UK market has delivered performance that is competitive with other developed markets in local currency terms over the period under review (ahead of Europe and behind the US), and there have been signs of improvement on the economic front. Employment is at an all-time high, and inflation has been falling. Lower inflation has also helped create real-terms wage growth, aided by a tightening labour market. The relatively lacklustre GDP growth early in the year was, in my opinion, partly attributable to the unusually cold and long winter, which was the view of the Bank of England also.

The key positives during the period were stock-specific, but by contrast one of the main negatives was macro- driven: being underweight oil related stocks. The oil price has risen since the beginning of March, driven in part by ongoing supply disruption in Venezuela and Donald Trump's decision to re-impose sanctions on Iran. I remain of the view that a drop in the oil price, with a medium-term range of $40-$60 per barrel, is likely and recently there has been more talk of OPEC increasing production under pressure from the US. Our analysis also suggests that US shale supply will continue to ramp up in the second half of 2018 and that demand forecasts will be revised down as the impact of higher prices filters through to end-users.

Another macro headwind for the portfolio over the last year has been the historic level of unpopularity of UK stocks - especially those exposed to the domestic UK economy - among global investors that has continued to depress share prices. Although some of the company's domestic UK holdings have been able to buck this trend, with value recognised by bidders if not always by the market, it has caused others to take a hit. Domestic-facing UK banks, such as Lloyds, Barclays and RBS are prime examples and the company's positions in those stocks have performed relatively poorly as a result over the last year.

Two other detractors to returns over the period were Dixons Carphone and Merlin Entertainments. Merlin's share price suffered from the terror attacks in London in 2017, which deterred tourists from visiting. However, overall profits still rose as Legoland Japan and five other smaller attractions came on stream. Dixons Carphone had a substantial profit warning in August 2017. The issue related to the Carphone Warehouse side of the business and was due to a combination of factors, including a slow uptake of new mobile phones as consumers hold onto their existing phones for longer as well as changes to EU roaming rates.

Arrow Global was another negative. This debt collection business has been heavily shorted in the market and its share price has therefore taken a hit. I am unconvinced by the bearish arguments made in shortseller analysis and it is worth noting that private equity is very interested in this sector, reflecting a very different approach to many stock market investors when it comes to valuing longer-term cashflows. We have encouraged Arrow to improve its disclosure to enhance the market's understanding of its business.

Elsewhere Countrywide, the estate agency group, saw its shares fall sharply after it announced a profit warning and said it intended to strengthen its balance sheets through a round of equity fundraising. The estate agency market is very challenging at present and Countrywide has not helped itself in the last couple of years. A new management team has plenty of self-help measures to enact and consolidation in this sector is still highly likely, in my view.

Strategy

The company is managed with a bottom-up approach that focuses on two specific types of opportunity. Firstly 'recovery' stocks, meaning those that have been written off or deemed un-investible by the market. These should be well-placed to benefit from specific catalysts such as industry restructuring or management change, combined with the expectation of substantial valuation upside given the inherent volatility of such situations. Secondly, 'growth' stocks that can generate above‑average rates of growth over an extended time period. I apply a strict Free Cash‐flow screen to such stocks to ensure that they are acquired at what I consider to be reasonable prices.

Initial position sizes are determined by a mixture of conviction, upside to target price and liquidity, and I generally aim for a starting position size of 2-3%. This is based on the view that all positions should meaningfully contribute to the performance of the company while still allowing for a sensible level of diversification.

Index weightings are not a primary consideration during portfolio construction. Indeed, I am quite happy to hold zero weightings in big index constituents if the stock does not meet the criteria of either 'recovery' or 'growth'. This can lead to periods of higher volatility relative to the index and introduces an element of currency risk. I also make use of the flexibility to diversify the company's portfolio geographically through holding a small number of overseas stocks, which provide the company with a means of exposure to investment themes where I feel there is no suitable UK‐listed alternatives (Apple and Manchester United are examples from the current portfolio).

I am aware of the general tendency for investors to 'fall in love' with a stock and keep holding it past the point that it fulfilled its potential. I therefore take each stock's 2-year price target seriously. When a stock reaches its price target the original investment case will be reappraised. If the story has materially changed for the better, then the price target could be revised upwards. If not, the position will be sold and reinvested in a fresh idea.

Engagement

Engaging closely with the companies that we invest in is a fundamental part of my investment process. I believe that it is crucial in improving my understanding of our holdings and, with such a concentrated portfolio, I can work closely with management and non-executives to enhance the value of our investments or to restore value when things have gone wrong. This does not just involve meeting with the CEO or CFO: in 2017 I engaged in person with over 90% of the chairmen of the portfolio's UK holdings and I hope to hit 100% over the course of 2018.

Sometimes the purpose is to help company management understand how their business is viewed in the wider market and assist them to communicate their long-term plans and prospects more effectively. If done well, such communication can help address any misconceptions that exist in the market and will tend to return the share price to a level that reflects the true value and potential of the business. Examples of this sort of engagement in the last year have been Inmarsat, where heavy investment in new technology had depressed cashflow and caused the shares to fall, and Arrow Global, which was hit by negative sentiment from short sellers that in my view have too bearish a view of the company's prospects. Finally, we were active in engaging with GKN both before and during the takeover process after it received a bid from Melrose, putting forward our views (mentioned above) about how management might best serve the interests of shareholders.

Outlook

We are halfway through 2018 and already this year five of the holdings in the company's portfolio have been taken over or received formal bid approaches. Given the company's portfolio only holds around 30 sizeable positions, that is an unusually high hit rate. Why has this happened, and can it continue?

The first point to make is that the UK is still deeply unloved by global investors. Sentiment, as measured by BAML's Global Fund Manager Survey, is the worst it has been since 2008, when the UK's banking system was on the verge of collapsing. In one sense, that attitude is perfectly understandable given the political and economic uncertainty affecting the UK, but it also means that there are some very lowly-valued stocks on the market.

On top of this, I believe the UK stock market has become very myopic, focusing on current-year earnings and heavily punishing those companies that are investing now to drive growth and profits over the medium term. My investment time horizon is longer than this, usually 2-3 years and often further, and so I see plenty of valuation anomalies at present. Other investors, such as private equity or corporates will also tend to operate on longer timelines and this is why they are willing to pay higher prices than the market in M&A deals.

The role of luck should not be overlooked in all this. James Moir (who joined the team as an Equity Analyst at the end of 2017) and I do lots of work trying to identify companies which we think the market is undervaluing, but it still requires a real bidder to make an actual approach and that is much harder to predict. At the start of 2018 I had my own list of likely M&A candidates in the company's portfolio and, while GKN and Inmarsat were near the top of that list, ZPG and CityFibre would have been much lower down.

If, as seems likely, the UK remains out of favour among global investors for some time to come, then the UK market may see plenty more M&A activity in the second half of the year. We believe our strength in individual stock-picking and our focus on companies with strong cashflows leaves the company's portfolio well placed to benefit, but, as noted above, there is also an element of luck involved too.

Steve Davies

Jupiter Asset Management Limited

Investment Adviser

20 September 2018

Investment Portfolio as at 30 June 2018

\* The difference in values between the year end dates is affected both by price movements and any sales or purchases from the portfolio including purchases made using the proceeds arising from the Jupiter Dividend & Growth Trust PLC rollover.

** The prior year holding in GKN was taken over by Melrose Industries on 17 April 2018 and the Company received shares in Melrose Industries.

*** Unquoted.

Cross holdings in other Investment Companies

As at 30 June 2018, 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 2018

Strategic Report

The strategic report is intended 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

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 2018. The directors expect that the company will continue to operate in the same manner during the current financial year.

The company is a public limited company 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 Taxes 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.

Investment objective and strategy

The company's investment objective is to concentrate on capital appreciation from holding predominantly listed investments. The investment adviser researches companies, with the responsibility of ensuring that each potential investment falls within the company's stated investment policy. The portfolio is reviewed by the board at regular intervals and the directors are satisfied that the portfolio was consistent with the stated policy and investment objective throughout the year to 30 June 2018.

Dividend policy

The board has not set an objective of a specific portfolio yield for the company in relation to the year under review and the level of such yield has historically varied with the sectors to which the company's portfolio is exposed at any given time. However, substantially all distributable revenues that are generated from the company's investment portfolio are expected to be paid out in the form of an annual dividend.

For the year to 30 June 2018 the directors are proposing a single interim dividend of 7.0p per share. The distributable revenues for the period were £1,346,874, equivalent to 7.03p per share at year end. The dividend payment is therefore 100% covered by distributable revenues.

Loan facility and gearing

In order to improve the potential for capital returns to shareholders, the company has access to a flexible loan facility with Scotiabank Europe plc for amounts up to £17 million. The board does not set any limits or restrictions on the company's use of the loan facility, other than that it should not exceed the maximum amount of the facility.

Gearing is defined as the ratio of a company's loan facility to its equity capital, expressed as a percentage. In rising markets, gearing tends to benefit the company if the performance of the investment portfolio exceeds the cost of the prior ranking entitlements of lenders and other creditors. Conversely, in falling markets the company suffers if the investment portfolio increases in value by less than cost of those prior entitlements.

The board regularly reviews the company's level of gearing. The maximum level of gearing is currently set at 20% of the company's total assets at the time of drawdown. The amount of the loan facility that is drawn down during the year can be adjusted for tactical reasons at the discretion of the investment adviser, who reports any proposed changes to the board.

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 2018 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 changes over time;

· The movement of the company's share price;

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

· Changes in the discount over varying periods;

· Performance versus the company's peer group;

· The dividend yield and level of revenue cover.

The movement in the NAV, ordinary share price, dividend and benchmark are reported and summarized in the company's monthly factsheets. These can be found on the investment adviser's website at www.jupiter.com/JUKG. They are also available on request from the company secretary.

Future developments

It is the board's ambition to continue to grow the asset base of the company through a combination of organic growth and further new issuance of shares with a view to achieving the critical mass necessary to attract broader demand from wealth managers, IFAs and other institutional buyers of investment trust shares. The investment adviser continues to be encouraged to use the particular advantages of an investment trust structure to enhance potential returns to shareholders, including the use of gearing, the ability to employ derivatives for investment purposes from time to time and the freedom to hold high conviction positions through periods of sharp market fluctuations.

Discount to the net asset value

The directors review the level of the discount, defined as the extent to which the middle market price of the company's ordinary shares diverges from its NAV per share, on a regular basis. In the twelve months to 30 June 2018 the share price moved in a range between a discount of 0.58% to 5.55% to NAV.

In February 2014 the board decided to implement a discount policy under which it would use share buy backs and new issues of shares with the intention of ensuring that, in normal market conditions, the market price of the company's shares would track their underlying net asset value. The board considers that a commitment to the active removal of discount risk helps improves liquidity for both buyers and sellers of the company's shares.

The directors have powers granted to them at the last AGM to purchase ordinary shares and either cancel or hold them in treasury as a method of influencing the discount to NAV. The board is proposing that its authority to repurchase up to approximately 14.99% of its issued share capital should be renewed at the next AGM on 14 November 2018.

For the avoidance of doubt, repurchases will always be at the absolute discretion of the board in light of prevailing market conditions and within the guidelines set by the board, the Companies Act, and the Listing Rules. Any purchases will be made only through the market at prices below the prevailing estimated NAV per ordinary share and where the directors believe such purchases will enhance shareholder value and assist in narrowing any discount to NAV at which the ordinary shares may trade.

The company has the authority to hold in treasury any of its ordinary shares that it purchases as a result of the share buyback authority granted by shareholders, in accordance with the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the 'Regulations'). These ordinary shares may be subsequently cancelled or sold for cash. This gives the company the ability to reissue shares quickly and cost effectively and provides the company with additional flexibility in the management of its capital.

As at 30 June 2018 there were 10,576,185 ordinary shares held in Treasury. During the year, 2,216,496 ordinary shares representing 3.6% of the total ordinary shares in issue at 30 June 2018, were bought back. Jupiter Dividend & Growth Trust PLC, as part of its reconstruction proposals, offered its shareholders the option of rolling over their holdings into Jupiter UK Growth Investment Trust PLC. Those who opted to do this became shareholders in the company with effect from 30 November 2017 after Jupiter Dividend & Growth Trust PLC was wound up. As a result, 7,821,713 shares were issued at a price of 315.10p each.

The board has no current plans to change its policy on the reissue of treasury shares. Were such a change to be made it will be announced via a Regulatory Information Service approved by the FCA. The board's current policy is that any ordinary shares held in treasury will not be resold by the company at a discount to the investment adviser's estimate of the presiding net asset value per ordinary share as at the date of the proposed issue.

Management

The company has no employees and most of its day to day responsibilities are delegated to Jupiter Asset Management Limited ('JAM'), which acts as the company's investment adviser and company secretary.

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

The board's management engagement committee is responsible for reviewing the administrative and management arrangements of the company. During the year the board challenged the management company JAM on a number of issues, all of which were satisfactorily resolved after discussion.

Risks and uncertainties

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

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. The interest rate on the loan facility is reviewed at regular intervals.

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

Liquidity risk - This risk can be viewed as the liquidity of the securities in which the company invests and the liquidity of the company's shares. The company may invest in securities that have a very limited market which will affect the ability of the company's investment adviser to dispose of securities when he no longer feels they offer the potential for future returns. Likewise the company's shares may experience liquidity problems when shareholders are unable to realise their investment in the company because there is a lack of demand for the company's shares. At its quarterly meetings the board considers the current liquidity in the company's investments when setting restrictions on the company's exposure. The board also reviews, on a quarterly basis, the company's buy-back programme and in doing so is mindful of the liquidity in the company's shares.

Gearing risk - The company's gearing can impact the company's performance by accelerating the decline in value of the company's 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.

Loan facility default risk- The company would be in default of the loan facility agreement if it were to breach certain parameters specified in the loan agreement by the lender Scotiabank Europe plc. These parameters are monitored by the fund manager and the lender. In the event of default, the loan would be repayable within 30 days. The board consider that cash could be raised from the company's portfolio in that timeframe without material prejudice to the interest of the shareholders.

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 las Annual General Meeting to purchase ordinary shares as a method of controlling the discount to net asset value and enhancing shareholder value. Further details of the buy-back programme can be found in the chairman's statement under the heading discount and premium and discount management.

Regulatory risk - The company operates in a complex regulatory environment and faces a number of regulatory risks. A breach of section 1158 of the CTA 2010 could result in the company being subject to capital gains tax on portfolio movements. Breaches of other regulations such as the UKLA Listing rules, could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers such as the Investment Adviser could also lead to reputational damage or loss.

The board monitors regulatory risks at its quarterly board meetings and relies on the services of its company secretary, JAM, and its professional advisers to ensure compliance with, amongst other regulations, the Companies Act 2006, the UKLA Listing Rules, the FCA's Disclosure and Transparency Rules and the Alternative Investment Fund Managers Directive. The investment adviser is contractually obliged to ensure that its conduct of business conforms to applicable laws and regulations.

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

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

Operational risk - Failure of the core accounting systems, or a disastrous disruption to the Investment Adviser's business or that of the administration provider JPMCB, could lead to an inability to provide accurate reporting and monitoring. The Board annually reviews the investment adviser's and the administrator's statements on their business continuity planning and have done so again at the 11 September 2018 meeting of the board.

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 reviews the investment adviser's and the administrator's statements on its internal controls and procedures once a year.

Directors

As at 30 June 2018, the board comprised one female and four male directors. The company's policy on board diversity is included in the corporate governance section of the report of the directors within the annual report & accounts.

Employees, environmental, social and human rights issues

The company has no employees as the board has delegated the day to day management and administration functions to JUTM, JAM and other third parties. All of the company's activities are outsourced to third parties. 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 the environmental and social responsibility, including with regard to human rights, is considered as part of the overall assessment of risk and suitability for the portfolio, the investment adviser does not necessarily decide to, or not to, make an investment on environmental and social grounds alone.

Global greenhouse gas emissions

The company has no greenhouse gas emissions to report from its operations as its day-to-day management and administration functions have been outsourced to third parties and it neither owns physical assets, 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

The company's investment objective is to achieve long-term capital growth and the board regards the company as a long-term investment. In accordance with provision C.2.2 of the UK Corporate Governance Code, as issued by the Financial Reporting Council ('FRC') in April 2016, the board has a responsibility to assess the prospects of the company over the next three years.

In view of the fact that: (a) the company holds a highly liquid portfolio invested predominantly in UK listed equities; and (b) no significant increase to ongoing charges or operational expenses is expected, the board has concluded that it expects that the company will continue in operation and meet its liabilities as they fall due over the next three years.

For and on behalf of the Board:

Tom H Bartlam

Chairman

20 September 2018

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. 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; and

(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

20 September 2018

Statement of Comprehensive Income for the year ended 30 June 2018

The total column of this statement is the income statement of the Company, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance produced by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations.

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 2018

* 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 2018

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

** An adjustment was made to the reserves to split the amount raised on the reissue of shares from Treasury between the profit element, as now shown in share premium, and the cost of shares issued, now shown in retained earnings. This represents £13,000 from the year ended 30 June 2011 plus £56,000 from the year ended 30 June 2016. The total amount had previously all been taken to retained earnings. The impact on the statement of comprehensive income is £nil.

Statement of cash flow for the year ended 30 June 2018

*£174,000 of accrued income was reallocated to investment income in the 2017 figures. The impact on the statement of financial positon is £nil.

Notes to the Accounts for the year ended 30 June 2018

1. Accounting policies

The accounts comprise the financial results of the company for the year to 30 June 2018. The accounts are presented in pounds sterling, as this is the functional currency of the company. The accounts were authorised for issue in accordance with a resolution of the directors on 20 September 2018. 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 Association of Investment Companies (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.

The company continues to adopt the going concern basis in the preparation of the financial statements.

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

(a) Revenue 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.

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 Association of Investment Companies (AIC), supplementary information which analyses the statement of comprehensive income between items of a revenue and capital nature has been presented alongside the statement. 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 annual report & 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 they are 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 buy-back 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 Income and Corporation Taxes Act 2010 ('ICTA') are not liable for taxation of capital gains.

(j) Accounting developments

The following are standards, amendments and interpretations that have been published by IASB and are relevant to the company but are not yet effective for year ended 30 June 2018:

International Accounting Standards (IAS/IFRS's)

IFRS 9 Financial Investments Classification and Measurement

Effective date: 1 January 2018

Amendments to IFRS 9 Prepayment Features with Negative Compensation

Effective date: 1 January 2019

IFRS 15 Revenue from Contracts with Customers

Effective date: 1 January 2018

The directors anticipate that the adoption of the above standards and interpretation in future periods will have no material impact on the financial statements of the company. The company intends to adopt the standards in the reporting period when they become effective.

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.

3. Income

4. Investment management fee

5. Other administrative expenses

6. Dividends

Set out below is the total dividend payable in respect of the financial year under review, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered:

7. Earnings per ordinary share

The earnings per ordinary share figure is based on the net gain for the year of £3,337,000 (2017: £10,239,000) and on 17,124,716 (2017: 14,277,978) ordinary shares, being the weighted average number of ordinary shares in issue during the year excluding shares held in treasury.

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 £65,192,000 (2017: £45,224,000) and on 19,145,493 (2017: 13,540,276) 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 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 2017 to 30 June 2018 was £297,974 with £81,508 outstanding at year end. 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 2018.

Prior to 18 April 2016 the base management fee payable to JUTM was 0.80% per annum of the company's net assets, less a waiver of £40,000 per annum. However, with effect from the change in the company's investment strategy approved by shareholders on 18 April 2016 and the appointment of a new portfolio manager, Steve Davies, the base management fee was reduced to 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.

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 (plus any dividends per ordinary share paid or payable and any accrual for unpaid performance fees for the period) 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).

The total amount of any base management and performance fees payable to JUTM in respect of any one accounting period is limited to 2% of the adjusted net assets of the company. 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 accounting 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.

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

10. Contingent liabilities and capital commitments

As at 30 June 2018 and 30 June 2017 there were no contingent liabilities or capital commitments.

11. Post statement of financial position event

Since the year end an additional 340,552 ordinary shares were repurchased to be held in treasury for prices between 319p and 338p per share.

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 www.morningstar.co.uk/uk/NSM.

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:

Richard Pavry

Head of Investment Trusts

Jupiter Asset Management Limited, Company Secretary

investmentcompanies@jupiteram.com

020 3817 1496

21 September 2018