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 2019

Chairman's Statement

At 30 June 2019 the company had total assets under management of £53.8 million. During the twelve months to 30 June 2019 the total return on the net asset value of the company's shares was -11.9%. This compares with the total return on the company's benchmark, the FTSE All-Share Index, of 0.6%.

Management review

It has now been more than three years since shareholders approved the change in the company's investment policy to focus on UK growth and recovery investment opportunities and we appointed Steve Davies as our fund manager. These past three years have been a challenging period for active investors in general, and in particular for those, such as our fund manager, who focus to a considerable extent on cyclical, domestically facing UK equities.

As a board we review and debate the company's progress both in absolute terms and relative to its benchmark and peers. We are conscious that the company has not achieved the performance that we had hoped for over the past three years. This is the result of both the unfavourable macro factors noted above and stock specific issues within the portfolio. In my interim statement I expressed the board's frustration at the poor investment performance of the company and regrettably this underperformance has continued in the second half of the year.

Since April 2016, when the new mandate was introduced, the company has generated a total negative return, including reinvested dividends, of -0.3%. As a result, the company has underperformed our benchmark index by 34.3% as at 30 September 2019. Having expressed our growing concerns to the investment adviser Jupiter Asset Management in a number of meetings over the past year, in the absence of any improvement we have come to the conclusion that our strategy is not working and needs to be changed.

In the review of our strategy, we have been actively engaging with Jupiter Asset Management and our brokers Numis Securities to identify alternative arrangements that could better serve the interests of shareholders. These alternatives include the adoption of an alternative investment approach for the company from within the Jupiter group and a potential appointment from another fund management company. The outcome of these ongoing discussions will be announced in due course.

Dividend

We are pleased to announce an increased single interim dividend for the year of 8.5p per share to be paid on 22 November 2019 to shareholders shown on the register of shareholders on 18 October 2019. In order to retain investment company status and avoid the need to pay capital gains tax on investment gains we are required to distribute a minimum of 85% of our investment income in any one year. The dividend increase reflects a combination of higher dividend income from our portfolio and a reduction in issued share capital as a result of share buybacks.

The board's ambition is to maintain the dividend at the level paid in the preceding financial year and, if justified by performance, to grow it over time, as we have been able to do in respect of this year. Our dividend policy could, however, change in the future in the event of our adopting a new investment approach.

Gearing

'Gearing' is 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 £12 million. As at 30 June 2019 the company's gearing level was 5%, and as at 27 September 2019 it was 6%.

Discount and premium management

The board and the investment adviser remain 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'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 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 2019, the company repurchased a total of 2,279,421 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 company is the only investment trust in the UK All Companies sector to offer a zero discount commitment.

The company has repurchased a total of £20.3m over the last three years since the implementation of the company's current investment strategy. The impact on our asset base was offset by the £24m in shares issued to former investors in Jupiter Dividend & Growth Trust PLC in 2017.

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 buybacks 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.

Board composition

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 EU regulations introduced at the beginning of 2018 to provide investors with a key information document ("KID"). This document 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 noon on 19 November 2019 at the offices of Jupiter Asset Management 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 in the annual report & accounts where various resolutions relating to special business are explained.

The board would welcome your attendance at the AGM.

Market outlook

In the UK it is impossible at the time of writing to predict what the Brexit outcome will be. However, the manner in which the politics of Brexit play out will clearly have a significant impact on the performance of any investment company which focuses primarily on UK-based companies, as we do.

Outside the UK, there will be a change in political leadership in Brussels, while uncertainty over the future path of interest rates, the US/China trade war and geopolitical developments in the Middle East and Asia will continue to exercise investors. Central banks face some difficult policy decisions in the face of apparently slowing global demand that could even tip some economies over into recession.

With regard to the future of your company, our current investment adviser, Steve Davies, will remain in place until such time as alternative portfolio management arrangements have been agreed by the board. The board is working to identify the best outcome for our shareholders and will communicate with shareholders as soon as a decision has been made.

Tom H Bartlam

Chairman

4 October 2019

Financial Highlights for the year ended 30 June 2019

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 2019

*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 was a volatile 12 months for UK equities. In common with major equity markets worldwide, UK shares suffered a sharp setback in the final quarter of 2018 as the heightened trade tensions between the US and China raised concerns about the outlook for global growth. This was offset by a rally in 2019 as investor sentiment was lifted by hopes of improved trade relations between the US and China and as markets began to price in looser monetary policy, from the Fed in particular. Unsurprisingly in this environment, safe haven stocks and bond proxies have outperformed, while value investing as a style has suffered against strategies focused on quality, growth or momentum.

Brexit continued to dominate the agenda in the UK. Theresa May was unable to secure any parliamentary backing for the withdrawal agreement negotiated with the EU. However, parliament was unable to agree on a majority for any other option, forcing the Prime Minister to ask for a delay to Article 50. With the Brexit deadline postponed until 31 October, the government was widely punished in the European and local elections, causing Mrs May to resign as leader of the Conservative Party. The British pound weakened as the main contenders in the resulting leadership contest appeared more likely to contemplate a no- deal Brexit if required.

Larger multinational companies closed the period with relatively flat returns. However, the ongoing uncertainty surrounding Brexit caused domestically-focused businesses to lag behind as the period progressed as UK economic activity stalled due to the effects of the Brexit uncertainty.

Performance review

Over the 12 months to 30 June 2019 the company's share price returned -15.4% and NAV returned -11.9% (both including dividends) compared to a total return of 0.6% for the FTSE All-Share Total Return Index. The FTSE 250 Index underperformed the more international FTSE 100 Index (-3.8% vs 1.6%) and this generated a significant headwind for the company's relative performance; the FTSE All-Share Index having a much higher weighting to the FTSE 100 Index than the company.

On a positive note, PureTech Health was the largest stock specific contributor. The biopharmaceutical company, which specialises in the nervous, immune, and gastrointestinal systems, performed strongly off the back of a number of positive developments, including the announcement of a collaboration with Swiss drug giant Roche and the successful FDA approval of its Gelesis weight management product and a number of other promising developments in its pipeline of innovative healthcare projects.

Another winner was credit reporting agency Experian, which outperformed the market after delivering strong numbers and an accelerating growth trend off the back of some exciting new products. Other positives included one of the company's overseas holdings, Ferrari. Shares of the Italian luxury car maker showed strong momentum with positive results and the launch of a new hybrid supercar underpinning a forecast 10% jump in its profits for 2019.

The largest stock specific detractor from the company's relative returns was Thomas Cook, with its stock price declining almost 90% over the 12 months. The holiday operator issued several profit warnings and announced that it would suspend its dividend, with last summer's heatwave, reduced demand for winter getaways and Brexit uncertainty all contributing to lower sales. We had hoped that the company would be able to realise significant value for its airline business and/or its Scandinavian operations following the receipt of multiple bids in May. This would have enabled the group to reduce its sizeable debt burden and allow shareholders to retain ownership of a tour operator business with significant scope for improved profitability through self-help and if market conditions improved. However, as market conditions for airlines and tour operators worsened through the summer, and the valuation multiples of the bidders themselves deteriorated, these bids were withdrawn or reduced in value and the amount of funding Thomas Cook needed to fund itself increased significantly. The company attempted a recapitalisation with Fosun (its largest shareholder) injecting a large amount of new capital and banks and bondholders converting debt into equity, but this was ultimately not deliverable and the company was placed into liquidation in September. Following the termination of the airline sale process in July, we reduced our position size significantly over August and September (from 5.6m shares to 2.1m), such that the company's exposure at the time of its liquidation was just 0.16% of NAV.

Another negative was Sirius Minerals. The fertilizer developer raised $425m of new equity in May as part of a larger funding package for the construction of its polyhalite mine in Yorkshire and this created some short- term pressure on the share price as the new equity issuance was digested. Further share price decline has followed since the end of our financial year resulting in a material reduction in value, with the company postponing the $500m bond that would have unlocked the final elements of the funding package. Sirius has almost £120m of cash on its balance sheet and is slowing down construction while it considers its strategic options. This will focus on reducing the overall cost of the project, rescheduling certain elements of the project to reduce the perceived risks and considering a variety of alternative financing solutions.

Other negatives included Dixons Carphone. The company suffered a cybersecurity breach in June 2018, and subsequently cut its dividend. It reported a loss for the year ending April 2019 due to slower sales of mobile phones with lengthy contracts and onerous leases. ITV also weakened as the broadcaster blamed Brexit-related uncertainty for a decline in its ad revenues.

Strategy

The portfolio 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 uninvestible 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 also 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 (Ferrari and YUM China are examples from the current portfolio).

I am aware of the general tendency for investors to keep holding a stock 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, but also chairmen and non-executive directors too.

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.

Outlook

To nobody's surprise, Boris Johnson emerged victorious from the Conservative Party leadership election. Brexit will of course dominate his agenda, but it isn't entirely clear how he can achieve a better deal with the EU than that already on the table, nor is it clear to what extent parliament has the mechanisms or political will to block the potential 'no deal' outcome that he has so consistently refused to rule out.

My view is that the best approach is to stay nimble when it comes to allocations within UK equities. Therefore, during April and May we reduced the exposure to domestic UK stocks, with the main focus of this reduction on the company's UK financial positions (particularly the domestic UK banks where we have cut weightings significantly) given the downward direction of bond yields. Patience is required as far as the UK is concerned, but we must not lose sight of the fact that such assets are now on extremely low valuations and any hint of progress or reduced uncertainty could lead to sharp share price rises. I was recently reminded of a similar set of circumstances in the early 1990s when global growth companies dramatically outperformed domestic names in the run up to Black Wednesday, but then this situation dramatically reversed once the domestic uncertainty had been removed.

In the meantime, we continue to focus on good stock- picking across the portfolio, whether that be large cap growth stories like Experian or less well-known holdings such as Puretech. We continue to refresh the portfolio with new ideas too, with Diageo, Compass, Prudential and Avast added in the course of this financial year and two other new positions initiated since then. The funds for these purchases have come partly from the reduction in our UK domestic weightings, but also the proceeds of several holdings that have been bid for or taken private over the year, notably ZPG, Inmarsat and Merlin Entertainments. Given the extremely cheap valuations of UK equities, it is perhaps little surprise that those with a longer-term investment horizon (notably private equity) are buying such assets and that M&A activity in the UK is so high. We regard ourselves as similarly patient long-term investors and that is why the current environment, challenging as it is on day-to-day basis, represents such an exciting investment opportunity.

Steve Davies

Jupiter Asset Management Limited

Investment Adviser

4 October 2019

Investment Portfolio as at 30 June 2019

† Unquoted

Cross holdings in other Investment Companies

As at 30 June 2019, 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 2019

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 2019. 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 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.

Investment objective and strategy

The company's investment objective, which is currently under review, 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 2019.

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 2019 the directors are proposing a single interim dividend of 8.5p per share. The distributable revenues for the period were £1,571,810, equivalent to 9.32p 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 £12 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 borrowings to its total assets (less cash), 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 2019 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

As noted in the chairman's statement, the board has been actively engaging with JAM and the company's brokers, Numis Securities, to identify alternative management arrangements that could better serve the interests of shareholders. These alternatives include the adoption of an alternative investment approach for the company from within the Jupiter group and a potential appointment from another fund management company. The outcome of these ongoing discussions will be announced in due course.

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 2019 the discount to premium range is -5.2% to +1.4% to NAV, with an average of -2.1% over the year.

In February 2014 the board decided to implement a discount policy under which it would use share buybacks and new issues of shares with the intention of ensuring that, in normal market conditions, the market price of the company's shares 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 19 November 2019.

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 2019 there were 12,855,606 ordinary shares held in Treasury. During the year, 2,279,421 ordinary shares representing 7.7% of the total ordinary shares in issue at 30 June 2019, were bought back.

The board has no current plans to change its policy on the reissue of treasury shares. Were such a change to be made an announcement will be made 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 JAM on a number of issues, all of which were 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 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. The board is currently undertaking a strategic review of its investment policy and processes.

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 buyback programme and in doing so is mindful of the liquidity in the company's shares.

Gearing risk

The company's gearing can impact the company's performance by accelerating the decline in value of the company's 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 investment adviser 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 last 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 buyback 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 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, 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 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 reviews the investment adviser's and the administrator's statements on its internal controls and procedures once a year.

Economic risk

The outcome of the UK's withdrawal from the European Union remains unclear, creating continued volatility in UK markets. 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.

Directors

As at 30 June 2019, 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 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.

Modern slavery

The company does not fall within the scope of the Modern Slavery Act 2015 as its turnover is less than £36million.

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 assessed the viability of the company over a rolling three-year period. As noted in the chairman's statement, the board is undertaking a strategic review of its management arrangements. These alternatives under consideration include the adoption of an alternative investment approach for the company from within the Jupiter group and a potential appointment from another fund management company. The outcome of these ongoing discussions will be announced in due course. As at the date of this report, it is not anticipated that any potential changes will have an impact on the company's longer term viability.

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 to meet its liabilities as they fall due over the next three years.

For and on behalf of the Board:

Tom H Bartlam

Chairman

4 October 2019

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; 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

4 October 2019

Statement of comprehensive income for the year ended 30 June 2019

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 2019

* 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 2019

*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 2019

Notes to the Accounts for the year ended 30 June 2019

1. Accounting policies

The accounts comprise the financial results of the company for the year to 30 June 2019. 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 4 October 2019. 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.

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.

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 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 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

The following are standards, amendments applicable to the company:

IFRS 9 Financial Instruments

In the current period the company has adopted IFRS 9 financial instruments which became effective for accounting periods commencing on or after 1 April 2018. IFRS 9 replaces IAS 39 financial instruments: recognition and measurement and introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is not applicable to items that have already been derecognised at 1 April 2018, the date of initial application.

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

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

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

The board has assessed the carrying value of trade and other receivables using the simplified approach as permitted under IFRS 9. Under this approach the board has assessed whether a loss allowance should be recognised during the year based on lifetime expected credit losses ("ECLs"). Under the simplified approach the board has used a provision matrix for calculating the expected losses as a practical expedient. This assessed the historical default rates and applied these rates to the carrying amount of the receivables to assess whether or not any impairment should be recognised. As a result of this the board concluded that no impairment was required. Comparative figures for the year ended 30 June 2018 have not been restated and are still accounted for in accordance with IAS 39 financial instruments: recognition and measurement.

IFRS 15 Revenue from Contracts with Customers

The company adopted IFRS 15 revenue from contracts with customers which became effective for accounting periods commencing on or after 1 April 2018. IFRS 15 replaces IAS 18 revenue and establishes a five step model to account for revenue arising from contracts with customers.

In addition, guidance on interest and dividend income have been moved from IAS 18 to IFRS 9 without significant changes to the requirements. Therefore, there was no impact of adopting IFRS 15 for the company.

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 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. (Loss)/earnings per ordinary share

The earnings per ordinary share figure is based on the net loss for the year of £7,829,000 (2018 net gain: £3,337,000) and on 18,198,496 (2018: 17,124,716) 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 £49,402,103 (2018: £65,192,000) and on 16,866,072 (2018: 19,145,493) 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 2018 to 30 June 2019 was £262,554 with £61,753 outstanding at period 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 2019.

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.

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 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 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 2019 and 30 June 2018 there were no contingent liabilities or capital commitments.

11. Post statement of financial position event

Since the year end an additional 753,692 ordinary shares were repurchased to be held in treasury for prices between 270.27p and 294.71p per share.

12. Post balance sheet events

The investment adviser's review makes reference to decline in market prices, following the financial year end, in Sirius Minerals and Thomas Cook, both of which were substantial holdings for the company during the year under review. As at 27 September 2019 the company incurred further cumulative unrealised losses on these investments of £2.5m since 30 June 2019. The chairman's statement describes a strategic review of the company's management arrangements which has been initiated following the financial year end, the outcome of which will be announced in due course.

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

4 October 2019