JUKG.L Regulatory News (JUKG)

JUPITER UK GROWTH INVESTMENT TRUST PLC

Unaudited Half Yearly Financial Report for the six months to 31 December 2017

Ten year history to 31 December 2017

* Adjusted for five for one stock split in 2013.

Chairman's statement

It is with pleasure that I present the board's interim report for Jupiter UK Growth Investment Trust PLC for the six months to 31 December 2017. As at 31 December the company had investments of £73.5m and net assets attributable to shareholders of £66.7m.

Investment performance

After a strong start to 2017, our performance in the six months to 31 December, the period covered by this report, was disappointing. In the period our share price and net asset value per share (including dividends) returned -1.7 per cent and -0.7 per cent respectively, compared with a total return of 7.2 per cent for the FTSE All-Share Index.

As at 28 February 2018 the net asset value per share was 317.60p, a 2.21 per cent decrease since the end of December 2017, and the middle market price per share on the London Stock Exchange was 309p, representing a modest discount to its net asset value.

As shareholders will be aware, Steve Davies, our investment adviser, invests primarily in UK companies, many of whose fortunes are particularly dependent on the UK domestic economy. Such UK domestic companies are currently one of the least-loved developed market investments, due in no small part to the uncertainty about the UK's future relationship with the European Union. Some of our more UK consumer-dependent investments have also found trading to be challenging. Both these factors have affected our performance during the period.

A more detailed analysis of the company's recent performance is included in our investment adviser's report below and I will not seek to cover the same ground here.

Rollover of Jupiter Dividend & Growth Trust PLC

On 30 November 2017 we welcomed a large number of new shareholders who acquired shares in the company pursuant to 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 £24.6m in new shares at 315p per share increased the company's net assets to £66.7m (as at 31 December), representing an important step towards our stated objective of growing the company's asset base to £150m and beyond.

Gearing

As at 31 December 2017 the company's net gearing level (being the amount of drawn down bank debt less the cash held on the balance sheet) was 10 per cent. The investment adviser intends to increase gearing at times of perceived low valuations, while reducing it as markets recover. This approach has added significant value over the course of the company's longer term history and remains an important tactical tool to improve returns.

Dividends

As announced in 2016 the board's policy now is to pay a single annual dividend shortly after the company's Annual General Meeting each year. The board's ambition remains to maintain the dividend at the same level as last year and to grow it over the longer term.

Discount management

The board implements a discount and premium policy under which it uses share buybacks and new

 issues of shares with the intention of ensuring that, in normal market conditions, the market price of the company's shares will track their underlying net asset value. The board believes that this commitment to the active removal of discount and premium risk will improve liquidity for both buyers and sellers of the company's shares. During the period under review the company has repurchased a total of 824,750 shares. As a result the company's shares have continued to trade at close to net asset value. We are one of only two trusts in the UK All Companies sector that operates a zero discount policy, a useful form of protection for shareholders if the recent spike in equity market volatility were to persist.

The board

I have pleasure in welcoming Keith Bray to the board. Keith is a chartered public finance accountant and management consultant. He was director of financial services at the City and County of Cardiff and prior to that was director of financial services at the South Glamorgan County Council. He was also formerly a director of Jupiter Dividend & Growth Trust PLC.

PRIIPS 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 the applicable EU regulations, the board does not believe that these projections are an appropriate or helpful way to assess the company's future prospects. Accordingly, the board urges shareholders also to consider the more complete information set out in these interim and the company's 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.

Outlook

While the UK domestic market has been out of favour with investors recently, we believe that in due course this sentiment will change. The disparity in returns between UK domestic stocks and international equities has rarely been as high as it is today. As the Brexit negotiations continue, if there is positive progress towards a sensible transition deal and a reasonable final settlement, then there is clearly room for investors to take a more positive view of the UK as an investment destination. Such an outcome would be positive for much of your company's portfolio of investments, which include UK growth and recovery stocks, and could produce a significant uplift in the value of your shares. Additionally your company's recent increased investment in international stocks brings considerable upside potential.

Tom Bartlam

Chairman

29 March 2018

Investment adviser's review for the six months to 31 December 2017

Market background

There were two thematic headwinds to performance as the period unfolded: firstly, small & midcap stocks outperformed the FTSE 100 Index and, for liquidity reasons, I always look to devote at least half of the portfolio to large cap stocks. On top of this, stocks with strong earnings momentum tended to outperform (often with scant regard to valuation), while value or recovery stories struggled to gain much traction with investors in 2017. The portfolio currently holds around half of its assets in recovery stocks and I am also very disciplined when it comes to the valuations associated with our growth positions.

Performance review

Over the six months to 31 December 2017 the company's share price returned -1.7% and NAV returned -0.7% (both including dividends) compared to a total return of 7.2% for the FTSE All-Share Index.

Notable positive contributors to returns came from Taylor Wimpey and Thomas Cook. Thomas Cook benefited from good demand over the summer, with bookings up significantly and strong demand across all major markets - it continues to take substantial costs out of its businesses as well as enhancing its customer offer. Taylor Wimpey had a very strong start to 2017 and reaffirmed its commitment to its substantial dividend, with potential to increase further over the next few years. The company continued to report strong trading throughout the year. WH Smith also continued to perform well, as all three of the companies mentioned here proved that it was possible to deliver strong returns from UK domestics despite the pervasively negative sentiment towards the UK.

Two of the most significant detractors to returns during the year were Dixons Carphone and Merlin Entertainments. Merlin's share price suffered from the terror attacks in London in 2017, which deterred tourists from visiting. The CEO warned that "whilst the outlook for 2018 is difficult to predict, it's likely these recent trends will continue". 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. The issue related to the Carphone Warehouse side of the business - the electrical division (Currys) has been growing like-for-like sales and market share. Weakness in the phone division were 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. I have been working closely with management to understand the issues and restore value.

Having a zero weighting in oil companies detracted from returns in the period as the oil price rose above $65, with OPEC production particularly disciplined in 2017. However, US shale production continues to grow (and will most likely accelerate in 2018) and I believe the price will come down to my $40-$60 range. Holding no large cap miners was also a headwind to performance as it was the best performing sector on the back of a resurgence in Chinese demand, albeit there are already some incipient signs that growth in 2018 may be more muted.

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 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 (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% in 2018.

Sometimes the purpose is to ensure that companies doing well financially do not rest on their laurels or neglect their customers - a good example would be IAG where the business is delivering excellent cash flow growth but there have been a number of recent customer service issues at their British Airways subsidiary. Conversely, where things have not gone well, I may question whether strategic or management change is required, as was the case in my conversations with Dixons Carphone and GKN in the second half of 2017.

Outlook

Investor sentiment towards the UK is now as bad as it was during the Financial Crisis, there are a few catalysts that I think would make the market take a more positive view on UK domestics. With the pound now strengthening, inflationary pressures should subside noticeably in 2018. On the political front, a transitional agreement on Brexit has been secured and this should significantly reduce the chances of the UK economy falling off a cliff edge in 2019. Bond yields are also rising around the world, which should bode well for the Trust's substantial weighting to Financials. We hold no exposure to Staples and Utilities which tend to underperform as yields rise.

I am not blind to the political risk that could send the pound back down from here, so I am balancing our UK recovery plays with exciting (and reasonably valued) international growth stories such as Experian, Inchcape and Apple as well as the three newest additions to the portfolio - Ferrari, Formula One and YUM China.

Finally, I am delighted that James Moir has joined the Jupiter UK Growth team in December as an analyst. James most recently worked at UK Financial Investments where he was an Executive Director for Banking and Capital Markets. In his short time here, James has already made a positive impact, bringing his analytical skills to bear by providing valuable insights into both existing portfolio holdings and a number of potential new ideas.

The last 6 months have been disappointing, particularly after such a strong performance in the early months of 2017. I am very excited about prospects both in the short and medium terms, particularly in a broader market context where it feels like returns across a variety of asset classes are likely to be muted at best in 2018. Already we have seen a bid for GKN in the early weeks of January (the shares are up c. 30% so far in 2018) and I would expect further M&A activity in the months ahead.

Steve Davies

Fund Manager

Jupiter Asset Management Limited

Investment Adviser

29 March 2018

Cross holdings in other investment companies

As at 31 December 2017, 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-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.

Interim Management Report

Related party transactions

During the first six months of the current financial year no transactions with related parties have taken place which have materially affected the financial position or performance of the company during the period.

Details of related party transactions are contained in the Annual Report & Accounts 2017 and in Note 11 to this report.

Principal risks and uncertainties

The principal risks to the company are investment policy and process, investment strategy and share price movement, interest rates, liquidity risk, gearing risk, the discount to net asset value, regulatory risk, credit and counterparty risk, loss of key personnel, operational risk and financial risk. A detailed explanation of the risks and uncertainties facing the company can be found on pages 13 and 14 of the company's published report and accounts for the year to 30 June 2017.

Going concern

The financial statements have been prepared on a going concern basis. The directors consider that this is the appropriate basis as they have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. In considering this, the directors took into account the company's investment objective, risk management policies and capital management policies, the diversified portfolio of readily realisable securities which can be used to meet short-term funding commitments and the ability of the company to meet all of its liabilities and ongoing expenses. The directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Directors' responsibility statement

We the directors of Jupiter UK Growth Investment Trust PLC confirm to the best of our knowledge:

a) The condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and profit and loss of the company;

b) the half yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

c) the directors' statement of principal risks and uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

d) the half yearly report includes details on related party transactions.

The half yearly financial report for the six months to 31 December 2017 comprises the chairman's statement, managers' review, the directors' responsibility statement and a condensed set of financial statements, and has not been audited or reviewed by the auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

Tom Bartlam

Chairman

29 March 2018

Statement of comprehensive income for the six months to 31 December 2017 (unaudited)

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

The financial information does not constitute 'accounts' as defined in section 434 of the Companies Act 2006.

No operations were acquired or discontinued during the period.

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

Statement of changes in net equity for the six months to 31 December 2017 (unaudited)

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

Notes to the financial statements for the six months to 31 December 2017

1. Accounting policies

The accounts comprise the unaudited financial results of the company for the six months from 1 July 2017 to 31 December 2017, 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).

The accounts are presented in pounds sterling, as this is the functional currency of the company. All values are rounded to the nearest thousand pounds (£'000) except where indicated.

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.

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

Revenue recognition

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

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

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.

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 Note 7. In arriving at this breakdown, investment management fees and interest are charged 25% to the revenue account and 75% to capital reserves. That part of any investment performance fee which is deemed by the directors to relate to the capital outperformance of the company's investments will be charged to capital and that part relating to revenue outperformance will be charged to revenue. All other operational costs including administration expenses (but with the exception of any investment performance fees which are charged to capital) were charged to revenue.

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.

2. Significant accounting judgements, estimates and assumptions

The preparation of the company's financial statements on occasion requires management to make judgements, estimates and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the current and future periods, depending on circumstance.

Management do not believe that any accounting judgements have been applied to this set of financial statements, other than the allocations between capital and revenue in the statement of comprehensive income.

3. Earnings per Ordinary Share

The earnings per Ordinary share figure is based on the net return for the period of £399,000 (Dec 2016: £6,843,000) and on 14,571,867 (Dec 2016: 14,661,370) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.

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

4. Gains on investments

5. Transaction costs

The following transaction costs were incurred during the period:

6. Comparative information

The financial information contained in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the six months to 31 December 2017 and 31 December 2016 has not been audited.

The information for the year ended 30 June 2017 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 30 June 2017 have been filed with the Register of Companies. The report of the auditors on those accounts contained no qualification or statement under section 498(2) of the Companies Act 2006.

7. Retained earnings

The table below shows the movement in the retained earnings analysed between revenue and capital items.

*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 1 December 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.

8. Net asset value per Ordinary share

The net asset value per Ordinary share is based on the net assets attributable to the Ordinary shareholders of £66,699,000 (30 June 2017: £45,224,000) and on 20,537,239 (30 June 2017: 13,540,276) Ordinary shares, being the number of Ordinary shares in issue at the period end, excluding Ordinary shares held in Treasury

9. Principal risk profile

The principal risks the company faces in its portfolio management activities are:

· Foreign currency risk;

· Market price risk i.e. movements in the value of investments holdings caused by factors other than interest rate or currency movement;

· Interest rate risk;

· Fair value hierarchy; and

· Credit and counterparty risk.

Further details of the company's management of these risks can be found in note 13 of the company's annual report and accounts for the year ended 30 June 2017.

There have been no changes to the management of or the exposure to these risks since that date.

10. Fair value hierarchy

IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:

Level 1 reflects financial instruments quoted in an active market.

Level 2 reflects financial instruments whose fair value is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables includes only data from observable markets.

Level 3 reflects financial instruments whose fair value is determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable market transactions in the same instrument and not based on available observable market data.

The financial assets measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows:

Equity investments

A reconciliation of fair value measurements in level 3 is set out in the following table:

* On 1 September 2016 the formal liquidation of Pitchwell Ltd was completed by the appointed liquidator EY.

11. Related parties

Jupiter Unit Trust Managers Limited ('JUTM'), the Alternative Investment Fund Manager, is a company within the same group as Jupiter Asset Management Limited, the investment adviser. JUTM receives an investment management fee as set out below.

JUTM is contracted to provide investment management services to the company, subject to termination by not less than twelve months' notice by either party.

The base 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.

The management fee payable to JUTM in respect of the period 1 July 2017 to 31 December 2017 was £139,224 with £83,454 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.

Any performance fee payable 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) 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 2017), increased or decreased by the total return of the Benchmark Index increases or decreases during the calculation period plus 2%; and

3) the net asset value per Ordinary share on Friday, 30 June 2017 (being 333.99p).

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. No performance fee was payable to JUTM in respect of the previous accounting period ended 30 June 2017.

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. At 31 December 2017 there were no such investments.

The foregoing represents the full text of the Half Yearly Report for the six months to 31 December 2017, which will be available for download from the Company's website. (www.jupiteram.com/JUKG)

The Half Yearly report for the 6 months ended 31 December 2017 has not been reviewed by the Company's auditors.

By order of the Board

Jupiter Asset Management Limited, Secretary

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

investmentcompanies@jupiteram.com

020 3817 1000

29 March 2018