JUKG.L Regulatory News (JUKG)

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

Legal Entity Identifier: 549300QSBKGE8ZO08A97

Half Yearly Financial Report for the six months to 31 December 2019

Chairman's statement

I present the interim report for the Jupiter UK Growth Investment Trust PLC for the six months to 31 December 2019. The UK stock market rose over the review period, driven by greater clarity regarding Brexit and international developments, including central bank cuts in interest rates and optimism over a "phase one" trade deal between the US and China.

These positive trends continued into early 2020, but have since been completely overshadowed by the dramatic impact of the unfolding Covid-19 coronavirus pandemic, which has eviscerated the stock market and produced an almost unprecedentedly steep and sudden collapse in investor confidence on a global scale. 

In little over three weeks, the FTSE All-Share index has fallen by 16.1% and the pound has lost 6.3% of its value against the US Dollar, while bond yields have fallen to near record lows once more. As at 24 March 2020 the Trust's share price had fallen 41.7% since the beginning of the year. These share price and bond yield declines have been echoed in every major market around the world. Despite a succession of announcements of impressively large and increasingly radical counter-measures by central banks and governments designed to calm the markets, at the time of writing there has been no let-up in the global market collapse.  

The scale and speed of the downturn in markets has inevitably led to fears that we may be heading into a global recession, a renewed liquidity crisis for many financial institutions and the possible bankruptcy of thousands of companies. In normal times, financial markets set prices on the basis of future expectations and until there is evidence that the spread of the virus is being successfully contained, so that economic activity can revive after the sudden shock of the pandemic, it is clearly impossible to make any firm or positive statements about the outlook.

The evidence from past crises of this kind is that financial markets do always recover over time, once there is greater visibility of an end to the driving forces behind the disruption. In the case of the coronavirus, that will come when it starts to become apparent that the disease is on the way to being contained and economic activity has resumed. Even though the authorities' understanding of the virus is building day by day with experience, that realisation may take some time to crystallise. Further out there is the hope that an effective vaccine can be developed and produced in sufficient quantities and sufficiently rapidly to prevent a second wave of infections.  

How far and how quickly the markets recover at that point will depend not only on the path of economic data but on the prices at which assets are then selling, the perceived effectiveness of the tsunami of counter-measures now in place (or being planned), and - not least - on investors' appetite for risk. In the meantime, we can only aspire to stay calm and monitor closely the extent of the viral and financial contagion.

That this pandemic will also create investment opportunities in time is not in doubt. Any eventual rebound in equity markets is likely to favour funds that have a high conviction growth-biased strategy similar to the one that Jupiter UK Growth has adopted in recent years, albeit with poor delivery. The challenge for our Trust is to take advantage of these opportunities under our new manager. 

Investment performance

Along with global equity markets, the UK stock market rose over the second half of 2019. Larger companies, many of which have sizeable overseas earnings, were supported by a weak pound as fears of a no-deal Brexit weighed on the currency for much of the period. By late July, the FTSE 100 Index had reached a one year high, but fears of a global recession caused a sharp sell-off in August. UK equities later recovered, with the FTSE 100 re-testing its July highs in late December.

The FTSE 250 Index of more domestically-focused mid-sized companies performed even better, closing the year at a record high. In October, domestic stocks surged on news that the UK had secured an amended withdrawal agreement with the EU. The Conservative Party's decisive general election victory in December further boosted sentiment towards domestically focused UK equities, although a sharp rally in the British pound weighed on the value of multinational companies' overseas earnings.

The combination of these factors meant that the company's investments performed substantially better in the second half of the period than in the first. Unfortunately, in spite of the improving market environment, the performance of the company was adversely affected by two holdings in particular. One was Thomas Cook which collapsed into receivership during the period. The second was Sirius Minerals, which was unable to secure funding for the latest phase of its mining project in North Yorkshire, and was subsequently rescued by Anglo-American in early 2020 at a price of 5.5p per share. In the six months to 31 December 2019 the holding in Sirius Minerals was written down by £2.1m.

Despite these reverses, during the period the share price and NAV per share increased by 11.7% and 7.8% respectively (both including dividends) compared with a total return of 5.5% for the FTSE All-Share index.

Dividend

An interim dividend of 8.5p per share was paid on 22 November 2019 to shareholders shown on the register of shareholders on 18 October 2019. The board has in the past stated its ambition to maintain the dividend at the level paid in the preceding financial year and, if justified by performance, to grow its dividend over time. With regard to the current year, in view of the uncertainty regarding dividend receipts from some of our investee companies, we will keep our dividend under review while noting that we have surplus revenue reserves which can be used to cover some dividend payments.

Gearing

As at 31 December 2019, the company's net gearing level (being the amount of drawn down bank debt, less cash held on the balance sheet pending investment on that date, as a proportion of the company's total assets) was 8%. The company's investment manager would normally expect to increase gearing at times of low valuations while decreasing gearing in stronger markets.

Change of investment manager 

On 18th February the board announced that it had reached an agreement with Jupiter for Richard Buxton to assume lead fund management responsibility for the company. Richard will be supported by Errol Francis and Ed Meier who have worked with Richard for many years.

This follows the announcement by the board on 4 October 2019 that the company had decided to review its investment strategy following a sustained period of poor performance. This was a comprehensive exercise which considered various alternatives, including the adoption of an alternative manager from within Jupiter, the appointment of another fund management company as investment manager and the liquidation of the company together with a rollover into another listed investment company.

The conclusion to appoint Richard Buxton meets the board's strategic objectives and follows the announcement by Jupiter on 17 February 2020 regarding its proposed acquisition of Merian Global Investors Limited ("Merian"). Richard will assume lead fund management responsibility following approval of the transaction by Jupiter's shareholders and regulators which is expected to take place before the end of April. If the acquisition is not approved we will write to shareholders making recommendations as to the future management of the trust.

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

Richard has worked with Errol and Ed for over 14 years. In respect of their UK Alpha strategy which will be adopted by the company, the team utilises a high-conviction approach typically holding 30-40 stocks, combining fundamental research with a patient, long-term time horizon. The team principally invests in UK large cap companies but also selectively takes mid-cap exposures. Following this approach, the team has a strong long-term performance record with 10 year cumulative total returns to 31st December 2019 of 145.4%, which compares with the FTSE All-Share Index return of 118.3%.

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

As part of these new arrangements, the board has agreed with Jupiter that the company will not be charged a base management fee for the period from 1 January 2020 to 31 December 2020. Based on the current net asset value this is an estimated saving of c. £135,000 over that period.

The company will continue its stated policy of using 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.

The future

In these turbulent times, when the outlook remains so uncertain, there is only limited comfort to be taken from statements about future prospects. The board believes that Richard Buxton, whom we decided to appoint as our new investment manager, and who has managed money through both the two worst bear markets of the last 30 years, has the necessary experience and judgement to achieve significant improvement in the Trust's performance, consistent with his long-term performance record. 

Until his expected arrival at the end of April we will be monitoring the portfolio closely and have put in place interim arrangements with Jupiter intended to enable us to take advantage of opportunities that arise as a result of any dramatic change in current market conditions. 

The board and the investment manager remain committed to growing the company over time, recognising that the net assets, particularly after the recent dramatic market fall which has reduced our market capitalisation to £28m at 24 March 2020, are now well below the minimum size preferred for prospective investment by many institutional and wealth management investors. We have already raised this serious issue with Richard Buxton and will work with him and his colleagues to address it once the new arrangements are in place.

While we have made our decision about the future management of the Trust, we are also conscious that these are exceptional times in the financial markets. Our intention therefore is to keep our management arrangements under review over the coming months while the economic and market backdrop evolves and to remain cognisant of our reduced market capitalisation. If circumstances demand a change of course, we will not hesitate to make that change if we judge that to be in the best interests of shareholders as a whole.

Tom Bartlam

Chairman

30 March 2020

Fifteen year history to 31 December 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 for the six months to 31 December 2019

Market background

The UK equity market rose over the six month period. While international developments helped to support the advance to 31 December 2019 - central banks reduced interest rates and there was growing optimism over a "phase one" trade deal between the US and China - domestic policies increasingly dominated investor sentiment. New Prime Minister Boris Johnson's "do or die" approach to Brexit led to fears that the UK would crash out of the European Union ('EU') without a deal on 31 October, causing global investors initially to shun both the UK equity market and the British pound. However, with the Brexit deadline only days away, UK equities were boosted when Boris Johnson unexpectedly secured an amended agreement with the EU. Unable to get House of Commons' backing for the deal, the prime minister asked the EU for a further extension to Article 50. The parliamentary impasse was only resolved in December when a general election gave the Conservative Party a very sizeable majority that exceeded most commentators' expectations. Parliament subsequently passed into law that the UK will leave the EU on 31 January 2020.

After trading in a relatively narrow range for much of the period, UK stocks surged on the election result. Sterling also rose sharply. Cheap, domestically-focused, stocks such as banks and housebuilders rallied the most, significantly outperforming more highly-valued global stocks as the strength of Sterling weighed on the overseas earnings of larger, multinational companies. Utility stocks, and companies in other industries that had been under threat of renationalisation, also rebounded.

Performance review

Over the six months to 31 December 2019, the company's share price returned 11.7% and NAV returned 7.8% (both including dividends) compared to a total return of 5.5% for the FTSE All-Share Index. The FTSE 250 Index, which tends to be more domestically-focused, outperformed the more multinational FTSE 100 Index by a substantial margin (14.1% vs 3.7%) as UK domestic stocks bounced after the revamped deal with the EU was announced in October, and again, after the general election result. Sterling also strengthened against the US Dollar during the period, boosting domestic and importing companies in relation to international/exporters. These factors were a significant boost for the company's relative performance as the company has a significant overweighting towards domestic names.

On a stock level, the largest individual contributor to relative returns was PureTech Health. The biotech investment platform benefited from the surging share price of a listed subsidiary, Karuna Therapeutics, which announced positive drug testing results for schizophrenia medication KarXT.

Elsewhere IAG - owner of airline brands British Airways and Iberia - strengthened, as shares recovered from the lowest valuation that IAG or its predecessor British Airways had seen in the last 30 years. IAG continued to generate strong cashflows despite a disruptive summer and some upward pressure on its fuel costs. In November, IAG said it had agreed to buy Spanish airline Air Europa for €1bn as it seeks to open up the South American transatlantic market and turn Madrid into Europe's next hub airport. December brought further good news when British Airways pilots backed a revised pay offer, ending the threat of further strikes.

Other winners during the period included WH Smith which announced an acquisition to expand its travel retail operations in North America and reported continued strong trading in its UK travel business. Meanwhile, ITV was a beneficiary of positive advertising revenue growth following the success of TV shows such as Love Island and its coverage of the Rugby World Cup. ITV has also launched a new streaming service, Britbox, in conjunction with the BBC and Channel 4 which opens up an exciting new revenue stream.

On the negative side, Sirius Minerals was the largest stock specific detractor from the company's relative returns. The fertilizer developer is developing a polyhalite mine in Yorkshire, but announced it was not able to proceed with an anticipated $500m high-yield bond offering. The bond was needed to unlock a $2.5bn credit facility from JP Morgan that would fully fund the project through to completion. Sirius decided to slow down certain elements of the construction project to give itself time to explore other options. In January 2020, Sirius received and recommended a takeover bid from Anglo-American, but the uncertainty meant that it was a significant drag on the company's relative returns during the period under review. The company has since accepted a cash offer of 5.5 pence per share.

Thomas Cook was another notable negative. The holiday operator finally collapsed into liquidation in September after the failure of various rescue attempts and recapitalisations. We engaged with the senior management of Thomas Cook on numerous occasions to express concerns about the issues the company was facing and to explore possible solutions to restore some value to the share price, most notably the potential sale of the airline. Those discussions did not produce the desired outcome, causing us to reduce the company's holding significantly during the third quarter of 2019, to what was a very modest position (0.15%) when the shares were finally suspended. The liquidation process, which might take years to complete, is ongoing with no recent updates from liquidators at the time of writing. We do not expect any returns from this stock and it is therefore valued at nil.

Outlook

The UK entered 2020 on a more positive footing following the resolution of the uncertainty surrounding Brexit and the strength of the global economy. However, any optimism about the outlook was demolished by the emergence and spread of the Covid-19 virus. What started out as a local issue in China was declared a pandemic by the World Health Organisation on 11th March with rapidly growing infection rates in multiple countries. In order to contain the spread of the virus, governments around the world have implemented policies designed to dramatically restrict the movement of citizens which has led to a collapse in economic activity. The UK, along with all other developed countries, will almost certainly go into a recession later this year. The UK government's response to the economic situation has been unprecedented in modern times, offering grants to companies to continue to pay the wages of employees who have been furloughed, deferring VAT payments by all companies for one quarter and providing business rates holidays for the worst affected sectors. The aggregate value of these measures is £330bn. The Government has also provided a £30bn fiscal stimulus package while the Bank of England has reduced interest rates to an all-time low of 0.1%, prompting a fall in Sterling to its lowest level against the US Dollar since 1985.

The UK equity market, like all other major equity markets, has fallen by more than 20% over the last few weeks and we are therefore, technically, in a bear market. As at 24 March 2020, the FTSE All-Share Index had fallen by 28.5% since the start of the year while the more domestically-facing FTSE 250 Index had fallen by 34.9%. The NAV per share of the Company had fallen by 41.0% over the same period, reflecting the domestic orientation of the portfolio.

In periods such as this, the investment focus should be on calm evaluation of the fundamental strengths of each company in the portfolio. We have engaged via telephone and video-conference with the management teams of almost all our holdings to assess balance sheet strength and to understand contingency plans to address the consequences of the unfolding crisis. We have been stress-testing our holdings to ensure they could get through an extended period with no revenues. We are gradually adapting these stress tests as we get greater clarity on government measures and on companies' own actions including deferring rent payments, postponing dividends where necessary and tapping additional sources of liquidity. The situation continues to evolve rapidly and many share prices remain extremely volatile. We have reduced the gearing of the Trust and will continue to adjust position sizes of individual holdings as necessary to reflect both market moves and our risk assessment of each company.

Steve Davies

Fund Manager

Jupiter Asset Management Limited

Investment adviser

30 March 2020

Cross holdings in other investment companies

As at 31 December 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.

Directors' Responsibility Statement

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 2019 and the notes to the Half Yearly Financial Report 2019.

Principal risks and uncertainties

The principal risks to the company are interest rates, investment policy and process, investment strategy and share price movement, liquidity risk, gearing risk, loan facility default 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 19 and 20 of the company's published report and accounts for the year to 30 June 2019.

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 2019 comprises the chairman's statement, investment advisers' 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

30 March 2020

Statement of comprehensive income for the half year to 31 December 2019 (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.

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

Statement of changes in net equity for the six months to 31 December 2019 (unaudited)

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

Notes to the financial statements for the six months to 31 December 2019

1. Accounting policies

The accounts comprise the unaudited financial results of the company for the six months from 1 July 2019 to 31 December 2019, 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 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 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.

Presentation of statement of comprehensive income

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the statement of comprehensive income between items of a revenue and capital nature has been presented alongside the statement. In accordance with the company's articles of association, net capital returns may not be distributed by way of dividend.

An analysis of retained earnings broken down into revenue (distributable) items and capital (non -distributable) items is given in the notes to the Half Yearly Financial Report 2019. 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) 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.

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.

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 in the statement of comprehensive income.

3. Earnings per Ordinary Share

The earnings per ordinary share figure is based on the net profit for the period of £3,497,000 (Dec 2018: Net loss £12,581,000) and on 16,150,101 (Dec 2018: 18,725,313) 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/(Losses)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 2019 and 31 December 2018 has not been audited

The information for the year ended 30 June 2019 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 30 June 2019 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.

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 £48,498,000 (30 June 2019: £49,402,000) and on 15,780,810 (30 June 2019: 16,866,072) ordinary shares, being the number of ordinary shares in issue at the period end, excluding ordinary shares held in treasury.

9. Analysis of changes in net debt

10. 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.

Further details of the company's management of these risks can be found in note 14 of the company's annual report and accounts for the year ended 30 June 2019.

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

11. 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:

The closing balance represents Ludgate 181 (Jersey) £189,000 (30 June 2019: £190,000)

Thomas Cook Group went into liquidation on 23 September 2019. The book cost of £1,287,000 was written down to zero on 24 September 2019.

12. Related parties

Jupiter Unit Trust Managers Limited ('JUTM'), the Alternative Investment Fund Manager, is a company within the same group as Jupiter Asset Management Limited ('JAM') the investment adviser. JUTM is contracted to provide investment management services to the company, subject to termination by not less than twelve months' notice by either party.

JUTM receives an investment management fee as set out below. The management fee payable to JUTM in respect of the period 1 July 2019 to 31 December 2019 was £120,297 with £61,369 outstanding at period end.

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

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

JUTM is also entitled to an investment performance fee which is based on the out-performance of the net asset value per share over the total return on the benchmark index (being the total return on the FTSE All Share Index) in each calculation period. No performance fee was payable to JUTM in respect of the year ended 30 June 2019. There is no accrual in the accounts in respect of the performance fee at the interim period end. A performance fee will only crystallize if an amount is calculated as due at the end of a calculation period as described below.

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

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

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

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

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

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

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

There are no transactions with the directors other than the remuneration paid to them as disclosed in the directors' remuneration report on page 28 and the beneficial interests of the directors in the ordinary shares of the company as disclosed on page 29 of the 2019 annual report and accounts.

Availability of Half Yearly Financial Report

The Half Yearly Financial Report will shortly be available for download from the Company's website www.jupiteram.com/JUKG

By order of the Board

Jupiter Asset Management Limited, Company Secretary

The Zig Zag Building

70 Victoria Street

London SW1E 6SQ

30 March 2020

For further information, please contact:

Magnus Spence

Head of Investment Trusts & Alternatives

Jupiter Asset Management Limited

investmentcompanies@jupiteram.com

020 3817 1000

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