JUS.L Regulatory News (JUS)

Jupiter US Smaller Companies plc (the 'Company')

Legal Entity Identifier: 549300HKKL9K1NY4TW55

Annual Financial Report for the year ended 30 June 2019

Financial Highlights for the year ended 30 June 2019

* Russell 2000 Index (sterling adjusted).

Chairman's Statement

Dear fellow shareholder

Although it was a difficult year for the US smaller companies market, I am pleased to report that the Net Asset Value ("NAV") per share of your Company increased by 4.5% in the twelve months to 30 June 2019. This compares to a fall of 1.1% for the Company's benchmark, the sterling adjusted Russell 2000 Index. Since Robert Siddles was appointed as fund manager on 1 January 2001, the NAV per share has risen 407% compared to 280% for the benchmark and since the Company's incorporation on 11 March 1993, the NAV per share has increased 1153% compared with a gain of 781% for the benchmark.

The Company takes a conservative approach to investment that can provide superior performance in weaker markets and this happened in the financial year under review. The fund manager continued to apply the improvements to portfolio construction required by the Board that were implemented in the previous year.

Market review

During the year under review, in dollar terms, the Russell 2000 Index of smaller companies lost 4.7% lagging the Standard & Poor's Composite Index which rose 8.2%. The more technology-oriented NASDAQ Composite Index also increased, gaining 6.6%.

Sterling investors gained modestly from the strength of the US dollar, which increased by 3.7% in the year. The Company's investments are denominated in dollars but are valued for reporting purposes in sterling.

The US smaller companies sector advanced, reaching new highs but then peaked at the end of August. This was followed by a 27% fall in the following months, reaching a low on Christmas Eve. The causes of this severe correction seemed to be concerns about economic growth, trade tensions with China and rising interest rates. Wage inflation began to accelerate in 2018, reaching a rate of over 3%, a level that would normally cause concern at the Federal Reserve (the 'Fed'). Slower US economic growth was confirmed by the usually reliable ISM Manufacturing indicator (purchasing manager's index) which began to decline but by late December the market began to advance again. President Trump publicly criticised Fed policy, which was followed by dovish comments from the Fed and there were some signs of progress in trade talks. All this reignited a stock market rally and the Russell 2000 Index rose 24% from its low to 30 June 2019, erasing most of its earlier losses.

During the second half of the year, the market was helped by economic trends which were interpreted as meaning that the Fed would not raise rates. As a result, the manufacturing sector slowed further and wage inflation stopped rising.

The best performing sectors were utilities (helped by a rallying bond market), technology and producer durables. The laggards were energy, consumer staples, and materials and processing. Value stocks in general continued to suffer in what has now been a 13-year trend of lagging the market (your fund manager uses a value style of investing).

Discount and premium management

The Board remains committed to its stated policy of using share buybacks with the intention of ensuring that, in normal market conditions, the market price of its shares reflects a discount of less than 10% of Net Asset Value per share.

The share-buyback program contributed 0.4% to performance in the year under review.

During the year, the Company bought back 790,018 shares. At 30 June 2019 there were 4,210,612 shares held in Treasury.

The price of the shares rose by 1.5% to 1,045p over the year. The discount to NAV per share was 9.3% at the end of the period compared to 6.7% on 30 June 2018.

Gearing

During the second half of the period the Company increased its loan facility with Scotia Bank from $10m to $15m to facilitate management of the portfolio and allowing the manager to take advantage of new opportunities as they arise. The maximum potential gearing is set at 20% of the Company's assets. As at 30 June 2019 the Company had net borrowings of 1.2% of assets and at 30 September 2019 it was 4.6%.

Board composition

We are aware of recent corporate governance changes that will automatically treat directors who have served more than nine years as no longer independent; and we will keep these developments under review. In my view one needs to balance the recommendation to refresh the composition of the board from time to time with the advantage of retaining directors with relevant and sometimes long- standing experience, particularly in a specialist area such as US Smaller Companies.

All the current directors will offer themselves for re-election at the Annual General Meeting ('AGM') with the exception of Mr Bachop who is suffering from ill health. The Board would like to thank Mr Bachop for his valued contribution to the Company over the last 20 years.

Review of external auditors

In accordance with current legislation the Company has to change its present auditors by 2020. To meet the timetable, on behalf of the Board, the Audit Committee invited tenders from prospective audit firms. Following this process the Board will propose to shareholders at the forthcoming AGM that haysmacintyre LLP are appointed as auditors. The firm is London-based with 33 partners and received the 2017 'Audit Team of the Year' award at the British Accountancy Awards. Investment companies are a sector in which the firm specialises and is familiar with Jupiter's processes.

Annual General Meeting

The AGM will be held at 11.30 a.m. on Tuesday, 26 November 2019 and I hope that you will attend. The meeting will be held in the offices of Jupiter Asset Management Limited at The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ. In addition to the formal business, the Investment Adviser will provide a short presentation to shareholders.

Outlook

It is difficult to be certain of the market outlook at this stage of such a long economic cycle: slowing economic growth is an overriding concern. Against this, the bond market rally helps to support stock market valuations, investor sentiment is not overly-bullish and there are prospects for interest rate cuts.

The US smaller company sector is an attractive one and interesting for long term investors. Generally it is under-researched and offers areas of undiscovered value. Shareholders should benefit from the Company's conservative investment approach that focuses on buying good companies when their shares are out of favour.

Gordon Grender

Chairman

8 October 2019

Investment Adviser's Review

The market was more difficult this year than last. In the first half of the year there was a large correction and in the second value stocks underperformed. However, the sell-off provided several new investment opportunities for the Company: the investment approach used by the manager seeks to exploit the market when it overreacts to bad news on individual stocks.

Investment performance was good compared to the benchmark: the Russell 2000 Index in sterling terms fell 1.1% but growth in NAV per share was 5.6% better. This was a result of good stock selection particularly in the health care and consumer discretionary sectors.

We continued to apply the enhancements to the investment process introduced two years ago that aim to increase the contribution from good stock selection. The proportion of the portfolio in the top ten holdings increased from 36% a year ago to 40% at the end of the period and the number of holdings in the portfolio was 40 compared to 42 a year ago.

Investment approach

There has been no change to the Company's investment philosophy or the way in which the manager chooses stocks. The Company takes a conservative investment approach that aims to preserve capital rather than to chase growth aggressively. It focuses on taking a long-term view of companies' business prospects and buying shares of growing companies when they are out of favour with substantial appreciation potential. At the same time, it avoids the most popular growth stocks that are expensively priced.

Performance

Seven stocks contributed 1% or more to performance and five of these were top ten holdings. The largest contributor was The Ensign Group (nursing homes) whose strategy of buying and improving struggling nursing homes is working well. DMC Global (drill pipe perforation tools) benefited from further market share gains from its time-saving new products for the fracking industry. The position was sold towards the end of the period because competitors introduced their own new products and weakening oil prices threaten growth. America's Car- Mart (financing and sale of used cars) gained from the end of easy credit. This meant that new car lenders became less competitive and the company saw the return of customers with better credit ratings. LiveRamp, previously Acxiom (online consumer identification services) rose after it sold its Acxiom Marketing Solutions business to Interpublic Group for the unexpectedly high price of $2.2bn, which was almost equal to the company's then market capitalisation. The stock was sold because the remaining business operates in a highly competitive industry, is loss-making and does not fit the manager's conservative investment approach. Ollie's Bargain Outlet (off-price retailer) continued to exploit Amazon's success and the favourable environment for retail liquidations. Genesee & Wyoming (short line railroads) appreciated on news that the company was investigating strategic options. It subsequently announced on 1 July its sale to private equity groups GIC Pte Ltd and Brookfield Infrastructure Partners LP. The stock was added to the portfolio in 2002 and has appreciated by more than eleven times since then.

As ever in small company investing, there were disappointments. Three stocks detracted from performance by more than one percent. The worst detractor was Lions Gate Entertainment A (film and television production and programme distribution) where the cost of expanding its international "over the top" distribution (i.e. internet delivery of programming) is proving to be more than we expected. GTT Communications (data connectivity services for enterprises) had a disappointing year as investors reacted badly to the lack of organic growth following the acquisition of London-based Interoute Communications. The size of the reaction was magnified by the company's high level of debt. Since the year end, the Company's holdings in Lions Gate Entertainment A and GTT Communications have been sold. American Vanguard (agri-chemicals) suffered from the US agricultural recession and unprecedented floods in the Midwest. The latter is probably a one- off event, and grain prices are beginning to pick up with a boost for farmers' incomes. The company continues its strategy of acquiring and improving niche agri-chemical brands.

There were two takeovers in the period: Civitas Solutions (day care for adults with intellectual disabilities) was sold to private equity firm Centerbridge Partners LP at a 27% premium to the 30-day average share price. Following a strategic review REIS (commercial property database services) was acquired by Moody's at a 32% premium.

Portfolio

The Company's conservative investment approach produces two main kinds of value stocks, cheap "Buffett compounders" and recovery stocks. The first are reliable growth stocks that should be able to grow over long periods whereas the second are more short-term investments where a temporarily depressed industry has improvement potential. The market correction and concerns about economic growth provided the opportunity to add stocks with recovery potential and examples were LCI Industries (assemblies for recreational vehicles or "RVs"), Univar (chemicals distribution) and United Rentals (equipment rentals). The manager was also on the lookout for compounders that could contribute growth even if economic growth slowed. Three examples were Construction Partners A (road repair services), ICU Medical (connectors for intravenous therapy) and Limoneira (the leading vertically integrated supplier of fresh lemons).

LCI Industries has a good record of growth from its focus on "towables" (i.e. caravans), the RV of choice for Millennials, and acquiring smaller assembly manufacturers. Its products range from doors to slide-outs and are sold to RV manufacturers. It is a low capital intensity business and produces a high level of free cash flow that supports its merger & acquisitions ('M&A') strategy. The stock was depressed by economic concerns as well as a build-up of inventory at RV dealers. As excess inventories clear, LCI's expansion supplemented by moves into other leisure vehicles and international sales should benefit the shares.

Construction Partners was founded by management who have been in the road repair business for decades and it has a high level of insider ownership. It is based in Dothan, Alabama and benefits from the superior economic growth of the south east. Its approach is to own asphalt plants in the markets in which it operates, giving it a cost advantage. The company tracks competitors' contract wins to identify when they are working at full capacity in order to pinpoint less competitive contract bids when they arise. It also acquires smaller players where owners are approaching retirement. Insiders' control of the company helps make it the acquirer of choice because this ensures a safe home for a business that may have been built up over a working lifetime. It is now a top ten holding.

There were sales of recovery stocks where circumstances had improved, such as last year's acquisitions of Gray Television (television station operator in small cities) and Sanderson Farms (niche producer of large chickens). In addition, stocks were sold where business prospects were deteriorating and examples of these were The Michaels Companies (hobby crafts retailer), RPC (pressure pumping services) and Wabtec (technology products for rail and transit industries).

Gray Television is in a strong position to exploit the complex economic relationship between US TV networks, broadcasters, and distributors. When a larger player like Gray acquires small tv station groups it has greater negotiating power to increase retransmission fees (the fees paid to broadcasters by distributors such as cable companies), which improves the economics of M&A. The benefits to shareholders from this approach came much sooner than expected when it acquired similarly- sized Raycom Media. Since there remain concerns about declining tv advertising we sold the position.

The Michaels Companies was sold because of a deteriorating same store sales trend caused by store expansion by competitor Hobby Lobby in what is a slow growing (though resilient) retail category. In addition, the company had been slower than we hoped in expanding e-commerce, it seemed to be losing sales of profitable custom framing and its inclination to buy-back shares rather than reduce debt limits its strategic options.

Outlook

The US economy is expanding more slowly than earlier in the year. This reduces prospects for corporate profits growth for US smaller companies as a whole, which are predominantly domestically-focused. The Fed's move from tightening to easing interest rates is, however, a positive for equities with the caveat that since the US Presidential Election is just over a year away, other factors such as renewed trade concerns could come to the fore.

The portfolio holds many exciting and undervalued entrepreneurial companies with excellent long-term growth prospects where insiders have substantial "skin in the game". These should benefit shareholders in the future.

Robert Siddles

Fund Manager

Jupiter Asset Management Limited

Investment Adviser

8 October 2019

Strategic Review

The Strategic Report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.

The Strategic Report seeks to provide shareholders with the relevant information to enable them to assess the performance of the Directors of the Company during the period under review.

Business and Status

During the year the Company carried on business as an investment trust with its principal activity being portfolio investment. The Company has been approved by HM Revenue & Customs 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 ('CTA 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. In the opinion of the Directors, the Company has conducted its affairs in the appropriate manner to retain its status as an investment trust.

The Company is an investment company within the meaning of section 833 of the Companies Act 2006.

The Company is not a close company within the meaning of the provisions of the CTA 2010 and has no employees.

The Company was incorporated in England & Wales on 15 January 1993.

Reviews of the Company's activities are included in the Chairman's Statement and Investment Adviser's Review.

There has been no significant change in the activities of the Company during the year to 30 June 2019 and the Directors anticipate that the Company will continue to operate in the same manner during the current financial year.

Investment Objective

The Company's investment objective is to achieve long-term capital growth by investing in a diversified portfolio of primarily quoted US smaller and medium-sized companies.

Strategy

The Board recognises that by its nature the US smaller companies sector can be a risky asset class in which to invest. The sector is highly diversified with a great many companies from which to choose. Many companies are relatively immature, whether financially or operationally or in terms of management or market position. They tend to be highly geared to growth and are particularly vulnerable to market and other changes. Against this background, the Company has adopted a disciplined and relatively conservative investment style that focuses on companies with a strong franchise, free cash flow, insider ownership by management and whose shares are considered by the Investment Adviser to be cheap at the time of investment. Whilst shares in these companies will not always be the best performing, the Directors believe that this is an excellent approach to long-term investment in this sector.

Investment Policy

The investment policy of the Company is to invest in quoted US smaller and medium-sized companies and its objective is achieved through diversification of holdings across a variety of economic/industrial sectors.

No more than 10% of the total assets of the Company may be invested in other listed investment companies (including investment trusts) except in such other investment companies which themselves have stated that they will invest no more than 15% of their total assets in other listed investment companies, in which case the limit is 15%.

Benchmark Index

The Company's benchmark index is the sterling adjusted Russell 2000 Index.

Gearing

Gearing is defined as the ratio of a company's debt less cash held compared to its equity capital, expressed as a percentage. The effect of gearing is that, in rising markets, the Company tends to benefit from any growth of the Company's investment portfolio above the cost of payment of the prior ranking entitlements of any lenders and other creditors. Conversely, in falling markets the Company suffers more if the Company's investment portfolio underperforms the cost of those prior entitlements.

In order to improve the potential for capital returns to shareholders the Company has, with effect from 29 September 2018, negotiated a flexible loan facility with Scotiabank Europe for up to £20 million (with an option to increase to £30 million if desired).

Key Performance Indicators

At their quarterly Board meetings the Directors consider a number of performance indicators to help assess the Company's success in achieving its objectives. The key performance indicators used to measure the performance of the Company over time are as follows:

·; Net Asset Value changes;

·; The premium or discount of share price to Net Asset Value over time; 

·; A comparison of the absolute and relative performance of the Ordinary share price and the Net Asset Value per share relative to the return on the Company's Benchmark Index and of our peers; and 

·; Ordinary share price movement.

Information on these Key Performance Indicators and how the Company has performed against them can be found within the Chairman's Statement.

In addition, a history of the Net Asset Value, Ordinary share price and Benchmark Index are shown on the monthly factsheets which can be viewed on the Investment Adviser's website www.jupiteram.com/JUS and which are available on request from the Company Secretary.

Discount to Net Asset Value

The Directors review the level of the discount or premium between the middle market price of the Company's Ordinary shares and their Net Asset Value on a regular basis. The Directors have taken the opportunity to issue shares when there is sufficient demand. Such issues are always at a price which is in excess of the NAV. No shares were issued during the year under review.

The Board will continue to apply its policy of buying back shares at appropriate times with a view to limiting any discount in the longer term to less than 10%. The Directors had powers granted to them at the last Annual General Meeting ('AGM') held on 20 November 2018 to purchase Ordinary shares and either cancel or hold them in treasury as a method of controlling the discount to Net Asset Value and enhancing shareholder value.

The Company repurchased 790,018 Ordinary shares during the year under review at an average discount of 8.5%.

Under the Listing Rules, the maximum price that may currently be paid by the Company on the repurchase of any Ordinary shares is 105% of the average of the middle market quotations for the Ordinary shares for the five business days immediately preceding the date of repurchase. The minimum price will be the nominal value of the Ordinary shares. The Board is proposing that its authority to repurchase up to approximately 14.99% of its issued share capital be renewed at the AGM. The new authority to repurchase will last until the conclusion of the AGM of the Company in 2020 (unless renewed earlier). Any repurchase made will be at the discretion of the Board in light of prevailing market conditions and within guidelines set from time to time by the Board, the Companies Act, the Listing Rules and the Market Abuse Regulation.

Treasury Shares

In accordance with the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the 'Regulations') which came into force on 1 December 2003 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.

As at 30 June 2019 there were 4,210,612 Ordinary shares held in Treasury.

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. Further details of the Company's arrangement with JAM and the Alternative Investment Fund Manager ('AIFM'), Jupiter Unit Trust Managers Limited ('JUTM') can be found in the Notes to the Accounts.

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') as Custodian and 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.

Viability Statement

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 the next four years until the required vote on the continuation of the Company at the 2023 AGM.

The Company's investment objective is to achieve long term capital growth and the Board regards the Company's shares as a long- term investment. Four years is considered a reasonable period for investment in equities and is appropriate for the composition of the Company's portfolio. As part of its assessment, the Board has noted that shareholders will also be required to vote on the continuation of the Company at the 2020 AGM. On the basis of ongoing feedback from shareholders the board is confident that the 2020 continuation vote will be passed. The board has considered the company's business model including its investment objective and investment policy as well as the principal risks and uncertainties that may affect the Company. In particular, the Board has noted that:

·; the company maintains a relatively low level of gearing;

·; the company has maintained a consistent performance and share price discount to NAV; and

·; no significant increase to ongoing charges or operational expenses is anticipated.

The Board has also considered the market outlook, both for US smaller company equities and for investment trusts, and concluded that these remain an attractive opportunity for investors.

The Board has noted that there are a number of headwinds affecting the global economy: slower economic growth, US/China trade disputes, geo-political developments involving oil-producing countries and Brexit. The companies held in the Company's investment portfolio are unlikely to be wholly immune from the consequences of these headwinds. However, the Board has concluded that there is nevertheless a reasonable expectation that the Company will be able to continue in meet its liabilities as they fall due over the next four years.

Principal Risks and Uncertainties

The Board has undertaken a robust review of the principal risks and uncertainties that may affect the Company and its business which are described below:

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

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.

Liquidity Risk - The Company may invest in securities that have a very limited market which will affect the ability of the Investment Adviser to dispose of securities when it is no longer felt that 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 net 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 net assets at a time when the Company's portfolio is rising. The Company's level of gearing is under constant review by the Board who take into account the economic environment and market conditions when reviewing the level.

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 had 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.

Regulatory Risk - The Company operates in a complex regulatory environment and faces a number of regulatory risks. A breach of section 1158 of the CTA 2010 could result in the Company being subject to capital gains tax on portfolio movements. Breaches of other regulations such as the UKLA Listing rules, could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers such as the Investment Adviser could also lead to reputational damage or loss. The Board 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 confirms 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 - 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. Details of how the Board monitors the services provided by JAM and its associates are included within the Internal Controls section of the Report of the Directors.

Financial - Inadequate financial controls could result in misappropriation of assets, loss of income and debtor receipts and inaccurate reporting of Net Asset Value per share. The Board annually reviews the Investment Adviser's report on its internal controls and procedures.

Directors

The Company's policy on Board diversity is included in the Corporate Governance section of the Report of the Directors.

As at 30 June 2019 the Board comprised one female and four male Directors.

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. There are therefore no disclosures to be made in respect of employees.

The Board has noted its 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 its 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.

All of the Company's activities are outsourced to third parties.

Modern Slavery Act

The Modern Slavery Act 2015 requires certain companies to prepare a slavery and human trafficking statement. As the Company has no employees and does not supply goods and services, it is not required to make such a statement.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations as its day to day management and administration functions have been outsourced to third parties and it neither owns physical assets or 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 on Directors' Reports) Regulations 2013.

For and on behalf of the Board

Gordon Grender

Chairman

8 October 2019

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws) including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and the Republic of Ireland.

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 those financial statements, the Directors are required to:

(a) select suitable accounting policies and then apply them consistently; 

(b) make judgments and accounting estimates that are reasonable and prudent;

(c) state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and 

(d) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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 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, Report of the Directors, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

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

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website www.jupiteram.com/JUS, 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 Strategic Report and Report of the Directors include a fair review of the development and performance of the Company, together with a description of the principal risks and uncertainties that the Company faces; and

(c) in their opinion the Annual Report & Accounts, taken as a whole, is fair, balanced and understandable and provide the information necessary to assess the Company's position and performance, business model and strategy.

So far as each Director is aware at the time the report is approved:

(a) there is no relevant audit information of which the Company's auditors are unaware; and 

(b) the Directors have taken all steps required of a company director to make themselves aware of any relevant audit information and to establish that the Company's auditors have been made aware of that information.

For and on behalf of the Board

Gordon Grender

Chairman

8 October 2019

Income Statement for the year ended 30 June 2019

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

Statement of Financial Position as at 30 June 2019

The financial statements were approved by the Board of Directors and signed on its behalf on 8 October 2019.

Gordon Grender

Chairman

Company Registration Number 02781968

Statement of Changes in Equity for the year ended 30 June 2019

* Dividends are only payable from the Revenue Return element of Retained Earnings.

Notes to the Accounts for the year ended 30 June 2019

1. Accounting policies 

Basis of Preparation

The financial statements for the year ended 30 June 2019 have been prepared in accordance with UK Generally Accepted Accounting Practice ('UK GAAP') including Financial Reporting Standard 102 ('FRS 102'), the financial reporting standard applicable in the UK and Republic of Ireland and with the Statement of Recommended Practice ('SORP') for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies ('AIC') in November 2014 and updated in February 2018.

The Company continues to adopt the going concern basis in the preparation of the financial statements. The financial statements have been prepared in accordance with the Company's accounting policies as set out below. They are presented in accordance with the Companies Act 2006 (the 'Act') and the requirements of the SORP 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014.

The Company has taken advantage of the exemption from preparing a Cash Flow Statement under FRS 102, as it is an investment fund and the investments are substantially all highly liquid and carried at fair (market) value.

In accordance with FRS 102, the Company is required to nominate a functional reporting currency in which the company predominantly operates. Having regard to the Company's share capital and the predominant currency in which its shareholders operate, pounds sterling is the nominated functional reporting currency of the Company.

Statement of Compliance

The financial statements of the Company have been prepared in compliance with United Kingdom Accounting Standards, including FRS 102 and the Companies Act 2006.

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.

1. Net (loss)/return per ordinary share

2. 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 £161,520,000 (2018: £163,339,000) and on 14,012,801 (2018: 14,802,819) ordinary shares, being the number of ordinary shares in issue at the year end.

3. Related parties and transactions with the Manager

There are no transactions with the directors other than aggregated remuneration for services as directors as disclosed in the Directors' Remuneration Report and the beneficial interests of the directors in the ordinary shares of the Company.

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

Prior to 1 October 2017, the base management fee payable to JUTM was a quarterly fee of 0.20% of the net assets of the Company, excluding the value of any Jupiter managed investments. However, with effect from the change in the Company's investment strategy agreed by JUTM and the Board, the base investment annual management fee was reduced to 0.75% of adjusted net assets. This fee will be further reduced to 0.65% to the extent that the Company's adjusted net assets come to exceed £150 million and up to £200 million and will be reduced further to 0.55% to the extent that the Company's adjusted net assets come to exceed over £200 million.

The investment management fee payable to JUTM for the year 1 July 2018 to 30 June 2019 was £1,169,000 (2018: £1,221,000) with £289,000 outstanding as at 30 June 2019 (2018: £303,000).

The portfolio management of the Company is carried out by "JAM" under delegation from JUTM.

4. Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments outstanding as at 30 June 2019 (2018: nil).

5. Annual Results

This Annual Results announcement does not constitute the Company's statutory accounts for the years ended 30 June 2018 and 30 June 2019 but is derived from those accounts. Statutory accounts for the year ended 30 June 2018 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 September 2018 and the year ended 30 September 2019 both received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not include statements under Section 498 of the Companies Act 2006 respectively. The statutory accounts for the year ended 30 June 2019 have not yet been delivered to the Registrar of Companies and will be delivered following the Annual General Meeting.

The Annual General Meeting of the Company will be held on Tuesday, 26 November 2019.

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.jupiteram.com/JUS

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 1000

8 October 2019

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