TIDMJUKG
RNS Number : 3445R
Jupiter UK Growth Inv Trust PLC
20 September 2017
Jupiter UK Growth Investment Trust plc (the 'Company')
Annual Report & Accounts for the year ended 30 June 2017
This announcement contains regulated information
Chairman's Statement
Introduction
It is with pleasure that I present the Annual Report for the
Jupiter UK Growth Investment Trust PLC for the twelve months to 30
June 2017. This period is the first full year we have reported on
since the change in investment strategy and Steve Davies'
appointment as Investment Adviser. As we hoped when reporting a
year ago, the trust has continued to perform well since the market
dislocation around the time of the Brexit referendum.
Investment performance
With the UK market recovering strongly in the 12 months to 30
June 2017, the manager's stock-picking and asset allocation skills
have been shown to good effect. The Company's net asset value, with
dividends added back, grew by 26.7% and the share price, on the
same basis, by 25.5%. This compares favourably with the FTSE
All-Share index's 18.1% total return. The portfolio benefited from
its strategic lack of exposure to the oil and gas sectors and by
Steve's decision to top up his holdings in a number of domestic
stocks that were marked down sharply in the aftermath of the
referendum.
The manager's style is to hold a concentrated portfolio of 30-35
stocks that represent a number of high conviction ideas. It has one
of the highest "active shares" of its peer group, meaning that
shareholders are owning something very different to the UK market
index, a necessary condition for significant outperformance. The
growth bias of the trust means that it is likely to do particularly
well during rising markets. Its gains during the year were
particularly creditable given the strong performance of small and
midcap shares, to which we have relatively little exposure. Its
focus on companies with a strong presence in the UK consumer sector
makes it sensitive to consumer sentiment and spending levels, but
these have held up much better than many investors expected.
Turnover, another critical factor in driving performance, was
also commendably low during the period, as Steve notes in the
Investment Adviser's report. The fact that two of his larger
holdings were the subject of takeover and merger approaches during
the year is a testament to his ability to spot undervalued
opportunities. After the disappointment of the Brexit-inspired
underperformance during his first two months in charge, the board
is pleased that the trust is now delivering the competitive
positive returns that we were looking to achieve with the change in
mandate.
Dividend
The change in strategy last year to pursue growth in the UK
equity market had implications for the timing and frequency of
dividend payments. Having reviewed the portfolio and discussed the
issue with the Investment Adviser, the board resolved to replace
the regular quarterly dividends with a single annual dividend,
payable shortly after the annual general meeting each year. The
first of these payments has been set at 7.0p and will be paid on 23
November 2017 to those on the register on 3 November 2017. This is
equal to the aggregate of 7.0p paid in interim dividends in respect
of the previous financial year ended 30 June 2016. The board's
ambition is to at least maintain the dividend at this level and
look to grow it over time.
Gearing
As at 30 June 2017 the Company's net gearing level (being the
amount of drawn down bank debt of GBP9.5 million less the cash held
on the balance sheet pending investment on that date) was 5%. Steve
expects that he will tend to increase gearing during periods of low
valuations and reduce it in stronger markets. This approach has
added value over the course of the Company's history and we
continue to consider the use of gearing as a tactical tool to
improve returns.
Expanding the trust
The board remains committed to finding ways to increase the size
of our trust over time, so as to improve liquidity and spread the
trust's fixed running costs over a larger asset base. I am pleased
to advise shareholders that the board of Jupiter Dividend &
Growth Trust has agreed, as part of the reconstruction proposals it
is putting to its shareholders, to offer them the option of rolling
over their holdings into our trust. Those who opt to do this will
become shareholders in Jupiter UK Growth with effect from 1
December 2017 after Jupiter Dividend & Growth has been wound
up. We do not know how many will do so, but we are hopeful that it
will produce a material increase in our shareholder and asset base.
Further details of the transaction, including a shareholder
circular and prospectus, are intended to be published during
October.
Discount control
The board implements a discount and premium policy under which
it will use share buy backs and new issues of shares with the
intention of ensuring that, in normal market conditions, the market
price of the company's shares 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 12 months to 30 June 2017, the company repurchased a
total of 1,553,816 shares. As a result the shares of the Company
have continued to trade close to net asset value. The Company has
issued no Ordinary shares from Treasury during the year.
Annual General Meeting
The Company's AGM will be held at 10.30 am on 15 November 2017
at the offices of Jupiter Asset Management Limited at The Zig Zag
Building, 70 Victoria Street, London SW1E 6SQ.
In addition to the formal business, our portfolio manager will
provide a short presentation to shareholders on the performance of
the Company over the past year as well as an outlook for the
future. The board would welcome your attendance at the AGM as it
provides shareholders with an opportunity to ask questions of the
board and portfolio manager.
Outlook
The failure of the Conservatives to obtain a clear parliamentary
majority in the UK general election has created greater uncertainty
about the Government's negotiating strategy for Brexit. What has
become clearer is that the Government has been listening to the
concerns of business about the dangers of an abrupt exit and
appears to be moving towards the negotiation of a two or three year
transition period after 2019. The ebb and flow of the negotiations
will inevitably continue to have an influence over financial market
performance in the interim, but investor sentiment has remained
impressively resilient so far. We see no reason to change our
investment approach, which despite its UK focus, and current
exposure to the consumer sector, will continue to be driven
primarily by the manager's ability to pick shares in companies with
strong business models and growth prospects, and selling at bargain
or fair prices. Historically our manager's style of investing has
produced significant outperformance and we are confident that it is
more than capable of doing so again in the future.
Tom H Bartlam
Chairman
20 September 2017
Financial Highlights
Capital performance
30 June 30 June
2017 2016 % change
Total assets less current liabilities
(GBP'000) 45,224 40,052 +12.9
Ordinary share performance
30 June 30 June
2017 2016 % change
Net asset value per share (pence) 334.0 265.4 +25.8
Net asset value per share (with dividends
added back) +26.7
Mid market price (pence) 327.8 263.0 +24.6
Mid market price (with dividends added
back) +25.5
Discount to Net Asset Value (%) (1.9) (0.9)
FTSE All-Share Index Total Return (Bloomberg:
ASXTR) 6,777.29 5,737.47 +18.1
Revenue performance
Year ended Year ended
30 June 30 June
2017 2016 % change
Return after taxation (GBP'000) 1,099 1,324 -17.0
Revenue earnings per Ordinary share
(pence) 7.69 8.27 -7.0
Net dividend per Ordinary share (pence) 7.0 7.0 0.0
Net dividend yield per Ordinary share
(%)* 2.1 2.6
* As a function of the closing middle market price of an
Ordinary share at the relevant financial year end.
Dividends declared during the period under review
Rate/
per
share Announcement Payment
(net) Date XD Date Date
Fourth Interim for the year 15 September
ended 30 June 2016 1.60p 15 July 2016 25 August 2016 2016
Fifth Interim for the year ended 20 September 29 September 20 October
30 June 2016 0.60p 2016 2016 2016
Dividends declared after the period under review
Rate/
per
share Announcement Payment
(net) Date XD Date Date
Interim for the year ended 30 23 November
June 2017* 7.00p 26 October 2017 2 November 2017 2017
* The quarterly dividend policy was changed to pay a single
annual dividend with effect from 1 July 2016.
Ongoing charges ratio
Year ended Year ended
30 June 30 June
2017 2016
Ratio at year end (%) excluding finance costs 1.20 1.43
Ten Year History to 30 June 2017
Total
return
(net asset
Net value with
Total Asset dividends
Assets Dividend Value added back)
less declared per per per
current Ordinary Ordinary Ordinary
Year ended liabilities Share* Share Share
30 June GBP'000 p p %
2008 49,415 4.10 221.27 -7.3
2009 37,868 5.50 173.51 -19.3
2010 43,187 7.75 203.40 +21.0
2011 50,552 8.35 250.60 +27.5
2012 46,032 8.35 227.80 -5.8
2013 (restated) 54,683 8.35 274.30 +24.1
2014 56,603 4.80 297.10 +11.1
2015 54,099 6.40 312.90 +7.5
2016 40,052 7.00 265.35 -13.2
2017 45,224 7.00 333.99 +26.7
* Adjusted for five for one stock split in 2013.
Investment Adviser's Review
Market background
At the start of the period the noise surrounding the UK's vote
to leave the EU was followed by a new wave of monetary stimulus
from the Bank of England, inertia in the UK economy and a renewed
sense of political clarity following Theresa May becoming Prime
Minster. These all helped to invigorate UK stock markets and the
period was a generally positive one for the UK equity market.
Towards the end of 2016 news flow was largely dominated by the
US Presidential election and, following Trump's win, the
healthcare, infrastructure and defence sectors initially rallied on
the news. The Autumn Statement in the UK included few surprises,
and highlighted the resilience of the UK economy, upgrading growth
for 2016. GDP growth forecasts for 2017 were initially reduced
slightly, to +1.4%, but in the first quarter of 2017 these were
raised to 2%.
As 2017 continued, politics continued to dominate headlines.
Following the snap general election that resulted in a hung
parliament, the Conservatives managed to strike a deal with the
DUP, which cost them GBP1bn but meant Brexit negotiations
officially began, as planned on 19th June. The UK's economic and
political outlook for the remainder of the year has become more
uncertain, however the likelihood of a softer Brexit has probably
increased. The Bank of England decided to keep rates at 0.25%, but
the vote came in at 5-3, marginally edging towards a rise. Mark
Carney, at the Mansion House speech, then went on to report that
inflation pressures remain subdued and now is not the time for a
rate hike.
Performance review
Over the twelve months to 30 June 2017 the Company's share price
returned 25.5% and NAV rose 26.7% (both including dividends)
compared to a total return of 18.1% for the FTSE All-Share Index.
Over three years the Company's share price is up 15.3% versus 23.9%
for the Index, while over five years it is up 80.2% versus 65.3%
for the Index - although it's worth noting that the Company has
only been following its current investment strategy since April
2016.
The biggest positive contribution over the period under review
came from the portfolio's sizeable holding in Sirius Minerals,
which is developing a huge fertiliser resource in North Yorkshire.
Sirius was also promoted from the FTSE AIM Index to the Main Market
in April and joined the FTSE 250 Index in June.
IAG has been another significant contributor over the past year,
benefiting from a lower oil price, further improvements in cash
generation and good capacity discipline across the North Atlantic.
The period was not without its challenges, though, with its largest
subsidiary British Airways suffering a major IT meltdown in May. I
will be discussing the company's response to these events with both
the management team and the Chairman at our meetings over the next
couple of months.
One of the international holdings in the portfolio, Apple, rose
sharply on market-beating results which highlighted the company's
highest ever quarterly revenues, supported by record iPhone sales
and the market is now looking forward to the release of the new
iPhone in the autumn with some anticipation.
It was also good to see one of the fund's smaller cap holdings,
Arrow Global, performing well. Arrow is a debt collection and
management business (Jupiter is its largest shareholder) and it has
broadened its geographical and product capabilities significantly
since its IPO in 2013. The share price has almost doubled since
then, but it still looks attractive to me when I compare it to many
of its European peers.
More recently, the portfolio's zero weighting in the oil majors
has been another strong contributor to relative performance. I
believe the oil price remains stuck in a $40-$60 range, with the
potential for that range to move lower over time. In my view, the
oil majors do not offer an attractive risk/reward trade-off if that
is the starting assumption. US shale producers have continued to
increase production despite lower oil prices and the likes of Libya
and Nigeria are also bouncing back from previous disruptions. OPEC
has maintained its production cuts, but the recent political
changes in Saudi Arabia may have a significant impact on how things
evolve from here. Mohammed bin Salman, the youthful new Crown
Prince, is acutely aware that Saudi's oil could become a stranded
asset in 20-30 years' time if demand patterns change significantly,
so he is looking to reduce Saudi Arabia's fiscal dependence on oil
revenues and improve the economy's ability to cope with lower oil
prices.
The biggest detractor to returns in 2017 was Dixons Carphone.
Its electrical division continues to trade well but Carphone
Warehouse is struggling as consumers change handsets less
frequently and EU roaming charges are falling. The shares are now
extremely cheap, in my view, and I am engaging actively with the
company to restore value. Another negative was TalkTalk, which
reported a fall in revenue and a dividend cut that was larger than
the market expected. On a relative basis the portfolio's zero
weighting in HSBC was a negative too, as the bank rose strongly
alongside its sector over the year with an added benefit from
currency translation as sterling weakened.
In the aftermath of the UK's vote on membership of the European
Union, I added to a mixture of UK domestic names like ITV, Legal
& General, IAG, Taylor Wimpey - all of which had share prices
significantly impacted by the referendum. In addition, I added to
international growth stocks such as Merlin and Inchcape. These
latter names were beneficiaries of the fall in sterling following
the referendum, but their share prices did not move up as much as
some of the "safe haven" sectors like staples or the dollar-earning
commodity stocks.
More recent transactions included a substantial reduction in the
size of the Apple position following its strong performance. Also,
both Booker and Sky were sold following their respective merger/bid
approaches. I spent a considerable amount of time considering
whether to convert the fund's Booker shares into Tesco (the offer
was mostly in shares with a small cash element) but concluded that
the potential upside in Tesco was insufficient, in my view,
compared to other opportunities I saw elsewhere. Fox's offer for
Sky remains subject to regulatory review and, rather than wait for
an outcome, I decided to exit and invest the proceeds in other
holdings.
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 two-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.
Outlook
Investor sentiment towards the UK remains very subdued and the
unexpectedly close outcome of June's general election has added an
extra element of uncertainty in the short-term.
We may be in the realms of "weak but stable" government for the
time being, with Mrs May's leadership likely to last somewhat
longer than generally expected. The Conservative party will be very
wary of holding a potentially divisive leadership battle anytime
soon, particularly if such a move precipitated another general
election which might let Jeremy Corbyn into Number Ten. Mrs May's
credibility has been severely dented and she will be forced into a
much more inclusive style of government.
The optimist in me hopes that this should improve the chances of
a slower and more economically friendly Brexit being negotiated
with the EU. However, the realist must also acknowledge that a weak
government and a bitterly divided range of opinions about Brexit
makes it foolish to dismiss the possibility of a chaotic,
cliff-edge Brexit as the Article 50 clock ticks inexorably on.
Steve Davies
Jupiter Asset Management Limited
Investment Adviser
20 September 2017
Investment Portfolio as at 30 June 2017
30 June 2017 30 June 2016
Value Percentage Value* Percentage
Company GBP'000 of investments GBP'000 of investments
Lloyds Banking Group 3,152 6.7 2,587 6.7
Barclays 2,977 6.3 1,956 5.1
Legal & General Group 2,899 6.1 2,065 5.3
Sirius Minerals 2,551 5.4 844 2.2
Dixons Carphone 2,342 5.0 2,009 5.2
International Consolidated
Airlines Group 1,949 4.1 1,106 2.9
Taylor Wimpey 1,876 4.0 869 2.2
Thomas Cook Group 1,813 3.8 1,050 2.7
Carnival 1,778 3.8 800 2.1
TalkTalk Telecom Group 1,763 3.7 1,715 4.4
Experian 1,623 3.4 1,490 3.9
Merlin Entertainments 1,579 3.4 1,340 3.5
WH Smith 1,570 3.3 1,442 3.7
GKN 1,503 3.2 - -
Zoopla Property Group 1,477 3.1 1,143 3.0
Inmarsat 1,467 3.1 1,282 3.3
ITV 1,435 3.0 1,332 3.4
Inchcape 1,414 3.0 980 2.5
Royal Bank of Scotland Group 1,412 3.0 1,024 2.6
Arrow Global Group 1,364 2.9 669 1.7
Apple 1,231 2.6 1,330 3.4
Manchester United 1,086 2.3 913 2.4
Howden Joinery Group 1,051 2.2 721 1.9
Hays 1,020 2.2 587 1.4
DFS Furniture 862 1.8 608 1.6
Virgin Money 859 1.8 77 0.2
Countrywide 819 1.7 617 1.6
PureTech Health 575 1.2 472 1.2
CityFibre Infrastructure 447 1.0 462 1.2
Gloo Networks 438 0.9 496 1.3
AO World 273 0.6 377 1.0
Consort Medical 245 0.5 246 0.6
Ludgate 181 (Jersey)(^) 175 0.4 235 0.6
Angle 145 0.3 122 0.3
Tissue Regenix Group 107 0.2 143 0.4
Total investments 47,277 100.0
^ Unquoted.
* The difference in values between the year end dates is
affected both by price movements and any sales or purchases from
the portfolio.
Cross holdings in other Investment Companies
As at 30 June 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-ended investment funds (including listed investment
trusts) other than those which themselves have stated investment
policies to invest no more than 15% of their total assets in other
listed closed-ended investment funds. The Company does not
anticipate that the Investment Adviser will make any new
investments in other collective investment schemes, investment
companies or investment trusts.
Classification of Investments as at 30 June 2017
FTSE North
&
All- Latin
2016 2017 Share Equities UK Europe America
% % % % %
- - 11.39 Oil & Gas
- - 11.11 Oil & Gas Producers - - -
Oil Equipment, Services &
- - 0.28 Distribution - - -
2.2 5.4 6.59 Basic Materials
- - 0.65 Chemicals - - -
- - 0.32 Forestry & Paper - - -
- - 0.07 Industrial Metals & Mining - - -
2.2 5.4 5.56 Mining 5.40 - -
8.8 7.8 11.41 Industrials
- - 1.57 Construction & Materials - - -
- - 1.99 Aerospace & Defence - - -
- - 0.93 General Industrials - - -
- - 0.48 Electronic & Electrical - - -
- - 0.72 Industrial Engineering - - -
- - 0.42 Industrial Transportation - - -
8.8 7.8 5.30 Support Services 7.81 - -
7.0 7.1 15.43 Consumer Goods
2.5 3.2 0.24 Automobile & Parts 3.18 - -
- - 2.71 Beverages - - -
- - 0.80 Food Producers - - -
2.2 3.9 3.53 Household Goods & Home Construction 3.97 - -
- - 0.03 Leisure Goods - - -
2.3 - 2.55 Personal Goods - - -
- - 5.58 Tobacco - - -
1.3 2.3 9.32 Health Care
0.6 0.5 1.05 Health Care Equipment & Services 0.52 - -
0.7 1.8 8.27 Pharmaceuticals & Biotechnology 1.76 - -
42.1 37.2 11.31 Consumer Services
2.7 - 1.23 Food & Drug Retailers - - -
16.8 13.7 1.86 General Retailers 13.66 - -
9.0 6.2 3.59 Media 6.15 - -
13.6 17.3 4.64 Travel & Leisure 15.05 - 2.30
8.9 7.8 3.79 Telecommunications
5.6 4.7 1.15 Fixed Line Telecommunications 4.68 - -
3.3 3.1 2.64 Mobile Telecommunications 3.10 - -
- - 3.19 Utilities
- - 0.69 Electricity - - -
- - 2.50 Gas, Water & Multiutilities - - -
3.4 2.6 0.88 Information Technology
- - 0.80 Software & Computer Services - - -
3.4 2.6 0.08 Technology Hardware & Equipment - - 2.60
73.7 70.2 73.31 Total Non-Financials 65.28 - 4.90
----- ----- ------ ------------------------------------- ---------- ------ -------
26.3 29.8 26.69 Financials
14.6 17.8 11.24 Banks 17.78 - -
- - 1.13 Non-life Insurance - - -
5.3 6.1 4.71 Life Insurance 6.13 - -
Real Estate Investment &
1.6 1.7 0.46 Services 1.73 - -
- - 2.07 Real Estate Investment Trusts - - -
3.5 3.3 2.68 Financial Services 3.25 - -
- - 4.40 Equity Investment Instruments - - -
1.3 0.9 0.00 Non-equity Investment Instruments 0.93 - -
100.0 100.00 2017 Totals 95.10 - 4.90
----- ----- ------ ------------------------------------- ---------- ------ -------
100.0 2016 Totals 89.41 4.79 5.80
----- ----- ------ ------------------------------------- ---------- ------ -------
Strategic Report
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 ('HMRC') as
an investment trust subject to the Company continuing to meet the
eligibility conditions of sections 1158 and 1159 of the Corporation
Taxes Act 2010 and the ongoing requirements for approved companies
as detailed in Chapter 3 of Part 2 of the Investment Trust
(Approved Company) (Tax) Regulations 2011. 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 Corporation Tax Act 2010 and has no
employees.
The Company was incorporated in England & Wales and launched
on 1 January 1972.
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 2017 and the Directors
anticipate that the Company will continue to operate in the same
manner during the current financial year.
Investment objective and benchmark
The Company's investment objective is to concentrate on capital
appreciation from holding predominantly listed investments.
Performance during the year under review was measured against
the FTSE All-Share Index Total Return expressed in Sterling.
Strategy
The Investment Adviser has adopted a bottom-up approach that
focuses on two specific types of opportunity. The first are
'recovery' stocks. 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. The second
are 'growth' stocks that can generate above-average rates of growth
over an extended time period.
The Investment Adviser researches companies, ensuring that each
potential investment falls within the Company's stated investment
policy. Consideration is also given to a potential investment's
risk/return profile and growth prospects before an investment is
made. Once companies operating within the appropriate theme have
been identified and due diligence has been carried out, the
Investment Adviser will decide whether a particular investment
would be appropriate.
Investment policy
The Directors have instructed the Investment Adviser to invest
the Company's assets in accordance with the Investment Policy.
It is the Company's policy to invest no more than 10%, in
aggregate, of the Company's total assets 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.
At the year end, none of the Company's assets were invested in
the securities of other UK Listed investment companies.
Dividend policy
The Board has not set an objective of a specific portfolio yield
for the Company and the level of such yield is expected to vary
with the sectors and geographical regions to which the Company's
portfolio is exposed at any given time. However, substantially all
distributable revenues that are generated from the Company's
investment portfolio are expected to be paid out in the form of an
annual dividend.
Gearing
Gearing is defined as the ratio of a company's long term 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 outperformance 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 access to a flexible loan facility
with Scotiabank Europe PLC for amounts up to GBP12 million.
The Directors consider it a priority that the Company's level of
gearing should be maintained at appropriate levels with sufficient
flexibility to enable the Company to adapt at short notice to
changes in market conditions.
The Board has not set any limits or restrictions on the
Company's loan facility other than the limit of the Company's
current loan facility with Scotiabank Europe PLC. The Board
regularly reviews the Company's level of gearing which is currently
set at a maximum level of 20% of the Company's total assets at the
time of drawdown.
Derivative transactions
The Company may take short positions (using contracts for
difference) in respect of a small number of larger capital
securities. The Directors have set limits to the overall exposures
and performance is monitored on a regular basis.
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 over time;
-- Share price movement;
-- A comparison of the Ordinary share price and NAV to the composite Benchmark;
-- Discount over varying periods;
-- Peer Group comparative performance;
-- Yield - changes over time and when compared to the Company's peers.
A history of the NAV, Ordinary share price, dividend and
benchmark are shown on the monthly factsheets which can be viewed
on the Company's page of the Investment Adviser's website
www.jupiteram.com/JUKG and which are available on request from the
Company Secretary.
Discount to Net Asset Value
The Directors review the level of the discount between the
middle market price of the Company's Ordinary shares and their NAV
on a regular basis.
The Directors have powers granted to them at the last AGM to
purchase Ordinary shares and either cancel or hold them in treasury
as a method of influencing the discount to NAV and enhancing
shareholder value.
The Board is proposing that its authority to repurchase up to
approximately 14.99% of its issued share capital should be renewed
at the AGM. Unless renewed earlier, the new authority to repurchase
will last until the conclusion of the AGM of the Company in 2018.
For the avoidance of doubt, repurchases will always be at the
absolute discretion of the Board in light of prevailing market
conditions and within guidelines set from time to time by the
Board, the Companies Act, and the Listing Rules. Any purchases will
be made only through the market at prices below the prevailing
estimated NAV per Ordinary share and where the Directors believe
such purchases will enhance shareholder value and assist in
narrowing any discount to NAV at which the Ordinary shares may
trade.
In February 2014 the Board decided to implement a new discount
policy under which it would use share buy backs and new issues of
shares with the intention of ensuring that, in normal market
conditions, the market price of the Company's shares would track
their underlying net asset value.
The Board considered that this commitment to the active removal
of discount risk would in due course provide materially improved
liquidity for both buyers and sellers of the Company's shares,
although there could be no guarantee that any discount control
mechanism implemented by the Board would have its desired
effect.
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 bought back
pursuant to the above authority may be held in Treasury. These
Ordinary shares may be subsequently cancelled or sold for cash.
This gives the Company the ability to reissue shares quickly and
cost effectively and provides the Company with additional
flexibility in the management of its capital. The Company may hold
in Treasury any of its Ordinary shares that it purchases pursuant
to the share buy back authority granted by shareholders.
During the year, 1,553,816 Ordinary shares representing 7.1% of
the total Ordinary shares in issue at 30 June 2017, were bought
back.
The Company issued no Ordinary shares from Treasury during the
year.
As at 30 June 2017 there were 8,359,689 Ordinary shares held in
Treasury.
The Board believes that the effective use of Treasury shares can
assist the Company in improving liquidity in the Company's Ordinary
shares, managing any imbalance between supply and demand and
minimizing the volatility of the discount at which the Ordinary
shares trade to their net asset value for the benefit of
shareholders. It is believed that this facility gives the Company
the ability to sell Ordinary shares held in Treasury quickly and
cost effectively, and provides the Company with additional
flexibility in the management of the capital base.
The Board shall have regard to current market practice for the
reissue of Treasury shares by investment trusts and the
recommendations of the Investment Adviser. The Board will make an
announcement of any change in its policy for the reissue of
Ordinary shares from Treasury via a Regulatory Information Service
approved by the FCA. The Board's current policy is that any
Ordinary shares held in Treasury will not be resold by the Company
at a discount to the Investment Adviser's estimate of the presiding
net asset value per Ordinary share as at the date of issue.
Management
The Company has no employees and most of its day to day
responsibilities are delegated to Jupiter Asset Management Limited
('JAM'), who act as the Company's Investment Adviser and Company
Secretary.
J.P. Morgan Europe Limited ('JPMEL') acts as the Company's
Depositary and the Company has entered into an outsourcing
arrangement with J.P. Morgan Chase Bank N.A. ('JPMCB') for the
provision of accounting and administrative services.
Although JAM is named as the Company Secretary, JPMEL provides
administrative support to the Company Secretary as part of its
formal mandate to provide broader Fund Administration services to
the Company.
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 prospects of the
Company over the next three years. The Company's investment
objective is to achieve long-term capital growth and the Board
regards the Company as a long-term investment.
In carrying out its assessment, 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 as detailed below.
The Board has noted that:
-- The Company holds a highly liquid portfolio invested
predominantly in UK listed equities; and
-- No significant increase to ongoing charges or operational expenses is anticipated.
The Board has therefore concluded that there is a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the next three
years.
Risks and uncertainties
The principal risk factors that may affect the Company and its
business can be divided into the following areas:
Investment policy and process - Inappropriate investment
policies and processes may result in under performance against the
prescribed Benchmark Index and the company's peer group.
The Board manages these risks by ensuring a diversification of
investments and regularly reviewing the portfolio asset allocation
and investment process. In addition, certain investment
restrictions have been set and these are monitored as
appropriate.
Investment strategy and share price movement - The Company is
exposed to the effect of variations in the price of its
investments. A fall in the value of its portfolio will have an
adverse effect on shareholders' funds. It is not the aim of the
Board to eliminate entirely the risk of capital loss, rather it is
its aim to seek capital growth. The Board reviews the Company's
investment strategy and the risk of adverse share price movements
at its quarterly board meetings taking into account the economic
climate, market conditions and other factors that may have an
effect on the sectors in which the Company invests. There can be no
assurances that appreciation in the value of the Company's
investments will occur but the Board seeks to reduce this risk.
Interest rates - The Company has exposure to cash which
generates interest through interest bearing accounts. The Board is
mindful of interest rates when reviewing the Company's exposure to
cash.
The interest rate on the loan facility is reviewed at regular
intervals.
Liquidity risk - This risk can be viewed as the liquidity of the
securities in which the Company invests and the liquidity of the
Company's shares. The Company may invest in securities that have a
very limited market which will affect the ability of the Company's
Investment Adviser to dispose of securities when he no longer feels
they offer the potential for future returns. Likewise the Company's
shares may experience liquidity problems when shareholders are
unable to realise their investment in the Company because there is
a lack of demand for the Company's shares. At its quarterly
meetings the Board considers the current liquidity in the Company's
investments when setting restrictions on the Company's exposure.
The Board also reviews, on a quarterly basis, the Company's buy
back programme and in doing so is mindful of the liquidity in the
Company's shares.
Gearing risk - The Company's gearing can impact the Company's
performance by accelerating the decline in value of the Company's
Total Assets at a time when the Company's portfolio is declining.
Conversely gearing can have the effect of accelerating the increase
in the value of the Company's Total Assets at a time when the
Company's portfolio is rising. At its quarterly meetings the Board
is mindful of the outlook for equity markets when reviewing the
Company's gearing.
Discount to Net Asset Value - A discount in the price at which
the Company's shares trade to net asset value would mean that
shareholders would be unable to realise the true underlying value
of their investment. The Directors have powers granted to them at
the last Annual General Meeting to purchase Ordinary shares as a
method of controlling the discount to net asset value and enhancing
shareholder value. Further details of the buy back programme can be
found in the Chairman's Statement under the heading Discount
control.
Regulatory risk - The Company operates in a complex regulatory
environment and faces a number of regulatory risks. A breach of
section 1158 of the CTA 2010 could result in the Company being
subject to capital gains tax on portfolio movements. Breaches of
other regulations such as the UKLA Listing rules, could lead to a
number of detrimental outcomes and reputational damage. Breaches of
controls by service providers such as the Investment Adviser could
also lead to reputational damage or loss. The Board monitors
regulatory risks at its quarterly board meetings and relies on the
services of its Company Secretary, JAM, and its professional
advisers to ensure compliance with, amongst other regulations, the
Companies Act 2006, the UKLA Listing Rules, the FCA's Disclosure
and Transparency Rules and the Alternative Investment Fund Managers
Directive. The Investment Adviser is contractually obliged to
ensure that its conduct of business conforms to applicable laws and
regulations.
Credit and counterparty risk - The failure of the counterparty
to a transaction to discharge its obligations under that
transaction could result in the Company suffering a loss.
Loss of key personnel - The day to day management of the Company
has been delegated to the Investment Adviser. Loss of the
Investment Adviser's key staff members could affect investment
return. The Board is aware that JAM recognises the importance of
its employees to the success of its business. Its remuneration
policy is designed to be market competitive in order to motivate
and retain staff and succession planning is regularly reviewed. The
Board also believes that suitable alternative experienced personnel
could be employed to manage the Company's portfolio in the event of
an emergency.
Operational risk - Failure of the core accounting systems, or a
disastrous disruption to the Investment Adviser's business or that
of the administration provider JPMCB, could lead to an inability to
provide accurate reporting and monitoring. The Board annually
reviews the Investment Adviser's and the Administrator's statements
on their business continuity planning.
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 and the Administrator's
statements on its internal controls and procedures.
Details of how the Board monitors the services provided by JAM
and its associates are included within the Internal Control section
of the Report of the 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 Jupiter Unit
Trust Managers Limited ('JUTM'), JAM and other third parties. There
are therefore no disclosures to be made in respect of
employees.
The Board has noted the Investment Adviser's policy on
Environmental, Social and Human Rights issues as detailed
below:
The Investment Adviser considers various factors when evaluating
potential investments. While an investee company's policy towards
the environmental and social responsibility, including with regard
to human rights, is considered as part of the overall assessment of
risk and suitability for the portfolio, the Investment Adviser does
not necessarily decide to, or not to, make an investment on
environmental and social grounds alone.
All of the Company's activities are outsourced to third
parties.
Global greenhouse gas emissions
The Company has no greenhouse gas emissions to report from its
operations as its day-to-day management and administration
functions have been outsourced to third parties and it neither owns
physical assets, property nor has employees of its own. It
therefore does not have responsibility for any other emissions
producing sources under the Companies Act 2006 (Strategic Report
and Directors' Reports) Regulations 2013.
For and on behalf of the Board:
Tom H Bartlam
Chairman
20 September 2017
Statement of Directors' Responsibilities in Relation to the
Financial Statements
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable United
Kingdom law and those International Financial Reporting Standards
('IFRS') as adopted by the European Union.
Under Company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the return or
loss of the Company for that period. In preparing the financial
statements, the Directors are required to:
(a) select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
(b) present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
(c) provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance;
(d) state that the Company has complied with IFRS, subject to
any material departures disclosed and explained in the financial
statements; and
(e) make judgements and estimates that are reasonable and prudent.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Company financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Statement of Corporate
Governance that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. The work carried out by the Auditor does not
include consideration of the maintenance and integrity of the
website and accordingly the Auditor accepts no responsibility for
any changes that have occurred to the financial statements when
they are presented on the website.
The financial statements are published on www.jupiteram.com/JUKG
which is a website maintained by Jupiter Asset Management
Limited.
Visitors to the website need to be aware that legislation in the
United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Each of the Directors, confirms to the best of their knowledge
that:
(a) the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company; and
(b) the report includes a fair view of the development and
performance of the business and the position of the Company
together with a description of the principal risks and
uncertainties that the Company faces; and
(c) that in the opinion of the Board, the Annual Report and
Accounts taken as a whole, is fair, balanced and understandable and
it provides the information necessary to assess the company's
performance, business model and strategy
So far as each of the Directors is aware at the time the report
is approved:
(a) there is no relevant audit information of which the
Company's auditors are not aware; and
(b) the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
By Order of the Board
Tom H Bartlam
Chairman
20 September 2017
Statement of Comprehensive Income for the year ended 30 June
2017
Year ended 30 June
2017 Year ended 30 June 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain/(loss) on investments
at fair value - 8,938 8,938 - (8,482) (8,482)
Income 1,481 - 1,481 1,717 - 1,717
Other income 19 - 19 40 - 40
Foreign exchange gain - 457 457 - 1,007 1,007
Gross return 1,500 9,395 10,895 1,757 (7,475) (5,718)
Investment management fee (56) (168) (224) (45) (192) (237)
Other expenses (299) (11) (310) (338) (111) (449)
Total expenses (355) (179) (534) (383) (303) (686)
Net return/(loss) before
finance costs
and taxation 1,145 9,216 10,361 1,374 (7,778) (6,404)
Finance costs (31) (76) (107) (34) (91) (125)
Return/(loss) on ordinary
activities
before taxation 1,114 9,140 10,254 1,340 (7,869) (6,529)
Taxation (15) - (15) (16) - (16)
Net return/(loss) after
taxation 1,099 9,140 10,239 1,324 (7,869) (6,545)
--------------------------- --------- ------- --------- ------- -------- --------
Return/(loss) per Ordinary
share 7.69p 64.02p 71.71p 8.27p (49.16)p (40.89)p
--------------------------- --------- ------- --------- ------- -------- --------
The total column of this statement is the income statement of
the Company, prepared in accordance with IFRS. The supplementary
revenue return and capital return columns are both prepared under
guidance produced by the Association of Investment Companies (AIC).
All items in the above statement derive from continuing
operations.
No operations were acquired or discontinued during the year.
All net income is attributable to the equity holders of Jupiter
UK Growth Investment Trust PLC. There are no minority
interests.
Statement of Financial Position as at 30 June 2017
2017 2016
GBP'000 GBP'000
Non current assets
Investments held at fair value through
profit or loss 47,277 38,701
Current assets
Receivables 200 163
Cash and cash equivalents 7,454 12,376
7,654 12,539
Total assets 54,931 51,240
Current liabilities
Payables (9,707) (11,188)
Total assets less current liabilities 45,224 40,052
--------------------------------------- ------- --------
Capital and reserves
Called up share capital 1,095 1,095
Share premium 26,136 26,136
Capital redemption reserve 683 683
Retained earnings* 17,310 12,138
Total equity shareholders' funds 45,224 40,052
--------------------------------------- ------- --------
Net Asset Value per Ordinary share 334.0p 265.4p
--------------------------------------- ------- --------
* Under the Company's Articles of Association any dividends are
distributed only from the revenue reserve
Statement of Changes in Net Equity for the year ended 30 June
2017
Capital
Share Share Redemption Retained
Capital Premium Reserve Earnings Total
For the year ended 30 June 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 June 2016 1,095 26,136 683 12,138 40,052
Ordinary shares repurchased - - - (4,742) (4,742)
Net return for the year - - - 10,239 10,239
Equity dividends paid and declared - - - (325) (325)
Balance at 30 June 2017 1,095 26,136 683 17,310 45,224
--------------------------------------------- --------- ------- --- --------------------- --------
Dividends paid during the period were paid out of revenue reserves.
Capital
Share Share Redemption Retained
Capital Premium Reserve Earnings Total
For the year ended 30 June 2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 June 2015 1,095 26,136 683 26,185 54,099
Ordinary shares reissued from Treasury - - - 956 956
Ordinary shares repurchased - - - (7,435) (7,435)
Net loss for the year - - - (6,545) (6,545)
Equity dividends paid and declared - - - (1,023) (1,023)
Balance at 30 June 2016 1,095 26,136 683 12,138 40,052
--------------------------------------------- --------- ------- --- --------------------- --------
Dividends paid during the period were paid out of revenue
reserves.
Statement of Cash Flow for the year ended 30 June 2017
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
Cash flows from operating activities
Investment income received 1,621 1,696
Investment management fee paid (263) (338)
Investment performance fee paid - (285)
Other cash receipts 19 43
Other cash expenses (433) (502)
Net cash inflow from operating activities
before taxation 944 614
Interest paid (135) (125)
Taxation (16) (22)
Net cash inflow from operating activities 793 467
------------------------------------------- ---------- ----------
Cash flows from investing activities
Purchases of investments (14,955) (38,967)
Sales of investments 13,850 56,606
Net cash (outflow)/inflow from investing
activities (1,105) 17,639
------------------------------------------- ---------- ----------
Cash flows from financing activities
Shares reissued - 956
Shares repurchased (4,742) (7,435)
Equity dividends paid (325) (1,023)
Net cash outflow from financing activities (5,067) (7,502)
------------------------------------------- ---------- ----------
(Decrease)/increase in cash (5,379) 10,604
Change in cash and cash equivalents
Cash and cash equivalents at start of
year 12,376 765
Realised gain on foreign currency 457 1,007
Cash and cash equivalents at end of year 7,454 12,376
------------------------------------------- ---------- ----------
Notes to the Accounts for the year ended 30 June 2017
1. Accounting policies
The Accounts comprise the financial results of the Company for
the year to 30 June 2017. The Accounts are presented in pounds
sterling, as this is the functional currency of the Company. The
Accounts were authorised for issue in accordance with a resolution
of the Directors of the Directors on 20 September 2017. All values
are rounded to the nearest thousand pounds (GBP'000) except where
indicated.
The Accounts have been prepared in accordance with International
Financial Reporting Standards (IFRS), which comprise standards and
interpretations approved by the International Accounting Standards
Board (IASB) and International Accounting Standards Committee
(IASC), as adopted by the European Union (EU).
Where presentational guidance set out in the Statement of
Recommended Practice (SORP) for Investment Trusts issued by the
Association of Investment Companies (AIC) is consistent with the
requirements of IFRS, the directors have sought to prepare the
financial statements on a basis compliant with the recommendations
of the SORP.
The Company continues to adopt the going concern basis in the
preparation of the financial statements.
(a) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business.
Revenue includes dividends from investments quoted ex-dividend
on or before the date of the Statement of Financial Position.
Dividends receivable from equity shares are taken to the revenue
return column of the Statement of Comprehensive Income.
Deposit and other interest receivable, expenses and interest
payable are accounted for on an accruals basis. These are
classified within operating activities in the Statement of Cash
Flow.
Underwriting commission is taken to income and recognised when
the issue takes place, except where the Company is required to take
up all or some of the shares underwritten, in which case an
appropriate proportion of the commission received is deducted from
the cost of those shares.
(b) Presentation of Statement of Comprehensive Income
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the Association
of Investment Companies (AIC), supplementary information which
analyses the Statement of Comprehensive Income between items of a
revenue and capital nature has been presented alongside the
statement. In accordance with the Company's Articles of
Association, net capital returns may not be distributed by way of
dividend.
Investment Management fees and finance costs are charged 75% to
capital and 25% to revenue. The annual management fee reduction, in
place until 18 April 2016, was credited 100% to revenue. The April
2016 reconstruction reduction to the management fee was credited
100% to capital. Saving scheme administration and transaction
handling charges were charged to capital. All other operational
costs including administration expenses (but with the exception of
any investment performance fees which are charged to capital) are
charged to revenue.
(c) Basis of valuation of investments
Investments are recognised and derecognised on a trade date
where a purchase and sale of an investment is under contract whose
terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured at
cost, being the consideration given.
All investments are classified as held at fair value through
profit or loss. All investments are measured at fair value with
changes in their fair value recognised in the Statement of
Comprehensive Income in the period in which they arise. The fair
value of listed investments is based on their quoted bid price at
the reporting date without any deduction for estimated future
selling costs.
Foreign exchange gains and losses on fair value through profit
and loss investments are included within the changes in the fair
value of the investments.
For investments that are not actively traded and/or where active
stock exchange quoted bid prices are not available, fair value is
determined by reference to a variety of valuation techniques. These
techniques may draw, without limitation, on one or more of: the
latest arm's length traded prices for the instrument concerned;
financial modelling based on other observable market data;
independent broker research; or the published accounts relating to
the issuer of the investment concerned.
(d) Finance costs
Interest-bearing bank loans and overdrafts are recorded at the
proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis to the
Statement of Comprehensive Income using the effective interest
method and are added to the carrying amount of the instrument to
the extent that they are not settled in the period in which they
arise.
(e) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and that are subject
to insignificant risks of changes in value.
(f) Bank Interest
Bank interest is recognised in the Statement of Comprehensive
Income in the period in which they are incurred. Bank interest is
directly charged 25% to revenue and 75% to capital.
(g) Foreign currencies
Transactions in currencies other than pounds sterling are
recorded at the rates of exchange prevailing on the dates of the
transactions. At the date of each Statement of Financial Position,
monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on that date.
Non-monetary assets and liabilities carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Gains
and losses arising on retranslation are included in net profit or
loss for the year, except for exchange differences arising on
non-monetary assets and liabilities where the changes in fair value
are recognised directly in equity.
(h) Treasury shares
In accordance with the relevant provisions of the Companies Act
2006 any Ordinary shares repurchased, pursuant to the above
authority, may be held in treasury. These Ordinary shares may
subsequently be cancelled or sold for cash. This would give the
Company the ability to reissue shares quickly and cost effectively
and provide the Company with additional flexibility in the
management of its capital. The Company may hold in treasury any of
its Ordinary shares that it purchases pursuant to the share
buy-back authority granted by shareholders.
(i) Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The Company's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the date
of the Statement of Financial Position.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognized for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profit will be available against which
deductible temporary differences can be utilised.
Investment trusts which have approval under Section 1158 of the
Income and Corporation Taxes Act 2010 ('ICTA') are not liable for
taxation of capital gains.
(j) Accounting developments
The following standards, amendments and interpretations have
been published by IASB and are relevant to the Company but are not
yet effective for year ended 30 June 2017:
International Accounting Standards (IAS/IFRS's)
IFRS 9 Financial Investments Classification and Measurement
Effective date: 1 January 2018
Amendments to IAS 7 Statement of Cash flows
Effective date: 1 January 2017
IFRS 15 Revenue from Contracts with Customers
Effective date: 1 January 2018
The Directors anticipate that the adoption of the above
standards and interpretation in future periods will have no
material impact on the financial statements of the Company. The
Company intends to adopt the standards in the reporting period when
they become effective.
2. Significant accounting judgements, estimates and assumptions
The preparation of the Company's Financial Statements on
occasion requires management to make judgements, estimates and
assumptions that affect the reported amounts in the primary
financial statements and the accompanying disclosures. These
assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities
affected in the current and future periods, depending on
circumstance.
Management do not believe that any significant accounting
judgements have been applied to this set of Financial Statements
other than the allocations between capital and revenue.
3. Income
2017 2016
GBP'000 GBP'000
Income from fixed asset investments:
Dividends from UK companies 1,323 1,363
Property income distribution
from UK REITS - 39
Dividends from overseas companies 158 315
1,481 1,717
Other income:
Fee rebate 2 29
Deposit interest 2 -
Interest from liquidity fund 15 -
Underwriting Commission - 11
19 40
1,500 1,757
----------------------------------------- ------- -------
Income from fixed asset investments is derived:
Listed on the UK Stock Exchange 1,323 1,402
Listed on overseas Stock Exchanges 158 315
1,481 1,717
----------------------------------------- ------- -------
4. Investment management and performance fees
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fee* 56 168 224 45 192 237
56 168 224 45 192 237
---------------------- ------- ------- ------- ------- ------- -------
* During the previous year ended 30 June 2016, an amount of
GBP32,000 (pro-rated to 17 April 2016) was waived by the Investment
Adviser from the total management fee payable and as directed by
the Board, this was wholly applied to Revenue. An additional amount
of GBP40,000 was waived from the management fee payable being a
contribution to the costs of the April 2016 reconstruction of the
Company. This was allocated wholly to capital.
5. Other administrative expenses
2017 2016
GBP'000 GBP'000
Directors' remuneration 88 88
Auditors' remuneration - audit 29 28
Auditors' remuneration - other services - 1
Savings scheme administration (charged
to capital)* - 54
Transaction handling charges (charged
to capital) 10 2
Reconstruction legal fees (charged
to capital) - 55
Loan facility legal fees (charges
to capital) 1 -
Other 182 221
310 449
---------------------------------------- -------- -------
* The Jupiter ISA/Savings Scheme closed on 30 November 2015.
6. Dividends
2017 2016
Amounts recognised as distributions to equity
holders in the period: GBP'000 GBP'000
2015 Fourth interim of 1.6p per Ordinary share - 273
2016 First interim of 1.6p per Ordinary share - 258
2016 Second interim of 1.6p per Ordinary share - 253
2016 Third interim of 1.6p per Ordinary share - 239
2016 Fourth interim of 1.6p per Ordinary share 237 241
2016 Fifth interim of 0.6p per Ordinary share 88 88
325 1,352
----------------------------------------------- ------- -------
Set out below is the total dividend payable in respect of the
financial year under review, which is the basis on which the
requirements of Section 1158 of the Corporation Tax Act 2010 are
considered:
2017 2016
Dividends on equity shares: GBP'000 GBP'000
First Interim of 0.0p per Ordinary share
(2016: 1.6p) - 258
Second Interim of 0.0p per Ordinary share
(2016: 1.6p) - 253
Third Interim of 0.0p per Ordinary share
(2016: 1.6p) - 239
Fourth Interim of 0.0p per Ordinary share
(2016: 1.6p) - 241
Fifth Interim of 0.0p per Ordinary share
(2016: 0.6p) - 88
2017 Interim of 7.0p per Ordinary share 936 -
936 1,079
------------------------------------------ ------- -------
7. Earnings per Ordinary share
The earnings per Ordinary share figure is based on the net gain
for the year of GBP10,239,000 (2016: loss of GBP6,545,000) and on
14,277,978 (2016: 16,008,175) Ordinary shares, being the weighted
average number of Ordinary shares in issue during the year
excluding shares held in Treasury.
The earnings per ordinary share figure detailed above can be
further analysed between revenue and capital, as below.
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
Net revenue return 1,099 1,324
Net capital return/(loss) 9,140 (7,869)
Net total return/(loss) 10,239 (6,545)
--------------------------------------------- ---------- ----------
Weighted average number of Ordinary shares
in issue during the year 14,277,978 16,008,175
Revenue earnings per Ordinary share 7.69p 8.27p
Capital earnings/(losses) per Ordinary share 64.02p (49.16)p
Total earnings/(losses) per Ordinary share 71.71p (40.89)p
--------------------------------------------- ---------- ----------
8. Net Asset Value per Ordinary share
The net asset value per Ordinary share is based on the net
assets attributable to the equity shareholders of GBP45,224,000
(2016: GBP40,052,000) and on 13,540,276 (2016: 15,094,092) Ordinary
shares, being the number of Ordinary shares in issue at the year
end, (excluding Ordinary shares held in Treasury).
9. 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.
Prior to 18 April 2016 the base management fee payable to JUTM
was 0.80% per annum of the Company's net assets, less a waiver of
GBP40,000 per annum. However, with effect from the change in the
Company's investment strategy approved by shareholders on 18 April
2016 the base management fee was reduced to 0.50% of Adjusted Net
Assets (being net assets before deducting or making provision for
any Performance Fee which may be due and after deduction of the
value of any Jupiter Managed Investments). This fee will be further
reduced to 0.45% to the extent that the Company's Adjusted Net
Assets come to exceed GBP150 million and will be reduced further
still to 0.40%. To the extent that the Company's Adjusted Net
Assets exceed GBP250 million.
The management fee payable to JUTM in respect of the period 1
July 2016 to 30 June 2017 was GBP223,855 with GBP56,387 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) 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, in each case as increased
or decreased by the increased 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 accounting periods
for the purposes of any performance fee accrual, the Board agreed
with the manager on 26 September 2016 that it would be appropriate
to adopt the higher estimated NAV of 285.80p as at 29 July 2016 as
its new high watermark for these purposes.
No performance fee was payable to JUTM in respect of the year
ended 30 June 2017.
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 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 Investment Management Group
Limited, or any subsidiary undertaking of Jupiter Investment
Management Group Limited, receives fees as investment manager or
investment adviser. During the year there were no such
investments.
10. Contingent liabilities
As at 30 June 2017 and 30 June 2016 there were no potential
contingent liabilities.
11. Post statement of financial position event
Since the year end an additional 276,000 Ordinary shares were
repurchased to be held in treasury for prices between 317p and 336p
per share.
Availability of Annual Report
A copy of the Annual Report & Accounts will shortly be
submitted to the National Storage Mechanism and will be available
for inspection at www.morningstar.co.uk/uk/NSM.
The Annual Report & Accounts will also be available for
download from the Company's section of Jupiter Asset Management's
website www.jupiteronline.com/JUKG.
Hard copies of the Annual Report & Accounts will also be
available upon request from the registered office of the Company at
The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ.
For further information, please contact:
Richard Pavry
Head of Investment Trusts
Jupiter Asset Management Limited, Company Secretary
investmentcompanies@jupiteram.com
020 3817 1496
20 September 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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