TIDMJUKG
RNS Number : 0759C
Jupiter UK Growth Inv Trust PLC
14 October 2020
Jupiter UK Growth Investment Trust plc (the 'Company')
Legal Entity Identifier: 549300QSBKGE8ZO08A97
Annual Report & Accounts for the year ended 30 June 2020
Chairman's statement
At 30 June 2020 the company had total assets under management of
GBP31m, compared with GBP54m at the beginning of our financial
year. The net asset value total return for our financial year to 30
June 2020 was -27.9% compared with the total return on the
company's benchmark, the FTSE All- Share Total Return Index, of
-13.0%. This unacceptably poor performance was caused in part by
the impact of Covid-19 in the third quarter of our financial year,
when in the space of just 32 days between February 19 and March 23
the FTSE All-Share Total Return Index fell by -33.9%.
The market sell-off was however compounded by further instances
of poor stock selection and risk management within the company's
portfolio. These were the same shortcomings which had prompted the
board in February to appoint Richard Buxton from Merian Global
Investors as the new lead fund manager of the company.
Unfortunately, by the time he was able to take effective control of
the company's portfolio, the damage to the company's asset value
had already been done.
In our Interim Statement released in March of this year I wrote
that "we would keep our management arrangements under review over
the coming months while the economic and market backdrop evolves
and to remain cognisant of our reduced market capitalisation".
While the stock market has recovered some of its losses incurred in
February and March, the economic outlook remains uncertain. Our
market capitalisation remains very low and is currently GBP28m. I
wrote in our interim statement that such a size fell well below the
minimum size generally considered investable by wealth managers and
other prospective investors.
Having discussed this issue with our advisers, Numis, the
directors announced on 28 September that we had come to the
conclusion that in the wake of these further losses we are no
longer likely to be able to grow the company in its present form by
attracting significant new investors in the foreseeable future. We
have advised Jupiter of this opinion, which they have accepted. The
board has therefore been considering what are now the best options
for the future of the company and its shareholders.
We currently believe that the best option is to liquidate the
company so that shareholders will have the option to receive cash
or, if possible, the ability to roll over their investment into
another investment vehicle; subsequently the accounts have been
prepared on a basis other than a going concern. Your board is
discussing options with its advisers and establishing the interest
of investment managers in offering rollover options. We would also
welcome any suggestions that shareholders may have regarding the
future of the company. Shareholders can submit suggestions by email
to jukg.shareholder@jpmorgan.com .
The board would hope to be in a position to update shareholders
not later than our Annual General Meeting in November. It is
intended that a circular be issued to shareholders in due course
outlining the full details of recommended proposals. The circular
will also include a notice for a general meeting of the company,
enabling resolutions to be proposed and voted on by
shareholders.
Market background
After ratcheting steadily higher over the second half of 2019,
the UK equity market fell very sharply over the first quarter of
2020 as the Covid-19 outbreak spread beyond China, being declared a
full-scale global pandemic by the World Health Organisation on 23
March. The draconian measures implemented to control the spread of
the virus raised fears that the global economy was facing a severe
recession. By the end of March, UK economic activity had ground to
a virtual standstill.
After losing around a quarter of their value over the first
three months of 2020, UK equities started to rebound in the second
quarter. The rally was driven by unprecedented levels of monetary
and fiscal support from central banks and governments, which acted
swiftly to support both companies and many self-employed.
Nevertheless, at the time of writing the FTSE All-Share Total
Return Index remains some 20% lower than it was at its peak in
February.
Performance review
The performance of the company in our last financial year was
very poor, with our share price and NAV (with dividends added back)
falling by -30.6% and -27.9% respectively compared with a fall of
-13.0% in the FTSE All-Share Total Return Index. While the
performance in the first half was satisfactory, with our NAV rising
by 7.8% against 5.5% for the index, the performance on our mainly
domestically focused portfolio in the second half was badly hit as
the impact of COVID 19 became more widely felt. During our third
quarter to 31 March 2020 the NAV per share fell by -38.9% compared
with a fall of 25.1% for the index. The performance in our last
quarter, following the arrival of Richard Buxton as our fund
manager, was satisfactory, moving largely in line with the index.
That has continued into the current financial year. It was not
enough however to make up for the earlier underperformance. More
detailed information regarding the performance of our portfolio is
set out in the investment adviser's review.
Management arrangements
On 18 February 2020 the board announced that it had reached an
agreement with Jupiter for Richard Buxton to assume lead fund
management responsibility for the company. This followed the
announcement by the board on 4 October 2019 that the company had
decided to review its investment strategy following a sustained
period of poor performance. This was a comprehensive exercise which
considered various alternatives, including the adoption of an
alternative manager from within Jupiter, the appointment of another
fund management company as investment manager and the liquidation
of the company together with a rollover into another listed
investment company.
The conclusion to appoint Richard Buxton followed the
announcement by Jupiter on 17 February 2020 regarding its proposed
acquisition of Merian. At the board's request plans were made to
transition the portfolio so that it aligned with Merian's UK Alpha
strategy, even though he had still formally to join Jupiter. For a
variety of reasons, it was not possible to put this arrangement in
place before early April, meaning that day to day management of the
portfolio was with the Jupiter Transition Management Team ('TMT')
throughout the period of market disruption.
The proposed acquisition of Merian was approved by Jupiter's
shareholders at its Annual General Meeting on 21 May 2020 and
Richard formally became the lead fund manager of the company with
effect from 26 May 2020, in place of the TMT who managed the
company's investment portfolio in the interim period from 18
February to 25 May 2020. Merian's UK Alpha strategy utilises a
high-conviction approach typically holding 30 -- 40 stocks,
combining fundamental research with a patient, long -- term time
horizon and has generated a strong long-term performance record
consistent with the company's investment objective and policy.
Richard Buxton joined Merian as head of UK equities and manager
of the Merian UK Alpha Fund in 2013. Richard was previously at
Schroders, where he managed the Schroder UK Alpha Plus Fund and the
Schroder UK Growth Fund plc, an investment trust. Prior to
Schroders he spent more than a decade at Baring Asset Management,
having commenced his investment career in 1985 at Brown Shipley
Asset Management.
There was no change to the investment objective or policy as a
result of the change of lead fund manager. The company's investment
objective is to deliver capital appreciation from holding a
portfolio of predominantly listed investments. While there are no
specific individual stock, sector, geographical or market
capitalisation limitations or weightings applicable, the manager
invests principally in companies which are listed in and/or which
undertake a significant proportion of their business in the United
Kingdom.
As part of these new arrangements, the board agreed with Jupiter
that the company would not be charged a base management fee for the
period from 1 January 2020 to 31 December 2020. Based on the net
asset value at 30 June 2020 this is an estimated saving of
approximately GBP151,000 over the 12-month period of the
agreement.
As described above the board has decided as a consequence of its
diminished size and growth prospects to recommend liquidation of
the company. I should emphasise that this decision is not a
reflection on the management of the portfolio by Richard Buxton and
his team.
Dividend
A resolution to declare a final dividend of 5.0p per share will
be proposed at the annual general meeting ('AGM') in November 2020
and if approved by shareholders will be payable on 30 November 2020
to shareholders shown on the register of shareholders on 6 November
2020. The ex-dividend date is 5 November 2020. The dividend for the
previous financial year was 8.5p per share.
While the board has in the past stated its ambition to maintain
the dividend at the level paid in the preceding financial year,
there has clearly been a radical and material change in the
company's circumstances which the directors believe warrants a
change in the dividend for the financial year to 30(th) June. The
economic disruption caused by Covid-19 has led to a significant
reduction in the expected investment income from a number of
companies in our portfolio and if the proposal to liquidate the
company is approved, this will be the final dividend that the
company will pay.
Having discussed a number of alternatives for determining an
appropriate level of dividend, the board judges that in the
circumstances it is most sensible to base it broadly on the amount
of investment income we have received, net of the company's
attributable expenses. This amounts to GBP745,744 or 4.96p per
share based on 15,021,896 shares as at 30 June 2020. After buybacks
since year end, this amounts to GBP745,744 or 5.08p per share based
on 14,675,854 shares as at 18 September 2020, which has been
rounded down to arrive at the 5.0p per share dividend which the
board is now recommending.
While we do have revenue reserves of GBP1.1m. which could have
been used to cover a higher dividend payment, as some other trusts
have done in response to the pandemic, the board's view is that in
the light of the potential liquidation in a few months' time, the
fairest outcome is to retain the revenue reserves in the company's
balance sheet so that in due course they can be distributed to
shareholders either as cash or as capital to be rolled over into
another investment vehicle, in line with the choice that
shareholders themselves decide.
Gearing
During the year the company had access to a flexible loan
facility with Scotiabank Europe Plc for amounts up to GBP22
million, with a commitment of GBP12 million. While this facility
was used to a modest extent in the earlier part of our financial
year, it has not been used in recent months. This facility expired
on 24 September 2020 and has not been renewed in light of the
company's plans to liquidate.
Discount and premium management
The board's stated policy is to use share buybacks and new
issues of shares to ensure that, in normal market conditions, the
market price of its shares will closely track the net asset value
per share. The commitment to active management of discount and
premium is designed to produce improved liquidity for both buyers
and sellers of the company's shares. During the 12 months to 30
June 2020, the company repurchased a total of 1,844,176 shares then
346,042 shares to 18 September 2020 bringing the total number of
shares now held in Treasury to 15,045,824.
Annual General Meeting
It is intended that the company's AGM will be held at 12 noon on
19 November 2020 at the offices of Jupiter Asset Management
Limited, The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ.
In consideration of the wellbeing of the company's shareholders and
in light of Government guidance around social distancing,
shareholders will not be permitted to attend the AGM this year. In
order to comply with relevant legal requirements, the AGM will be
convened with the minimum necessary quorum. Only the statutory and
formal business required by law will be conducted at the AGM and
there will be no presentations. In light of these restrictions,
shareholders can submit any questions by email to Magnus.Spence@
jupiteram.com. Subject to confidentiality, we will respond to any
questions submitted either directly or by publishing our response
on the company's website.
Please refer to the Notice of the AGM contained in the annual
report and accounts for full details on how to vote and how to
communicate any questions that would usually be raised at the
meeting. Shareholders are strongly encouraged to nominate the
'Chairman of the meeting' as their proxy rather than any other
person who will not be permitted to attend.
Please also note that we have removed paper from the voting
process to reduce further the environmental impact of the company.
Electronic proxy voting is now available and shareholders can also
submit voting instructions using the web-based voting facility at
www.signalshares.com or, for institutional shareholders, at
www.proxymity.io. If you have not already registered with Signal
Shares you will need your investor code, which can be found on your
share certificate. Once registered you will be able to vote
immediately by selecting 'proxy voting' from the menu.
If you require any assistance with electronic voting or wish to
receive a hard copy proxy form, please contact the company's
registrars, Link Asset Services whose contact information is
provided in the annual report and accounts. Notice of the AGM,
containing full details of the business to be conducted at the
meeting, is set out in the annual report and accounts. Your
attention is also drawn to the report of the directors contained in
the annual report and accounts where various resolutions relating
to special business are explained.
Outlook
While the swift action of governments and central banks to
mitigate the economic damage of the pandemic may have avoided a
liquidity crisis, the threat to the financial health of both
business and individuals remains. An effective and widely available
vaccine to Covid-19 remains some months away, despite promising
results in a number of trials. Coupled with continuing
international tensions, and uncertainty over whether the UK and EU
can agree a mutually beneficial trade deal before the end of the
year, the outlook for the economy and markets is more muted and
unpredictable than usual.
The outlook for this company is sadly clear however. If approved
by shareholders, the proposed liquidation of Jupiter UK Growth will
bring the life of this company to an end after more than 48 years.
The company has been struggling for a number of years to establish
a relevant and sustainable future for itself in a changing and
competitive market environment. The board's view until now has
always been that, given a period of consistently superior
performance and effective marketing of its investment approach,
attracting new sources of demand to bring the company up to a
viable size, while a tough challenge, was not an insuperable
one.
In the event, despite our initial high hopes, the performance of
the company since 2016 has not been nearly good enough to justify
that faith, or to generate new demand for the shares, while recent
events have cruelly conspired to prevent us testing the ability of
our new fund manager to reverse that trend. It is a matter of great
regret to the board that, despite our best efforts over many
months, we are no longer able to justify continuing with the new
arrangements and have instead to recommend the liquidation of the
company.
Tom H Bartlam
Chairman
13 October 2020
Financial Highlights for the year ended 30 June 2020
Capital performance
30 June 30 June
2020 2019 % change
Total assets less current liabilities
(GBP'000) 30,455 49,402 -38.4
Ordinary share performance
30 June 30 June
2020 2019 %change
Mid market price (pence) 184.5 278.0 -33.6
Mid market price (with dividends
added back) (pence) 193.0 285.0 -30.6
Net asset value per share (pence) 202.7 292.9 -30.8
Net asset value per share (with dividends
added back) (pence) 211.2 299.9 -27.9
FTSE All-Share Total Return Index
(Bloomberg : ASXTR) 6,465.24 7,430.61 -13.0
Discount to net asset value (%) (9.0) (5.1)
Ongoing charges ratio (%) excluding
finance costs 1.16 1.15 +0.9
Revenue performance
Year ended Year ended
30 June 30 June
2020 2019 %change
Net revenue return after taxation
(GBP'000) 746 1,572 -52.5
Revenue earnings per ordinary share
(pence) 4.72 8.64 -45.4
Net dividend per ordinary share (pence) 8.50 7.00 +21.4
Net dividend yield per ordinary share
(%)* 4.61 2.52
*As a function of the closing middle market price of an ordinary
share at the relevant financial year end
Dividends declared for the period under review
Rate
per share Announcement Payment
(net) date XD date date
Dividend for the year
ended 30 June 2020 13 October 5 November 30 November
5.00p 2020 2020 2020
Fifteen Year History to 30 June 2020
Total
return
(net asset
Net value with
Total asset dividends
assets Earnings per Dividend value paid added
back)
less ordinary declared per per per
current share ordinary ordinary ordinary
Year ended liabilities share** share** share
30 June GBP'000 p p p %
2006 53,743 1.72 1.60 177.67 +26.6
2007 55,985 4.78 3.60 241.06 +35.4
2008 49,415 6.60 4.10 221.27 -7.3
2009 37,868 7.78 5.50 173.51 -19.3
2010 43,187 6.98 7.75 203.40 +21.0
2011 50,552 10.54 8.35 250.60 +27.5
2012 46,032 4.34 8.35 227.80 -5.8
2013 (restated)* 54,683 4.54 8.35 274.30 +24.1
2014 56,603 6.03 4.80 297.10 +11.1
2015 54,099 6.67 6.40 312.90 +7.5
2016 40,052 8.27 7.00 265.35 -13.2
2017 45,224 7.69 7.00 333.99 +26.7
2018 65,192** 7.87 7.00 340.51 +4.0
2019 49,402 8.64 8.50 292.91 -11.9
2020 30,455 4.72 5.00 202.74 -27.9
*Adjusted for five for one stock split in 2013.
** Total assets increased pursuant to the rollover of Jupiter
Dividend & Growth Trust PLC
Investment adviser's review
Market background
It has been an extraordinary 12 months for global equity
markets, and of course one of significant change for the company,
with the appointment of Richard Buxton as the new lead fund
manager.
In the first half of the year, equity market performance
globally had been encouraging as US-China tensions appeared to be
abating with the agreement of a "phase one" trade deal while global
central banks took action to reduce interest rates. The UK had been
a relatively strong performer in this context, reflecting the
Brexit deal agreed by Prime Minister Johnson in October and his
subsequent re-election in December with an 80-seat majority. The
latter event proved particularly supportive for more
domestically-focused UK stocks, with the removal of uncertainty and
the avoidance of a Jeremy Corbyn government driving a meaningful
rally in the FTSE-250 Index and an increase in consumer confidence.
Following the turn of the calendar year, to an extent, some of this
enthusiasm for UK domestically-focused stocks diminished as the
newly formed Conservative majority government began to set out a
vision for the UK's future trading relationship with the EU that
was more limited than that previously proposed by the UK government
and which some in the market had expected.
However, by far the most material event in markets, the economy
and society was the spread of the Covid-19 virus in early 2020.
Global markets had remained relatively robust in January and early
February despite the lockdown of the Chinese city of Wuhan in late
January. However, with the emergence of the virus in Europe and the
rapid spread of Covid-19-related deaths in Northern Italy, markets
began to drop significantly in late February. At the trough in
mid-March, the FTSE All Share Index was down 35.9% from the 2020
peak while the S&P 500 Index was down 33.9%. This represented
one of the most rapidly forming bear markets in history as
governments took unprecedented action to restrict the movements of
their citizens in order to slow the spread of the virus. By early
April, almost half of the world's population was under some kind of
government restriction on their activity, with almost 1.5bn under
strict lockdown conditions.
The rapid emergence of the pandemic and the economic effects of
the lockdowns implemented brought forth an unprecedented fiscal and
monetary response from global governments. The IMF estimated that
$9trn of global fiscal stimulus has been announced since the onset
of the Covid-19 crisis, while central bank base rates have tumbled
with the US rate now at 0%-0.25% and the UK base rate at 0.1%.
Reflecting this extraordinary support, markets rallied
significantly with the S&P 500 Index up 38.57% by the end of
June from the trough in March and the STOXX Europe 600 up
28.85%.
Globally, markets continue to struggle to balance the support
provided by governments against the ongoing impacts of Covid-19,
with a particular focus on the improvement in economic activity
expected as governments tentatively unlock their societies and on
the adverse developments in unemployment that may emerge as
government income support schemes are curtailed. Sector performance
continues to be substantially affected by divergent vulnerabilities
to the virus, with those less affected (such as technology,
healthcare and consumer staples) showing strong performance and
those substantially affected (aerospace, leisure travel) continuing
to struggle. Against this backdrop, the UK has been a relatively
weaker performer with the FTSE All Share Index down 13% in the past
year. In part, this reflected the market's sectoral focus on oil
and gas, financials and energy and in part the ongoing Brexit
process, where the two parties still struggle to reach agreement on
a future trade relationship. Notably, it has been a particularly
challenging environment for cash returns to shareholders, with UK
company dividends down 57% in the second quarter of the calendar
year 2020 relative to the same period in 2019, which has weakened
the yield support for many UK company share prices.
Performance review
Overall it was a very challenging year for the portfolio with
the company's share price falling by 33.6% and NAV by 30.6% (both
with dividends paid added back), a substantial underperformance
relative to the FTSE All Share Index which fell by 13% on a total
return basis. Over the year, performance was very volatile with the
company's shares up 11.7% in the first six months of the year,
ahead of the FTSE All Share Index up 5.5%, and then substantially
underperforming in March. Overall, prior to the transition of
manager in early April, the company's shares were down 39.9% since
the start of the year, relative to the FTSE All Share down 22.4%.
Since the transition of manager until 30 June 2020, the company's
shares have outperformed the index by 1.71%, increasing by 13.89%
overall.
Performance prior to the manager transition
Prior to the transition in manager, the company had been
positioned for a recovery in UK domestic valuations as political
uncertainty diminished and confidence returned, and more generally
for a positive turn in the global economy as US-China relations
normalised and the benefit of reduced interest rates was felt. This
positioning however proved to be highly problematic as Covid-19
took effect depressing the valuations and earnings of cyclically
exposed companies and smaller companies globally.
Over the course of the year prior to April, the principal
detractors from performance were those companies most exposed to
the effects of Covid-19 such as those in the leisure, consumer
aerospace and financial sectors. Cineworld was the worst performer
in the portfolio during the period as to lockdowns resulted in the
closure of all of its cinemas in the UK and US. Additional concerns
about its high debt burden were exacerbated by the proposed
acquisition of the Canadian chain Cineplex which drove the share
price down 85% during the period. The company's exposure to the
wider aerospace sector through aero and auto manufacturer Melrose
and airline IAG were also significant detractors as airlines were
either required to ground their fleets or did so in response to a
collapse in customer volumes. The company has remained a
shareholder in both of these businesses due to their strong market
positions and positive progress in securing incremental
liquidity.
Performance was also adversely affected by the company's
holdings in ITV, Taylor Wimpey and DFS, all of which suffered from
lockdown restrictions and from a broader significant reduction in
consumer confidence. ITV was forced to cease production of new
content at its studios, it lost the opportunity to broadcast
sporting events such as this summer's cancelled European Football
Championship and also suffered from a material reduction of
advertising spending by other adversely-affected sectors. Both
Taylor Wimpey and DFS were forced to close their manufacturing
sites and sales facilities. As providers of products heavily
reliant on consumer discretionary incomes, both suffered from
market scepticism regarding their near-term prospects. The company
has retained a holding in Taylor Wimpey reflecting its strong
market position, rapid reopening, remarkably strong consumer demand
and support from very low interest rates and government action on
stamp duty.
The company's significant holdings in the UK domestic financial
sector, which had performed strongly earlier in the year, were also
substantial detractors to returns. Here, Arrow Global, a purchaser
of defaulted consumer debt, was among the worst performers as
pre-existing market concerns regarding leverage met with market
scepticism regarding the quality of the assets in a broader
macroeconomic downturn. The company's holdings in Lloyds Banking
Group, RBS and Virgin Money also detracted as the regulator
required banks to halt dividend payments while concerns rose about
earnings and asset quality as interest rates fall and unemployment
rises. The company has retained a holding Lloyds Banking Group,
reflecting its strong market position and high quality management,
and Barclays, where significant exposure to capital markets
activity and the US market provide some offset to low interest
rates and UK domestic difficulties.
Lastly, prior to the onset of the pandemic, the company's
holding in Sirius Minerals had already adversely impacted
performance. Sirius had been seeking to raise $500 million of high
yield bond financing from the debt market to unlock a $2.5bn
facility from JPMorgan that would have seen the project through to
completion. The company announced however that it would not be able
to proceed with this offering, which left it with insufficient
financing to develop the project. The company was subject to a 5.5p
per share offer from Anglo American in January, which was
accepted.
Reflecting the wider market, positive contributions to returns
were provided by the company's holdings in technology and growth
stocks and overseas stocks, while underweights or void positions in
significantly challenged sectors and businesses (oil and gas, HSBC)
also provided relative support. The leading performer in the
portfolio was Avast, the UK-listed consumer cybersecurity provider.
The company was already enjoying a strong year prior to the
pandemic as progress in winning new customers and rolling out new
products helped to drive strong operational performance. It was
also a significant beneficiary of the crisis as those working from
home sought additional protection from cyber threats. Relative
support was also provided by the company's holdings in Yum China,
Manchester United and Ferrari, all listed overseas. These stocks
benefitted from being substantially non-sterling earners during a
period in which the pound fell against most global currencies.
Having been the first country to be affected by Covid-19, China
pursued a very restrictive but regionally-focused and relatively
short-lived lockdown. This allowed the country to reopen with
confidence earlier than others and consumer activity recovered
strongly, of which Yum China was a beneficiary. Although play had
not restarted by the beginning of April, Manchester United's
significant commercial, sponsorship and broadcasting revenues were
largely unaffected by Covid-19, with talks at the time ongoing to
recommence the season later in the year. Lastly, Ferrari's strong
forward order book coupled with its focus on ultra-high net worth
customers saw the shares perform relatively strongly.
Performance post manager transition
Since the transition in manager, the company's net asset value
has modestly outperformed the market. The company's blend of growth
and value holdings has allowed it to benefit both from strong
recovery among value stocks as government support flowed and
societies began to unlock, while also benefiting from growth
holdings which have continued to show strong operational momentum
during the period and performed well during periods of risk-off
sentiment.
The company's shareholding in Drax has been the largest positive
contributor, supported by its ability to maintain its dividend (a
rare feat in the prevailing market context) and confirmation of its
EBITDA guidance. Another strong performer was GVC which, having
performed very poorly on the Covid-19-related disruption, was able
to bounce back following a trading update on 6 April which outlined
solid revenues and measures to reduce costs and cash outflows and
increase liquidity. The company's continued holding in Barclays has
allowed it to benefit from a recovery in the share price on the
back of very strong operational performance in its investment bank
as Covid-19-related disruption in markets translated into very
robust trading volumes.
Among more growth-oriented stocks, Experian continued to perform
strongly as demand for its credit data and analytical products
remained undiminished by Covid-19. In addition, the company was
able to continue to pay dividends during the period. The company's
holding in Sage also performed well, reflecting its significant
base of subscription contracts and relatively modest
Covid-19-related disruption.
The most significant detractor in the company's portfolio was
travel retail specialist SSP Group. This business was very
materially challenged by Covid-19 disruption as it exclusively
operates at travel-related sites, particularly airports. In June
the business provided an update to the market to the effect that
trading during the lockdown period had been even worse than
expected in March, but that progress on reducing rent, salary and
working capital related outflows had been better than expected.
This was accompanied by confirmation that the business had over
GBP750m of available cash and liquidity. SSP Group has an
attractive market position and brands, effective management and
significant liquidity having already raised cash from shareholders,
and we look forward to a strong recovery once Covid-19-related
travel disruption diminishes.
Also significantly disrupted by Covid-19, Whitbread was a
material detractor to performance. Alongside interim results in May
the business announced a c.GBP1bn rights issue in which the company
participated. Although the rights issue was partly defensive, to
protect the group against significant outflows during lockdown due
to its high fixed cost base, it was also explicitly designed to
allow the business to be in a strong position once unlocking begins
in earnest to take advantage of opportunities which may arise as
other hotel competitors fall into difficulty or sites become
available.
Current strategy and positioning
It is only fair to point out that the strategy to which the
company is now aligned also underperformed during the
February-March sell-off, albeit not to the same degree as the
previous strategy. The UK Alpha strategy, while much more focused
on large cap stocks, nevertheless was not exposed to more defensive
sectors such as tobacco or consumer staples and did have some
similar exposure to both financial stocks and travel-related
companies.
The downturn induced by lockdowns is without precedent, but
equally so has been the response of both central banks and
governments. Provision of liquidity, ensuring access to credit,
direct support to companies, employees and households - all are
designed to preserve as much potential demand and supply as
possible as economies emerge from lockdown.
We know these measures cannot possibly return us immediately to
the status quo ante of 2019. Unemployment will rise and
precautionary savings with it. The recovery from the suspension of
economic activity will be a bumpy one. Capacity will be lost or
curtailed to match weaker demand. But governments will use fiscal
policy and spending on infrastructure to try to support activity.
Moreover, our focus is on those companies which - whether cyclical
or less so - can emerge from this in a stronger position to take
market share.
We are encouraged by recent conversations with companies which
suggest that despite much weaker revenues in the next couple of
years, they still anticipate being able to regain previous levels
of margin through cost-cutting, restructuring or renegotiating with
suppliers. While fully expecting the recovery to be an uneven one,
we are confident there is money to be made from backing long-term
winners through shorter-term headwinds.
Accordingly, the portfolio remains positioned to benefit from
improving economic conditions and is not defensively orientated.
While the stability of revenues at tobacco and consumer staples
companies is attractive in tough times, valuations reflect this -
and they are not without their own challenges. We maintain exposure
to selective growth stocks such as Experian, Fidelity National
Information Services and growth / turnaround company Sage, with a
preference for pharmaceutical and healthcare stocks over consumer
staples.
Our industrial exposure is through mining stocks, engineer Weir,
packaging company DS Smith, materials group CRH and turnaround
specialist Melrose, who are currently working on improving returns
from their acquisition of GKN.
Consumer exposure (excluding travel) is selective: retailers
Tesco, Next and Pets at Home, alongside gaming company GVC. Proven
management or situations turned around where there is scope for the
strong to get stronger in a tough environment. Two of our travel
stocks - SSP Group and Whitbread - have strengthened their balance
sheets in order to do likewise: emerge in a stronger competitive
position against weaker competitors.
Financials holdings are focused on Barclays and Lloyds Banking,
both trading at significant discounts to book value, together with
savings-orientated stocks Prudential and St James's Place.
Richard Buxton
Jupiter Asset Management Limited
Investment adviser
13 October 2020
Investment Portfolio as at 30 June 2020
30 June 2020
Value Percentage
Company GBP'000 of investments
AstraZeneca 1,543 5.1
GlaxoSmithKline 1,503 5.0
Fidelity National Information
Services 1,425 4.7
Rio Tinto 1,404 4.6
Experian 1,372 4.5
GVC Holdings 1,309 4.3
Barclays 1,247 4.1
Sage Group 1,244 4.1
Pets at Home Group 1,167 3.9
Tesco 1,149 3.8
Lloyds Banking Group 1,128 3.7
St James's Place 1,100 3.6
BP 1,071 3.5
Whitbread 1,065 3.5
Prudential 993 3.3
Smith & Nephew 937 3.1
DS Smith 925 3.1
Drax Group 925 3.1
Royal Dutch Shell 'B' 797 2.6
Weir Group 789 2.6
Glencore 764 2.5
Tate & Lyle 726 2.4
Next 718 2.4
SSP Group 686 2.3
Burberry Group 667 2.2
CRH 655 2.2
Vodafone 652 2.2
Taylor Wimpey 642 2.1
Melrose Industries 603 2.0
Micro Focus International 484 1.6
International Consolidated Airlines
Group 383 1.3
Ludgate 181 (Jersey) 189 0.6
Total investments 30,262 100.0
Unquoted
Cross holdings in other Investment Companies
As at 30 June 2020, 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 2020
2019 2020 Equities UK Other
% % % %
5.4 7.1 Basic materials
5.4 - Chemicals - -
- 7.1 Mining 4.6 2.5
12.5 19.1 Industrials
- 2.6 Industrial engineering 2.6 -
9.4 9.2 Support services - 9.2
3.1 4.2 Construction and materials 2.0 2.2
- 3.1 General industrials 3.1 -
12.1 6.7 Consumer goods
- 2.4 Food Producers 2.4 -
2.6 2.1 Household goods and home construction 2.1 -
- 2.2 Personal goods 2.2 -
4.8 - Automobile and parts - -
4.7 - Beverages - -
6.4 13.2 Health care
5.8 10.1 Pharmaceuticals and biotechnology 10.1 -
0.6 3.1 Health care equipment and services 3.1 -
37.9 21.5 Consumer services
21.6 11.4 Travel and leisure 5.8 5.6
- 3.8 Food and drug retailers 3.8 -
12.7 6.3 General retailers 6.3 -
3.6 - Media - -
4.2 2.2 Telecommunications
- 2.2 Mobile telecommunications 2.2 -
4.2 - Fixed line telecommunications - -
1.0 5.7 Information technology
1.0 5.7 Software and computer services 5.7 -
- 6.1 Oil & Gas
- 6.1 Oil and gas producers 6.1 -
3.1 Utilities
- 3.1 Electricity 3.1 -
79.5 84.7 Total non-financials 65.2 19.5
20.5 15.3 Financials
10.0 7.8 Banks 7.8 -
6.7 6.9 Life insurance 6.9 -
0.4 0.6 Non-equity investment instruments 0.6 -
3.0 - Financial services - -
0.4 - Real estate investment and services - -
100.0 2020 Totals 80.5 19.5
100.0 2019 Totals 77.4 22.6
Strategic review
The strategic review seeks to provide shareholders with relevant
information to enable them to assess the performance of the
directors of the company during the period under review. This
report has been prepared in accordance with the Companies Act 2006
(Strategic Report and Directors' Report) Regulations 2013.
Business and status and future developments
The company was incorporated in England & Wales and launched
on 1 January 1972. During the year it carried on business as an
investment trust with its principal activity being portfolio
investment. There has been no significant change in the activities
of the company during the year to 30 June 2020.
The company is a public limited company domiciled in the United
Kingdom and is an investment company within the meaning of section
833 of the Companies Act 2006. The company has been approved by HM
Revenue & Customs ('HMRC') as an investment trust, subject to
the company continuing to meet the eligibility conditions of
sections 1158 and 1159 of the Corporation Tax Act 2010 and the
ongoing requirements for approved companies, as detailed in Chapter
3 of Part 2 of the Investment Trust (Approved Company) (Tax)
Regulations 2011.
The company is not a close company within the meaning of the
provisions of the Corporation Tax Act 2010. In the opinion of the
directors, the company continues to conduct its affairs in the
appropriate manner to retain its status as an investment trust.
As noted in the Chairman's statement above, in the wake of
further losses incurred and the reduced market capitalisation of
the company, the board has come to the conclusion that they are no
longer likely to be able to grow the company in its present form by
attracting significant new investors in the foreseeable future.
Following the announcement on 28 September 2020, the board has
therefore been considering the best options for the future of the
company and its shareholders and currently believe that the best
option is to liquidate the company so that shareholders will have
the option to receive cash or, if possible, the ability to roll
over their investment into another investment vehicle.
Investment objective and strategy
There has been no change to the company's investment objective,
that being to concentrate on capital appreciation from holding
predominantly listed investments. While there are no specific
individual stock, sector, geographical or market capitalisation
limitations or weightings applicable, the manager will invest
principally in companies which are listed in and/or which undertake
a significant proportion of their business in the United
Kingdom.
Dividend policy
While the board has in the past stated its ambition to maintain
the dividend at the level paid in the preceding financial year,
there has clearly been a radical and material change in the
company's circumstances which the directors believe warrants a
change in the dividend for the financial year to 30 June 2020. The
economic disruption caused by Covid-19 has led to a significant
reduction in the expected investment income from a number of
companies in our portfolio and if the proposal to liquidate the
company is approved, this year's dividend will be the final
dividend that the company will pay.
Having discussed a number of alternatives for determining an
appropriate level of dividend, the board judges that in the
circumstances it is most sensible to base it broadly on the amount
of investment income received, net of the company's attributable
expenses. The board is recommending payment of a final dividend of
5.0p per share to shareholders for approval at this year's AGM. The
net revenue received after tax during the year was GBP745,744,
equivalent to 5.08p per share as at 18 September 2020. The dividend
payment is therefore 100% covered by net revenue for the financial
year.
While the company does have revenue reserves of GBP1.1m which
could have been used to cover a higher dividend payment, as some
other investment trusts have done in response to the pandemics, the
board's view is that in the light of the potential liquidation in a
few months' time, the fairest outcome is to retain the revenue
reserves in the company's balance sheet so that in due course they
can be distributed to shareholders either as cash or as capital to
be rolled over into another investment vehicle.
Loan facility and gearing
In order to improve the potential for capital returns to
shareholders, the company had access to a flexible loan facility
with Scotiabank Europe plc for amounts up to GBP22 million, with a
commitment of GBP12 million. The finance costs shown in the
statement of comprehensive income are in respect of the costs
incurrent for non-utilisation of the facility, up to the commitment
amount, during the year to the end of the loan term.
The facility expired on 24 September 2020 and has not been
renewed.
Short positions
The company has the flexibility to take short positions (using
contracts for difference) in respect of a small number of larger
capital securities. The directors have set limits to the overall
exposures and performance is monitored on a regular basis. During
the year to 30 June 2020 no short positions were initiated or
outstanding.
Performance review
At their quarterly board meetings the directors consider a
number of performance indicators in order for them to assess the
company's progress towards its objectives. The key performance
indicators used to measure the performance of the company over time
include:
-- Net asset value ('NAV') changes over time;
-- Ordinary share price movement;
-- The performance of the ordinary share price and NAV relative to the benchmark;
-- Changes in the discount to NAV over varying periods;
-- Performance versus the company's peer group;
-- The dividend yield and level of revenue cover.
A history of the net asset values, the price of the ordinary
shares and the benchmark index are shown on the monthly factsheets
which can be viewed on the investment adviser's website
www.jupiter.com/JUKG and which are available from the company
secretary.
Discount to the net asset value
The board's stated policy is to use share buybacks and new
issues of shares to ensure that, in normal market conditions, the
market price of its shares will closely track the net asset value
per share. The commitment to active management of discount and
premium is designed to produce improved liquidity for both buyers
and sellers of the company's shares. During the 12 months to 30
June 2020, the company repurchased a total of 1,844,176 shares for
holding in treasury during the year under review at an average
discount of 4.52%.
Benchmark index
The company's investment portfolio is not constructed in order
to track the performance of a benchmark and will typically differ
significantly in composition from the most commonly used UK market
indices. When reporting and reviewing performance the board uses
the FTSE All-Share Total Return Index as its primary benchmark.
Management
The company has no employees and most of its day to day
responsibilities are delegated to Jupiter Asset Management Limited
('JAM'), which act 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
annual report and accounts. JAM and JUTM are part of the Jupiter
Group which comprises Jupiter Fund Management PLC and all of its
subsidiaries ('Jupiter').
J.P. Morgan Europe Limited ('JPMEL') acts as the company's
depositary. The company has also 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.
Principal risks
The principal and emerging 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
underperformance against the prescribed benchmark index and the
company's peer group. The board manages these risks by ensuring a
diversification of investments and regularly reviewing the
portfolio asset allocation and investment process. In addition,
certain investment restrictions have been set and these are
monitored as appropriate.
Investment strategy and share price movement
The company is exposed to the effect of variations in the price
of its investments. A fall in the value of its portfolio will have
an adverse effect on shareholders' funds. It is not the aim of the
board to eliminate entirely the risk of capital loss, rather it is
its aim to seek capital growth. The board reviews the company's
investment strategy and the risk of adverse share price movements
at its quarterly board meetings taking into account the economic
climate, market conditions and other factors that may have an
effect on the sectors in which the company invests. There can be no
assurances that depreciation in the value of the company's
investments will not occur, but the board seeks to reduce that
risk.
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. Further details of the management of this risk
can be found in the notes to the annual report and accounts.
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 the
investment adviser 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, could lead to an inability to provide
accurate reporting and monitoring. The board regularly reviews the
investment adviser's and the administrator's statements on their
business continuity planning.
Financial
Inadequate financial controls could result in misappropriation
of assets, loss of income and debtor receipts and inaccurate
reporting of net asset value per share. The board annually reviews
the investment adviser's report on its internal controls and
procedures.
Emerging risks and uncertainties
Covid-19
The outbreak of the Covid-19 pandemic poses additional risks to
the company beyond the risks described under market risks above.
They include liquidity risks to markets, risks associated with the
maintenance of the current dividend policy and business continuity
risks for the investment adviser. Each of these risks is being
assessed on a day to day basis by the investment adviser.
Regulatory risk
The company operates in a complex regulatory environment and
faces a number of regulatory risks. A breach of section 1158 of the
Corporation Tax Act 2010 could result in the company being subject
to capital gains tax on portfolio movements. Breaches of other
regulations such as the UKLA Listing Rules could lead to a number
of detrimental outcomes and reputational damage. Breaches of
controls by service providers such as the investment adviser could
also lead to reputational damage or loss. The board monitors
regulatory risks at its quarterly board meetings and relies on the
services of its company secretary, investment adviser 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.
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.
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 AGM to purchase
ordinary shares as a method of controlling the discount to net
asset value and enhancing shareholder value.
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.
Economic Risk
The board reviews the company's investment strategy on a regular
basis, taking into account the economic climate and impact of share
price fluctuations in UK equities.
Enterprise risk is reviewed twice a year, taking into its remit
emerging risks as they become immediate, whist still maintaining a
long-term perspective where they are evolving at a fast rate.
Monitoring the Brexit process and its implications for the company
remains a priority for the directors and our investment adviser
bearing in mind that the company seeks to invest principally in
companies which are listed in and/or undertake a significant
proportion of their business in the UK.
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-party suppliers. There are therefore no disclosures to
be made in respect of employees.
The board has noted the investment adviser's policy on
environmental, social and human rights issues as detailed
below:
The investment adviser considers various factors when evaluating
potential investments. While an investee company's policy towards
environmental and social responsibility, including with regard to
human rights, is considered as part of the overall assessment of
risk and suitability for the portfolio, the investment adviser does
not necessarily decide to, or not to, make an investment on
environmental and social grounds alone.
Integration of environmental, social and governance ('ESG')
considerations into the investment adviser's investment process
JAM has a 30 year record of integrating ESG factors into the
investment process. Its Governance and Sustainability team
leverages its relationships with partner organisations such as the
UN Principles for Responsible Investment (UN PRI), the Investor
Forum and Institutional Investors Group on Climate Change (IIGCC)
and regularly engages with these and other industry bodies to
ensure it remains at the forefront of ESG integration. Where
relevant, lessons learned are disseminated across JAM's wider
investment team via its Stewardship Committee.
The investment adviser fully endorses the principles of the UN
Global Compact and would expect investee companies to meet its
criteria, although accepts that engagement with companies may
demonstrate that past failings are being addressed. There are
companies within our investment universe in which we would never
invest as they are unlikely to meet our responsible investment
criteria. Companies may be listed in London but operate in
geographies where we are uncomfortable about assurances regarding
working practices, ethical behaviour or levels of disclosure.
Unmanageable conflicts of interest between owner-managers and
minority shareholders would be another example. For other
companies, we may factor in a higher cost of capital or lower
valuation to reflect financial or reputational risks arising from
our responsible business analysis. This may also be reflected in
lower position sizes in holdings.
Modern slavery
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, property nor has employees of its own. It
therefore does not have responsibility for any other emissions
producing sources under the Companies Act 2006 (Strategic Report
and Directors' Reports) Regulations 2013.
Viability statement
In accordance with Provision 36 of the Code of Corporate
Governance as issued by the Association of Investment Companies in
February 2019 (the 'AIC Code'), the board has considered the longer
term prospects for the company.
In assessing the viability of the company the board has
considered the reduced market capitalisation of the company and the
size threshold below which the company would be considered
uneconomic or unviable; the company's performance and its
attractiveness to investors in the current environment. The board
has concluded that it is unlikely to be able to grow the company in
its present form by attracting significant new investors in the
forseeable future. The board currently believe that the best option
is to liquidate the company so that shareholders will have the
option to receive cash or, if possible, the ability to roll over
their investment into another investment vehicle. Consequently, the
period assessed for the purpose of the statement is to the proposed
liquidation date.
As part of its assessment of the viability of the company, the
board has considered the liquidity of the company's portfolio to
ensure that it will be able to meet its liabilities as they fall
due. The board notes that as part of the new arrangements agreed
with Jupiter during the financial year, the company will not be
charged a base management fee for the period 1 January 2020 to 31
December 2020 and no significant increase to ongoing charges or
operational expenses is expected. The board also notes that the
level of gearing in the company is nil and the loan facility held
by the company to September 2020 has not been renewed. The board
has considered the principal and emerging risks and uncertainties
which may affect the company as detailed in the annual report and
accounts including a review of the operational resiliency of the
company's key service providers in response to Covid-19.
Having considered these factors, the board has concluded that
there is a reasonable expectation that the company will be able to
continue in operation to the proposed liquidation date and meet its
liabilities as they fall due over the next year .
Section 172 statement
Under section 172 of the Companies Act 2006, the directors have
a duty to act in good faith and to promote the success of the
company for the benefit of its shareholders as a whole. This
includes taking into consideration the likely consequences of their
decisions in the long term and on the company's stakeholders such
as its shareholders, employees and suppliers, while acting fairly
between shareholders. The directors must also consider the impact
of the company's decisions on the environment, the community and
its reputation for maintaining high standards of business
conduct.
The company's service providers facilitate the directors'
ability to discharge this duty by, amongst other things, providing
them with relevant information and training on their duties. The
company also ensures that information pertaining to its
stakeholders is provided, as required, to the directors as part of
the information presented in regular board meetings in order that
stakeholder considerations can be factored into the board's
decision making. The directors' responsibilities are also set out
in the schedule of matters reserved for the board and the terms of
reference of its committees, both of which are reviewed regularly
by the board. At all times the directors can access as a board, or
individually, advice from its professional advisers including the
company secretary and independent external advisers.
The company's investment objective, to achieve capital growth
over the long term, supports the directors' statutory obligations
to consider the long term consequences of the company's
decisions.
The company does not have employees but the board is fully aware
of its responsibilities in overseeing the investment manager with
respect to the stewardship of the underlying assets which underpins
commitment to wider stakeholders.
The company's biggest environmental impact is not through
operations but its investments. The investment manager is delegated
to consider material environmental issues and the board will
examine these issues as part of its wider oversight duties.
Engagement with suppliers, customers and others and the effect
on principal decisions
The Shareholders - The shareholders of the company are both
institutional and retail and details of those with substantial
shareholdings are detailed in the annual report and accounts. The
board is committed to listening to the views of its shareholders
and giving useful and timely information by providing open and
accessible channels of communication including those listed
below.
The AGM - The company encourages participation from shareholders
at its AGMs where they can communicate directly with the directors
and investment adviser. In view of the alternative arrangements for
the AGM this year as a result of Covid-19, shareholders are invited
to submit any questions in advance of the AGM to Magnus.Spence@
jupiteram.com. Subject to confidentiality, we will respond to any
questions submitted either direct or by publishing our response on
the company's website. All views of the shareholders will be taken
into consideration and action taken where appropriate.
Online information - The company website contains the annual and
half yearly financial report along with monthly factsheets and
commentaries from the investment adviser. The daily NAV per share,
monthly top ten portfolio listings, dividend announcements and
various regulatory announcements can be found on the regulatory
news service of the London Stock Exchange.
Shareholder communications
Shareholders can raise issues or concerns at any time by writing
to the Chairman at the registered office. Further details about how
the board incorporates the views of the company's shareholders in
its decision making process can be found in the UK stewardship code
and the exercise of voting powers section in the annual report and
accounts. Further information about how the board ensures that each
director develops an understanding of the views of the company's
shareholders and can be found in corporate governance statement in
the annual report and accounts.
The investment adviser
The board and the investment adviser maintain an open and
constructive relationship, with meetings taking place a minimum of
four times per annum with monthly updates and additional meetings
as circumstances require. During the year, additional meetings were
held with the investment adviser to discuss transitional management
arrangements prior to Richard Buxton assuming lead fund management
responsibility for the portfolio and to discuss the portfolio with
Mr Buxton on his appointment. The audit committee meets at least
twice a year and as part of its role considers the internal
controls put in place by the investment adviser. The 'Management of
the company' section in the annual report and accounts details the
board's consideration of the investment adviser's performance, its
terms of appointment and their annual assessment of its continued
stewardship of the portfolio and its oversight of the
administrative functions.
The day to day responsibilities of the company are delegated to
the investment adviser who is the key service provider and supplies
investment management, administration and company secretarial
services. The investment adviser oversees the activities of the
company's other third-party suppliers on behalf of the company and
maintains open and collaborative relationships to maintain quality,
efficiency and cost control through regular communication with
dedicated members of the investment adviser's operational teams.
The board regularly reviews reports from its investment adviser,
the AIFM, the depositary, the company broker, the investor
relations research provider and the auditor. These provide vital
information concerning changes in market practice or regulation
which affect the company and assist the board in its
decision-making process. Representatives from these providers
attend company board meetings and give presentations on a regular
basis enabling in depth discussions concerning both their findings
and their performance.
Other third-party service providers
As an externally managed investment company with no employees or
physical assets, the principal stakeholders of the company are its
shareholders, investment adviser, AIFM, depositary, custodian,
administrator and registrar. The continuance, or otherwise, of
engagement of key third-party service providers are principal
decisions taken by the board, with the support of its management
engagement committee.
Principal decisions
The directors take into account s172 considerations in all
material decisions of the company. Examples of this can be seen as
follows:
-- On 4 October 2019, the board announced that it had decided to
review the company's investment strategy following a period of poor
performance. This was a comprehensive exercise which considered
various alternatives, including the adoption of an alternative
manager from within Jupiter, the appointment of another fund
management company as investment manager and the liquidation of the
company together with a rollover into another listed investment
company. As part of this process, the board engaged extensively
with its professional advisers and discussed the potential impact
of all proposals on the company's stakeholders.
-- At the conclusion of this review, the board reached an
agreement with Jupiter, for Richard Buxton to assume lead fund
management responsibility for the company following shareholder
approval of Jupiter's proposed acquisition of Merian. It was agreed
that the company's portfolio would be managed in line with the UK
Alpha strategy which has generated a strong long-term performance
record consistent with the company's investment objective and
policy
-- Under the new arrangements agreed with Jupiter, the board
agreed with Jupiter that the company would not be charged a base
management fee for the period from 1 January 2020 to 31 December
2020.
-- In light of the Covid-19 pandemic and measures taken to
contain the outbreak, Jupiter advised that there would be a delay
in seeking shareholder approval for the Merian acquisition at
Jupiter's AGM, thereby delaying Mr Buxton's appointment as lead
fund manager. Taking into consideration the potential impact of
this delay on the company's stakeholders, the board agreed with
Jupiter that a transitional management team comprising senior
members of Jupiter's investment team and led by Stephen Pearson,
the Chief Investment Officer of Jupiter, would assume
responsibility for the investment management of the company and
fully transitioned the company's investment portfolio to align with
the UK Alpha strategy in advance of Richard's appointment, which
took place in May 2020.
-- Taking into consideration the rise in status of Covid-19 to a
pandemic and the transition of portfolio management arrangements as
described above, the board increased its monitoring of the
portfolio and held more frequent discussions with the investment
adviser to discuss portfolio performance, discount management, and
oversight of key suppliers to ensure the safety of working
conditions and continuity of operational functions.
-- Notwithstanding the appointment of a new lead fund manager,
the board kept the company's management arrangements under review
while the economic and market backdrop evolved over the course of
the year and remained cognisant of the company's reduced market
capitalisation. Having consulted with its advisors, the board came
to the conclusion that it was no longer likely that it would be
possible to grow the company in its present form by attracting
significant new investors. The board advised shareholders on 28
September 2020 that it was considering options for the future of
the company and currently believes that the best option is to
liquidate the company so that shareholders will have the option to
receive cash or, if possible, the ability to roll over their
investment into another investment vehicle. The board is discussing
options with its advisers and welcomes any suggestions from
shareholders regarding the future of the company. Shareholders can
submit suggestions to jukg.shareholder@jpmorgan.com
In summary
The structure of the board and its various committees and the
decisions it makes are underpinned by the duties of the directors
under s172 on all matters. The board firmly believes in taking into
account the interests of all the company's key stakeholders.
For and on behalf of the board:
Tom H Bartlam
Chairman
13 October 2020
Statement of directors' responsibilities in relation to the
financial statements
The directors are responsible for preparing the annual report
and financial statements in accordance with applicable United
Kingdom law and those International Financial Reporting Standards
('IFRS') as adopted by the European Union.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the company and of the return or
loss of the company for that period. In preparing the financial
statements, the directors are required to:
(a) select suitable accounting policies in accordance with IAS 8
accounting policies, changes in accounting estimates and errors and
then apply them consistently;
(b) present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
(c) provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance;
(d) state that the company has complied with IFRS, subject to
any material departures disclosed and explained in the financial
statements; and
(e) make judgements and estimates that are reasonable and prudent.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the company financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, directors' report,
directors' remuneration report and statement of corporate
governance that comply with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website www.jupiteram.com/JUKG.
The work carried out by the auditor does not include
consideration of the maintenance and integrity of the website and
accordingly the auditor accepts no responsibility for any changes
that have occurred to the financial statements when they are
presented on the website.
The financial statements are published on www.jupiteram.com/JUKG
which is a website maintained by Jupiter Asset Management
Limited.
Visitors to the website need to be aware that legislation in the
United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Each of the directors, confirms to the best of their knowledge
that:
(a) the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company;
(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
13 October 2020
Statement of comprehensive income for the year ended 30 June
2020
Year ended 30 June 2020 Year ended 30 June 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on investments at
fair value - (13,494) (13,494) - (9,246) (9,246)
Income 1,168 - 1,168 1,998 - 1,998
Other income 1 - 1 94 - 94
Foreign exchange (loss)/gain - (3) (3) - 222 222
Gross (loss)/return 1,169 (13,497) (12,328) 2,092 (9,024) (6,932)
Investment management fee (30) (90) (120) (66) (197) (263)
Other expenses (359) (13) (372) (374) (15) (389)
Total expenses (389) (103) (492) (440) (212) (652)
Net return/(loss) before
finance costs 780 (13,600) (12,820) 1,652 (9,236) (7,584)
Finance costs (16) (48) (64) (54) (165) (219)
Return/(loss) on ordinary
activities 764 (13,648) (12,884) 1,598 (9,401) (7,803)
Taxation (18) - (18) (26) - (26)
Net return/(loss) after
taxation 746 (13,648) (12,902) 1,572 (9,401) (7,829)
Return/(loss) per ordinary
share 4.72p (86.43)p (81.71)p 8.64p (51.66)p (43.02)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 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 2020
2020 2019
GBP'000 GBP'000
Non current assets
Investments held at fair value through
profit or loss - 51,857
Current assets
Investments held at fair value through
profit and loss 30,262 -
Receivables 152 376
Cash and cash equivalents 153 1,536
305 1,912
Total assets 30,567 53,769
Current liabilities
Payables (112) (4,367)
Total assets less current liabilities 30,455 49,402
Capital and reserves
Called up share capital 1,486 1,486
Share premium 50,461 50,461
Capital redemption reserve 683 683
Retained earnings* (22,175) (3,228)
Total equity shareholders' funds 30,455 49,402
--------------------------------------- -------- -------
Net Asset Value per ordinary share 202.7p 292.9p
--------------------------------------- -------- -------
* Under the company's articles of association any dividends are
distributed only from the revenue reserve
Statement of changes in equity for the year ended 30 June
2020
Capital
Share Share redemption Retained
capital premium reserve earnings Total
For the year ended 30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 June 2019 1,486 50,461 683 (3,228) 49,402
Net loss for the year - - - (12,902) (12,902)
Dividends paid* - - - (1,365) (1,365)
Ordinary shares repurchased - - - (4,680) (4,680)
Balance at 30 June 2020 1,486 50,461 683 (22,175) 30,455
-------------------------------- ------- ------- ---------- -------- ----------
Capital
Share Share redemption Retained
capital premium reserve earnings Total
For the year ended 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 June 2018 1,486 50,461 683 12,562 65,192
Net return for the year - - - (7,829) (7,829)
Dividends paid* - - - (1,296) (1,296)
Ordinary shares repurchased - - - (6,665) (6,665)
Balance at 30 June 2019 1,486 50,461 683 (3,228) 49,402
-------------------------------- ------- ------- ---------- -------- ----------
*Dividends paid during the period were paid out of revenue
reserves.
Statement of cash flow for the year ended 30 June 2020
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
Cash flows from operating activities
Dividends received 1,533 1,943
Investment management fee paid (183) (282)
Deposit interest received 1 94
Other cash expenses (673) (224)
Net cash inflow from operating activities
before taxation 678 1,531
Interest paid (64) (225)
Taxation (18) (26)
Net cash inflow from operating activities 596 1,280
------------------------------------------- ---------- ----------
Cash flow from investing activities
Purchases of investments (35,434) (23,836)
Sales of investments 43,503 33,832
Net cash inflow from investing activities 8,069 9,996
------------------------------------------- ---------- ----------
Cash flow from financing activities
Shares repurchased (4,680) (6,665)
Equity dividends paid (1,365) (1,296)
Short term bank loan repaid (4,000) (13,000)
Net cash outflow from financing activities (10,045) (20,961)
------------------------------------------- ---------- ----------
Decrease in cash (1,380) (9,685)
Change in cash and cash equivalents
Cash and cash equivalents at start
of year 1,536 10,999
Realised (loss)/gain on foreign currency (3) 222
Cash and cash equivalents at end of
year 153 1,536
Notes to the Accounts for the year ended 30 June 2020
1. Accounting policies
The accounts comprise the financial results of the company for
the year to 30 June 2020. The accounts are presented in pounds
sterling, as this is the functional currency of the company. The
accounts were authorised for issue in accordance with a resolution
of the directors on 13 October 2020. 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 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.
As described in the Chairman's statement above, in the wake of
further losses incurred and the reduced market capitalisation of
the company, the board has come to the conclusion that they are no
longer likely to be able to grow the company in its present form by
attracting significant new investors in the foreseeable future. The
board has therefore been considering the best options for the
future of the company and its shareholders and currently believe
that the best option is to liquidate the company so that
shareholders will have the option to receive cash or, if possible,
the ability to roll over their investment into another investment
vehicle. These options will be subject to shareholder approval. As
a result of the above conclusion the directors' have concluded that
it is no longer appropriate for these financial statements to be
prepared on a going concern basis. As such, these financial
statements have been prepared on a basis other than the going
concern basis and, in accordance with IAS 1, the company has made
an assessment of the carrying value of its assets and have
concluded that the carrying value of its assets are reflective of
their recoverable amount. The company's investments which were
previously classified as non-current assets have now been
classified as current assets.
A summary of the principal accounting policies, all of which
have been applied consistently throughout the period, is set out
below:
(a) Income recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business.
Revenue includes dividends from investments quoted ex-dividend
on or before the date of the statement of financial position.
Dividends receivable from equity shares are taken to the revenue
return column of the statement of comprehensive income.
Special dividends are reviewed on a case by case basis to
determine if the dividend is to be treated as revenue or
capital.
Deposit and other interest receivable, expenses and interest
payable are accounted for on an accruals basis. These are
classified within operating activities in the statement of cash
flow.
Underwriting commission is taken to income and recognised when
the issue takes place, except where the company is required to take
up all or some of the shares underwritten, in which case an
appropriate proportion of the commission received is deducted from
the cost of those shares.
(b) Presentation of statement of comprehensive income
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the statement of
comprehensive income between items of a revenue and capital nature
has been presented alongside the statement. In accordance with the
company's articles of association, net capital returns may not be
distributed by way of dividend.
An analysis of retained earnings broken down into revenue
(distributable) items and capital (non-distributable) items is
given in the notes to the annual report and accounts. Investment
management fees and finance costs are charged 75% to capital and
25% to revenue. All other operational costs including
administration expenses (but with the exception of any investment
performance fees which are charged to capital) are charged to
revenue.
(c) Basis of valuation of investments
Investments are recognised and derecognised on a trade date
where a purchase and sale of an investment is under contract whose
terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured at
cost, being the consideration given.
All investments are classified as held at fair value through
profit or loss. All investments are measured at fair value with
changes in their fair value recognised in the statement of
comprehensive income in the period in which they arise. The fair
value of listed investments is based on their quoted bid price at
the reporting date without any deduction for estimated future
selling costs.
Foreign exchange gains and losses on fair value through profit
and loss investments are included within the changes in the fair
value of the investments.
For investments that are not actively traded and/or where active
stock exchange quoted bid prices are not available, fair value is
determined by reference to a variety of valuation techniques. These
techniques may draw, without limitation, on one or more of: the
latest arm's length traded prices for the instrument concerned;
financial modelling based on other observable market data;
independent broker research; or the published accounts relating to
the issuer of the investment concerned.
(d) Finance costs
Interest-bearing bank loans and overdrafts are recorded at the
proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis to the
statement of comprehensive income using the effective interest
method and are added to the carrying amount of the instrument to
the extent that they are not settled in the period in which they
arise.
(e) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and that are subject
to insignificant risks of changes in value.
(f) Bank interest
Bank interest is recognised in the statement of comprehensive
income in the period in which it is incurred. Bank interest is
directly charged 25% to revenue and 75% to capital.
(g) Foreign currencies
Transactions in currencies other than pounds sterling are
recorded at the rates of exchange prevailing on the dates of the
transactions. At the date of each statement of financial position,
monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on that date.
Non-monetary assets and liabilities carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Gains
and losses arising on retranslation are included in net profit or
loss for the year, except for exchange differences arising on
non-monetary assets and liabilities where the changes in fair value
are recognised directly in equity.
(h) Treasury shares
In accordance with the relevant provisions of the Companies Act
2006 any ordinary shares repurchased, pursuant to the above
authority, may be held in treasury. These ordinary shares may
subsequently be cancelled or sold for cash. This would give the
company the ability to reissue shares quickly and cost effectively
and provide the company with additional flexibility in the
management of its capital. On reissue of these shares the profit
element is allocated to share premium.
The company may hold in treasury any of its ordinary shares that
it purchases pursuant to the share buyback authority granted by
shareholders.
(i) Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The company's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the date
of the statement of financial position.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profit will be available against which
deductible temporary differences can be utilised.
Investment trusts which have approval under section 1158 of the
Corporation Tax Act 2010 are not liable for taxation of capital
gains.
(j) Accounting developments
At the date of authorization of the financial statements, the
following amendment to the IFRS standards and interpretations was
assessed to be relevant and is effective for annual periods
beginning or or after 1 January 2019:
-- IFRIC 23: Uncertainty over Income Tax Treatments
IFRIC 23 has not had an effect on the measurement or disclosure
of amounts recognized within the financial statements of the
company.
At the date of authorisation of the financial statements, the
following standards and interpretations were assessed to be
relevant and are all effective for annual periods beginning on or
after 1 January 2020:
-- IFRS 9, IAS 39 and IFRS 7 Amendments: Interest Rate Benchmark Reform.
The directors expect that the adoption of the standards listed
above will have either no impact or that any impact will not be
material on the financial statements of the company in future
periods.
At 30 June 2020, the company had net current assets of
GBP30,455,000 (30 June 2019: GBP49,402,000). The directors have a
reasonable expectation that the company has sufficient resources to
continue in operational existence until any liquidation date and
for the company to meet its objectives and measure performance
against them. The directors considered the Covid-19 pandemic and
the impact this may have on the company, noting in particular that,
in addition to its net current assets the company holds a portfolio
of largely liquid assets that, if required, can be sold to maintain
adequate cash balances to meet its expected cash flows. The
directors also reviewed scenarios of a significant drop in value of
the assets and noted that they will still be significantly higher
than liabilities. They have also confirmed the resiliency of the
company's key service providers and are satisfied that their
contingency plans and working arrangements are sustainable. The
board has established a framework of prudent and effective
controls, performed periodically by the audit committee, which
enable risks to be assessed and managed.
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. This
allocation is based on an average of long term historic NAV capital
returns.
3. Income
2020 2019
GBP'000 GBP'000
Income from non-current assets:
Dividends from UK companies 937 1,795
Dividends from overseas companies 231 203
1,168 1,998
Other income:
Deposit interest 1 15
Interest from liquidity fund - 79
1 94
1,169 2,092
Income from non current assets
is derived:
Listed on the UK stock exchange 937 1,795
Listed on overseas stock exchanges 231 203
1,168 1,998
4. Investment management fee
2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
management
fee 30 90 120 66 197 263
30 90 120 66 197 263
-------------- ---------------- ---------------- ---------------------- ----------------- ----------------- ----------------------
5. Other administrative expenses
For the year ended 30 June For the year ended 30 June
2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' remuneration 123 - 123 122 - 122
Auditors' remuneration
- audit 34 - 34 34 - 34
Loan facility legal fees 4 11 15 3 10 13
Transaction handling
charges - 2 2 - 2 2
Other 198 - 198 215 3 218
359 13 372 374 15 389
------------------------- --------- --------- -------- --------- --------- --------
6. Dividends
2020 2019
Amounts recognised as distributions to equity GBP'000 GBP'000
holders in the period:
Unclaimed dividends - (10)
2019 dividend of 8.5p (2019: 7.0p) per ordinary
share 1,365 1,306
1,365 1,296
------------------------------------------------ ------- -------
Set out below is the estimated total dividend payable in respect
of the financial year under review, and based on the shares in
issue as at the reporting date which is the basis on which the
requirements of Section 1158 of the Corporate Tax Act 2010 are
considered.
2020 2019
Dividends on equity shares: GBP'000 GBP'000
2020 dividend of 5.0p (2019: 8.5p) per ordinary
share 746 1,181
------------------------------------------------ ------- -------
7. Earnings per ordinary share
The earnings per ordinary share figure is based on the net loss
for the year of GBP12,902,000 (2019 net loss: GBP7,829,000) and on
15,790,045 (2019: 18,198,496) ordinary shares, being the weighted
average number of ordinary shares in issue during the year
excluding shares held in treasury. There were no events in which
the shareholders' ownership of the company was reduced due to the
issuance of new shares. Diluted and undiluted earnings per share
are therefore the same.
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
2020 2019
GBP'000 GBP'000
Net revenue return 746 1,572
Net capital loss (13,648) (9,401)
Net total loss (12,902) (7,829)
------------------------------------------- ---------- ----------
Weighted average number of ordinary shares
in issue during the year 15,790,045 18,198,496
Revenue earnings per ordinary share 4.72p 8.64p
Capital loss per ordinary share (86.43)p (51.66)p
Total loss per ordinary share (81.71)p (43.02)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 GBP30,455,454
(2019: GBP49,402,103) and on 15,021,896 (2019: 16,866,072) ordinary
shares, being the number of ordinary shares in issue at the year
end, excluding ordinary shares held in treasury.
9. Arrangements with related parties
Jupiter Unit Trust Managers Limited ('JUTM'), the Alternative
Investment Fund Manager, is a company within the same group as
Jupiter Asset Management Limited ('JAM') the investment adviser.
JUTM is contracted to provide investment management services to the
company, subject to termination by not less than twelve months'
notice by either party.
JUTM receives an investment management fee as set out below. The
management fee payable to JUTM in respect of the period 1 July 2019
to 30 June 2020 was GBP119,550 with GBPnil outstanding at period
end.
The management fee payable to JUTM is 0.50% of adjusted net
assets (being net assets before deducting or making provision for
any performance fee which may be due and after deduction of the
value of any Jupiter managed investments). This fee will be further
reduced to 0.45% to the extent that the company's adjusted net
assets come to exceed GBP150 million and will be reduced further
still to 0.40% to the extent that the company's adjusted net assets
exceed GBP250 million.
On 18 February 2020, the board announced that it had reached
agreement with Jupiter for Richard Buxton to assume lead fund
management responsibility for the company. The base management fee
charged to the company will continue to calculate as set out above.
However, as part of these new arrangements the board has agreed
with Jupiter that the company will not be charged a base management
fee for the period from 1 January 2020 to 31 December 2020.
JUTM is also entitled to an investment performance fee which is
based on the out-performance of the net asset value per ordinary
share over the total return on the benchmark index (being the total
return on the FTSE All-Share Index) in each accounting period. No
performance fee was payable to JUTM in respect of the year ended 30
June 2020.
Any performance fee payable per ordinary share will equal 15% of
the amount by which the increase in the adjusted net asset value
per ordinary share (being the net asset value per ordinary share
adjusted by adding back any accrual for unpaid performance fee and
any dividends paid or payable by reference to the calculation
period in question) exceeds the higher of:
1) in respect of each subsequent calculation period, the net
asset value per ordinary share on the last calculation date of the
immediately preceding calculation period, as increased or decreased
by the percentage by which the total return of the benchmark index
increases or decreases during the calculation period plus 2%;
2) if applicable, the net asset value per ordinary share on the
last calculation date by reference to which a performance fee was
paid (such calculation date not being before 30 June 2016),
increased or decreased by the total return of the benchmark index
increases or decreases during the calculation period plus 2%;
and
3) the estimated net asset value per ordinary share on Friday, 29 July 2016 (being 285.80p).
In respect of the calculation period ending 30 June 2017, the
turbulent market conditions in the immediate aftermath of the
Brexit referendum resulted in an estimated NAV per share of 265.12p
as at 30 June 2016. Rather than adopt this NAV as the new high
watermark for the then current and subsequent calculation periods
for the purposes of any performance fee accrual, the board agreed
with the manager on 26 September 2016 that it would be appropriate
to adopt the higher estimated NAV of 285.80p as at 29 July 2016 as
its new high watermark for these purposes.
The aggregate of any base management and performance fees
payable to JUTM in respect of any one calculation period is limited
to 2% of the adjusted net assets of the company on the relevant
calculation date.
No management fee is payable by the company to JAM in respect of
the company's holdings in investment trusts, open-ended funds and
investment companies in respect of which Jupiter Fund Management
PLC, or any subsidiary undertaking of Jupiter Fund Management PLC,
receives fees as investment manager or investment adviser. During
the period there were no such investments.
There are no transactions with the directors other than the
remuneration paid to them as disclosed in the directors'
remuneration report and the beneficial interests of the directors
in the ordinary shares of the company.
10. Contingent liabilities and capital commitments
As at 30 June 2020 and 30 June 2019 there were no contingent
liabilities or capital commitments.
11. Post statement of financial position event
Since the year end an additional 346,042 ordinary shares were
repurchased to be held in treasury for prices between 177p and 193p
per share.
12. Post balance sheet events
If approved by the shareholders the company will be liquidated
before the next financial year end.
The board advised shareholders on 28 September 2020 that it was
considering options for the future of the company and currently
believes that the best option is to liquidate the company so that
shareholders will have the option to receive cash or, if possible,
the ability to rollover their investment into another investment
vehicle.
The board hopes to be in a position to update shareholders not
later than the Annual General Meeting in November. It is intended
that a circular be issued to shareholders in due course outlining
the full details of recommended proposals. The circular will also
include a notice for a general meeting of the company, enabling
resolutions to be proposed and voted on by shareholders.
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
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
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:
Magnus Spence
Head of Investment Trusts and Alternatives
Jupiter Asset Management Limited, Company Secretary
investmentcompanies@jupiteram.com
020 3817 1000
14 October 2020
www.jupiteram.com/JUKG
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