Annual Report • Apr 30, 2013
Annual Report
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Annual Financial report for the year ended 30 April 2013
| Objective and Policy | 2 |
|---|---|
| Financial Highlights | 2 |
| Chairman's Statement | 4 |
| Investment Manager's Review | 6 |
| Portfolio of Investments | 9 |
| Directors | 14 |
| Directors' Report | 15 |
| Directors' Remuneration Report | 24 |
| Management Report and Statement of Directors' Responsibilities | 25 |
| Independent Auditor's Report | 26 |
| Consolidated Income Statement | 27 |
| Balance Sheets | 28 |
| Statements of Changes in Equity | 29 |
| Cash Flow Statements | 31 |
| Notes to the Financial Statements | 32 |
| Notice of Annual General Meeting | 46 |
| Information for Shareholders | 51 |
| Investment Manager, Company Secretary and Advisers | 52 |
Annual Financial report
The investment objective of the Company is to achieve above average rates of total return over the longer-term and to achieve a growing dividend stream. The investment policy is to invest mainly in UK and selected international equities, with the potential for investment in limited liability hedge funds, cash and bonds, unquoted investments, derivative instruments and other investments and securities as appropriate.
The Company will not invest more than 15 per cent of its gross assets in securities issued by other UK listed investment companies, including investment trusts.
| Total returns | Year ended 30 April 2013 |
Year ended 30 April 2012 |
|---|---|---|
| Net asset value per ordinary share | (2.8)% | (4.6)% |
| Ordinary share price | 4.5% | (13.9)% |
| FTSE All-Share Index | 17.8% | (2.0)% |
| Revenue and dividends | ||
| Revenue earnings per ordinary share | 2.24p | 1.76p |
| Dividends per ordinary share | 3.05p | 2.95p |
| Ongoing charges (excluding performance fees) | 0.9% | 1.0% |
| Capital | As at 30 April 2013 |
As at 30 April 2012 |
| Net asset value per ordinary share | 296.32p | 307.64p |
| Ordinary share price | 293.00p | 283.25p |
| Gearing | 17.3% | 10.5% |
Source: Artemis/Datastream
| Total returns to 30 April 2013 | 3 years | 5 years | Since 1 June 2003* |
|---|---|---|---|
| Net asset value per ordinary share | 14.4% | 23.5% | 360.4% |
| Ordinary share price | 17.9% | 34.6% | 370.5% |
| FTSE All-Share Index | 31.3% | 31.1% | 142.5% |
* The date when Artemis was appointed as Investment Manager. Source: Artemis/Datastream
Source: Artemis/Datastream
This chart shows the Company's dividend history since Artemis was appointed as Investment Manager.
The year to 30 April 2013 was a disappointing one for the Company. The net asset value total return was (2.8) per cent, with the net asset value falling by 4.2 per cent in the second half of the year. This performance came against a background of an improving stockmarket. The FTSE All-Share Index, which we consider a good proxy for an investment in the UK, rose by 17.8 per cent over the year.
As shareholders are aware, the Company's investment remit is broad and the stock-picking focus of the Investment Manager means that returns are unlikely to track any index. As can be seen from the portfolio composition (pages 9 to 13), there is significant exposure to particular industry sectors and to unquoted investments, reflecting the Investment Manager's highconviction style of investing. Whilst this has been successful over the long term, it can, as has been the case this year, result in performance that diverges from that of the market and the peer group.
Performance was adversely affected by our exposure to unquoted investments, valuations for a number of which were revised down, and by the portfolio's significant exposure to the oil & gas sector. In addition, the AIM market, on which a significant proportion of the Company's investments are listed, had a poor year in relative terms, falling by 8.3 per cent. Further details on the portfolio and performance can be found in the Investment Manager's Review.
I would remind shareholders that an investment in the Company should be seen as long-term in nature. On 1 June 2013, the Company marked 10 years under the management of Artemis, during which time the net asset value has risen by 376.6 per cent. An investment in the UK market over the same period would have produced a return of 142.5 per cent.
As I have indicated above, the carrying values of a number of the Company's unquoted investments were lowered during the year. The largest of these, Hurricane Energy and Vostok Energy, had been working on plans to float or sell their businesses. These plans, however, are taking longer than expected to reach completion. This prompted the Investment Manager to recommend to the Board that the valuations assigned to these investments be lowered. The aggregate impact of these reductions was over 8 per cent of the net asset value. This serves as a reminder of the realisation risks associated with investing in unquoted companies.
There was, however, better news elsewhere in the unquoted portfolio, with upward valuation revisions for The Hut Group and Reaction Engines, both of which
raised new money through share issues. This added around 4 per cent to the Company's net asset value.
One of the attractions of the Company is that investors can obtain exposure to interesting investment ideas not readily accessible through the quoted stockmarkets. The closed-ended nature of the Company makes it well suited to this type of investment, allowing the Investment Manager to take a long-term view of the investee company. We continue to believe that, over the longer term, shareholders will benefit from investment in these types of companies, as they have in the past.
There is more discussion of the unquoted investments, including an overview of the valuation process, in the Investment Manager's Review.
The Company has a £30 million revolving loan facility with Royal Bank of Scotland. At the year-end, £26.5 million was drawn down and £24 million was invested, delivering a gearing level of 17.3 per cent. The Investment Manager has discretion to vary the level of gearing, subject to gearing not being greater than 20 per cent of net assets. The Company's gearing range is zero to 20 per cent.
Your Board has declared a second interim dividend of 1.85p (2012: 1.75p) per ordinary share, bringing total dividends for the year ended 30 April 2013 to 3.05p (2012: 2.95p), an increase of 3.4 per cent. This dividend will be paid on 16 August 2013 to shareholders on the register on 26 July 2013.
Any shareholders wishing to re-invest their dividends can do so using the dividend re-investment plan, details of which are set out on page 51.
The Company bought back 1,535,128 ordinary shares during the year, 3.2 per cent of the share capital, at a cost of £4.3 million and an average discount to the prevailing net asset value of 9.6 per cent. The Board and the Investment Manager are fully committed to having the Company's shares trade at a low and stable discount to the net asset value and will continue to buy back shares whenever required to achieve this. Indeed, between the year end and the date of this report a further 1,751,800 ordinary shares have been bought back.
At the time of writing, the share price stood at a discount of 9.7 per cent to the net asset value.
The Alternative Investment Fund Managers Directive (AIFMD), a European directive that seeks to introduce further protection for investors, comes into force in the UK on 22 July 2013. There is, however, a one-year transitional period and therefore the Company needs to comply with AIFMD by 22 July 2014. Compliance with AIFMD will have an impact on a number of operational matters, as well as the contractual arrangements between the Company and the Investment Manager. We are discussing this new regulation with the Investment Manager and the Company's lawyers to ensure that compliance is achieved in the most efficient and cost effective way.
I plan to step down at next year's AGM. I joined the Board in 2003 and have served as Chairman for the best part of ten years. The appointment of a successor and a replacement director will be addressed by the Board in the coming months.
The annual review also concluded that each of the Directors of the Company should now stand for re-election on an annual basis. Accordingly resolutions for this are being proposed at the Annual General Meeting.
The Company's AGM will take place on Thursday, 12 September 2013 at 12.30 pm at the offices of Artemis Investment Management LLP, Cassini House, 57 St James's Street, London SW1A 1LD. The Notice of Meeting, containing full details of the business to be conducted at the meeting, is set out on pages 46 to 50.
The Directors look forward to welcoming you to the AGM. The fund managers, John Dodd and Adrian Paterson, will make a short presentation at the meeting. There will be light refreshments following the meeting, at which shareholders will have an opportunity to meet the Directors and fund managers. Should you be unable to attend the AGM in person, the Board would encourage you to use your proxy votes by completing and returning the form of proxy enclosed with this report.
Shareholders are reminded that the Investment Manager operates an Investment Plan and an ISA which enable investors to acquire shares in the Company through lump sum or regular investments. More details are set out in the 'Information for Shareholders' section on page 51.
Although a lack of clarity over future monetary policy has resulted in some volatility since the end of the reporting period, markets have broadly moved higher since the New Year. The gains have been underpinned by improvements in the global macro-economic picture and an increase in investor appetite for equities, given the meagre returns available on other asset classes. The US economy is growing again, albeit slowly, but growth in the UK remains stubbornly slow. As events in Cyprus illustrated, there remain unresolved problems in the eurozone. On the other hand, economic trends in emerging Asia, to which the Company has increased its exposure, appear more positive. Overall, although markets can continue to rise, macro headwinds seem likely to persist.
Whilst the Company had a disappointing year, the Investment Manager has, over the course of its 10-year tenure, demonstrated its ability to generate considerable value for shareholders. We therefore remain confident in its ability to continue to produce attractive returns for shareholders over the longer term.
Your Board is always keen to hear from shareholders. Should you wish to do so, you can contact me at [email protected]. You can find regularly updated information on the Company, including a factsheet and performance data, on the Company's dedicated web pages at artemis.co.uk.
A summary of these details and some additional information for shareholders is set out on pages 51 and 52 of this report.
Chairman 4 July 2013
The performance of your Company over the year to 30 April 2013 saw its net asset value fall by 2.8 per cent versus a rise of 17.8 per cent in the FTSE All-Share Index. A write-down in the values ascribed to some of its unquoted investments was a contributing factor. The largest negative revaluation was to its holding in Vostok Energy, accounting for a 5.2 per cent reduction in the Company's net asset value.
We discuss later in this report the methods we use to determine fair value for unquoted investments, such as Vostok Energy. But we would emphasize that, despite the poor performance of a number of our unquoted holdings over the last year, these types of investment have been positive contributors to performance over the longer term.
Source Artemis/Datastream.
| 3 years | 5 years | Since 1 June 2003* |
|
|---|---|---|---|
| Net asset value | 14.4% | 23.5% | 360.4% |
| Share price | 17.9% | 34.6% | 370.5% |
| FTSE All-Share Index | 31.3% | 31.1% | 142.5% |
* The date when Artemis was appointed as Investment Manager. All figures are total return to 30 April 2013.
Following a turbulent summer, stockmarkets rallied strongly through the latter part of 2012 and into early 2013. The main trigger for the rally was Mario Draghi's statement that he would do "whatever it takes" to prevent a break-up of the eurozone. After months of uncertainty – and some nail-biting parliamentary votes across southern Europe – investors welcomed the new, as yet untested, steadfastness of policymakers. Yields on bonds issued by peripheral eurozone economies began to fall from alarmingly high levels.
As worries about the future of the eurozone receded, equity prices surged higher despite the macro-economic headwinds. Along with Mr Draghi's reassuring comments, the gains were driven by a combination of additional quantitative easing, reasonable valuations and low interest rates.
The portfolio has settled down to core holdings in around 60 stocks, which together account for around 93 per cent of the total portfolio. The main investment themes in the portfolio are oil & gas, companies using the internet for their businesses, such as online retailers and social media, and other financials – predominantly fund and wealth managers.
Set out below are the five largest stock contributors and detractors to absolute performance over the year:
| Company | Market | Contribution % |
|---|---|---|
| The Hut Group | Unquoted | 3.5 |
| Africa Oil | Toronto SE | 1.8 |
| Telford Homes | AIM | 1.6 |
| Polar Capital Holdings | AIM | 1.5 |
| Oxford Catalysts | AIM | 1.2 |
| Company | Market | Contribution % |
|---|---|---|
| Vostok Energy | Unquoted | (5.2) |
| Hurricane Energy | Unquoted | (3.0) |
| New Britain Palm Oil | LSE | (2.2) |
| Lynton Holding Asia | Unquoted | (1.6) |
| Madagascar Oil | AIM | (0.9) |
Online retailing remains an area of interest for the Company. A growing number of consumers are choosing to shop using the internet rather than on the high street and online retailers are enjoying very strong top-line growth compared to their traditional 'bricks-and-mortar' peers. And, because their property costs are far lower, online retailers also benefit from a significant inbuilt cost advantage. While there are very few listed online retailers at present, the portfolio has exposure through holdings in three private companies – Gift Library, Hardlyever and The Hut Group.
The Hut Group was the year's standout performer. It raised equity in December to acquire a specialist online bike-retailing business to slot alongside its existing niche businesses. This fund raising also brought a new investor into the business and, together with a smaller equity issuance earlier in the year, added just over 3.5 per cent to the Company's net asset value over the review period. The intention remains to float the business. Given that quoted comparators are trading on high valuations despite inferior growth profiles, we believe there is still further upside here.
Elsewhere we have invested in All The Worlds Entertainment, which is a social entertainment business. Its main focus is to aggregate information gathered from social media sites like Facebook and Twitter and use the data to create social entertainment charts across a wide range of genres and people. The company is developing rapidly and we have seen an uplift in our valuation since we first invested. We believe that this as an exciting area for the future.
Following a strong showing in 2012, the portfolio's holdings in the oil & gas sector have been rather becalmed over recent months. That said, two stocks – Africa Oil and Providence Resources – performed well. Africa Oil discovered large amounts of oil in Kenya and is now drilling in adjacent areas. Providence Resources, having made a sizeable discovery (Barryroe) in the southern Irish Sea, is now involved in a formal farmout process following the publication of the independent competent persons report. Drilling is being carried out at Dunquin, another prospective well. We expect positive news soon.
On the negative side, two of our larger unquoted positions, namely Vostok Energy and Hurricane Energy were written down in value. In regard to Vostok Energy, the company has been in advanced discussions to sell itself to a third party, but had begun to lose faith in the negotiations owing to the long period of time that had elapsed since talks had commenced. Consequently, it was considered appropriate to write down the value of the holding, reflecting the appraisal of the discussions and the possible outcomes. The cost to the net asset value of this adjustment was approximately 5.2 per cent.
In the case of Hurricane Energy, there has been a frustrating period of inactivity, which is now set to continue with the planned drilling operations for 2013 having been cancelled. The drilling rig that Hurricane Energy had contracted would be delivered late as a result of the current operator suffering severe delays in another operation. The late delivery of the rig leaves insufficient time to allow the company to carry out its drilling and testing programme ahead of the onset of winter weather, which in turn could compromise the test results and expose the company to further costs and so the rig contract has been cancelled. The focus for the company has turned to the 2014 appraisal work for its West of Shetland assets. As a consequence of the cancellation of the 2013 drilling programme, the company's intention to IPO will not proceed at this time. It remains committed to seeking an AIM listing, but the approach and timetable require to be reviewed in light of developments.
Whilst oil & gas will remain a theme in the portfolio, exposure has been reduced over the year. As we make realisations from this part of the portfolio, we intend to reinvest the proceeds in those sectors where we see the best prospects for future growth, including online retailers and other financial companies.
Two other profitable areas for the portfolio, particularly towards the end of the review period, were its investments in the fund and wealth-management sectors. In fund management we have built decent positions in Polar Capital and Liontrust Asset Management; both are benefiting from strong inflows and rising equity markets. These businesses are at a tipping point where operational gearing is really starting to kick in, leading to strong profit growth. In wealth management, the portfolio has holdings in Brewin Dolphin and Ashcourt Rowan. Both are well positioned to take market share from smaller advisers following the implementation of the Retail Distribution Review.
Our longstanding holding in Telford Homes is also worthy of mention. It is a niche housebuilder specialising in East London. The Olympic Games put this part of London on the map and the appetite of overseas buyers to invest in property there has been voracious.
There were some other negatives too. Our palm oil holdings performed poorly. This came against a background of weakness in the underlying commodity price resulting from high stock levels in Malaysia. But we expect stock levels to fall as the year progresses and believe the structural increase in demand from Asia makes palm oil a very attractive area in which to invest.
Lynton Holding Asia, another of our unquoted holdings, had previously been valued based on an equity fund raising, and it was partially written down to an earnings basis of valuation to better reflect the recent trading position of the company.
| Sector | Contribution % |
|---|---|
| General Retailers | 3.5 |
| Financial Services | 2.3 |
| Household Goods & Home Construction | 2.1 |
| Software & Computer Services | 1.8 |
| Chemicals | 1.2 |
| Sector | Contribution % |
|---|---|
| Oil & Gas Producers | (8.0) |
| Mining | (2.9) |
| Food Producers | (2.5) |
| Personal Goods | (1.0) |
| Aerospace & Defence | (0.5) |
Given that unquoted investments made a negative contribution to the Company's returns over the review period a short overview of the process we use to determine the valuations of unquoted investments may be useful.
Accounting rules require that the Company's unquoted investments be valued at fair value. As the bases of valuation and the inputs used to determine fair value can vary, there is a degree of subjectivity to this process. Valuation bases may include, for example, recent transaction prices, earnings multiples or net assets.
The Investment Manager's process for valuing the unquoted investments is summarised as follows. Each investment is covered by at least one fund manager, who has the responsibility for monitoring this investment and producing a valuation proposal. This is then submitted to a review panel for discussion. The panel consists of Artemis' chief investment officer and two further experienced fund managers, neither of whom have direct responsibility for producing the initial valuation proposals. This panel carefully considers the recommendations before making the final determination of the proposed valuations.
As the Board has ultimate responsibility for the valuation of the unquoted investments, the panel's recommendations are then presented to the Board at each quarterly meeting where they are discussed and approved. Should there be any significant developments between these quarterly reviews, a revised valuation recommendation will be proposed by the Investment Manager for the Board's approval.
The net asset value is then updated to reflect the revised unquoted valuations as soon as practicably possible after the Board's approval.
We increased the Company's level of gearing through the year as we identified further investment opportunities and our confidence in equities grew. By the end of the period, borrowings represented 17.3 per cent of net assets. As fund managers, we consider that the borrowing powers give us additional flexibility in managing the portfolio. So, in our pursuit of shareholder returns, we will continue to use this flexibility within the parameters set by the Board.
After a good run, markets have become more volatile. The lack of economic growth, despite the vast amounts of liquidity central banks have pumped into the system, has come into focus again. The crisis in the eurozone remains unresolved. But, as we have stated before, we don't invest in economies or countries – but in companies. We continue to find investment opportunities and we believe that our unconstrained, high conviction approach to stock selection will continue to produce value for shareholders over the longer term. We will, no doubt, encounter some headwinds along the way, but we remain confident in our ability to produce positive returns for shareholders.
Fund managers Artemis Investment Management LLP 4 July 2013
| Investment | Sector | Country of incorporation |
Market Value £'000 |
% of total investments |
|---|---|---|---|---|
| Providence Resources1 | Oil & Gas Producers | Ireland | 8,998 | 5.6 |
| Hurricane Exploration2 | Oil & Gas Producers | UK | 7,663 | 4.7 |
| The Hut Group2 | General Retailers | UK | 7,561 | 4.7 |
| Polar Capital Holdings1 | Financial Services | UK | 5,876 | 3.6 |
| Africa Oil | Oil & Gas Producers | Canada | 5,001 | 3.1 |
| Salamander Energy | Oil & Gas Producers | UK | 4,882 | 3.0 |
| Emis Group1 | Software & Computer Services | UK | 4,563 | 2.8 |
| Eland Oil & Gas1 | Oil & Gas Producers | UK | 4,284 | 2.6 |
| Brewin Dolphin Holdings | Financial Services | UK | 4,180 | 2.6 |
| Liontrust Asset Management | Financial Services | UK | 4,175 | 2.6 |
| Top 10 investments | 57,183 | 35.3 | ||
| Telford Homes1 | Household Goods & Home | UK | 4,085 | 2.5 |
| Construction | ||||
| Genel Energy | Oil & Gas Producers | Jersey | 3,560 | 2.2 |
| Lynton Holding Asia2 Ashcourt Rowan1 |
Aerospace & Defence Financial Services |
Denmark UK |
3,464 3,182 |
2.1 2.0 |
| Reaction Engines2 | Aerospace & Defence | UK | 3,150 | 2.0 |
| Asian Plantations1 | Food Producers | Singapore | 3,067 | 1.9 |
| R.E.A. Holdings3 | Food Producers | UK | 2,980 | 1.8 |
| Lansdowne Oil & Gas1 | Oil & Gas Producers | UK | 2,860 | 1.8 |
| 2 All The Worlds Entertainment |
Media | Singapore | 2,636 | 1.6 |
| Continental Farmers Group1 | Food Producers | UK | 2,620 | 1.6 |
| Top 20 investments | 88,787 | 54.8 | ||
| Madagascar Oil 1 |
Oil & Gas Producers | Bermuda | 2,535 | 1.6 |
| Gleeson(M.J.) | Household Goods & Home | UK | 2,520 | 1.6 |
| Construction | ||||
| Retroscreen Virology1 | Pharmaceuticals & Biotechnology | UK | 2,363 | 1.5 |
| Helical Bar | Real Estate Investment & Services | UK | 2,232 | 1.4 |
| Claremont Partners2 | Travel & Leisure | UK | 2,165 | 1.3 |
| Igas Energy1 | Oil & Gas Producers | UK | 2,160 | 1.3 |
| Avation | Industrial Transportation | UK | 2,095 | 1.3 |
| Oxford Catalysts Group1 | Chemicals | UK | 2,072 | 1.3 |
| Rockhopper Exploration1 | Oil & Gas Producers | UK | 2,051 | 1.3 |
| Oxford Nanopore Technologies2 | Pharmaceuticals & Biotechnology | UK | 1,975 | 1.2 |
| Top 30 investments | 110,955 | 68.6 | ||
| City of London Investment Group | Financial Services | UK | 1,862 | 1.1 |
| Halley Asian Prosperity Fund | Equity Investment Instruments | Luxembourg | 1,859 | 1.1 |
| Lamp Group2 | Non-Life Insurance | UK | 1,718 | 1.1 |
| Gresham Computing | Software & Computer Services | UK | 1,677 | 1.0 |
| New Britain Palm Oil | Food Producers | Papua New Guinea | 1,662 | 1.0 |
| Hot Can2 Pittards1 |
Beverages | UK | 1,606 | 1.0 |
| The Vitec Group | Personal Goods Industrial Engineering |
UK UK |
1,575 1,535 |
1.0 0.9 |
| Equus Petroleum2 | Oil & Gas Producers | UK | 1,533 | 0.9 |
| Gift-Library.Com 2 | General Retailers | UK | 1,500 | 0.9 |
| Top 40 investments | 127,482 | 78.6 |
1 AIM quoted
2 Unquoted investment
3 Includes fixed interest element
| Investment | Sector | Country of incorporation |
Market Value £'000 |
% of total investments |
|---|---|---|---|---|
| Intelligent Energy2 Metapack2 Parity Group Praetorian Resources1 Hargreaves Services Canaccord Financial Rangers International Football Club1 Faroe Petroleum1 Powerflute1 1 |
Alternative Energy Industrial Transportation Software & Computer Services Mining Support Services Financial Services Travel & Leisure Oil & Gas Producers Forestry & Paper |
UK UK UK Guernsey UK Canada UK UK Finland |
1,500 1,476 1,459 1,431 1,336 1,242 1,220 1,184 1,175 |
0.9 0.9 0.9 0.9 0.8 0.8 0.8 0.7 0.7 |
| Charlemagne Capital Top 50 investments |
Financial Services | Cayman Islands | 1,100 140,605 |
0.7 86.7 |
| Park Group1 Genmark Diagnostics Senhouse Southeast Asian Focus Buried Hill Energy (Cyprus) 2 1 Randall & Quilter 2 Nplus1 Singer Redcentric1 Ithaca Energy1 Ten Alps1,3 Consort Medical |
Financial Services Healthcare Equipment & Services Equity Investment Instruments Oil & Gas Producers Non-Life Insurance Financial Services Software & Computer Services Oil & Gas Producers Media Healthcare Equipment & Services |
UK USA Bermuda Cyprus UK UK UK Canada UK UK |
1,100 1,084 1,076 1,071 1,049 962 944 878 864 800 |
0.7 0.7 0.7 0.7 0.6 0.6 0.6 0.5 0.5 0.5 |
| Top 60 investments | 150,433 | 92.8 | ||
| Real Estate Investors1 | Real Estate Investment & Services | UK | 781 | 0.5 |
| Eden Research1 Sandvine2 Trinity Exploration & Production1 Management Consulting Group Wasabi Energy1 Physiolab Technologies2 MBA Polymers2 Reneuron Group1 Ironveld1 |
Pharmaceuticals & Biotechnology Technology Hardware & Equipment Oil & Gas Producers Support Services Alternative Energy Healthcare Equipment & Services Industrial Engineering Pharmaceuticals & Biotechnology Industrial Metals & Mining |
UK UK UK UK Australia UK USA UK UK |
753 750 730 646 633 600 566 565 540 |
0.5 0.5 0.5 0.4 0.4 0.4 0.3 0.3 0.3 |
| Top 70 investments | 156,997 | 96.9 | ||
| Bumi Penna Consulting1 Chateau Lafite Rothschild 20092 Chateau Lafite Rothschild 20102 Fox Marble1 Patagonia Gold1 MWB Group Holdings3 EastCoal H&T Group1 Hardlyever 2 |
Mining Support Services Beverages Beverages Mining Mining Real Estate Investment & Services Mining Financial Services General Retailers |
UK UK France France UK UK UK Canada UK UK |
539 476 455 425 425 420 384 362 313 300 |
0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 |
1 AIM quoted
2 Unquoted investment
3 Includes fixed interest element
| Investment | Sector | Country of incorporation |
Market Value £'000 |
% of total investments |
|---|---|---|---|---|
| Oilex1 | Oil & Gas Producers | Australia | 279 | 0.2 |
| Niche Group2 | Financial Services | UK | 175 | 0.1 |
| Infusion 20022 | Industrial Transportation | UK | 143 | 0.1 |
| Redstone1 | Software & Computer Services | UK | 133 | 0.1 |
| 1 FastJet |
Travel & Leisure | UK | 105 | 0.1 |
| MBL Group1 | Media | UK | 54 | – |
| Jubilant Energy1 | Oil & Gas Producers | Netherlands | 44 | – |
| Flying Brands | General Retailers | UK | 36 | – |
| Petrohunter Energy | Oil & Gas Producers | USA | 21 | – |
| Chateau Rieussec 20102 | Beverages | France | 18 | – |
| Top 90 investments | 162,104 | 100.0 | ||
| Conexion Media Group1 | Media | UK | 13 | – |
| Resaca Exploitation1 | Oil & Gas Producers | USA | 3 | – |
| Leed Resources1 | Oil & Gas Producers | UK | 1 | – |
| Homeland Renewable Energy2 | Electricity | USA | – | – |
| Energy Equity Resources2 | Oil & Gas Producers | UK | – | – |
| Hawk Group2 | Financial Services | UK | – | – |
| Betex Group2 | Travel & Leisure | UK | – | – |
| ROK Entertainment | Media | USA | – | – |
| ROK Global | Media | UK | – | – |
| Vostok Energy2 | Oil & Gas Producers | UK | – | – |
| Top 100 investments | 162,121 | 100.0 | ||
| Other investments (4) | – | – | ||
| Total investments | 162,121 | 100.0 |
2 Unquoted investment
3 Includes fixed interest element
Large cap – market cap equivalent to FTSE 100 companies Mid cap – market cap equivalent to FTSE 250 companies Small cap – market cap equivalent to companies below FTSE 250 Annual Financial report
Geographical analysis of the portfolio as at 30 April 2013
| 2013 % of total |
2012 % of total |
|
|---|---|---|
| Country of incorporation | investments | investments |
| UK | 72.5 | 73.0 |
| Ireland | 5.6 | 5.2 |
| Canada | 4.6 | 5.8 |
| Singapore | 3.5 | 3.6 |
| Bermuda | 2.3 | 0.3 |
| Jersey | 2.2 | 0.3 |
| Denmark | 2.1 | 3.5 |
| Luxembourg | 1.1 | – |
| USA | 1.0 | 0.8 |
| Papua New Guinea | 1.0 | 3.7 |
| Guernsey | 0.9 | – |
| Finland | 0.7 | 0.8 |
| Cayman Islands | 0.7 | – |
| Cyprus | 0.7 | 0.6 |
| Australia | 0.6 | 1.6 |
| France | 0.5 | 0.7 |
| Netherlands | – | 0.1 |
| 100.0 | 100.0 |
Sectors are ICB Industry classifications
| 2013 | 2012 | |
|---|---|---|
| Sector | % of total investments |
% of total investments |
| Oil & Gas Producers | 30.7 | 39.3 |
| Financial Services | 15.0 | 10.8 |
| Food Producers | 6.3 | 9.7 |
| General Retailers | 5.8 | 1.4 |
| Software & Computer Services Aerospace & Defence |
5.4 4.1 |
4.8 4.2 |
| Household Goods & Home Construction | 4.1 | 1.5 |
| Pharmaceuticals & Biotechnology | 3.5 | 2.0 |
| Industrial Transportation | 2.3 | 1.8 |
| Travel & Leisure | 2.2 | 2.9 |
| Media | 2.1 | 0.6 |
| Real Estate Investment & Services | 2.1 | 3.3 |
| Mining | 1.9 | 4.1 |
| Equity Investment Instruments | 1.8 | 0.4 |
| Non-Life Insurance | 1.7 | 1.4 |
| Healthcare Equipment & Services | 1.6 | 1.3 |
| Beverages | 1.6 | 0.7 |
| Support Services | 1.5 | 2.1 |
| Alternative Energy | 1.3 | 1.3 |
| Chemicals | 1.3 | 1.5 |
| Industrial Engineering | 1.2 | 1.8 |
| Personal Goods | 1.0 | 1.4 |
| Forestry & Paper | 0.7 | 0.8 |
| Technology Hardware & Equipment | 0.5 | 0.4 |
| Industrial Metals & Mining | 0.3 | – |
| Oil Equipment, Services & Distribution | – | 0.2 |
| Gas, Water & Multiutilites | – | 0.2 |
| Electronic & Electrical Equipment | – | 0.1 |
| 100.0 | 100.0 |
Sectors are ICB sector classifications
Annual Financial report
Simon Miller, aged 60, qualified as a barrister before joining Lazard Brothers in 1976. He is chairman of Dunedin LLP, a private equity business, chairman of Brewin Dolphin Holdings plc, of Blackrock North American Income Trust plc and of JP Morgan Global Convertibles Income Fund Limited. He is a non-executive director of Scottish Friendly Assurance.
Appointed as a non-executive Director on 14 July 2003 and Chairman on 25 September 2003. Chairman of the Nomination and Management Engagement Committees.
David Barron, aged 54, was head of the investment trust business at J.P. Morgan Asset Management until March 2013. He joined the asset management business of Robert Fleming & Co. Limited in 1995. Before joining Flemings in 1995, Mr Barron worked in corporate finance for Hambros Bank and Merrill Lynch. He is a nonexecutive director of the Association of Investment Companies. He is a member of the Institute of Chartered Accountants of Scotland and holds an MBA from INSEAD.
Appointed as a non-executive Director on 17 February 2005. Mr Barron was Chairman of the Audit Committee until 5 July 2011.
Tom Cross Brown, aged 65, was global chief executive officer of ABN AMRO Asset Management, having previously been chief executive officer of ABN AMRO Asset Management in the UK and global head of business development. Prior to joining ABN AMRO, Mr Cross Brown spent 21 years at Lazard Brothers & Co. and was chief executive of Lazard Brothers Asset Management Limited between 1994 and 1997. He is currently the chairman of Just Retirement (Holdings) Limited, and a non-executive director of Phoenix Group Holdings. He is a non-executive member of the management committee of Artemis Investment Management LLP.
Appointed as a non-executive Director on 5 April 2006.
Andrew Dalrymple, aged 53, is currently an investment manager at Aubrey Capital Management Limited, having previously been a senior portfolio manager (Global Equities) with First State Investments (UK) Limited where he managed the First State Global Opportunities Fund from its inception in July 1999 until 2006. He joined Stewart Ivory Limited as a portfolio manager in 1998 before its acquisition by First State in 2000. Between 1991 and 1998 he was based in Hong Kong as a director and dealing director with S.G. Warburg and UBS Warburg Limited. He was also a director of James Capel (Far East) Limited during that period, having served at Cazenove & Co. Limited in London for several years.
Appointed as a non-executive Director on 1 April 2004.
Ian Dighé, aged 57, was a director of Gartmore Growth Opportunities plc and joined the Board following the merger in December 2010. He has over 25 years of industry experience and was previously a director of Singer & Friedlander and was the founder and deputy chairman of Bridgewell Group plc. He is currently executive chairman of Miton Group plc, a director of Strategic Equity Capital plc and a number of private companies and charitable trusts.
Appointed as a non-executive Director on 13 December 2010. Mr Dighé was appointed as Chairman of the Audit Committee on 5 July 2011.
With the exception of Mr Cross Brown, each of the Directors were independent of the Investment Manager throughout the year ended 30 April 2013 and up to the date of this Report.
With the exception of Mr Cross Brown, all Directors were members of the Audit, Nomination and Management Engagement Committees throughout the reporting period.
The Directors have pleasure in presenting their report, together with the audited financial statements of the Group and the Company, for the year ended 30 April 2013.
The Company operates as an investment trust company and is an investment company within the meaning of section 833 of the Companies Act 2006 (the "Act"). The Company was approved by HM Revenue & Customs as an investment trust in accordance with the requirements of section 1158 of the Corporation Taxes Act 2010 for the year ended 30 April 2012.
The regulations which apply to investment trusts changed with effect from 1 January 2012. The Company has been approved as an investment trust under the new regime for the year ended 30 April 2013 and future periods, subject to the Company continuing to meet the eligibility conditions and ongoing requirements of the regulations. The Board will manage the Company so as to continue to meet these conditions.
The Company has no employees and delegates most of its operational functions to service providers, details of which are set out below.
The objective of the Company is to achieve above average rates of total return over the longer term and to achieve a growing dividend stream.
In pursuit of this objective, the Company's portfolio is actively managed by the Investment Manager and comprises largely UK equities, with selected overseas investments. The Investment Manager takes a stock specific approach in managing the portfolio and therefore sector weightings are of secondary consideration. As a result of this approach the portfolio will not track any stock market index. There is no restriction on the number of investments that can be held in the portfolio.
The Company invests in unquoted companies. The Investment Management Agreement provides that at the time of investment these investments shall represent no more than 30 per cent of net assets. For the purpose of measuring this, unquoted investments will be measured by the lower of their cost or current valuation. The Company can invest up to 30 per cent of its net assets in hedge funds and/or other unregulated collective investment schemes. The Company will not invest more than 15 per cent of its gross assets in other investment companies listed on the main market of the London Stock Exchange.
The Company uses gearing as part of its investment strategy. The Articles of Association (the "Articles") permit the Company to borrow up to 25 per cent of its adjusted capital and reserves. Subject to this being complied with, the level of borrowing is a matter for the Board, whilst the utilisation of borrowings is delegated to the Investment Manager. This utilisation may be subject to specific guidelines established by the Board from time to time. The current guidelines permit the Investment Manager to utilise borrowings of up to 20 per cent of net assets. The Company has a £30 million borrowing facility with The Royal Bank of Scotland plc, of which £26.5 million was drawn down at the year end. The use of gearing by the Investment Manager will vary from time to time, reflecting its views on the potential returns from stockmarkets. The Company's gearing is reviewed by the Board and Investment Manager on an ongoing basis.
The performance of the Company is reviewed regularly by the Board and it uses a number of key performance indicators ("KPIs") to assess the Company's success in meeting its objective. The KPIs which have been established for this purpose are:
■ Discrete annual total returns
| Year ended 30 April | Net asset value |
Share price |
FTSE All-Share Index |
|---|---|---|---|
| 2009 | (24.2)% | (21.8)% | (26.9)% |
| 2010 | 42.0% | 46.0% | 36.6% |
| 2011 | 23.4% | 31.0% | 13.7% |
| 2012 | (4.6)% | (13.9)% | (2.0)% |
| 2013 | (2.8)% | 4.5% | 17.8% |
Source: Artemis/Datastream
| Year ended 30 April | Rate per ordinary share |
% increase |
|---|---|---|
| 2009 | 2.60p | 6.1% |
| 2010 | 2.75p | 5.8% |
| 2011 | 2.85p | 3.6% |
| 2012 | 2.95p | 3.5% |
| 2013 | 3.05p | 3.4% |
■ Ongoing charges as a proportion of shareholders' funds (excluding performance fees)
| As at 30 April | Ongoing charges |
|---|---|
| 2009 | 1.1% |
| 2010 | 1.1% |
| 2011 | 0.9% |
| 2012 | 1.0% |
| 2013 | 0.9% |
Further information on the KPIs can be found in the Financial Highlights summary on pages 2 and 3. In addition to the above KPIs, the Board monitors the discount at which the shares trade at against the underlying net asset value. Whilst no specific discount target has been set, the Board has given the Investment Manager discretion to exercise the Company's authority to buy-back its own shares from time to time to address any imbalances between the supply and demand of the Company's shares in order to achieve a stable discount. The Board will also use its authority to issue new ordinary shares from time to time should there be excess demand for the Company's shares.
A summary of the Company's developments during the year ended 30 April 2013, together with its prospects for the future, is set out in the Chairman's Statement on pages 4 and 5 and Investment Manager's Review on pages 6 to 8.
The Board's principal focus is the delivery of positive long-term returns for shareholders. This will be dependent on the success of the investment strategy, in the context of both economic and stockmarket conditions. The investment strategy, and factors that may have an influence on it, are discussed regularly by the Board and the Investment Manager. The Board regularly considers the ongoing development and strategic direction of the Company, including its promotion and the effectiveness of communication with shareholders.
The Board, in conjunction with the Investment Manager, has developed a risk map which sets out the principal risks faced by the Company. It is used to monitor these risks and to review the effectiveness of the controls established to mitigate them. Further information on the Company's internal controls is set out in the corporate governance section on pages 20 to 23. As an investment company the main risks relate to the nature of the individual investments and the investment activities generally. These include market price risk, foreign currency risk, interest rate risk, credit risk and liquidity risk.
A summary of the key areas of risk is set out below:
■ Investment: the Company's investments are selected on their individual merits and the performance of the portfolio is not likely to track the wider UK market (FTSE All-Share Index). The Board believes this approach will continue to generate good long-term returns for shareholders. Currently 31.0 per cent (2012: 28.0 per cent) of the Company's investments (at market value) is represented by unquoted companies and these investments can carry a higher degree of risk. The Board considers that this risk is justified by the longer term nature of the investment objective and the Company's closed-ended structure, and that such investments will continue to be a source of positive returns for shareholders. The Company may also have significant exposure to particular industry sectors from time to time. Risk will be diversified through a broad range of investments being held. The Board discusses the investment portfolio with the Investment Manager at each Board meeting and part of this discussion includes a detailed review of the Company's unquoted investments and their valuations.
Further information on risks and the management of them are set out in the notes to the financial statements on pages 43 and 44.
The Group's results for the year are set out in the Consolidated Income Statement on page 27. The Board has declared dividends for the year totalling 3.05 pence per share. The second interim dividend for the year ended 30 April 2013 of 1.85 pence per share will be paid on 16 August 2013 to shareholders who are on the register at the close of business on 26 July 2013.
The Company's Articles provide that at the AGM to be held in 2018, and at every fifth AGM thereafter, a vote on whether the Company should continue in existence as an investment trust will be proposed as an ordinary resolution.
The Company's investments are managed by Artemis, subject to an Investment Management Agreement dated 3 June 2003 and a Supplemental Agreement dated 11 November 2010 (together the "Agreement"). Pursuant to the Agreement, Artemis is entitled to a management fee of 0.75 per cent per annum of the monthly market
capitalisation of the Company, payable quarterly in arrears. In addition, a performance-related fee equal to 15 per cent of any outperformance by the Company's share price (on a total return basis) of the rate of total return on the FTSE All-Share Index plus 2 per cent per annum, measured over a rolling three year period, other than for the first two performance periods ending on 30 April 2012 and 30 April 2013 respectively.
The performance fee payable each year cannot exceed 2.5 per cent of the Company's market capitalisation at the end of the performance period. The performance fee operates a "high water mark" such that it will only be payable if the Company's share price ends the measurement period higher than at the start of such period and is higher than the share price level (on a total return basis) at which a performance fee was last paid. No performance fee was earned for the year ended 30 April 2013.
The Agreement may be terminated by either party on twelve months' written notice. In the event of the Company terminating the Agreement by giving less than twelve months' notice, Artemis is entitled to an amount in lieu of notice equivalent to 0.75 per cent of the market capitalisation of the Company on the date of termination and the performance fee (if any) due in accordance with the Agreement.
John Dodd and Adrian Paterson are the day to day fund managers. Portfolio ideas may also be generated by the other members of the Artemis investment team from time to time. Artemis is authorised and regulated by the Financial Conduct Authority and at 30 April 2013 had £14.5 billion of assets under management.
Having recently reviewed the Investment Manager's engagement, the Board believes that its continuing appointment, on its current terms, remains in the interests of shareholders. In arriving at this view, consideration was given to the long-term performance against the broader market, represented by the FTSE All-Share Index, the investment strategy and the general support and information provided by Artemis. Such a review is carried out on an annual basis.
The Directors of the Company and their biographical details are set out on page 14. Each of the Directors held office throughout the year under review.
No Director has a contract of service with the Company.
Mr Miller and Mr Dalrymple have both served as Directors for more than nine years. In accordance with the AIC's Code of Corporate Governance they are now subject to annual re-election. The Board does not consider length of service itself to affect a Director's independence.
Mr Cross Brown is not considered to be independent due to his membership of the management committee of Artemis and therefore stands for re-election on an annual basis.
Following the annual review of the Board, it has now adopted a policy that all Directors should offer themselves up for re-election on an annual basis with effect from this year's AGM. Accordingly Mr Barron and Mr Dighé will also stand for re-election at the AGM.
The Board recommends the re-election of each of the Directors on the basis of their industry knowledge, experience and their contribution to the operation of the Company.
Directors' and Officers' liability insurance cover is held by the Company to cover Directors against certain liabilities that may arise in conducting their duties.
The Company's Articles provide the Directors of the Company, subject to the provisions of UK law, with an indemnity in respect of liabilities which they may sustain or incur in connection with their appointment. Save for this, there are no qualifying third party indemnity provisions in force.
The Directors' interests in the capital of the Company who held office at 30 April 2013 were as follows:
| 30 April 2013 | 1 May 2012 | |||
|---|---|---|---|---|
| Non- | Non | |||
| Beneficial | beneficial Beneficial | beneficial | ||
| Mr Miller | 10,144 | – | 10,044 | – |
| Mr Barron | 8,792 | – | 5,000 | – |
| Mr Cross Brown | 44,321 | – | 44,321 | – |
| Mr Dalrymple | 46,000 | 32,000 | 46,000 | 32,000 |
| Mr Dighé | 6,325 | – | 6,325 | – |
| 30 April 2013 | 1 May 2012 | |||
|---|---|---|---|---|
| Non- | Non | |||
| Beneficial | beneficial Beneficial | beneficial | ||
| Mr Miller | 1,428 | – | 1,428 | – |
| Mr Barron | 713 | – | 713 | – |
| Mr Cross Brown | 6,331 | – | 6,331 | – |
| Mr Dalrymple | 8,285 | 2,857 | 8,285 | 2,857 |
| Mr Dighé | – | – | – | – |
There have been no changes to the above holdings between 30 April 2013 and the date of this Report.
At no time during the year did any Director hold a material interest in any contract, arrangement or transaction with the Company or its subsidiary undertakings.
The Company has two share classes: ordinary shares of 1 pence each and subscription shares of 1 pence each. As at 30 April 2013 the Company had 48,535,988 ordinary shares (2012: 48,844,470) and 6,865,616 subscription shares (2012: 6,867,134) in issue.
The Company made market purchases of its own ordinary shares totalling 1,535,128 (2012: 622,048) for an aggregate consideration of £4,315,000 (2012: £1,730,000). This represented 3.2 per cent of issued ordinary share capital at the start of the period, with a nominal value of £15,351. The shares were bought at an average discount of 9.6 per cent (2012: 7.3 per cent) and are held in treasury.
During the year the Company issued and allotted 1,518 (2012: 19,231) ordinary shares in connection with the exercise of subscription rights by holders of a corresponding number of subscription shares. These shares were issued at the subscription price of 345.0 pence per share.
The ordinary share capital includes 1,847,176 shares held in treasury (2012: 622,048). During the year 310,000 treasury shares were cancelled (2012: nil).
Since the period end, 1,751,800 ordinary shares have been purchased into treasury, and 666,448 ordinary shares held in treasury have been cancelled. As at 4 July 2013, the Company had 47,869,540 ordinary shares in issue. Of these, 2,932,528 ordinary shares are held in treasury, and therefore the Company's total voting rights are 44,937,012.
The subscription shares rank equally with each other and do not carry any voting rights or the right to receive any dividends from the Company. Each subscription share confers the right (but not the obligation) to subscribe for one ordinary share at 345.0 pence on the last business day in June and December of each year up to 31 December 2017, after which the subscription shares will lapse. The subscription shares are freely transferable in the form of which they are currently registered and are traded on the London Stock Exchange.
At any general meeting of the Company, every ordinary shareholder attending in person or by proxy (or by corporate representative) is entitled to one vote on a vote on a show of hands and, where a poll is called every ordinary shareholder attending in person or by proxy is entitled to have one vote for every ordinary share of which he is the holder. There are no restrictions concerning the voting rights of the Company's ordinary shares or the holding or transfer of the Company's shares and there are no special rights attached to any of the ordinary shares. The Company's ordinary shareholders may, by ordinary resolution, declare dividends provided such dividends are
not in excess of any dividends recommended by the Directors. The Directors may also pay interim dividends. The Company is not aware of any agreements between shareholders which may result in any restriction on the transfer of shares or on the voting rights.
As at the date of this Report, the table below sets out those shareholders who have notified the Company that they hold more than 3 per cent of the voting rights attaching to the ordinary shares in issue.
| Shareholder | Number of ordinary shares held as at 4 July 2013 |
% of voting rights |
|---|---|---|
| JPMorgan Asset | ||
| Management | 2,597,549 | 5.8% |
| Mr John Dodd | 2,560,955 | 5.7% |
| Mr Mark Tyndall | 2,125,590 | 4.7% |
| Investec Wealth & Investment | 1,683,799 | 3.7% |
| Mr Adrian Paterson | 1,476,401 | 3.3% |
The requirements relating to the appointment and replacement of Directors are contained in the Articles of the Company, a copy of which can be found on the Company's web site at artemis.co.uk. Amendments to the Articles, and the giving of powers to issue or buy-back the Company's shares, require appropriate resolutions to be passed by shareholders. The current authorities to buy-back and issue shares will expire at the AGM and proposals for their renewal are set out on pages 46 to 50. There are no agreements which the Company is party to that might affect its control following a takeover bid; and there are no agreements between the Company and its Directors concerning compensation for loss of office.
It is the Company's policy to obtain the best possible terms for all business and therefore there are no standard payment terms. The Company agrees with its suppliers the terms on which business will be transacted and it is the Company's policy to abide by those terms. At 30 April 2013 there were no amounts owed to suppliers in respect of invoices received but unpaid (30 April 2012: none).
The Directors, having considered the likely cash flows and operational costs of the Company for the 18 months from the year end, are of the opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in the preparation of the financial statements.
Details of the 2013 AGM are set out in the Chairman's Statement on page 5 and the Notice of Meeting on pages 46 to 50. Resolutions in relation to the re-issue of treasury shares and special business are set out below.
The Board believes that the use of treasury shares can assist with the liquidity of the Company's ordinary shares to address any imbalances between supply and demand and consider that being able to resell any such treasury shares at a discount to net asset value provides maximum flexibility in the management of the Company's capital. The Listing Rules of the United Kingdom Listing Authority require that shareholder approval is obtained in order to issue shares or resell treasury shares at a discount to net asset value. Accordingly, Resolution 9 will be proposed as an ordinary resolution to allow the Company to sell shares from treasury at a discount to net asset value. Shares would only be sold from treasury when market demand is identified and, pursuant to the authority conferred by Resolution 9, subject to the condition that the discount at which shares are resold must not be less than the average discount at which the total number of shares held in treasury were repurchased. This resolution is conditional on the passing of Resolution 11.
Any shares held in treasury for more than twelve months from the date of acquisition will be cancelled.
The Directors were authorised at the AGM in September 2012 to allot up to an aggregate nominal amount of £68,660 pursuant to the exercise rights attaching to the subscription shares and up to an aggregate nominal amount of £23,772 under a general authority to allot ordinary shares. These authorities shall expire at the conclusion of the next AGM of the Company to be held in 2013. Resolution 10, which will be proposed as an ordinary resolution, seeks to renew these authorities.
The current authority for Directors to allot shares in the Company without first offering them to existing shareholders, in accordance with statutory pre-emption procedures, will also expire at the forthcoming AGM. The Directors believe it to be in shareholders' interests to continue to have such an authority for the forthcoming year and accordingly will seek to renew the authority and to disapply pre-emption rights at the forthcoming AGM.
Accordingly, Resolution 11 will, if approved, authorise the Directors to allot new ordinary shares up to an aggregate nominal amount of £68,656 in respect of subscription shares and £22,469, under a general authority, representing approximately 15.3 per cent and 5 per cent of the Company's issued ordinary share capital as at the date of this report, for cash without first offering such
shares to existing shareholders pro rata to their existing holdings. Resolution 11 will be proposed as a special resolution and the authorities will continue in effect until the conclusion of the AGM to be held in 2014 or, if earlier, on 31 October 2014. The Directors will only issue new ordinary shares pursuant to the general authority if they believe it is advantageous to the Company's shareholders to do so.
The Company's existing authority to make market purchases of up to 14.99 per cent of the issued ordinary and subscription share capital will expire at the forthcoming AGM. The Directors consider that the Company should continue to have authority to make market purchases of its own shares and accordingly Resolution 12 will be proposed as a special resolution at the forthcoming AGM to renew that authority.
Repurchased ordinary shares may be held in treasury or cancelled. All repurchased subscription shares will be cancelled. The ability to repurchase subscription shares will allow the Board to manage the dilutive effect of these when there is no demand for them through the market.
The maximum price which may be paid for purchases of ordinary shares and subscription shares (as applicable) through the market will not exceed the higher of (i) 5.0 per cent above the average of the middle market quotations (as derived from the Official List) for the relevant shares for the five consecutive dealing days ending on the dealing day immediately preceding the date on which the purchase is made and (ii) the higher of the price quoted for (a) the last independent trade of, or (b) the highest current independent bid for, any number of ordinary shares or subscription shares, as applicable, on the trading venue where the purchase is carried out. In addition, repurchases of ordinary shares will only be made in the market at prices below the prevailing net asset value per ordinary share.
The Directors consider that passing the resolutions to be proposed at the AGM will be in the best interests of the Company and shareholders as a whole and unanimously recommend that shareholders vote in favour of each of these resolutions as they intend to do in respect of their own holdings.
Our auditor, KPMG Audit Plc has instigated an orderly wind down of its business. The Audit Committee has responsibility for making a recommendation to the Board on the appointment of the external auditor and after careful consideration of the services provided during the year and a review of their effectiveness, the Audit Committee recommended to the Board that KPMG LLP (an intermediate parent company of KPMG Audit Plc) should
be appointed as auditor. Accordingly, an ordinary resolution will be proposed at the forthcoming AGM for the appointment of KPMG LLP and to authorise the Directors to agree its remuneration.
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware and each Director has taken all steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
The Company is committed to high standards of Corporate Governance. This statement outlines how the principles of the AIC Code of Corporate Governance issued in October 2010 (the "AIC Code") were applied throughout the financial year. The AIC Code has been endorsed by the Financial Reporting Council (the "FRC") and compliance with the AIC Code enables the Company to meet its obligations in relation to the provisions of the UK Corporate Governance Code, insofar as they relate to the Company's business. The Board considers that in the course of the year and up to the date of this report the Company has complied with the AIC Code.
Set out below is how the Company has applied the principles of the AIC Code.
All Directors on the Board of the Company are nonexecutive and the Company's day-to-day responsibilities are delegated to third party service providers.
The Board is responsible for determining the strategic direction of the Company. It meets at least four times a year to review the performance of the Company's investments, the financial position of the Company, its performance in relation to the investment objective and all other important issues to ensure that the Company's affairs are managed within a framework of prudent and effective controls. Whilst certain responsibilities are delegated, a schedule of matters specifically reserved for its decision has been adopted by the Board.
Responsibilities are clearly defined and allocated between the Chairman, the Board, the Investment Manager and a number of third party service providers.
No one individual has unfettered powers of decision. The Chairman, Mr Miller, was at the time of his appointment, and remains, independent of the Investment Manager. The Chairman leads the Board and ensures its effectiveness on all aspects of its operation ensuring that each Director receives accurate, timely and clear
information enabling them to perform effectively as a Board. The Company Secretary liaises with the Chairman prior to each meeting to agree agenda content and papers to be submitted to Board and Committee meetings. In addition, the Chairman is responsible for ensuring there is effective communication with shareholders.
The Board has set the parameters within which the Investment Manager operates and these are set out in the Investment Management Agreement and in Board minutes. Representatives of the Investment Manager attend each Board meeting enabling the Directors to seek clarification on its activities in managing the Company.
The Board has formalised arrangements under which Directors, in furtherance of their duties, may take independent professional advice at the Company's expense. The Directors have access to the advice and services of the Company Secretary, through its appointed representatives, who are responsible to the Board for ensuring that proper procedures are followed and that applicable rules and regulations are complied with.
The appointment and removal of the Company Secretary is a matter for the Board as a whole.
The Board comprises five Directors, all of whom are nonexecutive. The names of the Directors, together with their biographical details, are set out on page 14 of this Report.
The Board considers that all the Directors, with the exception of Mr Cross Brown, were independent of the Investment Manager and comply with the criteria for independence as set out in the AIC Code. Mr Cross Brown is not considered independent due to his position on the management committee of Artemis. Each of the Directors is deemed to be independent in character and judgement. The Nomination Committee meets annually to consider matters of independence.
The Company's Senior Independent Director is David Barron. This position is reviewed annually.
Directors are appointed subject to the provisions of the Act and the Company's Articles. Any Directors appointed by the Board are subject to election by shareholders at the first AGM following their appointment.
At the AGM, all Directors offer themselves for re-election.
The Board recommends the re-election of each Director to shareholders on the basis of their expertise and experience in investment matters and their continuing effectiveness and commitment to the Company.
| Date of appointment |
Due for re-election |
|
|---|---|---|
| Mr Miller | 14 July 2003 | AGM 2013 |
| Mr Cross Brown | 5 April 2006 | AGM 2013 |
| Mr Dalrymple | 1 April 2004 | AGM 2013 |
| Mr Barron | 17 February 2005 | AGM 2013 |
| Mr Dighé | 13 December 2010 | AGM 2013 |
The Directors of the Company have not been appointed subject to a service contract. The terms and conditions of their appointments are set out in letters of appointment, which are available for inspection at the registered office of the Company and at the AGM.
The Board, led by the Nomination Committee, conduct an annual review of its performance and that of its Committees, the Chairman and individual Directors. This review is based on a process of appraisal by interview, with the evaluation of the performance of the Chairman being undertaken by the other Directors, led by the Senior Independent Director. The Board is satisfied that it continues to have an appropriate balance of skills and experience and therefore supports the resolutions to re-elect each of the Directors at the forthcoming AGM.
In order to enable the Directors to discharge their duties, three Board Committees, each with written terms of reference, have been established. Committee membership is set out on page 14 of this Report. Attendance at meetings of the Committees is restricted to members and persons expressly invited to attend. Copies of the terms of reference for the Board Committees are available from the Company Secretary or on the Investment Manager's website at artemis.co.uk. The Chairman of the Board acts as Chairman for the Committees, with the exception of the Audit Committee, which is chaired by Mr Dighé.
The Company Secretary acts as the Secretary to each Committee.
The main responsibilities of the Audit Committee include monitoring the integrity of the Company's financial statements, the appropriateness of its accounting policies, reviewing the internal control systems and the risks to which the Company is exposed. It is also responsible for making recommendations to the Board regarding the appointment of the auditor, the independence of the auditor, the objectivity and effectiveness of the audit process and the approval of the financial statements. It meets at least twice per year.
The Audit Committee provides a forum through which the Company's auditor reports to the Board. The Audit Committee monitors the non-audit services being provided to the Company by its auditor and a policy with regard to the provision of these services has been
formalised. All members of the Audit Committee are considered to have relevant and recent financial and investment experience as a result of their employment in financial services and other industries.
Representatives from the Investment Manager and the Administrator may be invited to attend the meetings of the Audit Committee to report on issues as required. The Company does not have an internal audit function as most of its day-to-day operations are delegated to third parties. Both the Investment Manager and the Administrator have established internal control frameworks to provide reasonable assurance as to the effectiveness of the internal controls operated on behalf of their clients. Both third parties report to the Board, on a quarterly basis, any breaches of law or regulation or any operational errors. The Audit Committee considers annually whether there is a need for an internal audit function, and has agreed that it remains appropriate for the Company to rely on the internal controls that exist within its third party service providers.
The Management Engagement Committee, which meets at least annually, reviews the terms of appointment and the performance of each of the Company's third party service providers, including the Investment Manager, and makes recommendations to the Board for improvement or change as appropriate.
The Nomination Committee meets at least annually. It is responsible for ensuring that the Board has an appropriate balance of skills and experience to carry out its duties, for identifying and nominating to the Board new Directors and for proposing that existing Directors be re-elected. The Committee undertakes an annual performance evaluation of the Board, led by the Chairman. On those occasions when the Committee is reviewing the Chairman, or considering his successor, the Nomination Committee will normally be chaired by the Senior Independent Director.
The following table sets out the Directors' attendance at the Board and Committee meetings held during the year.
| Board Meetings |
Audit Committee Meetings |
|
|---|---|---|
| Number of meetings held | 4 | 3 |
| Mr Miller | 4 | 3 |
| Mr Barron | 4 | 3 |
| Mr Cross Brown* | 4 | 3 |
| Mr Dalrymple | 4 | 3 |
| Mr Dighé | 4 | 3 |
Annual Financial report
| Management Engagement Committee Meetings |
Nomination Committee Meetings |
|
|---|---|---|
| Number of meetings held | 1 | 1 |
| Mr Miller Mr Barron Mr Cross Brown* Mr Dalrymple Mr Dighé |
1 1 1 1 1 |
1 1 1 1 1 |
* Mr Cross Brown is not a member of the Audit, Management Engagement or Nomination Committees, but he is invited to attend any meetings held.
As the Company has no executive Directors, the Directors do not consider it appropriate to appoint a Remuneration Committee. The Board as a whole considers the Directors' remuneration within the limits set by the Company's Articles. Further details are set out in the Directors' Remuneration Report on page 24.
All Directors' continuing appointments are subject to reelection by shareholders at least every three years, however, the Board has adopted a policy of annual reelection in line with best practice. Where a Director has served for more than nine years they will be subject to an annual re-election. Directors are subject to a rigorous review after six years of service. The Board does not consider length of service itself to affect a Director's independence. The Board has agreed a procedure for the appointment of new Directors. Formal consideration of the skills and experience of the Board is undertaken to help identify the capabilities of a new Director when a vacancy arises. The Board is formulating a succession plan, and accordingly the Chairman will step down with effect from the AGM to be held in 2014.
New Directors appointed to the Board are provided with an induction which is tailored to the particular circumstances of the appointee. Regular updates are provided on changes in regulatory requirements that could affect the Company. The Directors are encouraged to attend industry and other seminars covering issues and developments relevant to investment trusts and receive other training as necessary.
The Board supports the principles of diversity in the boardroom. It acknowledges the benefits of having greater diversity, including gender, and considers this in seeking to ensure that the overall balance of skills and knowledge that the Board remains appropriate so that it can continue to operate effectively. The Board's Director selection policy will, first and foremost, seek to identify the person
best qualified to become a Director of the Company, but in so doing, consideration will be given to diversity, including gender.
The Board considers communication with shareholders an important function and Directors are always available to respond to shareholder queries. Shareholders can contact the Chairman using the email address [email protected]. The Board aims to ensure that shareholders are kept fully informed of developments in the Company's business through the Annual and Half-Yearly Reports and Interim Management Statements, as well as the daily announcement of the net asset values of the Company's ordinary shares to the London Stock Exchange. The Investment Manager produces a monthly factsheet which can be found on the Investment Manager's website at artemis.co.uk, along with other information on the Company. The Investment Manager meets with major shareholders on a periodic basis.
All shareholders are encouraged to attend and vote at the AGM, during which the Board and Investment Manager will be available to discuss issues affecting the Company. Details of shareholder voting are declared at every AGM and are available on the Investment Manager's website as soon as practicable following the close of the meeting. All Directors intend to attend this year's AGM, details of which are set out in the Notice of Meeting on pages 46 to 50 of this report.
Artemis has endorsed the UK Stewardship Code. This sets out the responsibilities of institutional investors in relation to the companies in which they invest and a copy of this can be found on Artemis' website at artemis.co.uk.
The Directors have given the Investment Manager discretion to exercise the Company's voting rights and the Investment Manager, so far as is practicable, will exercise them in respect of resolutions proposed by investee companies. The Investment Manager's voting for its clients is summarised on its website at artemis.co.uk.
The Company is committed to carrying out business fairly, honestly and openly. The Investment Manager has established policies and procedures to prevent bribery.
The Board has put in place procedures to deal with conflicts and potential conflicts of interest and considers that these have operated effectively throughout the year. The Board also confirms that its procedures for the approval of conflicts and potential conflicts of interest have been followed by the Directors during the year under review.
The Company has delegated the investment management of the Company to Artemis and, in its capacity as Investment Manager, Artemis has established certain procedures to assess investee companies' businesses in relation to social and environmental matters. It will follow these in its investment decision making process, subject to the overriding requirement of seeking to protect the economic interests of the Company and its shareholders.
The Board recognises its responsibility for the implementation, review and maintenance of effective systems of internal control to manage the risks to which the Company is exposed as well as ensuring that a sound system of internal control is maintained to safeguard shareholders' interests and the Company's assets. As the majority of the Company's systems are maintained on behalf of the Company by third party service providers under contract, the Board fulfils its obligations by requiring these service providers to report and provide assurances on their systems of internal control, which are designed to manage, rather than eliminate, risks. In light of the Board's reliance on these systems and the reports thereon, the Board can only provide reasonable and not absolute assurance against material misstatement or loss. The Board does, however, ensure that these service providers are employed subject to clearly defined contracts.
Both the Investment Manager and the Administrator have established internal control frameworks to provide reasonable assurances as to the effectiveness of the internal control systems operated on behalf of their clients. The Investment Manager reports to the Board on a regular basis with regard to the operation of its internal controls and risk management within its operations in so far as it impacts the Company. In addition, the Investment Manager reports quarterly to the Board on compliance with the terms of its delegated authorities under the Investment Management Agreement and other restrictions determined by the Board.
The Administrator also reports, on a quarterly basis, any breaches of law and regulation and any operational errors. This enables the Board to address any issues with regard to the management of the Company as and when they arise and to identify any known internal control failures. The key procedures which have been established to provide effective internal controls are as follows:
Investment management, accounting and custody of assets are segregated. The procedures of the individual parties carying out these functions are designed to complement each other.
Investment management and company secretarial services are provided by Artemis. The Board is responsible for setting the overall investment policy and monitoring the actions of the Investment Manager. The Board reviews information produced by the Investment Manager in detail on a regular basis.
By the procedures set out above, the Directors have reviewed the effectiveness of the Company's internal controls throughout the year under review and up to the date of this Report.
By order of the Board
Company Secretary 4 July 2013
The Directors are pleased to present their report on remuneration for the year ended 30 April 2013. The Company's auditor is required to audit certain information contained within this report and, where information set out below has been audited, it is clearly indicated. The auditor's opinion is included in the Independent Auditor's Report, which can be found on page 26.
The Company's policy is that fees payable to the Directors should reflect the time spent on the Company's affairs, the responsibilities borne by the Directors and should be sufficient to enable candidates of a high calibre to be recruited. The Company's policy is for the Chairman of the Board to be paid a higher fee than the other Directors, to reflect his more onerous role. The Chairman of the Audit Committee also receives an additional fee to reflect the additional responsibilities associated with the role. The Board reviews the level of Directors' fees each year, taking into account a range of external information, including peer group comparisons and relevant independent research. After consideration at a Board meeting on 20 June 2013, it was agreed that the fees for all the Directors should remain unchanged for the year ending 30 April 2014. It is the Company's policy that no Director shall be entitled to any benefits in kind, share options, long-term incentives, pensions or other retirement benefits, or compensation for loss of office. It is also considered appropriate that no aspect of Directors' remuneration should be performance-related in light of the Directors' non-executive status. Directors are entitled to claim expenses in respect of duties undertaken in connection with the management of the Company. It is the intention of the Board that, unless deemed appropriate to implement a revision, the above remuneration policy will continue to apply for the forthcoming and subsequent financial years.
During the year ended 30 April 2013, the Board consisted of non-executive Directors, who determine their remuneration as a whole. Accordingly, a separate Remuneration Committee has not been established. The Board has not relied upon the advice or services of any person to assist in making its remuneration decisions, although the Directors carry out reviews from time to time of the fees paid to directors of other investment trusts. The Directors do not have a contract of service with the Company but are instead appointed by letters of appointment. A Director may resign in writing to the Board at any time; there are no fixed notice periods or any entitlement to compensation for loss of office.
The information in this section has been subject to audit. The Directors who served during the years ended 30 April 2013 and 30 April 2012 received the following emoluments:
| Director1 | 2013 | 2012 |
|---|---|---|
| Mr Miller | £28,000 | £28,000 |
| Mr Barron2 | £20,000 | £21,000 |
| Mr Cross Brown | £20,000 | £20,000 |
| Mr Dalrymple | £20,000 | £20,000 |
| Mr Dighé | £22,000 | £21,000 |
1 None of the Directors who are Directors of the Company's wholly owned subsidiary received any remuneration from this company.
2 Mr Barron's fees were paid to nominated charities until 31 March 2013.
The performance graph above sets out the Company's ordinary share price total return (assuming re-investment of dividends) to ordinary shareholders from 30 April 2008 to 30 April 2013 compared to the total return of a notional investment in the FTSE All-Share Index. As investments are selected on their individual merits, the portfolio will not track any comparative index, and there is likely to be a divergence in performance between the Company and the index.
For and on behalf of the Board
Chairman 4 July 2013
Listed companies are required by the FCA's Disclosure and Transparency Rules (the "Rules") to include a management report in their annual financial statements. The information required to be in the management report for the purpose of the Rules is included in the Chairman's Statement (pages 4 and 5), the Investment Manager's Review (pages 6 to 8) and the Business Review contained in the Directors' Report (pages 15 to 23). Therefore no separate management report has been included.
The Directors are responsible for preparing the Annual Financial Report and the group and parent company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare group and parent company financial statements for each financial year. Under that law they are required to prepare the group financial statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.
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 group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Financial Statements are published on a website, artemis.co.uk, maintained by the Company's Investment Manager, Artemis Investment Management LLP. The maintenance and integrity of the corporate and financial information relating to the Company is the responsibility of the Investment Manager. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
For and on behalf of the Board
Chairman 4 July 2013
We have audited the financial statements of Artemis Alpha Trust plc for the year ended 30 April 2013 set out on pages 27 to 45. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
As explained more fully in the Directors' Responsibilities Statement set out on page 25, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.
In our opinion:
In our opinion:
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
Catherine Burnet (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants Edinburgh
4 July 2013
| Year ended 30 April 2013 |
Year ended 30 April 2012 |
||||||
|---|---|---|---|---|---|---|---|
| Notes | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Investment income Other income |
2 2 |
1,760 (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,760 (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,018 35 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,018 35 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Total revenue Losses on investments Losses on current asset |
1,739 – |
– (4,013) |
1,739 (4,013) |
2,053 – |
– (7,274) |
2,053 (7,274) |
|
| investments Currency losses |
10 | (140) – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(140) (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(638) – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– (68) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(638) (68) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Total income/(loss) | 1,599 | (4,034) | (2,435) | 1,415 | (7,342) | (5,927) | |
| Expenses | |||||||
| Investment management fee | 3 | (102) | (920) | (1,022) | (103) | (929) | (1,032) |
| Performance fee | 3 | – | – | – | 40 | 363 | 403 |
| Other expenses | 4 | (380) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(2) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(382) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(407) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(6) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(413) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) before finance costs | |||||||
| and tax | 1,117 | (4,956) | (3,839) | 945 | (7,914) | (6,969) | |
| Finance costs | 5 | (44) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(400) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(444) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(63) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(568) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(631) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) before tax Tax |
6 | 1,073 (12) |
(5,356) – |
(4,283) (12) |
882 (24) |
(8,482) – |
(7,600) (24) |
| Profit/(loss) for the year | 1,061 | (5,356) | (4,295) | 858 | (8,482) | (7,624) | |
| Earnings/(loss) per share |
8 | 2.24p | (11.31)p | (9.07)p | 1.76p | (17.44)p | (15.68)p |
The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
All income is attributable to the equity shareholders of Artemis Alpha Trust plc. There are no minority interests.
Annual Financial report
| Notes | Group 2013 £'000 |
Company 2013 £'000 |
Group 2012 £'000 |
Company 2012 £'000 |
|
|---|---|---|---|---|---|
| Non-current assets | |||||
| Investments | 9 | 162,121 | 163,291 | 162,480 | 163,811 |
| Current assets | |||||
| Investments held by subsidiary | 950 | – | 1,635 | – | |
| Other receivables | 12 | 547 | 405 | 664 | 853 |
| Cash and cash equivalents | 2,530 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,514 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
404 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
517 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| 4,027 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,919 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,703 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,370 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
||
| Total assets | 166,148 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
166,210 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
165,183 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
165,181 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Current liabilities | |||||
| Other payables | 13 | (1,300) | (1,362) | (834) | (832) |
| Bank loan | 18 | (26,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(26,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(16,000) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(16,000) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| (27,800) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(27,862) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(16,834) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(16,832) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
||
| Net assets | 138,348 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
138,348 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
148,349 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
148,349 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Equity attributable to equity holders | |||||
| Share capital | 14 | 554 | 554 | 557 | 557 |
| Share premium | 635 | 635 | 630 | 630 | |
| Special reserve | 65,334 | 65,334 | 69,649 | 69,649 | |
| Capital redemption reserve | 36 | 36 | 33 | 33 | |
| Retained earnings – revenue | 1,621 | 870 | 1,956 | 1,044 | |
| Retained earnings – capital | 15 | 70,168 | 70,919 | 75,524 | 76,436 |
| Total equity | 138,348 | 138,348 | 148,349 | 148,349 | |
| Net asset value per share | 16 | 296.32p | 296.32p | 307.64p | 307.64p |
These financial statements were approved by the Board of Directors and signed on its behalf on 4 July 2013 by:
Director
| Share | Share | Special | Capital redemption |
Retained earnings | |||
|---|---|---|---|---|---|---|---|
| Group | capital £'000 |
premium £'000 |
reserve £'000 |
reserve £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
| For the year ended 30 April 2013 | |||||||
| At 1 May 2012 | 557 | 630 | 69,649 | 33 | 1,956 | 75,524 | 148,349 |
| Total comprehensive income: Profit/(loss) for the year |
– | – | – | – | 1,061 | (5,356) | (4,295) |
| Transactions with owners | |||||||
| recorded directly to equity: | |||||||
| Repurchase of ordinary shares into treasury Cancellation of ordinary shares from treasury |
– (3) |
– – |
(4,315) – |
– 3 |
– – |
– – |
(4,315) – |
| Conversion of subscription shares | – | 5 | – | – | – | – | 5 |
| Dividends paid | – | – | – | – | (1,396) | – | (1,396) |
| At 30 April 2013 | 554 | 635 | 65,334 | 36 | 1,621 | 70,168 | 138,348 |
| For the year ended 30 April 2012 | |||||||
| At 1 May 2011 | 557 | 69,136 | 2,807 | 33 | 2,485 | 84,006 | 159,024 |
| Total comprehensive income: Profit/(loss) for the year |
– | – | – | – | 858 | (8,482) | (7,624) |
| Transactions with owners | |||||||
| recorded directly to equity: | |||||||
| Repurchase of ordinary shares into treasury | – | – | (1,730) | – | – | – | (1,730) |
| Conversion of subscription shares Cancellation of share premium |
– – |
66 (68,572) |
– 68,572 |
– – |
– – |
– – |
66 – |
| Dividends paid | – | – | – | – | (1,387) | – | (1,387) |
| At 30 April 2012 | 557 | 630 | 69,649 | 33 | 1,956 | 75,524 | 148,349 |
| Share capital |
Share premium |
Special reserve |
Capital redemption reserve |
Revenue | Retained earnings Capital |
Total | |
|---|---|---|---|---|---|---|---|
| Company | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| For the year ended 30 April 2013 | |||||||
| At 1 May 2012 | 557 | 630 | 69,649 | 33 | 1,044 | 76,436 | 148,349 |
| Total comprehensive income: | |||||||
| Profit/(loss) for the year | – | – | – | – | 1,222 | (5,517) | (4,295) |
| Transactions with owners recorded directly to equity: |
|||||||
| Repurchase of ordinary shares into treasury | – | – | (4,315) | – | – | – | (4,315) |
| Cancellation of ordinary shares from treasury | (3) | – | – | 3 | – | – | – |
| Conversion of subscription shares | – | 5 | – | – | – | – | 5 |
| Dividends paid | – | – | – | – | (1,396) | – | (1,396) |
| At 30 April 2013 | 554 | 635 | 65,334 | 36 | 870 | 70,919 | 138,348 |
| For the year ended 30 April 2012 | |||||||
| At 1 May 2011 | 557 | 69,136 | 2,807 | 33 | 983 | 85,508 | 159,024 |
| Total comprehensive income: | |||||||
| Profit/(loss) for the year Transactions with owners |
– | – | – | – | 1,448 | (9,072) | (7,624) |
| recorded directly to equity: | |||||||
| Repurchase of ordinary shares into treasury | – | – | (1,730) | – | – | – | (1,730) |
| Conversion of subscription shares | – | 66 | – | – | – | – | 66 |
| Cancellation of share premium | – | (68,572) | 68,572 | – | – | – | – |
| Dividends paid | – | – | – | – | (1,387) | – | (1,387) |
| At 30 April 2012 | 557 | 630 | 69,649 | 33 | 1,044 | 76,436 | 148,349 |
| Group 2013 £'000 |
Company 2013 £'000 |
Group 2012 £'000 |
Company 2012 £'000 |
|
|---|---|---|---|---|
| Operating activities | ||||
| Loss before tax | (4,283) | (4,283) | (7,600) | (7,600) |
| Interest payable | 444 | 444 | 631 | 631 |
| Losses on investments | 4,013 | 4,174 | 7,274 | 7,864 |
| Losses on current asset investments | 140 | – | 638 | – |
| Currency losses | 21 | 21 | 68 | 68 |
| Decrease/(increase) in other receivables | 271 | 260 | (87) | (90) |
| Decrease in other payables | (23) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(23) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(441) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(422) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash inflow from operating activities before interest and tax |
583 | 593 | 483 | 451 |
| Interest paid | (444) | (444) | (631) | (631) |
| Irrecoverable overseas tax suffered | (12) | (12) | (24) | (24) |
| Net cash inflow/(outflow) from operating activities | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 127 |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 137 |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (172) |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (204) |
| Investing activities | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Purchases of investments | (53,258) | (51,895) | (53,526) | (51,082) |
| Sales of investments | 50,484 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
48,672 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
69,240 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
73,325 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash (outflow)/inflow from investing activities | (2,774) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(3,223) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
15,714 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
22,243 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Financing activities | ||||
| Repurchase of ordinary shares into treasury | (4,315) | (4,315) | (1,730) | (1,730) |
| Conversion of subscription shares | 5 | 5 | 66 | 66 |
| Dividends paid | (1,396) | (1,396) | (1,387) | (1,387) |
| Increase/(decrease) in inter-company loan | – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
310 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(6,195) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash outflow from financing activities | (5,706) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,396) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(3,051) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(9,246) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net (increase)/decrease in net debt | (8,353) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,482) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
12,491 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
12,793 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net debt at the start of the year | (15,596) | (15,483) | (28,019) | (28,208) |
| Effect of foreign exchange rate changes | (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(68) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(68) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net debt at the end of the year | (23,970) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(23,986) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(15,596) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(15,483) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Bank loans | (26,500) | (26,500) | (16,000) | (16,000) |
| Cash | 2,530 | 2,514 | 404 | 517 |
| (23,970) | (23,986) | (15,596) | (15,483) |
(a) Basis of preparation. The Group's Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The Company's Financial Statements have also been prepared in accordance with IFRSs as adopted by the EU and in accordance with the provisions of the Companies Act 2006 (the "Act"). The principal accounting policies adopted by the Group and by the Company are set out below. The Company has taken advantage of the exemption provided under Section 408 of the Act not to publish its Income Statement and related notes.
Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") in January 2009 is consistent with the requirements of IFRS, the financial statements have been prepared in accordance with the SORP.
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 30 April 2013. There are no differences between the accounting policies applied in the Group and the Company.
The Group and Company financial statements are presented in Sterling, which is the currency of the primary environment in which the Group operates. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.
A number of estimates and judgements have been made in the preparation of the financial statements. These are reviewed regularly by the Board and Investment Manager. The most significant judgement is the valuation of unquoted investments, which is described in note 1(e) below.
(b) Basis of consolidation. The Group financial statements consolidate the financial statements of Artemis Alpha Trust plc and the entities it controls (its subsidiary) drawn up to 30 April each year.
Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement. The financial statements of subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated on consolidation.
Income Statement. 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 Consolidated Income Statement between items of revenue and capital nature has been presented alongside the Consolidated Income Statement.
(d) Segmental reporting. The Group has only one material segment of business being that of an investment trust company.
(e) Investments. Investments (including current assets investments) are designated as fair value through profit or loss upon initial recognition. Listed investments are measured initially at cost, and are recognised at trade date. Investments in subsidiary undertakings are stated in the Company's financial statements at fair value, which is deemed to be the net assets of each subsidiary.
For financial assets acquired, the cost is the fair value of the consideration. Subsequent to initial recognition, all listed investments are measured at their quoted bid or SETS prices without deduction for the estimated future selling costs. Unquoted investments are valued at fair value which is determined by the Board, through discussion with the Investment Manager and with reference to the valuation guidelines issued by the International Private Equity and Venture Capital Valuation Board. Valuation techniques employed include: price of recent
investment; earnings multiples; net assets; discounted cash flow techniques; industry valuation benchmarks; and available market prices.
Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Consolidated Income Statement as gains/(losses) on investments. Also included within this caption are transaction costs in relation to the purchase or sale of investments.
Assets are derecognised at the trade date of the disposal. Proceeds are measured at fair value which are regarded as the proceeds of sale less any transaction costs.
(f) Revenue. Dividends receivable on equity shares are recognised as revenue on an ex-dividend basis. Provision is made for any dividends not expected to be received. Income from fixed interest securities is recognised on an effective interest rate basis. Interest receivable from cash and short-term deposits and interest payable is recognised on an accruals basis. Special dividends are treated as repayment of capital or as revenue depending on the facts of each particular case.
(g) Expenses and finance costs. All expenses and interest payable are accounted for on an accruals basis. Expenses are charged through the revenue column in the Consolidated Income Statement except as follows:
The performance fee is accrued in the daily net asset value and is calculated using the prevailing price of the Company's ordinary shares and benchmark performance. The accrued fee is based on the full expected liability of performance fee as at the date of the calculation. Payments will be made to the Investment Manager at the end of each performance period, in line with the Investment Management Agreement. Any amounts accrued but not due for payment may be reversed as a result of future relative performance.
(h) Taxation. Deferred taxation is recognised in full using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Due to the Company's status as an investment trust, and the intention to meet the conditions of section 1158 of the Corporation Taxes Act 2010 in the forseeable future, the Company has not provided for deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
Bank borrowings are used on a periodic basis to meet the Company's cash requirements and are reviewed regularly by the Investment Manager. Loan draw downs are normally of short durations which are subject to an insignificant risk of change in valuation.
(j) Dividends. Dividends are recognised from the date on which they are irrevocably committed to payment.
Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction.
Foreign currency monetary assets and liabilities are translated into Sterling at the rate ruling on the balance sheet date. Foreign exchange differences arising on investment transactions are recognised through capital.
Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value. Other payables are non-interest bearing and are stated at their nominal value.
Capital Reserves – realised The following are accounted for in this reserve:
Capital Reserves – unrealised Changes in the fair value of investments that are not readily convertible to cash and amounts by which other assets and liabilities valued at market value differ from their book value are accounted for through this reserve.
This reserve is treated as distributable profits for all purposes, excluding the payment of dividends. The cost of share buy-backs is accounted for through this reserve.
Capital Redemption Reserve This reserve includes the nominal value of all shares bought back and cancelled by the Company.
Retained earnings – revenue The revenue profit or loss for the year is taken to or from this reserve, and any dividends declared by the Company are paid from this reserve.
the date of authorisation of these financial statements, the following Standards and Interpretations were in issue. They are not yet mandatory, but are available for early adoption. They are not expected to have any impact on the Group or the Company:
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Investment income* | ||
| UK dividend income | 1,341 | 1,167 |
| UK fixed interest | 157 | 295 |
| Overseas dividend income | 139 | 485 |
| UK scrip dividend income | 62 | – |
| UK REIT income | 61 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
71 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 1,760 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,018 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Other income | ||
| Underwriting commission | 13 | – |
| Bank interest | 2 | 3 |
| Subsidiary undertaking's dealing (losses)/profits | (36) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
32 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
35 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Total income | 1,739 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,053 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Total income comprises: | ||
| Dividends and interest from investments | 1,760 | 2,018 |
| Bank interest | 2 | 3 |
| Other income and dealing (losses)/profits | (23) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
32 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 1,739 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,053 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Income from investments | ||
| UK quoted investments | 1,607 | 1,253 |
| UK unquoted investments | 14 | 280 |
| Overseas quoted investments | 139 | 485 |
| 1,760 | 2,018 |
* All investments are designated at fair value through profit or loss on initial recognition, therefore all investment income arises on investments at fair value through profit or loss.
| Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Investment management fee | 102 | 920 | 1,022 | 103 | 929 | 1,032 |
| Performance fee | – | – | – | (40) | (363) | (403) |
Details of the investments management fee and performance fee are set out in the Directors' Report on pages 16 and 17. As at 30 April 2013, £347,000 was outstanding in respect of amounts due to the Investment Manager (2012: £322,000). As the performance in this period did not meet the criteria required, no performance fee was due (2012: nil).
| Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Directors' remuneration (excluding VAT and NIC) | 110 | – | 110 | 110 | – | 110 |
| Auditor's remuneration (excluding VAT): – Fee for the audit of the Company's financial report |
22 | – | 22 | 21 | – | 21 |
| – Audit of the subsidiary pursuant to legislation | 2 | – | 2 | 2 | – | 2 |
| – Non-audit services – taxation Other expenses |
10 236 |
– 2 |
10 238 |
10 264 |
– 6 |
10 270 |
| 380 | 2 | 382 | 407 | 6 | 413 |
| Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Loan interest* | 39 | 352 | 391 | 51 | 462 | 513 |
| Loan non-utilisation fee | 3 | 27 | 30 | 3 | 23 | 26 |
| Loan commitment fee | 2 | 21 | 23 | 8 | 75 | 83 |
| Overdraft interest* | – | – | – | 1 | 8 | 9 |
| 44 | 400 | 444 | 63 | 568 | 631 |
* Interest on financial liabilities that are not held at fair value through profit or loss.
| Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Irrecoverable overseas tax | 12 | – | 12 | 24 | – | 24 |
| 12 | – | 12 | 24 | – | 24 |
Annual Financial report
| Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Profit/(loss) before tax | 1,073 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,356) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(4,283) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
882 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,482) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(7,600) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) on ordinary activites multiplied by the | ||||||
| standard rate of UK corporation tax of 23.92% | ||||||
| (2012: 25.84%) | 257 | (1,281) | (1,024) | 228 | (2,192) | (1,964) |
| Non-taxable capital losses | – | 965 | 965 | – | 1,897 | 1,897 |
| Non-taxable UK dividends | (321) | – | (321) | (297) | – | (297) |
| Non-taxable scrip dividends | (15) | – | (15) | – | – | – |
| Non-taxable overseas dividends | (33) | – | (33) | (125) | – | (125) |
| Unutilised management expenses | 112 | 316 | 428 | 194 | 295 | 489 |
| Irrecoverable overseas tax | 12 | – | 12 | 24 | – | 24 |
| 12 | – | 12 | 24 | – | 24 |
The Group has excess management expenses, surplus loan relationship deficits and trading losses of £8,764,000 (2012: £7,742,000) that are available to offset future taxable revenue. No deferred tax asset has been recognised in respect of these amounts as it is unlikely to be utilised in the foreseeable future.
Set out below are the total dividends recognised in respect of the financial year ended 30 April 2013.
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| 2012 second interim dividend of 1.75p per ordinary share (2011: 1.65p) 2013 first interim dividend of 1.20p per ordinary share (2012: 1.20p) |
831 565 |
803 584 |
| 1,396 | 1,387 |
Dividends are recognised in the period in which they are due to be paid and are shown through the Statement of Changes in Equity. Therefore, the Statement of Changes in Equity for the year ended 30 April 2013 reflects the second interim dividend for the year ended 30 April 2012 which was paid on 17 August 2012. For the year ended 30 April 2013, a first interim dividend of 1.20 pence has been paid and a second interim dividend of 1.85 pence per share will be paid on 16 August 2013.
Set out below are the total dividends paid/payable in respect of the financial year ended 30 April 2013.
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| First interim dividend of 1.20p per ordinary share (2012: 1.20p) | 565 | 584 |
| Second interim dividend of 1.85p per ordinary share (2012: 1.75p) | 864 | 844 |
| 1,429 | 1,428 |
The basic revenue return per ordinary share is based on the revenue profit for the year of £1,061,000 (2012: £858,000) and on the 47,350,570 (2012: 48,635,430) ordinary shares, being the weighted average number of ordinary shares in issue during the year.
The basic capital return per ordinary share is based on the capital loss for the year of £5,356,000 (2012: £8,482,000) and on the 47,350,570 (2012: 48,635,430) ordinary shares, being the weighted average number of ordinary shares in issue during the year.
There was no dilution to the returns for the year ended 30 April 2013 (2012: none).
All investments are designated as fair value through profit or loss at initial recognition and all gains and losses arise on investments designated as fair value through profit or loss. Where investments are considered to be readily realisable for cash, the fair value gains and losses, recognised in these financial statements are treated as realised. All other fair value gains and losses are treated as unrealised.
IFRS 7 'Financial Instruments: Disclosures' requires an entity to provide an analysis of investments held at fair value through profit and loss using a fair value hierarchy that reflects the significance of the inputs used in making the measurements of fair value. The hierarchy used to analyse the fair values of financial assets is set out below.
Level 1 – investments with quoted prices in an active market;
Level 2 – investments whose fair value is based directly on observable current market prices or is indirectly being derived from market prices; and
Level 3 – investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data.
The investments held at the balance sheet date fell in to two categories, Level 1 and Level 3. The values and movements in these categories are summarised in parts (a) to (d) of this note. Any investments that are delisted or suspended from a listed stock exchange are transferred from Level 1 to Level 3.
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2013 £'000 |
2013 £'000 |
2012 £'000 |
2012 £'000 |
|
| UK quoted investments (Level 1) | ||||
| – UK listed | 37,245 | 37,245 | 41,968 | 41,968 |
| – AIM quoted | 70,330 | 70,330 | 64,374 | 64,374 |
| – Fixed interest | 765 | 765 | 753 | 753 |
| – Preference shares | 581 | 581 | 511 | 511 |
| Overseas quoted investments (Level 1) | 10,153 | 10,153 | 9,367 | 9,367 |
| Unquoted investments (Level 3) | ||||
| – Equities and warrants | 41,199 | 41,199 | 42,570 | 42,570 |
| – Preference shares and loan notes | 950 | 950 | 1,826 | 1,826 |
| – Other | 898 | 898 | 1,111 | 1,111 |
| – Subsidiary undertakings | – | 1,170 | – | 1,331 |
| 162,121 | 163,291 | 162,480 | 163,811 |
Annual Financial report
| Quoted (Level 1) £'000 |
2013 Unquoted (Level 3) £'000 |
Total £'000 |
Quoted (Level 1) £'000 |
2012 Unquoted (Level 3) £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Opening book cost | 102,967 | 38,902 | 141,869 | 114,486 | 39,259 | 153,745 |
| Opening fair value adjustment | 14,004 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
6,607 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
20,611 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
13,104 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
14,700 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
27,804 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Opening valuation | 116,971 | 45,509 | 162,480 | 127,590 | 53,959 | 181,549 |
| Movements in year: | ||||||
| Purchases at cost | 45,060 | 7,324 | 52,384 | 42,394 | 7,961 | 50,355 |
| Sales – proceeds | (48,018) | (712) | (48,730) | (53,914) | (8,236) | (62,150) |
| – realised gains/(losses) on sales | 4,750 | (3,472) | 1,278 | 655 | (736) | (81) |
| Transfer to/(from) unquoted investments (cost) | 2,027 | (2,027) | – | (654) | 654 | – |
| Transfer to/(from) unquoted investments | ||||||
| (unrealised gain/(loss)) | 285 | (285) | – | (150) | 150 | – |
| Decrease in fair value adjustment | (2,001) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(3,290) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,291) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,050 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,243) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(7,193) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Closing valuation | 119,074 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
43,047 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
162,121 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
116,971 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
45,509 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
162,480 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Closing book cost | 106,786 | 40,015 | 146,801 | 102,967 | 38,902 | 141,869 |
| Closing fair value adjustment | 12,288 | 3,032 | 15,320 | 14,004 | 6,607 | 20,611 |
| 119,074 | 43,047 | 162,121 | 116,971 | 45,509 | 162,480 |
| Quoted (Level 1) £'000 |
2013 Unquoted (Level 3) £'000 |
Total £'000 |
Quoted (Level 1) £'000 |
2012 Unquoted (Level 3) £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Opening book cost | 102,967 | 38,902 | 141,869 | 114,486 | 46,279 | 160,765 |
| Opening fair value adjustment | 14,004 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
7,938 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
21,942 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
13,104 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
16,714 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
29,818 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Opening valuation | 116,971 | 46,840 | 163,811 | 127,590 | 62,993 | 190,583 |
| Movements in year: Purchases at cost Sales – proceeds |
45,060 (48,018) |
7,324 (712) |
52,384 (48,730) |
42,394 (53,914) |
7,961 (15,349) |
50,355 (69,263) |
| – realised gains/(losses) on sales | 4,750 | (3,472) | 1,278 | 655 | (643) | 12 |
| Transfer to/(from) unquoted investments (cost) Transfer to/(from) unquoted investments |
2,027 | (2,027) | – | (654) | 654 | – |
| (unrealised gain/(loss)) | 285 | (285) | – | (150) | 150 | – |
| Decrease in fair value adjustment | (2,001) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(3,451) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,452) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,050 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,926) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(7,876) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Closing valuation | 119,074 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
44,217 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
163,291 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
116,971 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
46,840 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
163,811 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Closing book cost | 106,786 | 40,015 | 146,801 | 102,967 | 38,902 | 141,869 |
| Closing fair value adjustment | 12,288 | 4,202 | 16,490 | 14,004 | 7,938 | 21,942 |
| 119,074 | 44,217 | 163,291 | 116,971 | 46,840 | 163,811 |
For Level 3 investments IFRS 7 requires that if the effect of changing one or more of the inputs to reasonably possible alternative assumptions would be to change the fair value significantly, it should be disclosed. The information used in determination of the fair value of Level 3 investments is specific to each investee company and is in accordance with the methodologies set out in the accounting policies in Note 1(e). The investments have been reviewed and where reasonable possible alternatives have been identified, these have been applied to each investment. The potential impact to the net assets of the Company by using the reasonably possible alternative assumptions would be an increase/decrease of £nil of the fair value of Level 3 assets.
During the year, there were reductions in value of the following Level 3 assets, Vostok Energy (£7,817,000), Hurricane Energy (£4,488,000), Lynton Holding Asia (£2,195,000), MBA Polymers (£442,000), Chateau Lafite Rothschild 2009 (£107,000), Chateau Lafite Rothschild 2010 (£100,000) and Chateau Rieussec 2010 (£6,000).
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Realised gains/(losses) on sales of investments | 1,278 | (81) |
| Decrease in fair value adjustment | (5,291) | (7,193) |
| (4,013) | (7,274) |
Included in purchases at cost and proceeds from sales are the following transaction costs:
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2013 | 2013 | 2012 | 2012 | |
| £'000 | £'000 | £'000 | £'000 | |
| Purchases | 163 | 155 | 202 | 194 |
| Sales | 112 | 108 | 120 | 115 |
| 275 | 263 | 322 | 309 |
| % of ordinary Share capital held |
Principal activity | Country of incorporation and operation |
|
|---|---|---|---|
| Alpha Securities Trading Limited | 100 | Investment dealing | England |
Investment in the subsidiary undertaking is held at fair value, which is deemed to be the net assets of the company. Alpha Securities Trading Limited holds a portfolio of listed investments which are measured at their quoted bid prices. During the year the company made an unrealised loss of £140,000 (2012: £638,000) and a dealing loss of £36,000 (2012: gain of £32,000) which are included in the Income Statement.
Annual Financial report
At 30 April 2013 the Company held shares amounting to 3 per cent or more of the nominal value of any class of share capital of the following companies, not being participating interests.
| Class Held | % of class held | |
|---|---|---|
| Gift-Library.com | Ordinary | 57.8 |
| Claremont Partners | Ordinary | 42.4 |
| Lynton Holding Asia | Ordinary | 35.1 |
| Senhouse Southeast Asian Focus Fund | Ordinary | 19.9 |
| Pittards | Ordinary | 19.4 |
| All The Worlds Entertainment | Ordinary | 18.3 |
| Hardlyever | Ordinary | 15.3 |
| Infusion 2002 | Ordinary | 13.0 |
| Physiolab Technologies | Ordinary | 10.5 |
| Praetorian Resources | Ordinary | 10.2 |
| Hot Can | Ordinary | 8.4 |
| Ashcourt Rowan | Ordinary | 7.9 |
| Ten Alps | Ordinary | 7.8 |
| Eden Research | Ordinary | 6.9 |
| Lamp Group | Ordinary | 6.9 |
| Avation | Ordinary | 6.4 |
| Forest Support Service | Ordinary | 6.3 |
| Liontrust Asset Management | Ordinary | 6.2 |
| Nplus1 Singer | Ordinary | 6.1 |
| Conexion Media Group | Ordinary | 5.5 |
| Metapack | Ordinary | 5.4 |
| Parity Group | Ordinary | 5.1 |
| Reaction Engines | Ordinary | 4.7 |
| Betex Group | Ordinary | 4.6 |
| Lansdowne Oil & Gas | Ordinary | 4.6 |
| Continental Farmers Group | Ordinary | 4.5 |
| The Hut Group | Ordinary | 4.2 |
| Flying Brands | Ordinary | 3.9 |
| Ironveld | Ordinary | 3.8 |
| Gresham Computing | Ordinary | 3.6 |
| Telford Homes Charlemagne Capital |
Ordinary Ordinary |
3.6 3.5 |
| Madagascar Oil | Ordinary | 3.5 |
| Rangers International Football Club | Ordinary | 3.3 |
| Homeland Renewable Energy | Ordinary | 3.2 |
| Vostok Energy | Ordinary | 3.1 |
These investments are held by the Company at fair value through profit or loss as part of a portfolio of investments rather than as a medium through which the company carries out its business and therefore are not considered associated undertakings of the Company.
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2013 | 2013 | 2012 | 2012 | |
| £'000 | £'000 | £'000 | £'000 | |
| Amounts due from brokers | 383 | 241 | 229 | 183 |
| Prepayments and accrued income | 110 | 110 | 410 | 399 |
| Taxation recoverable | 54 | 54 | 25 | 25 |
| Amount due from subsidiary undertakings | – | – | – | 246 |
| 547 | 405 | 664 | 853 |
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2013 | 2013 | 2012 | 2012 | |
| £'000 | £'000 | £'000 | £'000 | |
| Amounts due to brokers | 813 | 813 | 324 | 324 |
| Accrued expenses | 487 | 485 | 510 | 508 |
| Amounts due to subsidiary undertakings | – | 64 | – | – |
| 1,300 | 1,362 | 834 | 832 |
| 2013 Number |
2013 £'000 |
2012 Number |
2012 £'000 |
|
|---|---|---|---|---|
| Allotted, called up and fully paid: Ordinary shares of 1p each Ordinary shares of 1p each held in treasury Subscription shares of 1p each |
46,688,812 1,847,176 6,865,616 |
467 18 69 |
48,222,422 622,048 6,867,134 |
482 6 69 |
| 554 | 557 |
| Number | £'000 | |
|---|---|---|
| Movements in ordinary shares during the year: | ||
| Ordinary shares in issue on 1 May 2012 | 48,222,422 | 482 |
| Repurchases of ordinary shares into treasury | (1,535,128) | (15) |
| Issue of ordinary shares on exercise of subscription shares | 1,518 | – |
| Ordinary shares in issue on 30 April 2013 | 46,688,812 | 467 |
The movements in ordinary shares held in treasury during the year are as follows:
| 2013 | 2013 | 2012 | 2012 | |
|---|---|---|---|---|
| Number | £'000 | Number | £'000 | |
| Balance brought forward | 622,048 | 6 | – | – |
| Repurchases | 1,535,128 | 15 | 622,048 | 6 |
| Shares cancelled | (310,000) | (3) | – | – |
| Balance carried forward | 1,847,176 | 18 | 622,048 | 6 |
During the year ended 30 April 2013, a total of 1,535,128 ordinary shares were repurchased by the Company at a total cost, including transaction costs, of £4,315,000 for placement in treasury (2012: 622,048 ordinary shares were repurchased for placement in treasury for £1,730,000).
During the year ended 30 April 2013, no ordinary shares were re-issued from treasury by the Company (2012: nil).
During the year ended 30 April 2013, 310,000 ordinary shares were cancelled by the Company (2012: nil). At 30 April 2013 the Company held 1,847,176 ordinary shares in treasury (2012: 622,048).
Annual Financial report
The movements in subscription shares during the year are as follows:
| Number | £'000 | |
|---|---|---|
| Balance brought forward | 6,867,134 | 69 |
| Conversion of subscription shares into ordinary shares | (1,518) | – |
| Balance carried forward | 6,865,616 | 69 |
During the year, holders of 1,518 (2012: 19,231) subscription shares exercised their rights to covert those shares into ordinary shares at a price of 345 pence per ordinary share, giving a total consideration received of £5,000 (2012: £66,000).
Holders of the remaining subscription shares may exercise their right to convert those shares into ordinary shares at a price of 345 pence per ordinary share as at the close of business on the last business day in either June or December each year to 31 December 2017, whereupon rights under the subscription shares will lapse.
| Group | Company | |||||
|---|---|---|---|---|---|---|
| Capital reserve – realised £'000 |
Capital reserve – unrealised £'000 |
Total capital reserve £'000 |
Capital reserve – realised £'000 |
Capital reserve – unrealised £'000 |
Total capital reserve £'000 |
|
| Balance at 1 May 2012 | 75,561 | (37) | 75,524 | 75,142 | 1,294 | 76,436 |
| Decrease in fair value adjustment | – | (5,291) | (5,291) | – | (5,452) | (5,452) |
| Net gain on realisation of investments | 1,278 | – | 1,278 | 1,278 | – | 1,278 |
| Currency losses on capital items | (21) | – | (21) | (21) | – | (21) |
| Costs charged to capital (net of tax relief) | (1,322) | – | (1,322) | (1,322) | – | (1,322) |
| Transfer between reserves | (16,832) | 16,832 | – | (16,832) | 16,832 | – |
| Balance at 30 April 2013 | 58,664 | 11,504 | 70,168 | 58,245 | 12,674 | 70,919 |
| Balance at 1 May 2011 | 73,364 | 10,642 | 84,006 | 72,852 | 12,656 | 85,508 |
| Decrease in fair value adjustment | – | (7,193) | (7,193) | – | (7,876) | (7,876) |
| Net (loss)/gain on realisation of investments | (81) | – | (81) | 12 | – | 12 |
| Currency losses on capital items | (67) | (1) | (68) | (67) | (1) | (68) |
| Costs charged to capital (net of tax relief) | (1,140) | – | (1,140) | (1,140) | – | (1,140) |
| Transfer between reserves | 3,485 | (3,485) | – | 3,485 | (3,485) | – |
| Balance at 30 April 2012 | 75,561 | (37) | 75,524 | 75,142 | 1,294 | 76,436 |
The net asset value per ordinary share is based on the net assets of £138,348,000 (2012: £148,349,000) and on 46,688,812 (2012: 48,222,422) ordinary shares, being the number of ordinary shares in issue at the year end.
The diluted net asset value per ordinary share has been calculated on the assumption that nil (2012: nil) subscription shares were exercised resulting in a total of 46,688,812 ordinary shares in issue (2012: 48,222,422).
At 30 April 2013, the Group and Company did not have any financial commitments which had not been accrued (2012: nil).
As detailed on page 2, the principal investment objective of the Group is to achieve above average rates of total return over the longer term and to achieve a growing dividend stream.
The Group's financial instruments comprise equities, fixed interest securities, warrants, cash balances, a bank loan as well as debtors and creditors that arise from its operations. These are held in accordance with its investment policy. The principal risks the Group faces are (i) market price risk (comprising currency risk, interest rate risk and other price risk); (ii) liquidity risk; and (iii) credit risk.
Market risk, which includes, foreign currency, interest rate and other price risk, arises mainly from uncertainty about future values of financial instruments held in the Group's investment portfolio. It is the Board's policy that the Group should maintain an appropriate spread of investments in the portfolio to seek to reduce the risks arising from factors specific to a particular company or sector. The day to day management of the portfolio is the responsibility of the Investment Manager, in accordance with the Company's investment policy. This includes ongoing detailed analysis of existing and potential investee companies. No derivatives or hedging instruments are used to manage market risk. The Board monitors the Company's overall market positions on a regular basis.
Details of the investments held at 30 April 2013 are disclosed in the investment portfolio set out on pages 9 to 11.
The portfolio has a number of overseas investments and the income and capital value can be affected by movements in exchange rates. The Group also operates a number of currency bank accounts and exchange gains or losses may arise as a result of the movement in the exchange rate between the date of the transaction denominated in a currency other than sterling and its settlement. It is not the Group's policy to hedge currency risk on an ongoing basis.
An analysis of the Group's currency exposure is detailed below:
| Investments at 30 April 2013 £'000 |
Net monetary assets at 30 April 2013 £'000 |
Investments at 30 April 2012 £'000 |
Net monetary assets at 30 April 2012 £'000 |
|
|---|---|---|---|---|
| US Dollar | 8,320 | – | 12,445 | 54 |
| Canadian Dollar | 6,771 | – | 7,368 | – |
| Danish Krone | 3,464 | – | 5,659 | – |
| Euro | – | 28 | 1 | 64 |
| Australian Dollar | – | – | 1,922 | – |
| Total | 18,556 | 28 | 27,395 | 118 |
A 5 per cent increase in sterling against the relevant foreign currencies would have the effect of reducing the profit or loss and the net assets by £929,000 (2012: £1,370,000). A 5 per cent decrease in sterling would have an equal and opposite effect.
The majority of the Group's financial assets are non interest bearing and therefore exposure to fair value interest rate fluctuations is limited.
When the Company has cash balances these are maintained in an interest bearing account. The benchmark that determines the interest paid on the cash balances is the UK bank base rate, which was 0.5 per cent at 30 April 2013 (2012: 0.5 per cent).
The Company has a 24 month multi-currency revolving credit facility of £30,000,000 of which £26,500,000 was drawn down at 30 April 2013 (2012: £16,000,000). Interest is charged at variable rates equivalent to 120 basis points over the London interbank market rate.
The table below sets out the weighted average effective interest rates for the fixed interest-bearing financial instruments:
| 30 April 2013 | 30 April 2012 | |||||
|---|---|---|---|---|---|---|
| Weighted | Weighted | |||||
| Weighted | average | Weighted | average | |||
| Fixed rate | average | period until | Fixed rate | average | period until | |
| investments | interest rate | maturity | investments | interest rate | maturity | |
| £'000 | % | Years | £'000 | % | Years | |
| Interest bearing securities | 1,149 | 3.52 | 2.86 | 2,329 | 7.91 | 2.58 |
Other price risk is the risk that the value of an instrument will fluctuate as result of changes in market prices (other than those relating to interest rate and credit risk), whether caused by factors specific to an investment of wider issues affecting the market generally. A 5 per cent increase in the value of the Group's investments would have the effect of increasing net assets by £8,106,000 (2012: £8,124,000). A 5 per cent decrease would have an equal and opposite effect.
This is the risk that the Group will encounter difficulty in meeting obligations associated with financial commitments. A proportion of the Group's financial instruments includes companies that are trading on AIM or are unquoted and these may not be readily realisable. The Group's investment strategy is to ensure that there are a sufficient number of investments that are readily realisable and can be sold to meet any funding requirements. The Company has an agreed overdraft facility of £2,500,000 to provide short-term funding flexibility in addition to the £30,000,000 multi-currency revolving credit facility. There was no overdraft at 30 April 2013 (2012: nil).
The Group primarily finances its operations through equity, retained profits and bank borrowings. As at 30 April 2013, the Group had drawn down £26,500,000 of its committed £30,000,000 multi-currency revolving credit facility with The Royal Bank of Scotland plc (30 April 2012: £16,000,000). Interest is incurred at a variable rate as agreed at the time of draw down and is payable at the maturity date of each advance. The interest rate at 30 April 2013 was 1.70 per cent per annum (2012: 1.89 per cent per annum). There was no interest rate risk associated with other short-term creditors at 30 April 2013 or 30 April 2012. There is no difference between the fair value of the financial liabilities and their carrying value.
The credit facility is committed until 30 November 2013. The amount that can be drawn down under the facility is limited by a covenant measured against a proportion of the Company's portfolio and cash such that the Company's gross borrowings must not exceed 30% of adjusted net assets (net assets adjusted for unquoted holdings and other concentration deductions).
This is the risk that an issuer or counterparty will fail to discharge its obligations or commitments to the Company resulting in a financial loss. The Investment Manager has a pre-approved list of counterparties it uses for investment transactions, which is reviewed on a regular basis.
The largest counterparty risk is with J.P. Morgan Chase Bank N.A., which acts as custodian and banker.
Bankruptcy or insolvency of the custodian may cause the Company's rights with regard to securities and cash balances held to be delayed or limited. The Board receives and review the custodian's annual report on internal controls.
The amounts paid to the Investment Manager and amounts outstanding at the year end are disclosed in Note 3. However, the existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party. All other transactions with subsidiary undertakings were on an arms length basis. During the year transactions in securities between the Company and its subsidiary undertakings amounted to £nil (2012: £nil). Outstanding balances are set out in note 13.
NOTICE IS HEREBY GIVEN that the Annual General Meeting ("AGM") of Artemis Alpha Trust plc (the "Company") will be held at the offices of Artemis Investment Management LLP, Cassini House, 57 St James's Street, London SW1A 1LD on Thursday, 12 September 2013 at 12.30 pm for the purpose of transacting the following business:
To consider and, if thought fit, to pass the following as ordinary resolutions:
To consider and, if thought fit, to pass the following as an ordinary resolution:
provided that this authority shall expire at the conclusion of the next annual general meeting of the Company to be held in 2014, unless previously revoked, varied or extended by the Company at a general meeting, save that this authority shall allow the Company to make offers or agreements before the expiry of this authority which would or might require relevant securities to be allotted after such expiry as if the authority conferred by this Resolution had not expired.
To consider and, if thought fit, to pass the following as special resolutions:
pursuant to any such offer or agreement as if the power conferred hereby had not expired; and
(a) the maximum aggregate number of ordinary shares and subscription shares hereby authorised to be purchased shall not exceed 6,736,058 or 1,029,155 respectively, or if different, that number of ordinary shares or subscription shares which is equal to 14.99 per cent of the relevant share class of the Company's issued share capital as at the date of this Resolution;
(b) the minimum price which may be paid for both an ordinary share and a subscription share shall be 1 pence per share;
By order of the Board:
Artemis Investment Management LLP Secretary 4 July 2013
Registered Office: Cassini House 57 St James's Street London SW1A 1LD
If you wish to attend the AGM in person, you should arrive at the venue for the AGM in good time to allow your attendance to be registered. It is advisable to have some form of identification with you as you may be asked to provide evidence of your identity prior to being admitted to the AGM.
Members are entitled to appoint one or more proxies to exercise all or any of their rights to attend, speak and vote at the AGM. A proxy need not be a member of the Company but must attend the AGM to represent a member. To be validly appointed a proxy must be appointed using the procedures set out in these notes and in the notes to the accompanying proxy form.
If members wish their proxy to speak on their behalf at the meeting, members will need to appoint their own choice of proxy (not the chairman of the AGM) and give their instructions directly to them.
Members can only appoint more than one proxy where each proxy is appointed to exercise rights attached to different shares. Members cannot appoint more than one proxy to exercise the rights attached to the same share(s). If a member wishes to appoint more than one proxy, they should contact Capita Registrars on 0871 664 0300 (calls to this number are charged at 10 pence per minute from a BT landline. Other providers' costs may vary. Lines are open from 8.30 am to 5.30 pm, Monday to Friday).
A member may instruct their proxy to abstain from voting on any resolution to be considered at the meeting by marking the "vote withheld" option when appointing their proxy. It should be noted that an abstention is not a vote in law and will not be counted in the calculation of the proportion of votes "for" or "against" the resolution.
The appointment of a proxy will not prevent a member from attending the AGM and voting in person if he or she wishes.
A person who is not a member of the Company but who has been nominated by a member to enjoy information rights does not have a right to appoint any proxies under the procedures set out in these notes and should read note 8 below.
34 Beckenham Road, Beckenham, BR3 4TU no later than 48 hours (excluding non working days) before the time of the AGM or any adjournment of that meeting.
If you do not have a proxy form and believe that you should have one, or you require additional proxy forms, please contact the Registrar on 0871 664 0300 (calls to this number are charged at 10 pence per minute from a BT landline. Other providers' costs may vary. Lines are open from 8.30 am to 5.30 pm, Monday to Friday).
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual and by logging on to the following website: euroclear.com/CREST. CREST personal members or other CREST sponsored members, and those CREST members who have appointed (a) voting service provider(s), should refer to their CREST sponsor or voting service provider(s) who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications, and must contain the information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy, must in order to be valid be transmitted so as to be received by the Registrar (ID RA 10) no later than 48 hours (excluding non working days) before the time of the General Meeting or any adjournment of that meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the Registrar is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed (a) voting
service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
In the case of joint holders, where more than one of the joint holders purports to appoint one or more proxies, only the purported appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's register of members in respect of the joint holding (the first named being the most senior).
Any corporation which is a member can appoint one or more corporate representatives. Members can only appoint more than one corporate representative where each corporate representative is appointed to exercise rights attached to different shares. Members cannot appoint more than one corporate representative to exercise the rights attached to the same share(s).
To be entitled to attend and vote at the AGM (and for the purpose of determining the votes they may cast), members must be registered in the Company's register of members at 6.00 pm on 10 September 2013 (or, if the AGM is adjourned, at 6.00 pm two working days prior to the adjourned meeting). Changes to the register of members after the relevant deadline will be disregarded in determining the rights of any person to attend and vote at the AGM.
Any person to whom this notice is sent who is a person nominated under section 146 of the Act to enjoy information rights (a "Nominated Person") may, under an agreement between him/her and the member by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights.
Information regarding the AGM, including information required by section 311A of the Act, and a copy of this notice of AGM is available on the Investment Manager's web site: artemis.co.uk.
As at 4 July 2013 (being the latest practicable date prior to the publication of this notice) the Company's issued share capital consisted of 44,937,012 ordinary shares, carrying one vote each and 6,865,616 subscription shares, which carry no voting rights. Therefore, the total voting rights in the Company as at 14 July 2013 were 44,937,012 votes.
Any person holding 3 per cent or more of the total voting rights of the Company who appoints a person other than the Chairman of the General Meeting as his proxy will need to ensure that they both comply with their respective disclosure obligations under the UK Disclosure and Transparency Rules.
Members meeting the threshold requirements set out in the Act have the right to: (a) require the Company to give notice of any resolution which can properly be, and is to be, moved at the meeting pursuant to section 338 of the Act; and/or (b) include a matter in the business to be dealt with at the meeting, pursuant to section 338A of the Act.
Under section 319A of the Act, the Company must cause to be answered any question relating to the business being dealt with at the AGM put by a member attending the meeting unless answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, or the answer has already been given on a website in the form of an answer to a question, or it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
Members who have any queries about the AGM should contact the Company Secretarial Department by writing to Artemis Investment Management LLP, Cassini House, 57 St James's Street, London, SW1A 1LD.
Members may not use any electronic address provided in this notice or in any related documents (including the accompanying circular and proxy form) to communicate with the Company for any purpose other than those expressly stated.
Annual Financial report
The following documents will be available for inspection at the registered office of the Company during normal business hours on any weekday (Saturdays, Sundays and English public holidays excepted) from the date of this notice until the conclusion of the Annual General Meeting:
No Director has a service contract with the Company.
As soon as practicable following the AGM, the results of the voting at the AGM, the number of votes cast for and against and the number of votes withheld in respect of each resolution will be announced via a Regulatory Information Service and placed on the Investment Manager's website: artemis.co.uk.
Members should note that it is possible that, pursuant to requests made by members of the Company under section 527 of the Act, the Company may be required to publish on a website a statement setting out any matter relating to: (a) the audit of the Company's financial statements (including the auditor's report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (b) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual financial statements were laid in accordance with section 437 of the Act. The Company may not require the members requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Act. Where the Company is required to place a statement on a website under section 527 of the Act, it must forward the statement to the Company's auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Act to publish on a website.
The Company's ordinary and subscription shares are traded on the London Stock Exchange and can be bought or sold through a stockbroker. The Company is also a qualifying investment trust for ISA purposes.
London Stock Exchange (SEDOL) number: 0435594
ISIN number: GB0004355946
Reuters code: ATS.L
Bloomberg code: ATS:LN
London Stock Exchange (SEDOL) number: B5SLGR8
ISIN number: GB00B5SLGR82
Reuters code: ATSS.L
Bloomberg code: ATSS:LN
Shares can also be purchased through the Artemis Alpha Trust Investment Plan and/or ISA operated by the Investment Manager, Artemis Investment Management LLP.
If investors would like further information on the Investment Plan or ISA please contact the Investment Manager on 0800 092 2051 or write to Artemis Investment Management LLP, Cassini House, 57 St James's Street, London, SW1A 1LD or e-mail [email protected].
All administrative enquiries relating to shareholder queries concerning holdings, dividend payments, notification of change of address, loss of certificate or to be placed on a
mailing list should be addressed to the Company's registrars at: Shareholder Services Department, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or by calling 0871 664 0300 (calls cost 10 pence per minute from a BT landline. Other providers' costs may vary. Lines are open from 8.30 am to 5.30 pm, Monday to Friday).
If you would like to receive dividend payments directly into your bank account, please contact the Company's registrar at the address above.
Shareholders are able to re-invest their cash dividends using the Plan operated by Capita Registrars. To find out more about the Plan, please contact Capita at: Shareholder Services Department, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or by calling 0871 664 0300 (calls cost 10 pence per minute from a BT landline. Other providers' costs may vary. Lines are open from 8.30 am to 5.30 pm, Monday to Friday).
The Company's net asset value is calculated daily and released to the London Stock Exchange. The share prices are listed in the Financial Times and also on the TrustNet website (trustnet.com). Up to date information can be found on the Investment Manager's website (artemis.co.uk), including a factsheet which is updated monthly. Shareholders can also contact the Chairman to express any views on the Company or to raise any questions they have using the email address [email protected].
Subscription shareholders can exercise their subscription shares at a price of 345 pence per share on 30 June and 31 December each year, up to 31 December 2017.
If you received subscription shares when they were issued, for the purposes of UK taxation, the issue of subscription shares is treated as a reorganisation of the Company's share capital. Such reorganisations do not trigger a chargeable disposal for the purposes of the taxation of capital gains, but they do require shareholders to reallocate the base cost of their ordinary shares between their ordinary shares and subscription shares received.
At the close of business on 13 December 2010 the middle market prices of the Company's ordinary shares and subscription shares were as follows:
Ordinary shares: 308.25
Subscription shares: 62.75
To exercise subscription shares, in whole or in part, shareholders must complete the notice of exercise of subscription share rights on the reverse of the share certificate and lodge the relevant subscription share
certificate(s) at the office of the Company's registrars during the period 28 days ending at 5.00 p.m. on the relevant subscription date, accompanied by a remittance for the aggregate conversion price for the ordinary shares in respect of which the subscription share rights are exercised.
Subscription shares that are in uncertificated form on the relevant subscription date shall be exercisable, in whole or in part, if (i) an uncertificated subscription notice is received on or within 28 days prior to the relevant subscription date (but not later than the latest time for input of the instruction permitted by the relevant electronic systems on that date) and (ii) a remittance for the aggregate conversion price for the ordinary shares in respect of which the subscription share rights are being exercised is received by the Company (or by such person as it may require for these purposes).
For capital gains purposes, the cost of the Company's ordinary shares at 31 March 1982 was 13.22p per share.
The Company is a member of The Association of Investment Companies ("AIC") which publishes monthly statistics on the majority of investment trusts. Further details can be obtained by contacting the AIC on 020 7282 5555 or at its website theaic.com.
Year End
30 April
Interim: December Annual: June/July
February and August
September
Artemis Investment Management LLP Cassini House 57 St James's Street London SW1A 1LD
The Investment Manager is authorised and regulated by the Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS
Cassini House 57 St James's Street London SW1A 1LD
Tel: 0800 092 2051 Email: [email protected] Website: artemis.co.uk
J.P. Morgan Europe Limited 125 London Wall London EC2Y 5AJ
Capita Registrars Shareholder Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Shareholder enquiries: 0871 664 0300 (Calls cost 10 pence per minute plus network extras. Lines are open from 8.30 am to 5.30 pm Monday to Friday).
J.P. Morgan Chase Bank N.A. 25 Bank Street Canary Wharf London E14 5JP
KPMG Audit Plc Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
J.P. Morgan Chase Bank N.A. 25 Bank Street Canary Wharf London E14 5JP
Cantor Fitzgerald One America Square, 3rd Floor 17 Crosswall London EC3N 2LB
Dickson Minto W.S. Broadgate Tower Primrose Street London EC2A 2EW
An investment company as defined under section 833 of the Companies Act 2006. Registered in England No. 253644
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