Annual Report • Apr 30, 2014
Annual Report
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Annual Financial report for the year ended 30 April 2014
| Financial Highlights | 2 |
|---|---|
| Strategic Report | 4 |
| Corporate Strategy & Policy | 4 |
| Chairman's Statement | 5 |
| Investment Manager's Review | 7 |
| Key Performance Indicators (KPIs) | 10 |
| Other matters | 10 |
| Portfolio of Investments | 12 |
| Directors | 17 |
| Directors' Report | 18 |
| Directors' Remuneration Report and Policy | 26 |
| Management Report and Statement of Directors' Responsibilities | 28 |
| Independent Auditor's Report to the members of Artemis Alpha Trust plc | 29 |
| Consolidated Income Statement | 31 |
| Balance Sheets | 32 |
| Statements of Changes in Equity | 33 |
| Cash Flow Statements | 35 |
| Notes to the Financial Statements | 36 |
| Notice of Annual General Meeting | 50 |
| Information for Shareholders | 55 |
| Investment Manager, Company Secretary and Advisers | 57 |
Annual Financial report
| Total returns | Year ended 30 April 2014 |
Year ended 30 April 2013 |
|---|---|---|
| Net asset value per ordinary share | 13.3% | (2.8)% |
| Ordinary share price | 3.1% | 4.5% |
| FTSE All-Share Index | 10.5% | 17.8% |
| Revenue and dividends | ||
| Revenue earnings per ordinary share | 6.16p | 2.24p |
| Dividends per ordinary share | 3.20p | 3.05p |
| Ongoing charges (excluding performance fees) | 1.0% | 0.9% |
| Capital | As at 30 April 2014 |
As at 30 April 2013 |
| Net asset value per ordinary share | 332.55p | 296.32p |
| Ordinary share price | 298.75p | 293.00p |
| Gearing | 17.4% | 17.3% |
Source: Artemis/Datastream
Source: Artemis/Datastream Source: Artemis/Datastream
| Total returns to 30 April 2014 | 3 years | 5 years | Since 1 June 2003* |
|---|---|---|---|
| Net asset value per ordinary share | 5.1% | 84.6% | 421.8% |
| Ordinary share price | (7.3)% | 77.5% | 382.0% |
| FTSE All-Share Index | 27.6% | 98.2% | 168.0% |
* 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.
* Including second interim dividend of 2.00 pence per ordinary share.
This Strategic Report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, which Artemis Alpha Trust plc (the "Company") is required to comply with for the first time for the year ended 30 April 2014.
The Company is incorporated in England. Its business as an investment trust is to buy and sell investments with the aim of achieving the corporate policy outlined 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 stockmarket index. There is no restriction on the number of investments that can be held in the portfolio.
The Company also 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.
In addition, 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 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 has been approved as an investment trust in accordance with the requirements of section 1158 of the Corporation Taxes Act 2010 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 Group has no employees and delegates most of its operational functions to service providers, details of which are set out in the report.
A summary of the Company's developments during the year ended 30 April 2014, together with its prospects for the future, is set out in the Chairman's Statement on pages 5 and 6 and Investment Manager's Review on pages 7 to 9. 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 Company's net asset value increased by 13.3 per cent during the year ended 30 April 2014. This compares to an increase over the same period of 10.5 per cent in the FTSE All-Share Index.
The Board has declared a second interim dividend of 2.00p (2013: 1.85p) per ordinary share, bringing the total for the year ended 30 April 2014 to 3.20p (2013: 3.05p), an increase of 4.9%. This is the result of two factors: first, the investment portfolio has produced a higher level of income this year due to dividends from its financial holdings; and second, the Company's dealing subsidiary had a very successful year and generated in excess of £1 million in profits which has boosted the overall amount available for dividends.
The second interim dividend will be paid on 15 August 2014 to those shareholders on the register as at 25 July 2014. 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 55.
For some time now, Artemis Alpha has had a significant exposure to the oil & gas sector which has delivered good returns over the longer term. However, over the last two years, against a backdrop of a high oil price, there has been very mixed performance within the sector. The best performance has come from production companies, whereas those focused on exploration and that have limited financial resources have as a result performed badly in share price terms.
The portfolio is now more diversified than it has been for a number of years, with the largest sector exposure now financial services where the Company has holdings in a number of investment management companies. It also has a substantial investment in companies which use the internet to create a competitive advantage in their industry, primarily internet retailers.
The Company's exposure to unquoted companies was maintained during the year and is well diversified by industry and stage of development. Their contribution played an important role within the portfolio.
3,482,409 ordinary shares were bought back during the year, representing 7.4 per cent of the share capital, at a cost of £9.7m and an average discount to the prevailing net asset value of 11 per cent. Buying back shares at a discount does have the effect of adding value for remaining shareholders, and in the year to 30 April 2014 the uplift from buybacks was equivalent to 2.50p per ordinary share.
As reported in the half-yearly statement, the Company entered into a new £30 million five-year, multi-currency revolving loan facility with The Royal Bank of Scotland in November 2013. The Board believes that this will provide flexibility over the medium term at a competitive rate.
Gearing was maintained at broadly the same level throughout the year and this was accretive to performance. At the year-end, borrowings represented 17.4 per cent of net assets.
As highlighted in previous reports, the Company is required to comply with AIFMD by July 2014. Artemis Fund Managers Limited, a company in the same group as the current Investment Manager, will be appointed as Investment Manager and Alternative Investment Fund Manager to the Company. The investment management agreement between the Company and the Investment Manager will be updated to reflect the requirements of AIFMD. A further requirement of AIFMD is to appoint a depositary that will be, inter alia, responsible for the safe keeping of the Company's assets, and the Board has appointed J.P. Morgan Chase to fulfil this role. There is a small annual fee, based on the value of the assets, payable to J.P. Morgan Chase, otherwise there are not expected to be any significant additional costs to shareholders as a result of complying with AIFMD.
As reported in the last annual report, I intend to retire as a Director and Chairman of the Company at the conclusion of the Annual General Meeting on 2 October 2014. I have thoroughly enjoyed my time on the Board and am confident in the future of Artemis Alpha. Duncan Budge will succeed me as Chairman.
The Company's AGM will take place on Thursday, 2 October 2014 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 50 to 54.
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.
Stockmarkets have recovered strongly since the depths of the financial crisis in 2009. But how much of this performance is due to the monetary policy of central banks is not yet clear. Valuations have increased faster than corporate earnings, and are starting to appear high for some companies. Sterling has also been a strong performer, which may affect a number of the portfolio's holdings which have international operations.
It is encouraging that the UK is one of the fastest growing economies in the developed world and, having built up cash over the past few years, companies are now starting to invest and levels of corporate activity have increased. This should create a positive background for markets.
Simon Miller Chairman 3 July 2014
Over the year to 30 April 2014, the Company's net asset value rose by 13.3 per cent compared with a rise of 10.5 per cent in the FTSE All-Share Index.
This was a significant improvement on the previous financial year, when the value ascribed to a number of the Company's unquoted holdings was written down, weighing on the Company's relative returns. The Company's long-term performance remains good.
Source Artemis/Datastream.
| 3 years | 5 years | Since 1 June 2003* |
|
|---|---|---|---|
| Net asset value | 5.1% | 84.6% | 421.8% |
| Ordinary share price | (7.3)% | 77.5% | 382.0% |
| FTSE All-Share Index | 27.6% | 98.2% | 168.0% |
* The date when Artemis was appointed as Investment Manager. All figures are total return to 30 April 2014.
Over the last 12 months, economies around the world have started to show signs of recovery. In combination with a prolonged period of low interest rates, this has enabled equities – and a number of other asset classes – to continue rising.
The UK's economic recovery has been notable. Unemployment is falling, growth is returning and house prices in some parts of the country are rising. The question now becomes when will interest rates go up. Expectations of higher rates have already led to a substantial rise in sterling over the last few months, endangering the competitiveness of the UK's exporters. In general, though, corporate profitability remains strong and consumers remain confident.
We have always had a strong emphasis on bottom-up stock picking and this continues to be the case. Over this financial year, the portfolio has had an increased focus around three core themes: other financials, online businesses and oil & gas. Both other financials and online businesses are seeing strong structural growth elements.
| Company | Market | Contribution % |
|---|---|---|
| Metapack | Unquoted | 3.1 |
| Polar Capital Holdings | AIM | 2.2 |
| Brewin Dolphin | LSE | 2.1 |
| Skyepharma | LSE | 1.8 |
| Liontrust Asset Management | LSE | 1.7 |
| Company | Market | Contribution % |
|---|---|---|
| Providence Resources | AIM | (4.7) |
| Hurricane Energy | AIM | (3.4) |
| Lansdowne Oil & Gas | AIM | (1.2) |
| Salamander Energy | LSE | (0.9) |
| Praetorian Resources | AIM | (0.8) |
Of the three themes, oil & gas has been the most challenging over the period and, while it remains a core theme, a decision was made some months ago to reduce the overall exposure in this area. This sector now accounts for around 15 per cent of the portfolio, down from nearer 40 per cent two years ago. This is an area in which we have some specialist expertise and, despite some short-term setbacks, we continue to believe that, selectively, the longer term growth prospects are good.
The best stock performer over the 12 month period was Metapack, one of the portfolio's unquoted online businesses. It has developed software to manage the home delivery process for online retailers and is the only company that provides a single point of integration for all UK and European couriers. It has a dominant position in the UK market: it counts 70 of the top 100 retailers among its clients. As an increasing proportion of retail business moves online, Metapack is seeing strong growth in both its top and bottom lines. The event that triggered the revaluation of our holding was the acquisition of 20 per cent of the company's equity by Index Ventures, a private equity firm that specialises in the technology sector. This transaction occurred at a substantial premium to our carrying value. Although we sold part of our holding at this level, we still have high expectations for Metapack.
In the other financials sector, the holdings in two asset managers, Polar Capital and Liontrust, performed strongly. Both companies are benefitting from rising equity markets and strong flows into their funds. These businesses have worked hard over the last couple of years to diversify their product offerings and to attract
high-calibre individuals, for whom the opportunity to own a stake in a successful, growing business is appealing. Furthermore, both are benefitting from the high levels of operational gearing, with margins increasing as assets under management grow.
The other investment in this area that has performed well is Brewin Dolphin, the wealth manager. Its profit margins have risen rapidly under the guidance of an excellent management team installed 18 months ago. Rigorous attention to costs and streamlining of the business has enabled the company to attain similar financial performance to that of its main competitors and now the focus is on how to drive revenues forward. By forcing many of the industry's smaller players out of the market, the increased costs of regulation should benefit the more established companies in this sector. Brewin Dolphin should be in an excellent position to grow its assets under management in the years ahead.
Other strong performers included Telford Homes, the specialist east London house builder, and a new holding, Skyepharma. This is an oral and inhalation drug delivery company receiving royalties from a portfolio of products partnered with major pharmaceutical companies. Its asthma product, Flutiform, is showing tremendous potential having been approved in 21 countries.
| Sector | Contribution % |
|---|---|
| Financial Services | 7.2 |
| Industrial Transportation | 4.4 |
| Pharmaceuticals & Biotechnology | 3.2 |
| Household Goods & Home Construction | 2.3 |
| General Retailers | 1.2 |
| Sector | Contribution % |
|---|---|
| Oil & Gas Producers | (8.5) |
| Beverages | (1.2) |
| Mobile Telecommunications | (0.7) |
| Travel & Leisure | (0.6) |
| Electricity | (0.5) |
Among the unquoted holdings, there were positive revaluations to the carrying values of the All The Worlds Entertainment and Gift Library, as external investors injected fresh equity to enable these businesses to grow. The valuation of Reaction Engines, which has developed a revolutionary lightweight heat exchanger for space and hypersonic propulsion systems, also increased. The company is part of the consortium developing the Sabre space plane engine with the European Space Agency that would enable an unpiloted vehicle to enter and return from space at a fraction of the cost of traditional expendable launch vehicles. Reaction Engines was boosted by the UK government's decision to provide it with a £60m
drawdown facility which the company will be able to access shortly.
On the negative side, the main disappointments were in the oil & gas sector. As noted above, we have taken a strategic decision to reduce exposure to this area. This year's biggest detractor was Providence Resources. Despite its substantial discovery in the Barryroe field, talks with potential partners over a farm-out agreement have stalled. The company insists it is still in discussions with a number of parties but the extended negotiations have unnerved investors. This has had a knock-on effect on Lansdowne Oil & Gas, another of the Company's holdings, which has a carried interest in Barryroe.
Although Hurricane Energy listed successfully on AIM in February, the subsequent fall in share price detracted from performance during the year. However since the Company's year end Hurricane has re-drilled an appraisal well at its Lancaster prospect. The flow test results exceeded management's expectations and the shares rose strongly. We believe this re-rating will continue once the pressure data has been analysed. There was also weakness in Salamander Energy's share price during the year under review. However, since the year end the company announced it was putting itself up for sale and we have used the subsequent share price strength to exit the position in its entirety.
In other sectors, Emis Group, a healthcare information technology company, disappointed after losing its chief executive. However, the business has continued to trade well and the shares have performed strongly since the period end.
In terms of transactions the largest new investment (other than Skyepharma) was another online business called GLI Finance. This company has bought holdings in a number of private peer-to-peer lending businesses. As a consequence of the reluctance of the major banks to lend to individuals and small businesses, peer-to-peer lending is one of the fastest growing areas in the UK economy. A number of platforms have been set up to match borrowers with lenders, ensuring that high quality borrowers can access loans at an appropriate interest rate. This industry appears to be a win-win for both borrowers and lenders alike. It has strong government support, and although some of the bigger peer–to-peer businesses might float over the next 18 months, GLI Finance is the only quoted company in the UK that gives investors access to this exciting growth area.
Other new investments included Martin & Co, a property lettings business aiming to grow in a highly fragmented market. On the unquoted side, we bought Gundaline, an agricultural business which owns a large parcel of land in New South Wales and focuses on growing cotton primarily for export to China and the Far East.
On the disposal side, we sold Madagascar Oil and Continental Farmers Group in their entirety and partial sales were made in Genel Energy, Africa Oil and Igas Energy. Among the other financials, profits were taken in Brewin Dolphin, Liontrust, Polar Capital and Ashcourt Rowan.
Following these transactions, the portfolio is as concentrated as it has been for some time. This reflects the high levels of conviction we have in these holdings.
Markets have continued to move upwards in 2014 thanks to very low interest rates and an improving economic background. Meanwhile, the prospects for realising value from the unquoted portfolio have improved significantly. Conditions for value realisation have been difficult over the last few years, but the recent surge in corporate activity, and the strength of the IPO market, should assist in our efforts to realise more of the unquoted portfolio. Therefore we remain optimistic about the year ahead.
Fund managers Artemis Investment Management LLP 3 July 2014
Annual Financial report
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 |
|---|---|---|---|
| 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% |
| 2014 | 13.3% | 3.1% | 10.5% |
Source: Artemis/Datastream
■ Dividends per ordinary share
| Year ended 30 April | Rate per ordinary share |
% increase |
|---|---|---|
| 2010 | 2.75p | 5.8% |
| 2011 | 2.85p | 3.6% |
| 2012 | 2.95p | 3.5% |
| 2013 | 3.05p | 3.4% |
| 2014 | 3.20p | 4.9% |
■ Ongoing charges as a proportion of shareholders' funds (excluding performance fees)
| As at 30 April | Ongoing charges |
|---|---|
| 2010 | 1.1% |
| 2011 | 0.9% |
| 2012 | 1.0% |
| 2013 | 0.9% |
| 2014 | 1.0% |
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.
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 22 to 25. 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:
Further information on risks and the management of them are set out in the notes to the financial statements on pages 47 to 49.
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.
During the year the Company repurchased a total of 3,482,409 ordinary shares, representing 7.4 per cent of the issued share capital. The Company has not repurchased any further ordinary shares since the year end.
A resolution to renew the Company's buy-back authority will be put to shareholders at the Annual General Meeting on 2 October 2014.
The Directors of the Company and their biographical details are set out on page 17.
No Director has a contract of service with the Company.
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 has 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 is currently comprised of five male Directors. The Company does not have any employees.
The Company has delegated the management of the Company's investments to Artemis which, in its capacity as Investment Manager, has a Corporate Governance and Shareholder Engagement document which sets out a number of principles that are intended to be considered in the context of its responsibility to manage investments in the financial interests of shareholders. Artemis undertakes extensive evaluation and engagement with company management on a variety of matters such as strategy, performance, risk, dividend policy, governance and remuneration. All risks and opportunities are considered as part of the investment process in the context of enhancing the long-term value of shareholders investments. This will include matters relating to material environmental, human rights and social considerations that will ultimately impact the profitability of a company or its stock market rating and hence these matters are an integral part of Artemis' thinking as investors.
As the Company has delegated the investment management and administration of the Company to third party service providers, and has no fixed premises, there are no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within the underlying investment portfolio.
The Financial Statements of the Company are included on pages 31 to 49 of this report.
For and on behalf of the Board
Chairman 3 July 2014
| Investment | Sector | Country of incorporation |
Market value £'000 |
% of total investments |
|---|---|---|---|---|
| The Hut Group2 Polar Capital Holdings1 2,3 All The Worlds Entertainment Skyepharma Brewin Dolphin Holdings Reaction Engines2 Gift-Library.Com2 Africa Oil Metapack2 |
General Retailers Financial Services Media Pharmaceuticals & Biotechnology Financial Services Aerospace & Defence General Retailers Oil & Gas Producers Industrial Transportation |
UK UK Singapore UK UK UK UK Canada UK |
7,562 7,026 5,857 5,554 5,006 4,725 4,527 4,452 4,369 |
4.5 4.2 3.5 3.3 3.0 2.9 2.7 2.7 2.6 |
| Emis Group1 Top 10 investments |
Software & Computer Services | UK | 3,903 52,981 |
2.3 31.7 |
| Liontrust Asset Management Claremont Alpha2 Avation Ashcourt Rowan1 Hurricane Energy1 Eland Oil & Gas1 Lynton Holding Asia2 Retroscreen Virology1 R.E.A. Holdings3 Providence Resources1 |
Financial Services Travel & Leisure Industrial Transportation Financial Services Oil & Gas Producers Oil & Gas Producers Aerospace & Defence Pharmaceuticals & Biotechnology Food Producers Oil & Gas Producers |
UK Isle of Man Singapore UK UK UK Denmark UK UK Ireland |
3,885 3,675 3,473 3,325 3,210 3,206 3,137 3,019 2,997 2,973 |
2.3 2.2 2.1 2.0 1.9 1.9 1.9 1.8 1.8 1.8 |
| Top 20 investments | 85,881 | 51.4 | ||
| Oxford Nanopore Technologies2 Asian Plantations1 Telford Homes1 |
Pharmaceuticals & Biotechnology Food Producers Household Goods & Home |
UK Singapore UK |
2,965 2,812 2,790 |
1.8 1.7 1.7 |
| Gresham Computing Pittards1 1 Charlemagne Capital Halley Asian Prosperity Fund Gleeson (M.J.) Lamp Group2 City of London Investment Group |
Construction Software & Computer Services Personal Goods Financial Services Equity Investment Instruments Household Goods & Home Construction Non-Life Insurance Financial Services |
UK UK Cayman Islands Luxembourg UK UK UK |
2,650 2,567 2,550 2,459 2,370 2,258 2,136 |
1.6 1.5 1.5 1.5 1.4 1.3 1.3 |
| Top 30 investments | 111,438 | 66.7 | ||
| Gaming Realms1 Martinco1 GLI Finance1 Igas Energy1 Genel Energy Physiolab Technologies2 Redcentric1 New Britain Palm Oil Gundaline2 Hargreaves Services1 |
Travel & Leisure Real Estate Investment & Services Equity Investment Instruments Oil & Gas Producers Oil & Gas Producers Healthcare Equipment & Services Software & Computer Services Food Producers Food Producers Support Services |
UK UK Guernsey UK Jersey UK UK Papua New Guinea Australia UK |
2,132 2,113 2,047 1,995 1,938 1,917 1,850 1,777 1,646 1,632 |
1.3 1.3 1.2 1.2 1.1 1.1 1.1 1.1 1.0 1.0 |
| Top 40 investments | 130,485 | 78.1 |
1 AIM quoted
2 Unquoted investment
3 Includes fixed interest element
| Investment | Sector | Country of incorporation |
Market value £'000 |
% of total investments |
|---|---|---|---|---|
| Intelligent Energy2 Ceramic Fuel Cells1,3 Velocys1 Rockhopper Exploration1 1 Randall & Quilter Powerflute1 Ithaca Energy1 Equus Petroleum2 Sandvine Park Group1 |
Alternative Energy Alternative Energy Chemicals Oil & Gas Producers Non-Life Insurance Forestry & Paper Oil & Gas Producers Oil & Gas Producers Technology Hardware & Equipment Financial Services |
UK Australia UK UK UK Finland Canada UK Canada UK |
1,630 1,487 1,451 1,431 1,387 1,312 1,301 1,295 1,284 1,219 |
1.0 0.9 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.7 |
| Top 50 investments | 144,282 | 86.4 | ||
| Lansdowne Oil & Gas1 Salamander Energy N+1 Singer 2 Penna Consulting1 1 Summit Mopowered Group1 Senhouse Southeast Asian Focus Buried Hill Energy (Cyprus) 2 Ironveld1 Real Estate Investors1 |
Oil & Gas Producers Oil & Gas Producers Financial Services Support Services Pharmaceuticals & Biotechnology Software & Computer Services Equity Investment Instruments Oil & Gas Producers Industrial Metals & Mining Real Estate Investment & Services |
UK UK UK UK UK UK Bermuda Cyprus UK UK |
1,170 1,137 1,090 1,080 1,062 1,026 1,024 987 982 980 |
0.7 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.6 |
| Top 60 investments | 154,820 | 92.7 | ||
| Urica2,3 Eden Research1 Ten Alps1,3 Rated People2 Consort Medical MBA Polymers2 Parity Group1 Gottex Holdings Horizon Discovery Group1 Genmark Diagnostics |
Financial Services Pharmaceuticals & Biotechnology Media Support Services Healthcare Equipment & Services Industrial Engineering Software & Computer Services Financial Services Pharmaceuticals & Biotechnology Healthcare Equipment & Services |
UK UK UK UK UK USA UK Switzerland UK USA |
800 710 670 625 617 609 602 601 601 575 |
0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 |
| Top 70 investments | 161,230 | 96.5 | ||
| Maison Seven2 Fox Marble1 Infusion 20022 Mobile Streams1 Rangers International Football Club1 Praetorian Resources1 Boohoo.com1 Chateau Lafite Rothschild 20092 4D Pharma1 Chateau Lafite Rothschild 20102 |
General Retailers Mining Industrial Transportation Mobile Telecommunications Travel & Leisure Mining General Retailers Beverages Pharmaceuticals & Biotechnology Beverages |
UK UK UK UK UK Guernsey UK France UK France |
559 550 520 503 468 422 398 364 350 325 |
0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 |
| Top 80 investments | 165,689 | 99.1 |
1 AIM quoted
2 Unquoted investment
3 Includes fixed interest element
| Investment | Sector | Country of incorporation |
Market value £'000 |
% of total investments |
|---|---|---|---|---|
| Reneuron Group1 | Pharmaceuticals & Biotechnology | UK | 302 | 0.2 |
| Hardlyever2 | General Retailers | UK | 300 | 0.2 |
| Occa Design Consultancy2 | Household Goods & Home | UK | 300 | 0.2 |
| Construction | ||||
| Hot Can2 | Beverages | UK | 199 | 0.1 |
| Niche Group2 | Financial Services | UK | 175 | 0.1 |
| MWB Group Holdings2,3 | Real Estate Investment & Services | UK | 96 | 0.1 |
| MBL Group1 Flying Brands |
Media General Retailers |
UK UK |
41 31 |
0.0 0.0 |
| Jubilant Energy1 | Oil & Gas Producers | Netherlands | 24 | 0.0 |
| Myeye Technology2 | Software & Computer Services | UK | 20 | 0.0 |
| Top 90 investments | 167,177 | 100.0 | ||
| Chateau Rieussec 20102 | Beverages | France | 18 | 0.0 |
| Petrohunter Energy | Oil & Gas Producers | USA | 12 | 0.0 |
| Wasabi Energy1 | Alternative Energy | Australia | – | 0.0 |
| Aero Inventory2 | Aerospace & Defence | UK | – | 0.0 |
| Betex Group2 | Travel & Leisure | UK | – | 0.0 |
| Eastcoal | Mining | Canada | – | 0.0 |
| Energy Equity Resources2 | Oil & Gas Producers | UK | – | 0.0 |
| Forest Support Service2 | Industrial Transportation | UK | – | 0.0 |
| Hawk Group2 | Financial Services | UK | – | 0.0 |
| Minorplanet Systems2 | Technology Hardware & Equipment | UK | – | 0.0 |
| Top 100 investments | 167,207 | 100.0 | ||
| Other investments (9) | – | – | ||
| Total investments | 167,207 | 100.0 |
1 AIM quoted
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
| Country of incorporation | 2014 % of total investments |
2013 % of total investments |
|---|---|---|
| UK | 70.5 | 72.5 |
| Singapore | 7.3 | 3.5 |
| Canada | 4.3 | 4.6 |
| Isle of Man | 2.2 | - |
| Denmark | 1.9 | 2.1 |
| Australia | 1.9 | 0.6 |
| Ireland | 1.8 | 5.6 |
| Cayman Islands | 1.5 | 0.7 |
| Guernsey | 1.5 | 0.9 |
| Luxembourg | 1.5 | 1.1 |
| Jersey | 1.1 | 2.2 |
| Papua New Guinea | 1.1 | 1.0 |
| Finland | 0.8 | 0.7 |
| USA | 0.7 | 1.0 |
| Bermuda | 0.6 | 2.3 |
| Cyprus | 0.6 | 0.7 |
| France | 0.4 | 0.5 |
| Switzerland | 0.3 | - |
| 100.0 | 100.0 |
ICB industry classifications.
| Sector | 2014 % of total investments |
2013 % of total investments |
|---|---|---|
| Financial Services | 16.6 | 15.0 |
| Oil & Gas Producers | 15.0 | 30.7 |
| Pharmaceuticals & Biotechnology | 8.6 | 3.5 |
| General Retailers | 7.9 | 5.8 |
| Software & Computer Services | 6.0 | 5.4 |
| Food Producers | 5.6 | 6.3 |
| Industrial Transportation | 5.0 | 2.3 |
| Aerospace & Defence | 4.8 | 4.1 |
| Media | 3.9 | 2.1 |
| Travel & Leisure | 3.8 | 2.2 |
| Equity Investment Instruments | 3.3 | 1.8 |
| Household Goods & Home Construction | 3.3 | 4.1 |
| Non-Life Insurance | 2.1 | 1.7 |
| Support Services | 2.0 | 1.5 |
| Real Estate Investment & Services | 2.0 | 2.1 |
| Alternative Energy | 1.9 | 1.3 |
| Healthcare Equipment & Services | 1.8 | 1.6 |
| Personal Goods | 1.5 | 1.0 |
| Chemicals | 0.9 | 1.3 |
| Forestry & Paper | 0.8 | 0.7 |
| Technology Hardware & Equipment | 0.8 | 0.5 |
| Industrial Metals & Mining | 0.6 | 0.3 |
| Mining | 0.6 | 1.9 |
| Beverages | 0.5 | 1.6 |
| Industrial Engineering Mobile Telecommunications |
0.4 0.3 |
1.2 - |
| 100.0 | 100.0 |
ICB sector classifications.
Simon Miller, aged 61, 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, BlackRock North American Income Trust plc and 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. Mr Miller is also Chairman of the Nomination and Management Engagement Committees.
David Barron, aged 55, is director of investment trusts and product strategy at Miton Group plc. Prior to this he was head of the investment trust business at J.P. Morgan Asset Management. 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 appointed Chairman of the Audit Committee on 12 December 2013.
Tom Cross Brown, aged 66, 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 Group plc, and a nonexecutive 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.
Duncan Budge, aged 57, retired from his role as Executive Director and Chief Operating Officer of RIT Capital Partners plc in 2011, having been appointed in 1995. He is chairman of Dunedin Enterprise Investment Trust plc and a director of The World Trust Fund. He is also chairman of Spencer House Limited.
Appointed as a non-executive Director on 19 November 2013.
Andrew Dalrymple, aged 54, 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.
With the exception of Mr Cross Brown, each of the Directors were independent of the Investment Manager throughout the year ended 30 April 2014 and up to the date of this Report.
Mr Miller, Mr Barron and Mr Dalrymple were members of the Audit, Nomination and Management Engagement Committees throughout the reporting period.
Mr Budge was appointed to the Audit, Nomination and Management Engagement Committees during the 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 2014.
The Group's results for the year are set out in the Consolidated Income Statement on page 31. The Board has declared dividends for the year totalling 3.20 pence per ordinary share. The second interim dividend for the year ended 30 April 2014 of 2.00 pence per ordinary share will be paid on 15 August 2014 to shareholders who are on the register at the close of business on 25 July 2014.
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 average 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, is payable other than for the first two performance periods ending on 30 April 2013 and 30 April 2014 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 (on a total return basis) than the share price level at which a performance fee was last paid. No performance fee was earned for the year ended 30 April 2014.
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 are 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 2014 had £18.1 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 Board has adopted a policy that all Directors should offer themselves up for re-election on an annual basis at each AGM.
Mr Budge, having been appointed during the year is due to stand for election at the first AGM following his appointment, and therefore is proposed for election at this year's AGM.
The Board recommends the re-election and election of each of the Directors on the basis of their industry knowledge, experience and their contribution to the operation of the Company.
Mr Dighé resigned as a director of the Company on 1 October 2013.
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 Company has two share classes: ordinary shares of 1 pence each and subscription shares of 1 pence each. As at 30 April 2014 the Company had 47,049,194 ordinary shares (2013: 48,535,988) and 6,865,234 subscription shares (2013: 6,865,616) in issue.
The Company made market purchases of its own ordinary shares totalling 3,482,409 (2013: 1,535,128) for an aggregate consideration of £9,685,000 (2013: £4,315,000). This represented 7.4 per cent of issued ordinary share capital at the start of the period, with a nominal value of £34,824. The shares were bought at an average discount of 11.2 per cent (2013: 9.6 per cent) and are held in treasury.
During the year the Company issued and allotted 382 (2013: 1,518) 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. On 3 July 2014 a further 1,258 ordinary shares were allotted in connection with the exercise of subscription rights.
The ordinary share capital includes 3,842,409 shares held in treasury (2013: 1,847,176). Any shares held in treasury for more than twelve months from the date of acquisition will be cancelled. During the year 1,487,176 treasury shares were cancelled (2013: 310,000).
Since the period end, nil ordinary shares have been purchased into treasury, and nil ordinary shares held in treasury have been cancelled. As at 3 July 2014, the Company had 47,050,452 ordinary shares in issue. Of these, 3,842,409 ordinary shares are held in treasury, and therefore the Company's total voting rights are 43,208,043.
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 3 July 2014 |
% of voting rights |
|---|---|---|
| Mr John Dodd | 2,560,955 | 5.9 |
| Mr Mark Tyndall | 2,125,590 | 4.9 |
| Investec Wealth Investment | 1,683,799 | 3.9 |
| Mr Adrian Paterson | 1,476,401 | 3.4 |
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 Investment Manager'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 buyback and issue shares will expire at the AGM and proposals for their renewal are set out on pages 50 to 54. 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.
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 2014 AGM are set out in the Chairman's Statement on page 5 and the Notice of Meeting on pages 50 to 54. 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 10 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 10, subject to the condition that the discount at which shares are resold must not be less than the weighted average discount at which the total number of shares held in treasury were repurchased. This resolution is conditional on the passing of Resolution 12.
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 2013 to allot up to an aggregate nominal amount of £68,656 pursuant to the exercise rights attaching to the subscription shares and up to an aggregate nominal amount of £21,604 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 2014. 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 £68,639 in respect of subscription shares and £21,604, under a general authority, representing approximately 15.9 per cent and 5.0 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 2015 or, if earlier, on 31 October 2015. 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 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.
KPMG LLP has expressed its willingness to continue in office as independent auditor. The Audit Committee has responsibility for making a recommendation to the Board on the re-appointment of the external auditor.
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 should be re-appointed as auditor. Accordingly, a resolution will be proposed at the forthcoming AGM for its re-appointment 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 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 Audit Committee is also responsible for making recommendations to the Board regarding the appointment of the Auditor, the objectivity and effectiveness of the audit process and the approval of the financial statements. It meets at least twice each year.
KPMG LLP (formerly KPMG Audit Plc) was appointed as Auditor to the Company on 7 July 2005. No tender for the audit of the Company has been undertaken since this date. As part of its review of the continuing appointment of the auditors, the Audit Committee considers the length of tenure of the audit firm, its fees and independence from the Investment Manager along with any matters raised during each audit. The fees paid to KPMG LLP in respect of audit services and non-audit services are disclosed in note 4 of the notes to the financial statements.
The Audit Committee meets with the Audit Partner responsible for the Company's audit at least once each year to discuss any matters arising from the annual audit. Representatives from the Investment Manager and the Administrator may also be invited to attend the meetings of the Audit Committee to report on issues as required.
Following a discussion with the Auditor and the Investment Manager, the Audit Committee considered the main risk that arises in relation to the financial statements to be the valuation and ownership of both listed and unquoted investments held by the Company.
The Administrator, Investment Manager and the Custodian have been appointed subject to clearly defined contracts and any breaches of these, or of any law or regulation the Company is required to comply with, are reported to the Board on a quarterly basis. The Board also receives the semi-annual report on internal controls from the Administrator and the Custodian. The Audit Committee considers all of these items as part of a risk and control assessment of the Company, which is undertaken at least every six months. The results of this are reported to the Board. The last review was undertaken in June 2014 and no exceptions were reported. The Audit Committee also considered the valuation of unquoted investments included in the Annual Financial Report and discussed these in detail with the Investment Manager.
In addition, as part of the annual audit, the Auditor has agreed the valuation of all of the listed investments in the portfolio to independent pricing providers, and for unquoted investments, discussed and challenged the valuation bases with the Investment Manager, considering recent transactions, underlying investee operating performance and capital structure to assess the appropriateness of the valuations. The Auditor also validated the existence of all the securities held by the Company to the records of the Custodian.
The Auditor also highlighted, as part of its planning, the calculation of the investment management fee and performance fee and the Company's compliance with S1158 as other areas considered within the audit. The Auditor has not reported any exceptions as part of its work in these areas.
The Company is committed to high standards of corporate governance and has established procedures to monitor its continuing compliance with the AIC Code. This statement outlines how the principles of the AIC Code issued in February 2013 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 FRC's Code of Corporate Governance, 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 applied the principles of the AIC Code.
Previously the Company had applied the principles of the AIC Code of October 2010. As a result of the adoption of the AIC Code of February 2013, the Board's policy on diversity has been added to the Strategic Report and additional information on the role and responsibilities of the Audit Committee has been added the Directors' Report.
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 17 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.
The Board recommends the election of Mr Budge and the re-election of Mr Barron, Mr Cross Brown and Mr Dalrymple to shareholders on the basis of their expertise and experience in investment matters and their continuing effectiveness and commitment to the Company.
As Mr Budge was appointed during the year, he stands for election at the AGM. As stated in the Chairmans' Statement, Mr Miller will retire as a Director and Chairman at the AGM and so does not stand for re-election. Mr Barron, Mr Cross Brown and Mr Dalrymple offer themselves for re-election.
| Date of appointment |
Due for re-election/ election |
|
|---|---|---|
| Mr Miller | 14 July 2003 | – |
| Mr Cross Brown | 5 April 2006 | AGM 2014 |
| Mr Dalrymple | 1 April 2004 | AGM 2014 |
| Mr Barron | 17 February 2005 | AGM 2014 |
| Mr Budge | 19 November 2013 | AGM 2014 |
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 17 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 Barron.
The Company Secretary acts as the Secretary to each Committee.
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.
As detailed in the Strategic Report on page 11, the Board supports the principles of diversity in the boardroom, and considers this in seeking to ensure that the overall balance of skills and knowledge that the Board has remains appropriate so that it can continue to operate effectively.
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 Budge | 2/2 | 2/2 |
| Mr Cross Brown* | 4 | 3 |
| Mr Dalrymple | 4 | 3 |
| Mr Dighé | 2 | 1 |
| Management Engagement Committee Meetings |
Nomination Committee Meetings |
|
|---|---|---|
| Number of meetings held | 1 | 1 |
| Mr Miller | 1 | 1 |
| Mr Barron | 1 | 1 |
| Mr Budge | – | – |
| Mr Cross Brown* | 1 | 1 |
| Mr Dalrymple | 1 | 1 |
| Mr Dighé | 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.
Mr Dighé resigned on 1 October 2013.
Mr Budge was appointed on 19 November 2013.
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. 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.
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 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 50 to 54 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 the Investment Manager's website at artemis.co.uk.
The Board has 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 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:
Administration services are provided by J.P. Morgan Europe Limited. The Administrator reports to the Board on a quarterly basis and ad hoc as appropriate. In addition, the Board receives the Administrator's reports on internal controls.
The Board is aware of the whistleblowing procedures of Artemis and the Administrator, which are considered satisfactory.
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.
Further information on the risks and the management of them is set out in the Strategic Report on page 10 and in note 18 of the notes to the financial statements.
The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and the information provided to shareholders is sufficient to allow them to assess the Company's performance, business model and strategy.
By order of the Board
Company Secretary 3 July 2014
The Directors are pleased to present the Company's remuneration report for the year ended 30 April 2014 in accordance with Schedule 8 of The Large and Mediumsized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the "Regulations"). The Company's auditors are 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 pages 29 and 30.
In accordance with the Regulations the remuneration policy of the Company is provided on page 27, which shareholders will be asked to approve at the AGM. In addition, an ordinary resolution, Resolution 2, to approve the remainder of this report will be put to shareholders at the AGM.
During the year ended 30 April 2014, the Board consisted of non-executive Directors, who determine their remuneration as a whole. Accordingly, a separate Remuneration Committee has not been established.
After consideration at a meeting of the Remuneration Committee and of the Board on 25 June 2014, it was agreed that, subject to the Directors' Remuneration Policy being approved by shareholders at the AGM, that the fees for each Director, for the year ending 30 April 2015, remain unchanged.
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 2014 and 30 April 2013 received the following emoluments:
| Director1 | 2014 | 2013 |
|---|---|---|
| Mr Miller | £28,000 | £28,000 |
| Mr Barron | £21,000 | £20,000 |
| Mr Budge2 | £7,337 | – |
| Mr Cross Brown | £20,000 | £20,000 |
| Mr Dalrymple | £20,000 | £20,000 |
| Mr Dighé3 | £11,000 | £22,000 |
1 None of the Directors who are Directors of the Company's wholly owned subsidiary received any remuneration from this company.
2 Mr Budge was appointed on 19 November 2013.
3 Mr Dighé resigned on 1 October 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 2009 to 30 April 2014 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.
The following table sets out the votes received at the last annual general meeting of shareholders, held on 12 September 2013, in respect of the approval of the Directors' Remuneration Report:
| Votes cast for | Votes cast against |
Total | Number of votes |
|
|---|---|---|---|---|
| Number | % Number | % | votes cast | withheld |
| 17,021,372 | 99.93 11,941 | 0.07 | 17,033,313 | 33,710 |
The Directors' interests in the capital of the Company who held office at 30 April 2014 were as follows:
| Non- | Non | ||
|---|---|---|---|
| Beneficial Mr Miller 10,144 Mr Barron 8,792 Mr Cross Brown 44,321 Mr Dalrymple 46,000 Mr Budge – Mr Dighé N/A |
– – – 32,000 – N/A |
beneficial Beneficial 10,144 8,792 44,321 46,000 – 6,325 |
beneficial – – – 32,000 – – |
| 30 April 2014 | 1 May 2013 | |||||
|---|---|---|---|---|---|---|
| Non- | Non | |||||
| Beneficial | beneficial Beneficial | beneficial | ||||
| Mr Miller | 1,428 | – | 1,428 | – | ||
| Mr Barron | 713 | – | 713 | – | ||
| Mr Budge | – | – | – | – | ||
| Mr Cross Brown | 6,331 | – | 6,331 | – | ||
| Mr Dalrymple | 8,285 | 2,857 | 8,285 | 2,857 | ||
| Mr Dighé | N/A | N/A | – | – |
There have been no changes to the above holdings between 30 April 2014 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.
In accordance with the Regulations, which the Company is required to comply with for the first time for the year ended 30 April 2014, the Directors are required to propose a remuneration policy to shareholders that will remain in place for a maximum of three years.
The Company's proposed remuneration policy is that fees payable to Directors are commensurate with the amount of time Directors are expected to spend on the Company's affairs, whilst seeking to ensure that fees are set at an appropriate level so as to enable candidates of a sufficient calibre to be recruited. The Company's Articles state the maximum aggregate amount of fees that can be paid to Directors in any year. This is currently set at £200,000 per annum and shareholder approval is required for any changes to this. The Remuneration Committee reviews and sets the level of Directors' fees annually, or at the time of the appointment of a new director, taking into account a range of external information, including peer group comparisons and relevant independent research.
Each Director is entitled to a base fee. The Chairman of the Board is paid a higher fee than the other Directors, to reflect the additional work required to be carried out in this role. The Chairman of the Audit Committee receives an additional fee to reflect the additional responsibilities and work associated with the role.
No Director is entitled to any benefits in kind, share options, annual bonuses, long-term incentives, pensions or other retirement benefits or compensation for loss of office.
Directors are appointed with no fixed notice periods and are not entitled to any extra payments on resignation. It is also considered appropriate that no aspect of Directors' remuneration is performance-related in light of the Directors' non-executive status.
Directors are able to claim expenses that are incurred in respect of duties undertaken in connection with the management of the Company.
New Directors will be remunerated in accordance with this policy and will not be entitled to any payments from the Company in respect of remuneration arrangements in place with any other employers which are terminated upon appointment as a Director of the Company.
Resolution 3, which is seeking shareholder approval for the Directors' Remuneration Policy, will, if approved, take effect from the AGM and will be valid for a period of three years unless renewed, varied or revoked by the Company at a general meeting.
On behalf of the Board and in accordance with the Regulations, I confirm that the Directors' Remuneration Report and Policy summarises, for the year ended 30 April 2014, the review undertaken and the decisions made regarding the fees paid to the Board, and the future remuneration policy of the Company which is to be approved by shareholders.
For and on behalf of the Board
Chairman 3 July 2014
Listed companies are required by the Financial Conduct Authority'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 Strategic Report (pages 4 to 11). 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 Strategic Report, 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 3 July 2014
We have audited the financial statements of Artemis Alpha Trust plc for the year ended 30 April 2014 set out on pages 31 to 49. In our opinion the financial statements:
In arriving at our audit opinion above on the Group financial statements, the risks of material misstatement that had the greatest effect on our Group audit were as follows:
Refer to page 21 (audit committee report), page 36 (accounting policy) and pages 41 to 44 (financial disclosures).
– agreeing 100 per cent of portfolio investment holdings to independently received third party confirmations.
Refer to page 21 (audit committee report), page 36 (accounting policy) and pages 41 to 44 (financial disclosures).
The materiality for the Group financial statements as a whole was set at £3,424,000. This has been determined
with reference to a benchmark of Group total assets (of which it represents 2%). Total assets, which is primarily composed of the Group's investment portfolio, is considered the key driver of the Group's capital and revenue performance and, as such, we believe that it is one of the principal considerations for members of the Group in assessing its financial performance.
We agreed with the Audit Committee to report to it all corrected and uncorrected misstatements we identified through our audit with a value in excess of £171,000, in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds.
Our audit of the Group was undertaken to the materiality level specified above and was performed at the Investment Manager, Artemis Investment Management LLP, and at the Administrator, J.P. Morgan Europe Limited, in Edinburgh.
In our opinion:
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
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:
We have nothing to report in respect of the above responsibilities.
As explained more fully in the Directors' Responsibilities Statement set out on page 28, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. 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. This report is made solely to the Group's members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2013a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Catherine Burnet (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Saltire Court 20 Castle Terrace Edinburgh EH1 2EG 3 July 2014
| Year ended 30 April 2014 |
Year ended 30 April 2013 |
||||||
|---|---|---|---|---|---|---|---|
| Notes | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Investment income Other income |
2 2 |
2,280 710 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,280 710 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,760 (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,760 (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Total revenue Gains/(losses) on investments Gains/(losses) on current asset |
2,990 – |
– 15,054 |
2,990 15,054 |
1,739 – |
– (4,013) |
1,739 (4,013) |
|
| investments Currency losses |
10 | 392 (4) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– (3) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
392 (7) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(140) – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(140) (21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Total income/(loss) | 3,378 | 15,051 | 18,429 | 1,599 | (4,034) | (2,435) | |
| Expenses | |||||||
| Investment management fee | 3 | (96) | (864) | (960) | (102) | (920) | (1,022) |
| Other expenses | 4 | (403) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(29) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(432) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(380) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(2) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(382) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) before finance costs | |||||||
| and tax | 2,879 | 14,158 | 17,037 | 1,117 | (4,956) | (3,839) | |
| Finance costs | 5 | (59) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(511) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(570) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(44) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(400) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(444) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) before tax Tax |
6 | 2,820 (98) |
13,647 – |
16,467 (98) |
1,073 (12) |
(5,356) – |
(4,283) (12) |
| Profit/(loss) for the year | 2,722 | 13,647 | 16,369 | 1,061 | (5,356) | (4,295) | |
| Earnings/(loss) per ordinary share |
8 | 6.16p | 30.90p | 37.06p | 2.24p | (11.31)p | (9.07)p |
The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with International Financial Reporting Standards. 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 2014 £'000 |
Company 2014 £'000 |
Group 2013 £'000 |
Company 2013 £'000 |
|
|---|---|---|---|---|---|
| Non-current assets | |||||
| Investments | 9 | 167,207 | 169,481 | 162,121 | 163,291 |
| Current assets | |||||
| Investments held by subsidiary | 1,263 | – | 950 | – | |
| Other receivables | 12 | 551 | 492 | 547 | 405 |
| Cash and cash equivalents | 1,437 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,134 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,530 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,514 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| 3,251 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,626 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
4,027 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,919 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
||
| Total assets | 170,458 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
171,107 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
166,148 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
166,210 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Current liabilities | |||||
| Other payables | 13 | (274) | (923) | (1,300) | (1,362) |
| Bank loan | 18 | (26,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(26,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(26,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(26,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| (26,774) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(27,423) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(27,800) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(27,862) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
||
| Net assets | 143,684 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
143,684 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
138,348 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
138,348 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Equity attributable to equity holders | |||||
| Share capital | 14 | 539 | 539 | 554 | 554 |
| Share premium | 636 | 636 | 635 | 635 | |
| Special reserve | 55,649 | 55,649 | 65,334 | 65,334 | |
| Capital redemption reserve | 51 | 51 | 36 | 36 | |
| Retained earnings – revenue | 2,994 | 1,145 | 1,621 | 870 | |
| Retained earnings – capital | 15 | 83,815 | 85,664 | 70,168 | 70,919 |
| Total equity | 143,684 | 143,684 | 138,348 | 138,348 | |
| Net asset value per ordinary share | 16 | 332.55p | 332.55p | 296.32p | 296.32p |
These financial statements were approved by the Board of Directors and signed on its behalf on 3 July 2014 by:
Director
The notes on pages 36 to 49 form part of these financial statements.
Company No: 253644
| 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 2014 At 1 May 2013 |
554 | 635 | 65,334 | 36 | 1,621 | 70,168 | 138,348 |
| Total comprehensive income: Profit for the year Transactions with owners |
– | – | – | – | 2,722 | 13,647 | 16,369 |
| recorded directly to equity: Repurchase of ordinary shares into treasury |
– | – | (9,685) | – | – | – | (9,685) |
| Cancellation of ordinary shares from treasury Conversion of subscription shares Dividends paid |
(15) – – |
– 1 – |
– – – |
15 – – |
– – (1,349) |
– – – |
– 1 (1,349) |
| At 30 April 2014 | 539 | 636 | 55,649 | 51 | 2,994 | 83,815 | 143,684 |
| For the year ended 30 April 2013 At 1 May 2012 Total comprehensive income: |
557 | 630 | 69,649 | 33 | 1,956 | 75,524 | 148,349 |
| Profit/(loss) for the year Transactions with owners |
– | – | – | – | 1,061 | (5,356) | (4,295) |
| recorded directly to equity: Repurchase of ordinary shares into treasury |
– | – | (4,315) | – | – | – | (4,315) |
| Cancellation of ordinary shares from treasury Conversion of subscription shares Dividends paid |
(3) – – |
– 5 – |
– – – |
3 – – |
– – (1,396) |
– – – |
– 5 (1,396) |
| At 30 April 2013 | 554 | 635 | 65,334 | 36 | 1,621 | 70,168 | 138,348 |
| Share | Share | Special | Capital redemption |
Retained earnings | |||
|---|---|---|---|---|---|---|---|
| Company | capital £'000 |
premium £'000 |
reserve £'000 |
reserve £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
| For the year ended 30 April 2014 At 1 May 2013 Total comprehensive income: |
554 | 635 | 65,334 | 36 | 870 | 70,919 | 138,348 |
| Profit for the year Transactions with owners recorded directly to equity: |
– | – | – | – | 1,624 | 14,745 | 16,369 |
| Repurchase of ordinary shares into treasury | – | – | (9,685) | – | – | – | (9,685) |
| Cancellation of ordinary shares from treasury Conversion of subscription shares |
(15) – |
– 1 |
– – |
15 – |
– – |
– – |
– 1 |
| Dividends paid | – | – | – | – | (1,349) | – | (1,349) |
| At 30 April 2014 | 539 | 636 | 55,649 | 51 | 1,145 | 85,664 | 143,684 |
| For the year ended 30 April 2013 At 1 May 2012 Total comprehensive income: |
557 | 630 | 69,649 | 33 | 1,044 | 76,436 | 148,349 |
| Profit/(loss) for the year Transactions with owners recorded directly to equity: |
– | – | – | – | 1,222 | (5,517) | (4,295) |
| Repurchase of ordinary shares into treasury | – | – | (4,315) | – | – | – | (4,315) |
| Cancellation of ordinary shares from treasury | (3) | – | – | 3 | – | – | – |
| Conversion of subscription shares Dividends paid |
– – |
5 – |
– – |
– – |
– (1,396) |
– – |
5 (1,396) |
| At 30 April 2013 | 554 | 635 | 65,334 | 36 | 870 | 70,919 | 138,348 |
| Group 2014 £'000 |
Company 2014 £'000 |
Group 2013 £'000 |
Company 2013 £'000 |
|
|---|---|---|---|---|
| Operating activities | ||||
| Profit/(loss) before tax | 16,467 | 16,467 | (4,283) | (4,283) |
| Interest payable | 705 | 710 | 444 | 444 |
| (Gains)/losses on investments (Gains)/losses on current asset investments |
(15,054) (392) |
(16,158) – |
4,013 140 |
4,174 – |
| Currency losses | 3 | 3 | 21 | 21 |
| (Increase)/decrease in other receivables | (136) | (136) | 271 | 260 |
| Decrease in other payables | (311) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(311) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(23) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(23) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash inflow from operating activities before interest | ||||
| and tax | 1,282 | 575 | 583 | 593 |
| Interest paid | (705) | (710) | (444) | (444) |
| Irrecoverable overseas tax suffered | (98) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(98) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(12) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(12) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash inflow/(outflow) from operating activities | 479 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(233) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
127 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
137 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Investing activities Purchases of investments |
(39,556) | (34,349) | (53,258) | (51,895) |
| Sales of investments | 48,922 | 43,553 | 50,484 | 48,672 |
| Net cash inflow/(outflow) from investing activities | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 9,366 |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 9,204 |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (2,774) |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (3,223) |
| Financing activities | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Repurchase of ordinary shares into treasury | (9,587) | (9,587) | (4,315) | (4,315) |
| Conversion of subscription shares | 1 | 1 | 5 | 5 |
| Dividends paid | (1,349) | (1,349) | (1,396) | (1,396) |
| Increase in inter-company loan | – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
587 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
310 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash outflow from financing activities | (10,935) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(10,348) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,706) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,396) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net increase in net debt | (1,090) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(1,377) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,353) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,482) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net debt at the start of the year | (23,970) | (23,986) | (15,596) | (15,483) |
| Effect of foreign exchange rate changes | (3) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(3) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net debt at the end of the year | (25,063) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(25,366) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(23,970) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(23,986) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Bank loans | (26,500) | (26,500) | (26,500) | (26,500) |
| Cash | 1,437 | 1,134 | 2,530 | 2,514 |
| (25,063) | (25,366) | (23,970) | (23,986) |
(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 IFRS 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 2014. 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 entity
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.
(c) Presentation of Consolidated 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 a 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 required to obtain approval under 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.
(i) Cash and cash equivalents. Cash and cash equivalents comprises deposits and overdrafts with banks and bank loans with maturities of less than three months from inception.
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.
Retaining 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:
Notes to the Financial statements (continued)
| 2014 £'000 |
2013 £'000 |
|
|---|---|---|
| Investment income* | ||
| UK dividend income | 1,689 | 1,341 |
| UK fixed interest | 202 | 157 |
| Overseas dividend income | 389 | 139 |
| UK scrip dividend income | – | 62 |
| UK REIT income | – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
61 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 2,280 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,760 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Other income | ||
| Subsidiary undertaking's dealing profits/(losses) | 706 | (36) |
| Bank interest | 4 | 2 |
| Underwriting commission | – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
13 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 710 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(21) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Total income | 2,990 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,739 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Total income comprises: | ||
| Dividends and interest from investments | 2,280 | 1,760 |
| Bank interest | 4 | 2 |
| Other income and dealing profits/(losses) | 706 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(23) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 2,990 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,739 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Income from investments | ||
| UK quoted investments | 1,479 | 1,607 |
| UK unquoted investments | 412 | 14 |
| Overseas quoted investments | 389 | 139 |
| 2,280 | 1,760 |
* 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 |
2014 Capital £'000 |
Total £'000 |
Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Investment management fee | 96 | 864 | 960 | 102 | 920 | 1,022 |
Details of the investment management fee and performance fee are set out in the Directors' Report on page 18. As at 30 April 2014, £78,000 was outstanding in respect of amounts due to the Investment Manager (2013: £347,000). As the performance of the Company's share price did not meet the criteria required for the payment of a performance fee, no payment has been made (2013: nil).
| Revenue £'000 |
2014 Capital £'000 |
Total £'000 |
Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Directors' remuneration (excluding VAT and NIC) Auditor's remuneration (excluding VAT): |
109 | – | 109 | 110 | – | 110 |
| – Fee for the audit of the Company's financial report | 22 | – | 22 | 22 | – | 22 |
| – Audit of the subsidiary pursuant to legislation – Non-audit services – taxation |
2 7 |
– – |
2 7 |
2 10 |
– – |
2 10 |
| Other expenses | 263 | 29 | 297 | 236 | 2 | 238 |
| 403 | 29 | 432 | 380 | 2 | 382 |
| Revenue £'000 |
2014 Capital £'000 |
Total £'000 |
Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Loan interest* | 50 | 452 | 502 | 39 | 352 | 391 |
| Loan commitment fee | 3 | 23 | 26 | 2 | 21 | 23 |
| Loan non-utilisation fee | 3 | 31 | 34 | 3 | 27 | 30 |
| Overdraft interest* | 3 | 5 | 8 | – | – | – |
| 59 | 511 | 570 | 44 | 400 | 444 |
* Interest on financial liabilities that are not held at fair value through profit or loss.
| Revenue £'000 |
2014 Capital £'000 |
Total £'000 |
Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Irrecoverable overseas tax | 98 | – | 98 | 12 | – | 12 |
| 98 | – | 98 | 12 | – | 12 |
Annual Financial report
| Revenue £'000 |
2014 Capital £'000 |
Total £'000 |
Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Profit/(loss) before tax | 2,820 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
14,386 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
17,206 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,073 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,356) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(4,283) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) on ordinary activites multiplied by the | ||||||
| standard rate of UK corporation tax of 22.84% | ||||||
| (2013: 23.92%) | 644 | 3,286 | 3,930 | 257 | (1,281) | (1,024) |
| Non-taxable capital (gains)/losses | – | (3,613) | (3,613) | – | 965 | 965 |
| Non-taxable UK dividends | (386) | – | (386) | (321) | – | (321) |
| Non-taxable scrip dividends | – | – | – | (15) | – | (15) |
| Non-taxable overseas dividends | (89) | – | (89) | (33) | – | (33) |
| Unutilised management expenses | (169) | 327 | 158 | 112 | 316 | 428 |
| Irrecoverable overseas tax | 98 | – | 98 | 12 | – | 12 |
| 98 | – | 98 | 12 | – | 12 |
The Group has excess management expenses, surplus loan relationship deficits and trading losses of £10,170,000 (2013: £8,764,000) 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 2014.
| 2014 £'000 |
2013 £'000 |
|
|---|---|---|
| 2013 second interim dividend of 1.85p per ordinary share (2012: 1.75p) 2014 first interim dividend of 1.20p per ordinary share (2013: 1.20p) |
824 525 |
831 565 |
| 1,349 | 1,396 |
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 2014 reflects the second interim dividend for the year ended 30 April 2013 which was paid on 16 August 2013. For the year ended 30 April 2014, a first interim dividend of 1.20p has been paid and a second interim dividend of 2.00p per ordinary share will be paid on 15 August 2014.
Set out below are the total dividends paid/payable in respect of the financial year ended 30 April 2014.
| 2014 £'000 |
2013 £'000 |
|
|---|---|---|
| First interim dividend of 1.20p per ordinary share (2013: 1.20p) | 525 | 565 |
| Second interim dividend of 2.00p per ordinary share (2013: 1.85p) | 864 | 824 |
| 1,389 | 1,389 |
The basic revenue return per ordinary share is based on the revenue profit for the year of £2,722,000 (2013: £1,061,000) and on 44,162,066 (2013: 47,350,570) 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 profit for the year of £13,647,000 (2013: capital loss of £5,356,000) and on 44,162,066 (2013: 47,350,570) 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 2014 (2013: 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 the categories, Level 1, Level 2 and Level 3. The values and movements in these categories are summarised in parts a to c of this note. Any investments that are delisted or suspended from a listed stock exchange are transferred from Level 1 to Level 3.
| Group 2014 £'000 |
Company 2014 £'000 |
Group 2013 £'000 |
Company 2013 £'000 |
|
|---|---|---|---|---|
| UK quoted investments (Level 1) | ||||
| – UK listed | 32,700 | 32,700 | 37,245 | 37,245 |
| – AIM quoted | 69,673 | 69,673 | 70,330 | 70,330 |
| – Fixed interest | 239 | 239 | 765 | 765 |
| – Preference shares | 632 | 632 | 581 | 581 |
| Overseas quoted investments (Level 1) | 6,924 | 6,924 | 7,219 | 7,219 |
| Mutual funds (Level 2) | 3,483 | 3,483 | 2,934 | 2,934 |
| Unquoted investments (Level 3) | ||||
| – Equities and warrants | 49,582 | 49,582 | 41,199 | 41,199 |
| – Fixed interest | 2,547 | 2,547 | 384 | 384 |
| – Preference shares | 721 | 721 | 566 | 566 |
| – Other | 706 | 706 | 898 | 898 |
| – Subsidiary undertakings | – | 2,274 | – | 1,170 |
| 167,207 | 169,841 | 162,121 | 163,291 |
Annual Financial report
| 2014 | 2013 | |||||||
|---|---|---|---|---|---|---|---|---|
| Quoted (Level 1) £'000 |
Quoted (Level 2) £'000 |
Unquoted (Level 3) £'000 |
Total £'000 |
Quoted (Level 1) £'000 |
Quoted (Level 2) £'000 |
Unquoted (Level 3) £'000 |
Total £'000 |
|
| Opening book cost Opening fair value adjustment Opening valuation |
104,342 11,798 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 116,140 |
2,444 490 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,934 |
40,015 3,032 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 43,047 |
146,801 15,320 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 162,121 |
102,577 13,949 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 116,526 |
390 55 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 445 |
38,902 6,607 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 45,509 |
141,869 20,611 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 162,480 |
| Movements in year: Purchases at cost Sales – proceeds – realised gains on sales |
22,951 (42,522) 3,232 |
507 – – |
10,078 (982) 774 |
33,536 (43,504) 4,006 |
43,006 (48,018) 4,750 |
2,054 – – |
7,324 (712) (3,472) |
52,384 (48,730) 1,278 |
| Transfer to unquoted investments (cost) Transfer to unquoted investments |
(462) | – | 462 | – | 2,027 | – | (2,027) | – |
| (unrealised loss) Increase/(decrease) in fair value adjustment |
(7,321) 18,150 |
– 42 |
7,321 (7,144) |
– 11,048 |
285 (2,436) |
– 435 |
(285) (3,290) |
– (5,291) |
| Closing valuation Closing book cost Closing fair value adjustment |
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 110,168 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 87,541 22,627 |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 3,483 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,951 532 |
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 53,556 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 50,347 3,209 |
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 167,207 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 140,839 26,368 |
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 116,140 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 104,342 11,798 |
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,934 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,444 490 |
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 43,047 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 40,015 3,032 |
ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 162,121 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 146,801 15,320 |
| 110,168 | 3,483 | 53,556 | 167,207 | 116,140 | 2,934 | 43,047 | 162,121 |
| 2014 | 2013 | |||||||
|---|---|---|---|---|---|---|---|---|
| Quoted (Level 1) £'000 |
Quoted (Level 2) £'000 |
Unquoted (Level 3) £'000 |
Total £'000 |
Quoted (Level 1) £'000 |
Quoted (Level 2) £'000 |
Unquoted (Level 3) £'000 |
Total £'000 |
|
| Opening book cost Opening fair value adjustment Opening valuation |
104,342 11,798 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 116,140 |
2,444 490 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,934 |
40,015 4,202 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 44,217 |
146,801 16,490 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 163,291 |
102,577 13,949 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 116,526 |
390 55 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 445 |
38,902 7,938 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 46,840 |
141,869 21,942 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 163,811 |
| Movements in year: Purchases at cost Sales – proceeds – realised gains on sales |
22,951 (42,522) 3,232 |
507 – – |
10,078 (982) 774 |
33,536 (43,504) 4,006 |
43,006 (48,018) 4,750 |
2,054 – – |
7,324 (712) (3,472) |
52,384 (48,730) 1,278 |
| Transfer to unquoted investments (cost) Transfer to unquoted investments (unrealised loss) |
(462) (7,321) |
– – |
462 7,321 |
– – |
2,027 285 |
– – |
(2,027) (285) |
– – |
| Increase/(decrease) in fair value adjustment Closing valuation Closing book cost |
18,150 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 110,168 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 87,541 |
42 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 3,483 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,951 |
(6,040) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 55,830 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 50,347 |
12,152 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 169,481 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 140,839 |
(2,436) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 116,140 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 104,342 |
435 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,934 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,444 |
(3,451) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 44,217 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 40,015 |
(5,452) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 163,291 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 146,801 |
| Closing fair value adjustment | 22,627 110,168 |
532 3,483 |
5,483 55,830 |
28,642 169,481 |
11,798 116,140 |
490 2,934 |
4,202 44,217 |
16,490 163,291 |
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 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 Level 3 assets, Lynton Holding Asia (£327,000), Hurricane Energy (£2,433,000), Hot Can (£1,606,000), Equus Petroleum (£238,000), Buried Hill Energy (Cyprus) (£84,000), Chateau Lafite Rothschild 2009 (£90,000) and Chateau Lafite Rothschild 2010 (£100,000).
| 2014 £'000 |
2013 £'000 |
|
|---|---|---|
| Realised gains on sales of investments | 4,006 | 1,278 |
| Increase/(decrease) in fair value adjustment | 11,048 | (5,291) |
| 15,054 | (4,013) |
Included in purchases at cost and proceeds from sales are the following transaction costs:
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2014 | 2014 | 2013 | 2013 | |
| £'000 | £'000 | £'000 | £'000 | |
| Purchases | 64 | 51 | 163 | 155 |
| Sales | 95 | 85 | 112 | 108 |
| 159 | 136 | 275 | 263 |
| % of ordinary share capital held |
Principal activity | Country of incorporation and operation |
|
|---|---|---|---|
| Alpha Securities Trading Limited | 100 | Investment dealing | England |
Investment in the Alpha Securities Trading Limited 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 gain of £392,000 (2013: loss of £140,000) and a dealing gain of £706,000 (2013: loss of £36,000) which are included in the Consolidated Income Statement.
The Company controls another investee company by virtue of its voting rights.
| % of ordinary share capital held |
Principal activity | Country of incorporation and operation |
|---|---|---|
| Claremont Alpha Limited 100 |
Holding company | Isle of Man |
Further investment will be considered in this entity based on the commercial factors prevailing at the time of investment. No commercial commitments exist between the Company and this entity.
The Company has elected to early adopt IFRS 10. This provides a consolidation exemption to companies that qualify as an "Investment Entity", whereby instead of consolidating subsidiaries, investment entities are permitted to measure the investment in subsidiaries at fair value through profit or loss.
The investment in Alpha Securities Trading Limited continues to be consolidated as this entity is classified as providing services that relate to the investment entity's investment activities.
The Directors have assessed the criteria required for the Company to qualify as an "Investment Entity" and confirms that:
c) The Company confirms that it measures and evaluates the performance of substantially all of its investments on a fair value basis.
Other characteristics of the Company supporting this classification is that there are multiple investments (see portfolio statement) and many underlying shareholders. Additionally investors are not exclusively related parties and the underlying investment positions taken are commonly in the form of equity.
At 30 April 2014 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 | |
|---|---|---|
| All The Worlds Entertainment | A Ordinary | 39.8% |
| Ashcourt Rowan | Ordinary | 4.9% |
| Avation | Ordinary | 5.8% |
| Betex Group | Ordinary | 4.6% |
| Ceramic Fuel Cells | Ordinary | 5.0% |
| Charlemagne Capital | Ordinary | 5.1% |
| Claremont Alpha* | Ordinary | 100.0% |
| Eden Reseach | Ordinary | 6.9% |
| Forest Support Service | Ordinary | 6.3% |
| Flying Brands | Ordinary | 3.9% |
| Gaming Realms | Ordinary | 6.0% |
| Gift-Library.com | A Ordinary | 100.0% |
| Greenwich Loan Income Fund | Ordinary | 4.0% |
| Gresham Computing | Ordinary | 3.1% |
| Gundaline | Ordinary | 12.0% |
| Hardlyever | A Ordinary | 65.2% |
| Hot Can | Ordinary | 8.4% |
| Infusion 2002 | Ordinary | 13.0% |
| Ironveld | Ordinary | 3.8% |
| Lamp Group | Ordinary | 6.9% |
| Lansdowne Oil & Gas | Ordinary | 4.6% |
| Liontrust Asset Management | Ordinary | 3.5% |
| Lynton Holding Asia Maison Seven |
Ordinary Ordinary |
35.1% 10.2% |
| Martinco | Ordinary | 7.0% |
| Metapack | A Ordinary | 5.6% |
| Mobile Streams | Ordinary | 8.0% |
| Mopowered Group | Ordinary | 8.4% |
| N+1 Singer | Ordinary | 6.1% |
| Occa Design Consultancy | Ordinary | 10.4% |
| Penna Consulting | Ordinary | 3.4% |
| Physiolab Technologies | Ordinary | 14.2% |
| Pittards | Ordinary | 17.6% |
| Praetorian Resources | Ordinary | 20.9% |
| Rangers International Football Club | Ordinary | 3.4% |
| Reaction Engines | Ordinary | 5.2% |
| R.E.A. Holdings | Ordinary | 9.0% |
| Senhouse Southeast Asian Focus | Ordinary | 19.9% |
| Ten Alps | Ordinary | 7.8% |
| The Hut Group | A | 13.3% |
| The Hut Group | A2 | 5.3% |
| The Hut Group | A3 | 8.5% |
| Urica | Ordinary | 16.7% |
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.
* See note 10 – entity is not consolidated.
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2014 | 2014 | 2013 | 2013 | |
| £'000 | £'000 | £'000 | £'000 | |
| Prepayments and accrued income | 252 | 252 | 110 | 110 |
| Amounts due from brokers | 251 | 192 | 383 | 241 |
| Taxation recoverable | 48 | 48 | 54 | 54 |
| 551 | 492 | 547 | 405 |
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2014 | 2014 | 2013 | 2013 | |
| £'000 | £'000 | £'000 | £'000 | |
| Accrued expenses | 176 | 176 | 487 | 485 |
| Amounts due to brokers | 98 | 98 | 813 | 813 |
| Amounts due to subsidiary undertakings | – | 649 | – | 64 |
| 274 | 923 | 1,300 | 1,362 |
| 2014 Number |
2014 £'000 |
2013 Number |
2013 £'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 |
43,206,785 3,842,409 6,865,234 |
432 38 69 |
46,688,812 1,847,176 6,865,616 |
467 18 69 |
| 539 | 554 |
| Number | £'000 | |
|---|---|---|
| Movements in ordinary shares during the year: | ||
| Ordinary shares in issue on 1 May 2013 | 46,688,812 | 467 |
| Repurchases of ordinary shares into treasury | (3,482,409) | (35) |
| Issue of ordinary shares on exercise of subscription shares | 382 | – |
| Ordinary shares in issue on 30 April 2014 | 43,206,785 | 432 |
Annual Financial report
The movements in ordinary shares held in treasury during the year are as follows:
| 2014 Number |
2014 £'000 |
2013 Number |
2013 £'000 |
|
|---|---|---|---|---|
| Balance brought forward | 1,847,176 | 18 | 622,048 | 6 |
| Repurchases of ordinary shares | 3,482,409 | 35 | 1,535,128 | 15 |
| Cancellation of ordinary shares | (1,487,176) | (15) | (310,000) | (3) |
| Balance carried forward | 3,842,409 | 38 | 1,847,176 | 18 |
During the year ended 30 April 2014, a total of 3,482,409 ordinary shares were repurchased by the Company at a total cost, including transaction costs, of £9,685,000 for placement in treasury (2013: 1,535,128 ordinary shares were repurchased for placement in treasury for £4,315,000).
The movements in subscription shares during the year are as follows:
| Number | £'000 | |
|---|---|---|
| Balance brought forward | 6,865,616 | 69 |
| Conversion of subscription shares into ordinary shares | (382) | – |
| Balance carried forward | 6,865,234 | 69 |
During the year, holders of 382 (2013: 1,518) subscription shares exercised their rights to covert those shares into ordinary shares at a price of 345.0 pence per ordinary share, giving a total consideration received of £1,000 (2013: £5,000).
Holders of the remaining subscription shares may exercise their right to convert those shares into ordinary shares at a price of 345.0 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 | Capital | Total | Capital | Capital | Total | |
| reserve – | reserve – | capital | reserve – | reserve – | capital | |
| realised | unrealised | reserve | realised | unrealised | reserve | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 May 2013 | 58,664 | 11,504 | 70,168 | 58,245 | 12,674 | 70,919 |
| Increase in fair value adjustment | – | 11,048 | 11,048 | – | 12,152 | 12,152 |
| Net gain on realisation of investments | 4,006 | – | 4,006 | 4,006 | – | 4,006 |
| Currency losses on capital items | (3) | – | (3) | (3) | – | (3) |
| Costs charged to capital (net of tax relief) | (1,404) | – | (1,404) | (1,410) | – | (1,410) |
| Transfer between reserves | 7,572 | (7,572) | – | 7,572 | (7,572) | – |
| Balance at 30 April 2014 | 68,835 | 14,980 | 83,815 | 68,410 | 17,251 | 85,664 |
| 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 |
The net asset value per share is based on the net assets of £143,684,000 (2013: £138,348,000) and on 43,206,785 (2013: 46,688,812) ordinary shares, being the number of ordinary shares in issue at the year end.
The diluted net asset value per share has been calculated on the assumption that nil (2013: nil) subscription shares were exercised resulting in a total of ordinary shares in issue 43,206,785 (2013: 46,688,812).
At 30 April 2014, the Group and Company did not have any financial commitments which had not been accrued (2013: nil).
As detailed on page 4, 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 at 30 April 2014 are disclosed in the investment portfolio set out on pages 12 to 14.
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 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 2014 £'000 |
Net monetary assets at 30 April 2014 £'000 |
Investments at 30 April 2013 £'000 |
Net monetary assets at 30 April 2013 £'000 |
|
|---|---|---|---|---|
| US Dollar | 9,502 | 11 | 8,320 | – |
| Canadian Dollar | 7,031 | – | 6,771 | – |
| Danish Krone | 3,137 | – | 3,464 | – |
| Australian Dollar | 1,646 | – | – | – |
| Swiss Franc | 601 | – | – | – |
| Euro | – | – | – | 28 |
| Total | 21,917 | 11 | 18,556 | 28 |
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 £1,096,000 (2013: £929,000). 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 2014 (2013: 0.5 per cent).
The Company has a 5 year multi-currency revolving credit facility of £30,000,000 of which £26,500,000 was drawn down at 30 April 2014 (2013: £26,500,000). Interest is charged at variable rates equivalent to 1.70 per cent 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 2014 | 30 April 2013 | |||||
|---|---|---|---|---|---|---|
| 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 | 2,786 | 3.29 | 1.65 | 1,149 | 3.52 | 2.86 |
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 £8,364,000 (2013: £8,106,000). 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 include companies that are traded 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 2014 (2013: nil).
The Group primarily finances its operations all through equity, retained profits and bank borrowings. As at 30 April 2014, 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 2013: £26,500,000). 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 2014 was 2.19 per cent per annum (2013: 1.70 per cent per annum). There was no interest rate risk associated with other short-term creditors at 30 April 2014 or 30 April 2013. There is no difference between the fair value of the financial liabilities and their carrying value.
The credit facility is committed until 30 November 2018. 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 35% 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 reviews 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.
The Company surrendered excess management expenses without payment to Alpha Securities Trading Limited of £353,000 (2013: £nil). All other transactions with the subsidiary undertaking were on an arm's length basis. During the year transactions in securities between the Company and its subsidiary undertaking amounted to £nil (2013: £nil). During the year the Company paid its subsidiary undertaking, interest on the intercompany loan amounting to £7,000 (2013: £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, 2 October 2014 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:
Resolution 10. That, in substitution for any existing authorities, the Directors be and are hereby generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 (the "Act") to exercise all the powers of the Company to allot:
provided that this authority shall expire at the conclusion of the next annual general meeting of the Company to be held in 2015, 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 6,476,885 or 1,028,910 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 3 July 2014
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.
A proxy form for use in connection with the AGM is enclosed. To be valid any proxy form or other instrument appointing a proxy, together with any power of attorney or other authority under which it is signed or a certified copy thereof, must be received by post or (during normal business hours only) by hand by the Registrar at Capita Registrars, PXS,
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 30 September 2014 (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.
As at 3 July 2014 (being the latest practicable date prior to the publication of this notice) the Company's issued share capital consisted of 43,208,043 ordinary shares, carrying one vote each and 6,863,976 subscription shares, which carry no voting rights. Therefore, the total voting rights in the Company as at 3 July 2014 were 43,208,043 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
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 currently conducts its affairs so that the shares in issue can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority's ("FCA's") rules in relation to non-mainstream investment products and intends to do so for the foreseeable future. The shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in an investment trust.
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 345.0 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 pm 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.co.uk.
Year End
30 April
Interim: December Annual: July
February and August
September
Cassini House 57 St James's Street London SW1A 1LD
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
Tel: 0800 092 2051 Email: [email protected] Website: artemis.co.uk
J.P. Morgan Europe Limited 25 Bank Street Canary Wharf London E14 5JP
Capita Asset Services Shareholder Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
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