Annual Report • Apr 30, 2016
Annual Report
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Annual Financial report for the year ended 30 April 2016
| Financial Highlights | 2 |
|---|---|
| Strategic Report | |
| Chairman's Statement | 4 |
| Investment Manager's Review | 6 |
| Twenty Five Largest Investments | 10 |
| Portfolio of Investments | 11 |
| Strategy and Business Review | 15 |
| Key Performance Indicators | 15 |
| Other Matters | 16 |
| Directors and Corporate Governance | 18 |
| Audit Information | |
| Report of the Audit Committee | 29 |
| Independent Auditor's Report to the members of Artemis Alpha Trust plc | 31 |
| Financial Statements | |
| Consolidated Income Statement | 33 |
| Balance Sheets | 34 |
| Statements of Changes in Equity | 35 |
| Cash Flow Statements | 37 |
| Notes to the Financial Statements | 38 |
| Shareholder Information | |
| Notice of Annual General Meeting | 52 |
| Information for Shareholders | 57 |
| Investment Manager, Company Secretary and Advisers | 59 |
Annual Financial report
| Total returns | Year ended 30 April 2016 |
Year ended 30 April 2015 |
|---|---|---|
| Net asset value per ordinary share | (6.1)% | (0.9)% |
| Ordinary share price | (13.2)% | (6.9)% |
| FTSE All-Share Index | (5.7)% | 7.5% |
| Revenue and dividends | ||
| Revenue earnings per ordinary share | 4.73p | 4.12p |
| Dividends per ordinary share | 3.90p | 3.55p |
| Ongoing charges (excluding performance fees) | 0.9% | 0.9% |
| Capital | As at 30 April 2016 |
As at 30 April 2015 |
| Net asset value per ordinary share | 303.43p | 326.28p |
| Ordinary share price | 235.50p | 275.00p |
| Gearing | 5.2% | 9.1% |
Source: Artemis/Datastream
Performance for the year ended 30 April 2016 Discount during the year ended 30 April 2016
Net Asset Value Total Return Share Price Total Return FTSE All-Share Index Total Return
Source: Artemis/Datastream Source: Artemis/Datastream
| Total returns to 30 April 2016 | 3 years | 5 years | Since 1 June 2003* |
|---|---|---|---|
| Net asset value per ordinary share | 5.6% | (2.0)% | 386.3% |
| Ordinary share price | (16.7)% | (25.0)% | 289.6% |
| FTSE All-Share Index | 12.0% | 29.4% | 171.7% |
* 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.
Annual Financial report
The last year has seen continued volatility in markets due, in part, to concerns over China's ability to sustain its growth projections and, in the last few months, uncertainty over the EU referendum. Against this background the Company's net asset value per share fell by 6.1 per cent during the year ended 30 April 2016 on a total return basis. This compares with a fall of 5.7 per cent in the FTSE All-Share Index over the same period.
Although the quoted investments were positive contributors to performance over the year, adding 0.3 per cent, overall performance was held back by a number of reductions in value in the unquoted investments amounting to 5.5 per cent of the net asset value. More detailed commentary on the portfolio is set out in the Investment Manager's review that follows.
The latest available net asset value per share, as at 5 July 2016, was 285.43 pence.
The Board remains acutely aware of the poor performance of the Company in recent years and the current level of the discount at which the shares trade to the underlying asset value. A sustained improvement in performance is needed to improve the rating of the shares and reduce the discount.
With this in mind, the Board has recently reviewed the Company's investment strategy with the fund managers. As a result, new guidelines and targets have been set, in particular for a reduction in the Company's exposure to unquoted investments. This has been a challenging area for the fund managers in recent years and has accounted for much of the poor performance and, the Board believes, has been the principal contributor to the Company's weaker share price rating. Further details of this strategy review are set out below.
The Board and fund managers have at the forefront of their minds the fact that there will be a continuation vote at the AGM in the autumn of 2018. The Board recognises the importance of delivering proof of progress for shareholders over the next twelve months.
As always, the Board welcomes the views of shareholders and will continue to engage with them to seek their views during the course of the year.
The discount widened over the year from 15.7 per cent to 22.4 per cent. The Board believes this reflects a combination of poor performance and the Company's significant exposure to unquoted investments, where the news has, for the most part, been negative. The Company bought back 676,000 shares during the period, at a cost of approximately £1.6 million, representing 1.6 per cent of the shares in issue.
The Board is very concerned at the current level of the discount and has considered various options to narrow it. Putting in place a formal share buy-back programme may appear to be an obvious way of addressing this issue. For a company of our size, however, this may have negative consequences: by shrinking the size of the Company it would further reduce liquidity in its shares. It would also increase the unquoted holdings as a proportion of the portfolio. Furthermore, there would be no guarantee that any short-term reduction in the discount would be sustained; previous buy-backs have had a limited impact on the discount. Instead, the best prospect for reducing the discount on a sustainable basis is likely to come from an improvement in performance and evidence of better news and/or realisations from the unquoted portfolio.
The Board will continue to monitor the position closely. We will seek to address any imbalances between the supply and demand by buying back shares as and when appropriate.
As indicated above, an area that has clearly detracted from performance over recent years is the unquoted portfolio. The Board and fund managers have agreed that a priority is to reduce the Company's exposure to unquoted holdings from its current level of 27.3 per cent to below 10 per cent over the next two years. The fund managers remain confident that value will be generated from these holdings and that a number of realisations can be achieved during this period. Whilst the objective is to reduce the exposure to unquoted companies, this will not be done at any price, and the exact timing cannot be predicted. Investments in new unquoted companies will only be made on an exceptional basis and then only once the investment has been formally considered and approved by the Board. Follow-on investments that will improve the prospects of the investee company – or preserve the Company's economic interest in it – will be permitted and remain at the discretion of the fund managers.
When unquoted investments are realised, it is expected that the proceeds will be invested in quoted companies. In line with the Company's wide investment remit, these could range from small cap stocks through to the largest companies of the FTSE 100. However, the Company's strong bias to smaller and mid cap companies is expected to remain, as this is where our fund managers continue to find the most promising investment opportunities. Any significant exposure to large caps is likely to be tactical in nature and consist of 'special situations' – buying shares that are undervalued and out of favour. Our fund managers are active stock-pickers and are not influenced by movements in, or constituents of, an index.
Part of the Company's investment objective is to provide a growing dividend stream and the Board will continue to target an annual rate of dividend growth of around 10 per cent. The reduction in exposure to unquoted investments
and the subsequent reinvestment into quoted companies should improve the overall yield of the portfolio and support the dividend. That said, the Company has sizeable revenue reserves, providing further flexibility in managing the portfolio from a yield perspective. The dividend yield will not dictate the overall shape of the portfolio.
Revenue earnings for the year were 4.73p per share, an increase of 14 per cent on the previous year. The Board has declared a second interim dividend of 2.50p (2015: 2.30p) per ordinary share. The total dividends for the year ended 30 April 2016 are therefore 3.90p (2015: 3.55p), an increase of 9.9 per cent from 2015 and in line with the Company's target of increasing the dividend by approximately 10 per cent each year.
The dividend will be paid on Friday, 19 August 2016, to shareholders on the register as at Friday, 15 July 2016, with an ex-dividend date of Thursday, 14 July 2016.
David Barron will retire as a director of the Company at this year's Annual General Meeting ("AGM"), having served as a director since February 2005 and as chairman of the audit committee for much of that period. During this time, David's expertise in, and extensive knowledge of, the investment trust sector has been invaluable. The Board would like to record their thanks and appreciation for David's very significant contribution to the Company and wish him well for the future.
The Company's AGM will take place on Wednesday, 5 October 2016 at 11.30 am at the offices of Artemis Fund Managers Limited, Cassini House, 57 St James's Street, London, SW1A 1LD. The fund managers, John Dodd and Adrian Paterson, will make a short presentation at the meeting. The Board would welcome your attendance as it provides shareholders with an opportunity to learn more about the Company and to ask questions of the Board and the fund managers. A light lunch will follow the meeting. For those shareholders who are unable to attend, I would encourage you to make use of your proxy votes by completing and returning the form enclosed with this report.
The recent historic vote to leave the EU has triggered an extended period of uncertainty for the UK in many respects. As most of our investments are in UK companies there will inevitably be important implications for these businesses. However, it is perhaps too early to predict where this will lead and the long-term effect on our investee companies. We will be assiduously reviewing the portfolio to see how we can protect the interests of the Company and its shareholders.
Chairman 6 July 2016
During the year under review, the Company's net asset value fell by 6.1 per cent on a total return basis compared with a fall of 5.7 per cent in the FTSE All-Share Index.
While the portfolio performed broadly in line with the index, the main drag related to write-downs in the portfolio of unquoted holdings. This more than offset the positive contribution from its portfolio of listed stocks.
Net Asset Value Total Return Share Price Total Return FTSE All-Share Index Total Return
Source Artemis/Datastream, total returns.
| 3 years % |
5 years % |
Since Launch % |
|
|---|---|---|---|
| Net asset value per ordinary share Share price FTSE All-Share Index |
5.6 (16.7) 12.0 |
(2.0) (25.0) 29.4 |
386.3 289.6 171.7 |
The Company's share price fell by more than the net asset value and we believe this reflected continued unease amongst investors over the unquoted portfolio. Although there have been some short-term issues with some of these investments, we believe many of them retain significant potential, a demonstration of which could prompt the Company's shares to be re-rated.
Overall the listed portfolio performed relatively well, as can be seen below.
| Contribution % |
|---|
| 0.3 |
| (5.5) |
| (0.9) |
The five largest stock contributors and detractors, along with an industry contribution analysis, are summarised in the tables below.
| Company | Market | Contribution % |
|---|---|---|
| Skyepharma | LSE | 1.9 |
| Penna Consulting | AIM | 1.5 |
| Gleeson (M.J.) Group | LSE | 1.1 |
| Mporium Group | AIM | 0.7 |
| Oxford Nanopore Technologies | Unquoted | 0.7 |
| Company | Market | Contribution % |
|---|---|---|
| Starcount | Unquoted | (2.9) |
| Reaction Engines | Unquoted | (1.2) |
| Gaming Realms | AIM | (1.1) |
| Pittards | AIM | (1.1) |
| Physiolab Technologies | Unquoted | (0.9) |
| Industry | Contribution % |
|---|---|
| Technology | 1.3 |
| Healthcare | 1.2 |
| Industrials | 0.4 |
| Consumer Goods | (0.4) |
| Basic Materials | (0.6) |
| Financials | (1.5) |
| Oil & Gas | (2.0) |
| Consumer Services | (3.6) |
In terms of industry contribution, technology and healthcare were the strong performers. Although holdings in the oil sector continued to be a negative, the oil price rallied towards the end of the year, climbing from \$30 to \$50 per barrel, enabling the Company's portfolio of oil companies to recoup some of its earlier losses. Reflecting subdued stock-markets, financials were down over the year.
In the listed portfolio, the biggest positive contribution came from Skyepharma, which makes oral and inhalation drug delivery systems. It works in partnership with the major pharmaceutical companies who market and sell its products. The royalty payments from Flutiform, its most important product, increased substantially as it gained approval in several new countries. A proposal to merge with Vectura was put to shareholders in March and subsequently agreed. Vectura's business is in respiratory related products and the two businesses are complementary. We believe combining them will bring benefits of scale and allow the resulting business to develop the next generation of devices more rapidly.
Another notable contribution came from Penna Consulting, a recruitment and outplacement specialist, which was bought by Adecco. Penna was benefiting from strong growth in both of its divisions and its roster of longstanding blue-chip customers made it an attractive acquisition for Adecco, which is looking to increase its position in the UK market. The offer price of 365p was four times the cost of the Company's initial investment.
Helped by ultra-low interest rates and government initiatives, the housebuilding sector performed strongly. In the portfolio, the prime beneficiary was MJ Gleeson. It consists of two main divisions: homes and strategic land. The homes division specialises in low-cost housing, predominantly in the north of England where demand is strong and competition limited. Its skill in securing land at favourable prices enables it to achieve industry-leading margins. It has ambitious plans to expand geographically and to increase annual sales from below 1,000 units to 3,000 units. The strategic land division should benefit from the relaxation of the planning regulations as the government tries to increase the number of houses being built. The final strong contributor in the listed portfolio was Mporium (formerly MoPowered). Its e-commerce platform allows consumers to browse, checkout and pay for goods using their smartphones. This is the fastest growing area of online retailing. After the arrival of the new management team and two refinancings, prospects are good as we eagerly await news of the revamped product – and contract wins.
On the negative side, the biggest detractors in the listed portfolio were Gaming Realms, Pittards and GLI Finance. Gaming Realms, an online operator of social gaming and gambling businesses, made a sizeable acquisition despite the profitability of its core business remaining unproven. This has weighed on the share price and we have gradually reduced our position.
Pittards, meanwhile, has proven a frustrating investment because we believe there is considerable unfulfilled potential in the business. A company with a 200-year history, it produces leather for manufacturers throughout the world. Its main tannery is in Yeovil but it also has a tannery and three factories in Ethiopia, where it makes gloves using its own leather. There has been a significant amount of change in this business: a new chairman is overseeing a strategic review and new money has been raised, enabling the company to buy the freehold of its tannery in Yeovil. Although global leather markets remain subdued, we believe the opportunities for Pittards to add to its customer list remain compelling. The high levels of operational gearing mean that any meaningful sales growth – or even a recovery to historic levels – would lead to a very substantial increase in profits. The shares are valued at a discount to net assets and, with a new chairman and finance director now in place, we are optimistic about its prospects over the next couple of years. GLI Finance, which invests in a number of online lending platforms, performed disappointingly. As with Pittards, there have been a number of significant changes over the last year as there were problems that needed addressing. In essence, the company had invested in too many online platforms which failed to achieve scalability and were too widely spread for management to control. A new chief executive has been appointed and he has started rationalising the portfolio and focusing on those platforms that have a clear pathway to scale and profitability. As part of this process a strategic investor has injected new capital to shore up the balance sheet. With its more focused approach and stronger balance sheet, we believe the company is well-placed to take advantage of the growth opportunities in this part of the alternative finance area.
As noted in the Chairman's statement, the poor performance of some of the Company's unquoted investments has overshadowed better performance elsewhere in the portfolio. Total exposure to unquoted investments at the year end was 27.3 per cent of the portfolio. Our intention is to significantly reduce exposure and, subject to any upward revaluations ahead of disposal, would aim to bring this down to less than 10 per cent of the portfolio over the next two years. Any further investments will only be considered on an exceptional basis. Should we to wish to make any new investment, we would agree this with the Board before doing so.
A list of the ten largest unquoted investments is set out below:
| Company | Description | % of Portfolio |
|---|---|---|
| Starcount | Social media data analytics |
3.5 |
| Metapack | Delivery optimisation technology |
3.3 |
| Oxford Nanopore Technologies |
Nanopore DNA sequencing |
3.0 |
| Claremont Alpha |
Taiwan casino investments |
2.7 |
| Reaction Engines |
Rocket propulsion systems |
2.4 |
| URICA | Global payment network for SMEs |
1.9 |
| Gundaline | Australian agriculture | 1.3 |
| Lamp Group | Healthcare & specialist insurance |
1.2 |
| Retail Money Markets |
Peer-to-peer lending | 1.2 |
| Oxford Sciences Innovation |
Oxford University intellectual property |
1.1 |
The valuations of the unquoted holdings are reviewed quarterly by Artemis' unquoted review panel and more frequently should a significant change occur between scheduled meetings. This internal group is independent of the fund managers and is responsible for Artemis' recommendations on valuations for the unquoted investments. The main changes in valuation are summarised below.
Oxford Nanopore Technologies and Rated People raised new capital at a premium to the previous carrying values, enabling their valuations to be revised higher. This, however, was more than offset by the write-downs in Starcount, Reaction Engines, Physiolab Technologies and Maison Seven.
The valuation of Starcount was written down earlier in the financial year following a £5 million equity issue funded mainly by its management team: Edwina Dunn and Clive Humby, best known as founders of the highly successful Tesco Clubcard. The new money was invested at a relatively low price to reflect the company's slower than expected progress in winning clients. We still believe that the innovative way of using social media analysis will add significant value to its clients. If it can land one significant client we feel more will follow.
We wrote down our carrying value of Reaction Engines, despite the encouraging news that BAE Systems had decided to invest £20 million in the company, although this came at a discount to the previous funding round. BAE's investment is a positive validation of the company's technology and has also enabled it to access further grant funding from the government. The company has appointed a highly qualified chief executive, Mark Thomas, from Rolls Royce. Technology to support space transport is developing rapidly at the moment and Reaction Engines believes there may be many other applications for its unique technology.
Physiolab Technologies, a medical device company that enables soft tissue to be repaired using hot and cold compression, suffered a series of technical glitches that led to delays in getting its product to market. This resulted in cashflow problems. While the lower valuation of the fund-raising reflected these delays, we are hopeful that the company can start to convert the many expressions of interest into actual sales.
The final, and most disappointing, detractor was Maison Seven, which sells women's fashion online. Although the business was growing its revenues, it was performing well below its own budget. In a very competitive market it was clear that it would need substantial additional investment merely to break even. Having supported the company financially through the Christmas trading period, the shareholders decided to put the business into administration following very disappointing sales and the investment was written off.
The negative impact of these four investments was a 5.5 per cent reduction in the Company's net asset value.
The largest sector in the portfolio continues to be 'other financials'. Outflows from Polar Capital's large Japanese fund continued and the performance of its other products was mixed, so we reduced our longstanding holding. We reinvested some of the proceeds into another fund manager, Liontrust. In contrast to Polar Capital, it is benefiting from strong performance and good flows into its product range.
Consolidation in the wealth management space continues. Here, we used the proceeds from the takeover of Ashcourt Rowan to buy back into Brewin Dolphin, having previously sold at higher levels. At the end of the financial year, Towry Law was bought by Permira Bestinvest. This deal makes the Company's investments in Brewin Dolphin and Charles Stanley look significantly undervalued.
We took advantage of worries about 'Brexit' before the EU referendum to buy two property stocks and to buy back into Telford Homes, a developer focused on east London, having previously sold its shares at a higher level. These stocks were badly hit in the run up to the EU referendum and were hit further following the result. There has been a partial recovery of the post referendum falls, but our belief is that London will remain a pre-eminent global city, made more attractive by the sharp fall in sterling.
We also bought shares in Majestic Wine following its acquisition of Naked Wines (a fast-growing retailer of wine online in the UK and US) and its appointment of a talented new chief executive, Rowan Gormley. The cash generated by the existing Majestic Wine stores is being used to fund the higher growth of Naked Wines, leading to a substantial re-rating of the shares.
Periodically, we will buy large companies if we feel their valuations have fallen too far. This year, we felt that was the case with BP, Tesco and Pearson.
In sales, we took advantage of the rebound in the oil price towards the end of the period to sell Cairn Energy. We also took profits in Powerflute, 4D Pharma and Emis Group.
Among the Company's internet-related businesses, we remain particularly impressed by the performance of Ratesetter (Retail Money Market), which passed the milestone of having lent £1 billion since inception and Metapack, whose successful expansion into Europe continues.
Our only investment in an unquoted company during the year came back in June 2015, when we bought into Oxford Sciences Innovation. This company has been set up to commercialise the intellectual property of Oxford University's mathematical, physical, life sciences and medical sciences divisions. There was very strong
demand from a wide range of UK and US institutions and the company raised £350 million in total, a record for this type of fund. It has already invested in some fascinating opportunities.
Although the Company continues to utilise its borrowing facility, cash received from our disposals exceeded purchases and saw borrowing fall from £14.5 million to £8.5 million by the year end. We will continue to use gearing to support our investment ideas when we consider it appropriate.
Our strategy remains to focus on areas where we feel we have an edge over others in our understanding of a company or an industry. This will tend to be in the area of the market in which we specialise: small-cap listed companies. From time to time, however, we will invest in larger companies if we feel compelling value has emerged. In this endeavour, we can call upon the knowledge and expertise of our colleagues across the wider Artemis investment team.
As we have discussed, there is a real drive to extract value from the Company's unquoted portfolio while reducing its overall exposure to this type of stock. Although some of these businesses have taken longer to execute on their plans than we might have liked, we remain confident that there remains plenty of untapped potential.
As we write, the market is continuing to react to the perceived implications of Brexit: a sustained period of ultra-low UK interest rates, the possibility of a recession and a prolonged period of uncertainty. Of these the last is certain, but the first two assume the worst. In turn this has divided performance in the market sharply. International earners are showing resilience, but the weight of selling is pushing domestically exposed stocks down hard.
We are inclined to think this disparity is overdone. There is a case for switching from expensive defensives and international stocks into companies that have been swept along in the domestic negativity – yet which have the characteristics and options at their disposal to outstay such conditions. In time the market will focus on where risk is discounted – as opposed to concentrating on areas into which money has flown unthinkingly. For example pharmaceuticals will soon find themselves in the eye of the US electoral uncertainty; and similarly European stocks will reflect the sustainability of the remainder of the eurozone. By contrast the UK will have re-priced; and although no-one likes an investment opportunity where the good news is less bad news, that could be a basis on which the market recovers its poise.
Meanwhile it is well worth remembering that international investors have been much more cautious about Brexit – and have been far less exposed to both European and UK stocks. Since 24 June, courtesy of the market's and sterling's weakness, UK assets are considerably cheaper for US investors than they were.
Finally, the old truism is true: volatility means opportunity. As stock-pickers, we believe that the weeks and months ahead should prove fruitful for your Company.
Fund managers Artemis Fund Managers Limited 6 July 2016
Annual Financial report
| Market Value | % of | ||
|---|---|---|---|
| Investment | Business activity | £'000 | portfolio |
| Skyepharma | Drug delivery specialist | 6,208 | 4.6 |
| Liontrust Asset Management | Asset management | 5,440 | 4.0 |
| Gleeson (M.J.) Group | Urban regeneration and land trading | 4,791 | 3.6 |
| 2 Starcount |
Social media data analytics | 4,728 | 3.5 |
| Polar Capital Holdings1 | Asset management | 4,546 | 3.4 |
| Metapack2 | Delivery optimisation technology | 4,384 | 3.3 |
| Oxford Nanopore Technologies2 | Nanopore DNA sequencing | 4,000 | 3.0 |
| Claremont Alpha2 | Taiwan casino developments | 3,677 | 2.7 |
| Penna Consulting1 | Global recruitment | 3,600 | 2.7 |
| Avation | Aircraft leasing | 3,255 | 2.4 |
| Reaction Engines2 | Rocket propulsion systems | 3,217 | 2.4 |
| Brewin Dolphin Holdings | Private client & wealth management | 3,151 | 2.3 |
| BP | Global integrated oil & gas company | 2,803 | 2.1 |
| Emis Group1 | Medical software supplier | 2,623 | 2.0 |
| URICA2,3 | Global payment network for SMEs | 2,550 | 1.9 |
| Martinco1 | Estate agent services | 2,501 | 1.9 |
| Helical Bar | Property development and investment | 2,494 | 1.9 |
| Gaming Realms1 | Online bingo & gaming | 2,442 | 1.8 |
| City of London Investment Group | Emerging markets asset management | 2,303 | 1.7 |
| Gresham Computing | Financial software services | 2,172 | 1.6 |
| Telford Homes1 | London housing developments | 2,161 | 1.6 |
| Halley Asian Prosperity Fund | Asian investment fund | 2,145 | 1.6 |
| Charles Stanley | Stock broking and asset management | 2,138 | 1.6 |
| Tesco | Retailer | 2,065 | 1.5 |
| Booker Group | Food wholesaler | 2,025 | 1.5 |
| Top 25 investments | 81,419 | 60.6 |
1 AIM quoted
2 Unquoted investment
3 Includes fixed interest element
| Investment | Business activity | Country of incorporation |
Market value £'000 |
% of total investments |
|---|---|---|---|---|
| Financials 2CG Senhouse Southeast |
Asian investment fund | Luxembourg | 1,409 | 1.0 |
| Asian Focus Fund | ||||
| Brewin Dolphin Holdings | Private client & wealth management | UK | 3,151 | 2.3 |
| Canaccord Genuity Group | Stock broking & wealth management | Canada | 68 | 0.1 |
| 1 Charlemagne Capital |
Emerging markets asset management | UK | 1,073 | 0.8 |
| Charles Stanley | Stock broking & asset management | UK | 2,138 | 1.6 |
| City of London Investment Group | Emerging markets asset management | UK | 2,303 | 1.7 |
| GLI Finance1 | Peer-to-peer lending investments | UK | 1,678 | 1.2 |
| Gottex Holdings | Asset management | Switzerland | 109 | 0.1 |
| Halley Asian Prosperity Fund | Asian investment fund | Luxembourg | 2,145 | 1.6 |
| Hawk Group2 | SME finance | UK | – | – |
| Helical Bar | Property development and investment | UK | 2,494 | 1.9 |
| Lamp Group2 | Healthcare and specialist insurance | UK | 1,664 | 1.2 |
| Liontrust Asset Management | Asset management | UK | 5,440 | 4.0 |
| Martinco1 | Estate agent services | UK | 2,501 | 1.9 |
| MWB Group Holdings2,3 | Property investment and developments | UK | – | – |
| N+1 Singer 2 |
Stock broking | UK | 1,250 | 0.9 |
| 1 Newriver |
UK retail property investments | UK | – | – |
| Orchard Funding Group1 | Professional fee funding services | UK | 1,605 | 1.2 |
| Oxford Sciences Innovation2 | Oxford University intellectual property | UK | 1,500 | 1.1 |
| Park Group1 | Retail vouchers and gift cards | UK | 1,438 | 1.1 |
| Polar Capital Holdings1 | Asset management | UK | 4,546 | 3.4 |
| Randall & Quilter 1 |
Investment and insurance services | UK | 666 | 0.5 |
| 2 Retail Money Market |
Peer-to-peer lender | UK | 1,600 | 1.2 |
| St. Modwen Properties | Property development and investment | UK | 919 | 0.7 |
| URICA2,3 | Global payment network for SMEs | UK | 2,550 | 1.9 |
| Total Financials | 42,247 | 31.4 | ||
| Consumer Services | ||||
| Be Heard Group1 | Digital marketing network | UK | 712 | 0.5 |
| Betex Group2 | Lottery management and technology | UK | – | – |
| Booker Group | Food wholesaler | UK | 2,025 | 1.5 |
| Claremont Alpha2 | Taiwan casino developments | Isle of Man | 3,677 | 2.7 |
| Dalata Hotel Group1 | Irish hotel operator | Ireland | 1,220 | 0.9 |
| Flying Brands | Multi brand home shopping group | UK | 28 | – |
| Gaming Realms1 | Online bingo & gaming | UK | 2,442 | 1.8 |
| Gift Library2 2 |
Bespoke luxury gift service | UK | – | – |
| Hardlyever | Online portal selling pre-owned luxury goods | UK | 871 | 0.7 |
| Maison Seven2 Majestic Wine1 |
Online fashion retailing | UK | – | – |
| MBL Group1 | Specialist wine retailer UK distributor and wholesaler of home |
UK UK |
1,967 54 |
1.5 0.1 |
| entertainment products | ||||
| Millennium & Copthorne | Hospitality and hotel group | UK | 1,612 | 1.2 |
| 2 ROK Entertainment |
Global mobile entertainment group | UK | – | – |
| 2 ROK Global |
Global mobile entertainment group | UK | – | – |
| Sports Direct International | UK sports retailer | UK | 578 | 0.4 |
| 2 Starcount |
Social media data analytics | UK | 4,728 | 3.5 |
| Ten Alps1 | Media and television production | UK | 980 | 0.7 |
| Tesco | Retailer | UK | 2,065 | 1.5 |
| Total Consumer Services | 22,959 | 17.0 |
1 AIM quoted
2 Unquoted investment
3 Includes fixed interest element
Annual Financial report
| Country of | Market value | % of total | ||
|---|---|---|---|---|
| Investment Industrials |
Business activity | incorporation | £'000 | investments |
| Aero Inventory2 | Aircraft parts suppliers | UK | – | – |
| Augean1 | Specialist waste management | UK | 690 | 0.5 |
| Avation | Aircraft leasing | Singapore | 3,255 | 2.4 |
| Gama Aviation1 | Aviation services | UK | 1,378 | 1.0 |
| Infusion 20022 | Delivery optimisation technology | UK | 479 | 0.3 |
| MBA Polymers2,3 Metapack2 |
Post-consumer recycled plastics producer Delivery optimisation technology |
USA UK |
310 4,384 |
0.2 3.3 |
| Penna Consulting1 | Global recruitment | UK | 3,600 | 2.7 |
| Rated People2 | Home maintenance services | UK | 803 | 0.6 |
| Reaction Engines2 | Rocket propulsion systems | UK | 3,217 | 2.4 |
| Volex | Power and data cabling technology | UK | 393 | 0.3 |
| Total Industrials | 18,509 | 13.7 | ||
| Health Care | ||||
| 4D Pharma1 | Drug development | UK | 358 | 0.3 |
| Eden Research1 | Agricultural chemicals | UK | 1,352 | 1.0 |
| Genmark Diagnostics | Molecular diagnostics company | USA | 437 | 0.3 |
| hVIVO1 | Vaccine testing | UK | 1,363 | 1.0 |
| Oxford Nanopore Technologies2 | Nanopore DNA sequencing | UK | 4,000 | 3.0 |
| Physiolab Technologies2,3 | Cryotherapy technology | UK | 1,227 | 0.9 |
| Skyepharma 1 |
Drug delivery specialist | UK | 6,208 | 4.6 |
| Summit Total Health Care |
Drug development | UK | 547 15,492 |
0.4 11.5 |
| Consumer Goods | ||||
| Chateau Lafite Rothschild 20092 Chateau Lafite Rothschild 20102 |
Physical wine holding Physical wine holding |
France France |
326 275 |
0.2 0.2 |
| Chateau Rieussec 20102 | Physical wine holding | France | 12 | – |
| Gleeson (M.J.) Group | Urban regeneration and land trading | UK | 4,791 | 3.6 |
| Gundaline2 | Australian agriculture | Australia | 1,797 | 1.3 |
| Hot2Go2 | Hot drinks containers | UK | – | – |
| Houseology Design Group2 | Home interiors and furniture design | UK | 605 | 0.5 |
| Pittards1 | High performance leather goods | UK | 1,530 | 1.1 |
| R.E.A. Holdings | Indonesian palm oil production | UK | 227 | 0.2 |
| Telford Homes1 | London housing developments | UK | 2,161 | 1.6 |
| Total Consumer Goods | 11,724 | 8.7 | ||
| Technology | ||||
| Coretx Holdings1 | Data and network infrastructure | UK | 1,472 | 1.1 |
| Emis Group1 | Medical software supplier | UK | 2,623 | 2.0 |
| Gresham Computing | Financial software services | UK | 2,172 | 1.6 |
| Mporium Group1 | Mobile retail design | UK | 1,338 | 1.0 |
| Parity Group1 | IT service group | UK | 79 | 0.1 |
| Redcentric1 | IT business systems and managed services | UK | 1,697 | 1.3 |
| Sandvine | Network policy control technology | Canada | 660 | 0.5 |
| Servelec Group | Healthcare and automation software | UK | 1,520 | 1.1 |
| Total Technology | 11,561 | 8.7 |
1 AIM quoted
2 Unquoted investment
3 Includes fixed interest element
| Investment | Business activity | Country of incorporation |
Market value £'000 |
% of total investments |
|---|---|---|---|---|
| Oil & Gas | ||||
| Africa Oil | East Africa oil & gas exploration | Canada | 1,172 | 0.9 |
| African Petroleum | West African oil & gas exploration | Australia | 219 | 0.2 2.1 |
| BP 2 |
Global integrated oil & gas company | UK | 2,803 | 0.6 |
| Buried Hill Energy (Cyprus) | Turkmenistan oil & gas exploration | Cyprus | 856 | |
| Ceramic Fuel Cells1 2 |
Electric fuel cells | Australia | – | |
| Eastcoal | Ukrainian coal mining | Canada | – | |
| Eland Oil & Gas1 | Nigerian oil & gas exploration | UK | 734 | 0.5 |
| Energy Equity Resources 2 |
African oil & gas exploration | UK | – | |
| (Norway) | ||||
| Equus Petroleum2 | Kazakhstan oil & gas exploration | UK | 436 | 0.3 |
| Homeland Renewable Energy2 | US renewable energy production | USA | – | |
| Hurricane Energy1 | West of Shetland oil & gas exploration | UK | 1,672 | 1.2 |
| Igas Energy1 | UK onshore gas production | UK | 108 | 0.1 |
| Lansdowne Oil & Gas1 | Irish gas storage & exploration | UK | 223 | 0.2 |
| Leed Resources1 | Natural resources investments | UK | – | |
| Path Investments2 | Turkish oil & gas investments | UK | 175 | 0.1 |
| Petrohunter Energy | US oil & gas exploration | USA | 5 | 0.4 |
| Providence Resources1 | Irish gas storage & exploration | Ireland | 478 | |
| Resaca Exploitation2 | US oil & gas development | USA | – | |
| Total Oil & Gas | 8,881 | 6.6 | ||
| Basic Materials | ||||
| Duke Royalty1 | Mining royalty payment investments | UK | 205 | 0.2 |
| Fox Marble1 | Kosovo marble mining | UK | 992 | 0.7 |
| Ironveld1 | South African iron mining | UK | 569 | 0.4 |
| Powerflute1 | Paper production | Finland | 1,337 | 1.0 |
| Total Basic Materials | 3,103 | 2.3 | ||
| Telecommunications | ||||
| Mobile Streams1 | Mobile content store | UK | 165 | 0.1 |
| Total Telecommunications | 165 | 0.1 | ||
| Utilities | ||||
| Kalina Power | Waste heat power generation | Australia | 6 | |
| Total Utilities | 6 | |||
| Total investments | 134,647 | 100.0 |
2 Unquoted investment
3 Includes fixed interest element
Large cap – market cap equivalent to FTSE 100 companies Mid cap – market cap equivalent to FTSE 250 companies Small cap – market cap equivalent to companies below FTSE 250
Annual Financial report
| 2016 % of total |
2015 % of total |
|
|---|---|---|
| Country of incorporation | investments | investments |
| UK | 85.4 | 72.5 |
| Isle of Man | 2.7 | 2.4 |
| Luxembourg | 2.6 | 2.3 |
| Singapore | 2.4 | 7.5 |
| Australia | 1.5 | 1.7 |
| Canada | 1.5 | 1.6 |
| Ireland | 1.3 | 0.6 |
| Finland | 1.0 | 1.3 |
| Cyprus | 0.6 | 0.7 |
| USA | 0.5 | 1.0 |
| France | 0.4 | 0.4 |
| Guernsey | – | 1.7 |
| Switzerland | 0.1 | 0.3 |
| Denmark | – | 4.7 |
| Cayman Islands | – | 1.3 |
| 100.0 | 100.0 |
Portfolio has been analysed using ICB industry classifications.
This Strategic Report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.
The Company is incorporated in England. Its business as an investment trust is to buy and sell investments with the aim of achieving the objective and 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 stock market 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 the aggregate value of 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 had no investments in hedge funds or unregulated collective investment schemes during the year. 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 £8.5 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 stock markets. 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 which remains subject to the Company continuing to meet the eligibility conditions and ongoing requirements of the regulations. The Board will manage the Company so as to continue to meet these conditions.
The Company has no employees and delegates most of its operational functions to service providers.
A summary of the Company's developments during the year ended 30 April 2016, together with its prospects for the future, is set out in the Chairman's Statement on pages 4 and 5 and Investment Manager's Review on pages 6 to 9. The Board's principal focus is the delivery of positive long-term returns for shareholders and this will be dependent on the success of the investment strategy. The investment strategy, and factors that may have an influence on it, such as economic and stock market conditions, 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 does not fall within the scope of the Modern Slavery Act 2015 as its turnover is less than £35 million. Therefore no slavery and human trafficking statement is included in the Annual Financial Report.
The performance of the Company is reviewed regularly by the Board and it uses a number of 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 |
|---|---|---|---|
| 2012 | (4.6)% | (13.9)% | (2.0)% |
| 2013 | (2.8)% | 4.5% | 17.8% |
| 2014 | 13.3% | 3.1% | 10.5% |
| 2015 | (0.9)% | (6.9)% | 7.5% |
| 2016 | (6.1)% | (13.2)% | (5.7)% |
Source: Artemis/Datastream
■ Dividends per ordinary share
| Year ended 30 April | Pence per ordinary share |
Increase |
|---|---|---|
| 2012 | 2.95p | 3.5% |
| 2013 | 3.05p | 3.4% |
| 2014 | 3.20p | 4.9% |
| 2015 | 3.55p | 10.9% |
| 2016 | 3.90p | 9.9% |
■ Ongoing charges as a proportion of shareholders' funds (excluding performance fees)
| As at 30 April | Ongoing charges |
|---|---|
| 2012 | 1.0% |
| 2013 | 0.9% |
| 2014 | 1.0% |
| 2015 | 0.9% |
| 2016 | 0.9% |
In addition to the above KPIs, the Board monitors the discount to the underlying net asset value at which the shares trade. No specific discount target has been set, but the Board sets the policy and 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 in the Company's shares. This is regularly reviewed by the Board. 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 24 and 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. Further information is set out on pages 49 and 51.
A summary of the key areas of risk is set out below:
(FTSE All-Share Index). The Company invests in smaller listed, AIM traded and unquoted investments which can be subject to a higher degree of risk than larger quoted investments. The Board considers that this risk is justified by the longer term nature of the investment objective and the Company's closed-ended structure, and that such investments should be a source of positive returns for shareholders. The Company may also have significant exposure to particular industry sectors from time to time. Risk will be diversified through having a broad range of investments in the portfolio. The Board discusses the investment portfolio with the Investment Manager at each Board meeting and part of this discussion includes a detailed review of the Company's unquoted investments, their valuations and future prospects.
The Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the extent of the losses. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings. All borrowing arrangements entered into require the prior approval of the Board and gearing levels are regularly discussed by the Board and Investment Manager.
Further information on risks and the management of them are set out in the notes to the financial statements on pages 49 to 51.
In accordance with the Association of Investment Companies (the "AIC") and AIC Code of Corporate Governance (the "AIC Code"), the Board has considered the longer term prospects for the Company. The period assessed is the five years to 30 April 2021. During this period the Board is required to put forward an ordinary resolution for the continuation of the Company for a further five years, with the next vote due to take place at the annual general meeting due to be held in September 2018. The Board believes that a review to this date would be too short to be meaningful for shareholders and has considered a five year period to be appropriate.
As part of its assessment of the viability of the Company, the Board has considered each of the principal risks and the impact on the Company's portfolio of a significant fall in UK markets. The Board has also considered the liquidity of the Company's portfolio to ensure that it will be able to meet its liabilities as they fall due.
The conclusion of this review is that the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to 30 April 2021, subject to shareholders approving the continuation of the Company in September 2018.
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.
Shareholders authorised the Company to buy back up to 14.99 per cent of the shares in issue at last year's AGM. This is used to manage the balance between supply and demand for the Company's shares in the market.
During the year the Company repurchased a total of 676,000 ordinary shares, representing 1.6 per cent of the issued share capital as at 1 May 2015 (2015: 368,200). The Company has repurchased a further 112,000 ordinary shares since the year end.
A resolution to renew the Company's buy-back authority will be put to shareholders at the AGM on 5 October 2016.
265 ordinary shares were issued during the year as a result of the exercise of subscription shares (2015: 2,292).
The Directors of the Company and their biographical details are set out on page 18.
No Director has a contract of service with the Company.
The Board supports the principles of diversity in the boardroom and 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 four male directors and one female director.
The Company has no employees and 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 managements 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 longterm 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.
Leverage is defined in the Alternative Investment Fund Manager Directive ("AIFMD") as any method by which the Company can increase its exposure by borrowing cash or securities, or from leverage that is embedded in derivative positions. The Company is permitted by its Articles to borrow up to 25 per cent of its net assets (determined as 125 per cent under the commitment and gross ratios in the AIFMD). The Company is permitted to have additional leverage of up to 100 per cent of its net assets, which results in permitted total leverage of 225 per cent under both ratios. The Alternative Investment Fund Manager ("AIFM") monitors leverage limits on a daily basis and reviews them annually. No changes have been made to these limits during the period. At 30 April 2016, the Company's leverage was 106.06 per cent as determined using both the gross methods and 109.79 per cent under the commitment method.
The Investment Manager is not able to enter into any stocklending agreements, to borrow money against the security of the Company's investments, or create any charges over any of the Company's investments, unless prior approval has been received from the Board.
The Financial Statements of the Company are included on pages 33 to 51 of this report.
For and on behalf of the Board
Chairman
6 July 2016
Duncan Budge, aged 60, was an Executive Director and Chief Operating Officer of RIT Capital Partners plc between 1995 and 2011. He is chairman of Dunedin Enterprise Investment Trust plc and a director of Lazard World Trust Fund, Lowland Investment Company plc, Menhaden Capital plc and Asset Value Investors Limited.
Appointed as a non-executive Director on 19 November 2013 and Chairman on 2 October 2014, Mr Budge was also appointed Chairman of the Nomination and Management Engagement Committees on 2 October 2014.
John Ayton, aged 54, practised as a corporate lawyer in Hong Kong and the City of London before founding Links of London, a global jewellery brand. After selling the company in 2007, Mr Ayton has been an investor in, and mentor to, a number of emerging luxury brands businesses, as well as launching the jewellery brand Annoushka. He is director of a number of private companies. He was awarded an MBE for his services to the UK jewellery industry in 2012.
Appointed as a non-executive Director on 25 June 2015.
David Barron, aged 57, 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 Dunedin Income Growth Investment Trust plc and is a member of the Institute of Chartered Accountants of Scotland.
Appointed as a non-executive Director on 17 February 2005, Mr Barron is Senior Independent Director.
Blathnaid Bergin, aged 41, joined RSA Insurance Group plc in 2013 as emerging markets financial controller. She was appointed Group Financial Controller in 2014. Prior to joining RSA, Ms Bergin spent 11 years at General Electric where she held a number of finance roles both in the capital and industrial businesses. She has worked in the UK and across much of Europe, Asia and Australia. Ms Bergin has extensive experience in building strong control environments and financial reporting and is a Fellow of the Institute of Chartered Accountants in Ireland.
Appointed as a non-executive Director on 9 July 2015 and Chairman of the Audit Committee on 2 December 2015.
Tom Cross Brown, aged 68, 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 deputy chairman of JRP Group plc, and is a non-executive member of the management committee of Artemis Investment Management LLP.
Appointed as a non-executive Director on 5 April 2006.
Mr Budge and Mr Barron were considered independent of the Investment Manager throughout the year ended 30 April 2016 and up to the date of this report. They were members of the Audit, Nomination and Management Engagement Committees throughout the period.
Mr Cross Brown is not considered independent of the Investment Manager due to his role as a non-executive member of the management committee of Artemis Investment Management LLP.
Mr Ayton and Ms Bergin were both considered independent of the Investment Manager upon appointment and up to the date of this report. They were appointed to the Audit, Nomination and Management Engagement Committees on 25 June and 9 July 2015, respectively.
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 2016.
The Group's results for the year are set out in the Consolidated Income Statement on page 33. The Board has declared dividends for the year totalling 3.90 pence per ordinary share. The second interim dividend for the year ended 30 April 2016 of 2.50 pence per ordinary share will be paid on 19 August 2016 to shareholders who are on the register at the close of business on 15 July 2016.
The Company's investments are managed by Artemis Fund Managers Limited ("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 may be payable 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.
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. Any relative underperformance compared to the FTSE All-Share Index (plus 2 per cent) each year is carried forward to the next period. This ensures that any under performance from prior years needs to be made up before any performance fee can become payable. No performance fee was earned for the year ended 30 April 2016 or 30 April 2015.
The Agreement may be terminated by either party on twelve months' written notice. In the event of the Company terminating the Agreement by giving less than twelve months' notice, Artemis is entitled to an amount in lieu of notice equivalent to 0.75 per cent of the market capitalisation of the Company on the date of termination and the performance fee (if any) due in accordance with the Agreement.
John Dodd and Adrian Paterson are the day-to-day fund managers. Portfolio ideas may also generated by the other members of the Artemis investment team from time to time, but all investment decisions are the responsibility of the fund managers.
Artemis is also the Alternative Investment Fund Manager ("AIFM") to the Company. The investment management agreement sets out Artemis' duties to the Company in respect of the AIFMD. No fees are paid to Artemis in respect of its role as the AIFM to the Company. Artemis has delegated responsibility for the day-to-day portfolio management of the Company's portfolio to Artemis Investment Management LLP.
Both Artemis entities are authorised and regulated by the Financial Conduct Authority and at 30 April 2016 had £22.7 billion, in aggregate, of assets under management.
The Board has reviewed the Investment Manager's engagement, including its management processes, risk controls and the quality of support provided to the Board and believes that its continuing appointment, on its current terms, remains in the interests of shareholders at this time. Such a review is carried out on an annual basis.
The Board has adopted a policy that all Directors should stand for re-election on an annual basis at each AGM.
The Board recommends the re-election of Mr Budge, Mr Ayton, Ms Bergin and Mr Cross Brown on the basis of their industry knowledge, experience and their contribution to the operation of the Company.
Mr Barron will retire as a director of the Company at the conclusion of the AGM on 5 October 2016.
Mr Dalrymple retired as a director of the Company on 1 October 2015.
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 2016 the Company had 42,899,142 ordinary shares (2015: 43,419,171) and 6,862,677 subscription shares (2015: 6,862,942) in issue.
The Company made market purchases of its own ordinary shares totalling 676,000 (2015: 368,200) during the year for an aggregate consideration of £1,576,000 (2015: £1,051,000). This represented 1.6 per cent of issued ordinary share capital at the start of the period, with a nominal value of £6,760. The shares were bought
at an average discount of 23.1 per cent (2015: 13.0 per cent) and are held in treasury.
During the year the Company issued and allotted 265 (2015: 2,292) 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 pence per share.
The ordinary share capital includes 734,000 shares held in treasury (2015: 578,294). The Company has a policy whereby any shares held in treasury for more than twelve months from the date of acquisition will be cancelled. During the year 520,294 treasury shares were cancelled (2015: 3,632,315).
Since the year end a further 112,000 ordinary shares have been purchased into treasury. As at 6 July 2016, the Company had 42,899,142 ordinary shares and 6,862,677 subscription shares in issue. Of these, 846,000 ordinary shares are held in treasury, and therefore the Company's total voting rights are 42,053,142.
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 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 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 6 July 2016 |
6 July 2016 % of voting rights |
|---|---|---|
| 1607 Capital Partners | 4,311,700 | 10.05 |
| Mr John Dodd | 2,660,955 | 6.21 |
| Schroders plc | 2,288,782 | 5.34 |
| Mr Mark Tyndall | 2,125,590 | 4.96 |
| Investec Wealth Investment | 1,683,799 | 3.93 |
The requirements relating to the appointment and replacement of Directors are contained in the Articles of the Company, a copy of which can be found on the Company's web site at artemisalphatrust.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 page 21. There are no agreements to which the Company is party 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 2016 AGM are set out in the Chairman's Statement on page 5 and the Notice of Meeting on pages 52 to 53. 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.
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 October 2015 to allot up to an aggregate nominal amount of £68,627 pursuant to the exercise of rights attaching to the subscription shares and up to an aggregate nominal amount of £21,420 under a general authority to allot ordinary shares. These authorities will expire at the forthcoming AGM of the Company. Resolution 8, 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 will seek to renew the authority and to disapply pre-emption rights at the forthcoming AGM.
Accordingly, Resolution 9 will, if approved, authorise the Directors to allot new ordinary shares up to an aggregate nominal amount of £68,627 in respect of subscription shares and £21,026, under a general authority, representing approximately 16.3 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 9 will be proposed as a special resolution and the authorities will continue in effect until the conclusion of the AGM to be held in 2017. 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 10 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 business days 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 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 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 2015, 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. It is the Board's intention that the Company will continue to comply with the terms of the AIC Code in the future. Set out below is how the Company applied the principles of the AIC Code.
All Directors of the Company are non-executive and the Company's day-to-day responsibilities are delegated to third party service providers.
Annual Financial report
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 Budge, 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 18 of this Report.
The Board considers that all the Directors, with the exception of Mr Cross Brown, are 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 Investment Management LLP. 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 currently David Barron and following his retirement at the AGM Blaithnaid Bergin will take up this position. 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 and annual re-election.
As stated in the Chairman's Statement, Mr Barron will retire as a Director at the conclusion of the AGM and will not stand for re-election. The Board recommends the reelection of Mr Budge, Mr Ayton, Ms Bergin and Mr Cross Brown to shareholders on the basis of their expertise and experience in investment matters and their continuing effectiveness and commitment to the Company.
| Date of appointment |
Due for re-election |
|
|---|---|---|
| Mr Ayton | 25 June 2015 | AGM 2016 |
| Mr Barron | 17 February 2005 | – |
| Ms Bergin | 9 July 2015 | AGM 2016 |
| Mr Budge | 19 November 2013 | AGM 2016 |
| Mr Cross Brown | 5 April 2006 | AGM 2016 |
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, conducts 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 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 18 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
Company's website artemisalphatrust.co.uk. The Chairman of the Board acts as Chairman for the Committees, with the exception of the Audit Committee, which is currently chaired by Ms Bergin.
The Company Secretary acts as the Secretary to each Committee.
The responsibilities of the Audit Committee are disclosed in the Report of the Audit Committee on pages 29 and 30 of this Report.
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 but excluding the Auditor, which is reviewed by the Audit Committee. The Committee 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 19, 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 of the Directors remains appropriate so that it can continue to operate effectively.
z
The following table sets out the Directors' attendance at the Board and Committee meetings held during the year to 30 April 2016.
| Board Meetings |
Audit Committee Meetings |
|
|---|---|---|
| Number of meetings held | 4 | 3 |
| Mr Ayton† | 4/4 | 2/2 |
| Mr Barron | 4/4 | 3/3 |
| Ms Bergin† | 3/3 | 2/2 |
| Mr Budge | 4/4 | 3/3 |
| Mr Cross Brown* | 4/4 | 2/3 |
| Mr Dalrymple† | 2/2 | 1/1 |
| Management Engagement Committee Meetings |
Nomination Committee Meetings |
|
|---|---|---|
| Number of meetings held | 1 | 2 |
| Mr Ayton† | 0/0 | 1/1 |
| Mr Barron | 1/1 | 2/2 |
| Ms Bergin† | 0/0 | 1/1 |
| Mr Budge | 1/1 | 2/2 |
| Mr Cross Brown* | 1/1 | 2/2 |
| Mr Dalrymple† | 1/1 | 1/1 |
* Mr Cross Brown is not a member of the Audit, Management Engagement or Nomination Committees, but he is invited to attend any meetings held.
† Mr Dalrymple retired on 1 October 2015. Mr Ayton was appointed on 25 June 2015 and Ms Bergin was appointed on 9 July 2015.
The Board has adopted a policy of annual re-election by Shareholders. 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.
An external consultant was engaged for the appointment of Ms Bergin.
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. The Board aims to ensure that shareholders are kept fully informed of developments in the Company's business through the Annual and Half-Yearly Financial Reports, 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 Company's website at artemisalphatrust.co.uk, along with other information on the Company. The Investment Manager meets with the Company's 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 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 52 and 53 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 and policies and procedures have been established 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 operational errors and any breaches of law and regulation. 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:
Oversight of certain administrative and custodial procedures is undertaken by the Company's Depositary, J.P. Morgan Europe Limited. The Board reviews information provided by the Depositary on a regular basis.
The Board clearly define the duties and responsibilities of its agents and advisers in the terms of their contracts. The appointment of agents and advisers is conducted by the Board after consideration of their capabilities to deliver the required services; their ongoing performance and contractual arrangements are monitored to ensure that they remain effective.
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 16 and in note 18 of the notes to the financial statements.
The Directors consider that the Annual Financial Report, 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
Artemis Fund Managers Limited Company Secretary 6 July 2016
In accordance with Schedule 8 of The Large and Medium sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the 'Regulations') the remuneration policy of the Company was approved by shareholders at the annual general meeting held on 2 October 2014. The policy will apply until 1 October 2017 (being three years from the date of shareholder approval of the policy) unless renewed, varied or revoked by shareholders at a general meeting and is as follows.
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 Board 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 also 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.
No changes have been made, or are proposed to be made, to the Remuneration Policy of the Company as approved by shareholders at the AGM held on 2 October 2014, however, the Company's policy and the overall
remuneration of each Director will continue to be monitored by the Board.
To date no comments have been received from shareholders in respect of the Remuneration Policy.
The Directors are pleased to present the Company's remuneration report for the year ended 30 April 2016 in accordance with the Regulations. The Company's Auditor is required to audit certain information contained within this report and, where information set out below has been audited, it is clearly indicated. The Auditor's opinion is included in the Independent Auditor's Report which can be found on pages 31 and 32.
In accordance with the Regulations, an ordinary resolution, Resolution 2, to approve this report will be put to shareholders at the AGM.
During the year ended 30 April 2016, the Board consisted solely 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 Board on 23 June 2016, it was agreed that the fees for each Director, for the year ending 30 April 2017, should 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 Directors who served during the years ended 30 April 2016 and 30 April 2015 received the following emoluments:
| Director1 | 2016 | 2015 |
|---|---|---|
| Mr Ayton2 | £16,978 | – |
| Mr Barron | £21,172 | £22,000 |
| Ms Bergin3 | £17,041 | – |
| Mr Budge | £28,000 | £24,666 |
| Mr Cross Brown | £20,000 | £20,000 |
| Mr Dalrymple4 | £8,407 | £20,000 |
| Mr Miller5 | – | £11,667 |
| £111,598 | £96,333 |
1 None of the Directors who are Directors of the Company's wholly owned subsidiary received any remuneration from this company.
Performance graph
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 2016 compared with 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 1 October 2015, in respect of the approval of the Directors' Remuneration Report:
The Directors' interests in the capital of the Company who held office at 30 April 2016 were as follows:
| 30 April 2016 | 1 May 2015 | ||||
|---|---|---|---|---|---|
| Non- | Non | ||||
| Beneficial | beneficial Beneficial | beneficial | |||
| Mr Ayton | – | – | – | – | |
| Mr Barron | 8,792 | – | 8,792 | – | |
| Ms Bergin | – | – | – | – | |
| Mr Budge | 15,000 | – | 15,000 | – | |
| Mr Cross Brown | 44,321 | – | 44,321 | – |
| 30 April 2016 | 1 May 2015 | ||||
|---|---|---|---|---|---|
| Non- | Non | ||||
| Beneficial | beneficial Beneficial | beneficial | |||
| Mr Ayton | – | – | – | – | |
| Mr Barron | 713 | – | 713 | – | |
| Ms Bergin | – | – | – | – | |
| Mr Budge | – | – | – | – | |
| Mr Cross Brown | 6,331 | – | 6,331 | – |
There have been no changes to the above holdings between 30 April 2016 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.
On behalf of the Board and in accordance with the Regulations, I confirm that the Directors' Remuneration Report summarises, for the year ended 30 April 2016, the review undertaken and the decisions made regarding the fees paid to the Board.
For and on behalf of the Board
Chairman 6 July 2016 Annual Financial report
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 17). Therefore no separate management report has been included.
The Directors are responsible for preparing the Annual Financial Report and the Group and 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, artemisalphatrust.co.uk, maintained by the Company's Investment Manager, Artemis. 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 6 July 2016
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, monitoring the nonaudit services provided to the Company by its Auditor and approving the financial statements and confirming to the Board that they are fair, balanced and understandable.
The Audit Committee provides a forum through which the Company's auditor reports to the Board.
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. Blathnaid Bergin, the Chairman of the Audit Committee, is a chartered accountant.
The Committee meets at least twice each year and 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 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 audit.
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 operational errors or breaches of law or regulation.
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.
As part of the Board's review of internal controls, the Audit Committee carries out and documents a risk and control assessment, which is kept under ongoing, and at least a six monthly, review. The Audit Committee reports its findings and recommendations to the Board.
KPMG LLP ("KPMG") 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 although under proposed new regulations a tender will need to be undertaken ahead of the year ending 30 April 2018 in which KPMG can be invited to participate.
The fees paid to KPMG in respect of audit services and non-audit services are disclosed in note 4 of the notes to the financial statements. As part of its review of the continuing appointment of the Auditor ahead of making a recommendation to the Board, the Audit Committee considered the quality of service provided by, and the effectiveness of, the Auditor, the length of tenure of the audit firm, its fees and independence from the Investment Manager, along with any matters raised during the audit.
It also noted that this was the fifth year that Catherine Burnet will have served as audit partner for the Company, and under independence rules will rotate off the Company's audit ahead of the 2017 year end.
As noted in the Directors' Report on page 21, KPMG has expressed its willingness to continue in office as independent Auditor. After careful consideration of the services provided during the year and a review of its effectiveness, the Audit Committee recommended to the Board that KPMG 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.
As part of the planning for the annual audit, the Audit Committee reviewed KPMG's audit strategy document, which highlighted the level of materiality applied by the Auditor, its key perceived audit risks and the scope of the audit.
Following this review, 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.
As part of the annual audit, the Auditor has agreed the valuation of all listed investments in the portfolio to independent pricing sources, and for unquoted investments, discussed and challenged the valuations with the Investment Manager and Directors. The Auditor also validated the existence of all securities held by the Company to the records of the Custodian.
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.
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 Section 1158 of the Corporation Taxes Act 2010 as other key areas considered as part of the audit. The Auditor has not reported any exceptions as part of its work in these areas.
The Audit Committee met with the Audit Partner responsible for the Company's audit at the Audit Committee meeting held on 23 June 2016 to discuss any matters arising from the annual audit. The Auditor stated that there were no significant matters to be reported and an unqualified audit opinion on the financial statements has been provided, and is set out on pages 31 and 32.
The Directors who held office at the date of approval of this Annual Report and Accounts 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 Audit Committee considers that the Annual Financial Report, 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.
The Audit Committee has established a policy for the provision of non-audit services to the Company which prohibits the provision of certain services by the Auditor which the Audit Committee believes would compromise auditor independence. Non-audit services are permitted subject to the Audit Committee being satisfied that the engagement would not compromise auditor independence where the total fees for non-audit services is less than 70 per cent of the average audit fees for the last three years and where auditor knowledge would be advantageous in carrying out the service.
During the year, KPMG was engaged to provide services in relation to the preparation and submission of the Company and its subsidiary's tax returns and computations to HM Revenue & Customs. The fees paid for providing these services are disclosed in note 4 of the notes to the financial statements. The engagement has been approved by the Audit Committee which is satisfied that this does not compromise auditor independence.
By order of the Board
Chairman of the Audit Committee 6 July 2016
We have audited the financial statements of Artemis Alpha Trust plc for the year ended 30 April 2016 set out on pages 33 to 51. In our opinion:
In arriving at our audit opinion above on the financial statements, the risks of material misstatement that had the greatest effect on our audit were as follows:
Refer to pages 29 and 30 (Report of the Audit Committee), pages 38 and 39 (accounting policy) and pages 33 to 51 (financial disclosures).
Refer to pages 29 and 30 (Report of the Audit Committee), pages 38 and 39 (accounting policy) and pages 33 to 51 (financial disclosures).
Annual Financial report
– consideration of the appropriateness, in accordance with relevant accounting standards, of the disclosures in respect of unquoted investments and the effect of changing one or more inputs to reasonably possible alternative valuation assumptions.
The materiality for the financial statements as a whole was set at £1.38m (2015: £3.2m), determined with reference to a benchmark of total assets, of which it represents 1 per cent, reflecting industry consensus levels (2015: 2 per cent).
We report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £69,000, in addition to other identified misstatements that warranted reporting on qualitative grounds.
The Group audit team performed the audit of the Group as if it was a single aggregated set of financial information. The audit was performed using the materiality level set out above and covered 100 per cent of total Group revenue, Group profit before tax, and Group total assets.
Our audit of the Company was undertaken to the materiality level specified above.
In our opinion:
Based on the knowledge we acquired during our audit, we have nothing material to add or draw attention to in relation to:
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:
■ we have identified material inconsistencies between the knowledge we acquired during our audit and the directors' statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy; or
■ the Report of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.
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 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 kpmg.com/uk/auditscopeukco2014a, 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.
Chartered Accountants Saltire Court 20 Castle Terrace Edinburgh EH1 2EG 6 July 2016
| Year ended 30 April 2016 |
Year ended 30 April 2015 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Notes | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| Investment income Other income |
2 2 |
2,632 (87) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,632 (87) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,415 2 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,415 2 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Total revenue Losses on investments Gains/(losses) on current asset |
2,545 – |
– (9,571) |
2,545 (9,571) |
2,417 – |
– (1,937) |
2,417 (1,937) |
||
| investments Currency losses |
10 | 40 – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– (41) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
40 (41) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(63) – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– (4) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(63) (4) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Total income/(loss) | 2,585 | (9,612) | (7,027) | 2,354 | (1,941) | 413 | ||
| Expenses Investment management fee |
3 | (80) | (722) | (802) | (93) | (839) | (932) | |
| Other expenses | 4 | (433) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(9) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(442) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(416) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(10) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(426) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Profit/(loss) before finance costs | ||||||||
| and tax Finance costs |
5 | 2,072 (40) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(10,343) (360) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,271) (400) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,845 (48) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(2,790) (442) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(945) (490) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Profit/(loss) before tax Tax |
6 | 2,032 (13) |
(10,703) – |
(8,671) (13) |
1,797 (20) |
(3,232) – |
(1,435) (20) |
|
| Profit/(loss) for the year | 2,019 | (10,703) | (8,684) | 1,777 | (3,232) | (1,455) | ||
| Earnings/(loss) per ordinary share |
8 | 4.73p | (25.07)p | (20.34)p | 4.12p | (7.50)p | (3.38)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.
| Notes | Group 2016 £'000 |
Company 2016 £'000 |
Group 2015 £'000 |
Company 2015 £'000 |
|
|---|---|---|---|---|---|
| Non-current assets | |||||
| Investments | 9 | 134,647 | 136,897 | 150,253 | 152,509 |
| Current assets | |||||
| Investments held by subsidiary | 1,243 | – | 1,289 | – | |
| Other receivables | 12 | 506 | 469 | 1,466 | 1,458 |
| Cash and cash equivalents | 1,753 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,587 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,778 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,189 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| 3,502 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,056 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
4,533 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,647 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
||
| Total assets | 138,149 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
138,953 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
154,786 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
155,156 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Current liabilities | |||||
| Other payables | 13 | (1,708) | (2,512) | (503) | (873) |
| Bank loan | 18 | (8,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(14,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(14,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| (10,208) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(11,012) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(15,003) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(15,373) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
||
| Net assets | 127,941 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
127,941 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
139,783 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
139,783 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Equity attributable to equity holders | |||||
| Share capital | 14 | 498 | 498 | 503 | 503 |
| Share premium | 645 | 645 | 644 | 644 | |
| Special reserve | 53,022 | 53,022 | 54,598 | 54,598 | |
| Capital redemption reserve | 92 | 92 | 87 | 87 | |
| Retained earnings – revenue | 3,804 | 2,000 | 3,368 | 1,554 | |
| Retained earnings – capital | 15 | 69,880 | 71,684 | 80,583 | 82,397 |
| Total equity | 127,941 | 127,941 | 139,783 | 139,783 | |
| Net asset value per ordinary share | 16 | 303.43p | 303.43p | 326.28p | 326.28p |
These financial statements were approved by the Board of Directors and signed on its behalf on 6 July 2016 by:
Chairman
| 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 2016 At 1 May 2015 |
503 | 644 | 54,598 | 87 | 3,368 | 80,583 | 139,783 |
| Total comprehensive income: Profit/(loss) for the year |
– | – | – | – | 2,019 | (10,703) | (8,684) |
| Transactions with owners recorded directly to equity: |
|||||||
| Repurchase of ordinary shares into treasury Cancellation of ordinary shares from treasury |
– (5) |
– – |
(1,576) – |
– 5 |
– – |
– – |
(1,576) – |
| Conversion of subscription shares Dividends paid |
– – |
1 – |
– – |
– – |
– (1,583) |
– – |
1 (1,583) |
| At 30 April 2016 | 498 | 645 | 53,022 | 92 | 3,804 | 69,880 | 127,941 |
| For the year ended 30 April 2015 At 1 May 2014 Total comprehensive income: |
539 | 636 | 55,649 | 51 | 2,994 | 83,815 | 143,684 |
| Profit/(loss) for the year Transactions with owners |
– | – | – | – | 1,777 | (3,232) | (1,455) |
| recorded directly to equity: Repurchase of ordinary shares into treasury |
– | – | (1,051) | – | – | – | (1,051) |
| Cancellation of ordinary shares from treasury Conversion of subscription shares Dividends paid |
(36) – – |
– 8 – |
– – – |
36 – – |
– – (1,403) |
– – – |
– 8 (1,403) |
| At 30 April 2015 | 503 | 644 | 54,598 | 87 | 3,368 | 80,583 | 139,783 |
Annual Financial report
| 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 2016 At 1 May 2015 Total comprehensive income: |
503 | 644 | 54,598 | 87 | 1,554 | 82,397 | 139,783 |
| Profit/(loss) for the year Transactions with owners recorded directly to equity: |
– | – | – | – | 2,029 | (10,713) | (8,684) |
| Repurchase of ordinary shares into treasury Cancellation of shares from treasury |
– (5) |
– – |
(1,576) – |
– 5 |
– – |
– – |
(1,576) – |
| Conversion of subscription shares Dividends paid |
– – |
1 – |
– – |
– – |
– (1,583) |
– – |
1 (1,583) |
| At 30 April 2016 | 498 | 645 | 53,022 | 92 | 2,000 | 71,684 | 127,941 |
| For the year ended 30 April 2015 At 1 May 2014 Total comprehensive income: |
539 | 636 | 55,649 | 51 | 1,145 | 85,664 | 143,684 |
| Profit/(loss) for the year Transactions with owners recorded directly to equity: |
– | – | – | – | 1,812 | (3,267) | (1,455) |
| Repurchase of ordinary shares into treasury Cancellation of ordinary shares from treasury |
– (36) |
– – |
(1,051) – |
– 36 |
– – |
– – |
(1,051) – |
| Conversion of subscription shares Dividends paid |
– – |
8 – |
– – |
– – |
– (1,403) |
– – |
8 (1,403) |
| At 30 April 2015 | 503 | 644 | 54,598 | 87 | 1,554 | 82,397 | 139,783 |
| Group 2016 £'000 |
Company 2016 £'000 |
Group 2015 £'000 |
Company 2015 £'000 |
|
|---|---|---|---|---|
| Operating activities Loss before tax |
(8,671) | (8,673) | (1,435) | (1,435) |
| Interest payable | 400 | 407 | 490 | 512 |
| Losses on investments | 9,571 | 9,577 | 1,937 | 1,955 |
| Gains/(losses) on current asset investments Currency losses |
(40) 41 |
– 41 |
63 4 |
– 4 |
| Decrease in other receivables | 55 | 57 | 15 | 23 |
| (Decrease)/increase in other payables | (110) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(110) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
263 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
259 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash inflow from operating activities before interest | ||||
| and tax | 1,246 | 1,299 | 1,337 | 1,318 |
| Interest paid | (400) | (407) | (490) | (512) |
| Irrecoverable overseas tax suffered | (13) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(11) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(20) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(20) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash inflow from operating activities | 833 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
881 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
827 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
786 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Investing activities Purchases of investments |
(40,521) | (37,988) | (31,548) | (29,473) |
| Sales of investments | 48,645 | 46,091 | 45,610 | 43,501 |
| Net cash inflow from investing activities | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 8,124 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 8,103 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 14,062 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 14,028 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Financing activities | ||||
| Repurchase of ordinary shares into treasury | (1,359) | (1,359) | (1,149) | (1,149) |
| Conversion of subscription shares | 1 | 1 | 8 | 8 |
| Dividends paid Decrease/(increase) in inter-company loan |
(1,583) – |
(1,583) 396 |
(1,403) – |
(1,403) (211) |
| Net cash outflow from financing activities | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (2,941) |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (2,545) |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (2,544) |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (2,755) |
| Net decrease in net debt | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 6,016 |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 6,439 |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 12,345 |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 12,059 |
| Net debt at the start of the year | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (12,722) |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (13,311) |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (25,063) |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (25,366) |
| Effect of foreign exchange rate changes | (41) | (41) | (4) | (4) |
| Net debt at the end of the year | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (6,747) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (6,913) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (12,722) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc (13,311) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Bank loans | (8,500) | (8,500) | (14,500) | (14,500) |
| Cash | 1,753 | 1,587 | 1,778 | 1,189 |
| (6,747) | (6,913) | (12,722) | (13,311) |
(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 and venture capital trusts issued by the Association of Investment Companies ("AIC") in November 2014 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 2016. 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.
Group financial statements consolidate the financial statements of Artemis Alpha Trust plc and its dealing subsidiary Alpha Securities Trading Limited drawn up to 30 April each year. In order to have control over a subsidiary the Company must have power over the investees exposure to the variable returns from the investee and the ability to use its power to affect the returns of the investee company. The financial statements of the dealing subsidiary are prepared for the same reporting year as the parent Company, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated on consolidation.
Income Statement. In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Income Statement between items of a revenue and capital nature has been presented in 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. These are included within current asset investments as they are held for short term gains and expected to be realised in less than one year.
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 is recognised on an accruals basis. Special dividends are treated as repayment of capital or as revenue depending on the facts of each particular case.
(g) Expenses and finance costs. All
expenses and interest payable are recognised on an accruals basis. Expenses are charged through the revenue column in the Consolidated Income Statement except as follows:
Investment management fees and finance costs are allocated on the basis of 10 per cent to revenue and 90 per cent to capital.
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 foreseeable 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 rates 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 Reserve – realised This reserve includes:
Capital Reserve – unrealised This reserve includes:
Changes in the fair value of investments that are not readily convertible to cash and amounts by which other assets and liabilities
valued at market value differ from their book value are accounted for through this reserve.
This reserve is treated as distributable profits for all purposes, excluding the payment of dividends. The cost of share buy-backs is accounted for through this reserve.
Capital Redemption Reserve This reserve includes the nominal value of all shares bought back and cancelled by the Company.
Retained earnings – revenue The revenue profit or loss for the year is taken to or from this reserve, and any dividends declared by the Company are paid from this reserve.
(n) Accounting developments. At
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:
Annual Financial report
| Year ended 30 April 2016 £'000 |
Year ended 30 April 2015 £'000 |
|
|---|---|---|
| Investment income* | ||
| UK dividend income | 2,129 | 1,898 |
| UK fixed interest | 21 | 104 |
| Overseas dividend income | 482 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
413 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 2,632 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,415 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Other income | ||
| Bank interest | 7 | 6 |
| Subsidiary undertaking's dealing losses | (94) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(4) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| (87) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Total income | 2,545 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,417 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Total income comprises: | ||
| Dividends and interest from investments | 2,632 | 2,415 |
| Bank interest | 7 | 6 |
| Other income and dealing losses | (94) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(4) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 2,545 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,417 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Income from investments | ||
| UK quoted investments | 1,878 | 1,508 |
| UK unquoted investments | 272 | 494 |
| Overseas quoted investments | 482 | 413 |
| 2,632 | 2,415 |
* 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.
| Year ended 30 April 2016 |
Year ended 30 April 2015 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Investment management fee | 80 | 722 | 802 | 93 | 839 | 932 |
Details of the terms of the investment management fee and performance fee are set out in the Directors' Report on page 19. As at 30 April 2016, £235,000 was outstanding in respect of amounts due to the Investment Manager (2015: £288,000). 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 (2015: nil).
| Year ended 30 April 2016 |
Year ended 30 April 2015 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Directors' remuneration (excluding VAT and NIC) Auditor's remuneration (excluding VAT): |
112 | – | 112 | 98 | – | 98 |
| – Fee for the audit of the Company's financial report | 24 | – | 24 | 24 | – | 24 |
| – Audit of the subsidiary pursuant to legislation | 2 | – | 2 | 2 | – | 2 |
| – Non-audit services – taxation | 10 | – | 10 | 11 | – | 11 |
| Other expenses* | 285 | 9 | 294 | 281 | 10 | 291 |
| 433 | 9 | 442 | 416 | 10 | 426 |
* Other expenses include stock exchange listing fees, directors' insurance, AIC membership fees, administration fees, registrars fees, corporate broker fee, depositary fees, and printing/postage.
| Year ended 30 April 2016 |
Year ended 30 April 2015 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Loan interest* | 25 | 227 | 252 | 40 | 365 | 405 |
| Loan commitment fee | 3 | 27 | 30 | 3 | 27 | 30 |
| Loan non-utilisation fee | 11 | 100 | 111 | 5 | 48 | 53 |
| Overdraft interest* | 1 | 6 | 7 | – | 2 | 2 |
| 40 | 360 | 400 | 48 | 442 | 490 |
* Interest on financial liabilities that are not held at fair value through profit or loss.
| Year ended 30 April 2016 |
Year ended 30 April 2015 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Irrecoverable overseas tax | 13 | – | 13 | 20 | – | 20 |
| 13 | – | 13 | 20 | – | 20 |
Annual Financial report
| Year ended 30 April 2016 |
Year ended 30 April 2015 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Profit/(loss) before tax | 2,032 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(10,703) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,671) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,797 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(3,232) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(1,435) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) on ordinary activites multiplied by the standard rate of UK corporation tax of 20.00% |
||||||
| (2015: 20.92%) | 406 | (2,140) | (1,734) | 376 | (676) | (300) |
| Non-taxable capital losses | – | 1,922 | 1,922 | – | 405 | 405 |
| Non-taxable UK dividends | (426) | – | (426) | (397) | – | (397) |
| Non-taxable overseas dividends | (96) | – | (96) | (86) | – | (86) |
| Unutilised management expenses | 116 | 218 | 334 | 107 | 271 | 378 |
| Irrecoverable overseas tax | 13 | – | 13 | 20 | – | 20 |
| 13 | – | 13 | 20 | – | 20 |
The Group has excess management expenses, surplus loan relationship deficits and trading losses of £13,599,000 (2015: £11,929,000) that may be 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 2016.
| Year ended 30 April 2016 £'000 |
Year ended 30 April 2015 £'000 |
|
|---|---|---|
| 2015 second interim dividend of 2.30p per ordinary share (2014: 2.00p) 2016 first interim dividend of 1.40p per ordinary share (2015: 1.25p) |
985 598 |
864 539 |
| 1,583 | 1,403 |
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 2016 reflects the second interim dividend for the year ended 30 April 2015 which was paid on 14 August 2015. For the year ended 30 April 2016, a first interim dividend of 1.40p has been paid on 29 January 2016 and a second interim dividend of 2.50p per share will be paid on 19 August 2016.
Set out below are the total dividends paid/payable in respect of the financial year ended 30 April 2016.
| Year ended 30 April 2016 £'000 |
Year ended 30 April 2015 £'000 |
|
|---|---|---|
| First interim dividend of 1.40p per ordinary share (2015: 1.25p) Second interim dividend of 2.50p per ordinary share (2015: 2.30p) |
598 1,054 |
539 985 |
| 1,652 | 1,524 |
The revenue earnings per ordinary share is based on the revenue profit for the year of £2,019,000 (2015: £1,777,000) and on the 42,694,142 (2015: 43,086,557) ordinary shares, being the weighted average number of ordinary shares in issue during the year.
The capital loss per ordinary share is based on the capital loss for the year of £10,703,000 (2015: capital loss £3,232,000) and on the 42,694,142 (2015: 43,086,557) 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 2016 (2015: none) relating to the Company's issued subscription shares.
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 have been categorised 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 2016 £'000 |
Company 2016 £'000 |
Group 2015 £'000 |
Company 2015 £'000 |
|
|---|---|---|---|---|
| UK quoted investments (Level 1) | ||||
| – UK listed | 43,895 | 43,895 | 32,508 | 32,508 |
| – AIM quoted | 47,553 | 47,553 | 63,090 | 63,090 |
| – Preference shares | 227 | 227 | 308 | 308 |
| Overseas quoted investments (Level 1) | 2,676 | 2,676 | 2,655 | 2,655 |
| Mutual funds (Level 2) | 3,554 | 3,554 | 3,394 | 3,394 |
| Unquoted investments (Level 3) | ||||
| – Equities and warrants | 32,743 | 32,743 | 44,069 | 44,069 |
| – Fixed interest | 2,750 | 2,750 | 3,099 | 3,099 |
| – Preference shares | 636 | 636 | 486 | 486 |
| – Other | 613 | 613 | 644 | 644 |
| – Subsidiary undertakings | – | 2,250 | – | 2,256 |
| 134,647 | 136,897 | 150,253 | 152,509 |
Annual Financial report
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Quoted (Level 1) |
Quoted (Level 2) |
Unquoted (Level 3) |
Total | Quoted (Level 1) |
Quoted (Level 2) |
Unquoted (Level 3) |
Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Opening book cost | 89,083 | 2,427 | 50,234 | 141,744 | 87,541 | 2,951 | 50,347 | 140,839 |
| Opening fair value adjustment | 9,478 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
967 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(1,936) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
8,509 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
22,627 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
532 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
3,209 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
26,368 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Opening valuation | 98,561 | 3,394 | 48,298 | 150,253 | 110,168 | 3,483 | 53,556 | 167,207 |
| Movements in year: | ||||||||
| Purchases at cost | 33,103 | 1,456 | 4,565 | 39,124 | 22,678 | – | 6,795 | 29,473 |
| Sales – proceeds | (36,212) | (1,139) | (7,808) | (45,159) | (29,524) | (647) | (14,319) | (44,490) |
| – realised gains/(losses) on sales | 8,561 | 296 | (2,318) | 6,539 | 6,420 | 123 | 9,379 | 15,922 |
| Transfer to/(from) unquoted | ||||||||
| investments (cost) | 509 | – | (509) | – | 1,968 | – | (1,968) | – |
| Transfer to/(from) unquoted | ||||||||
| investments (unrealised loss) | – | – | – | – | (375) | – | 375 | – |
| (Decrease)/increase in fair value | ||||||||
| adjustment | (10,171) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(453) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,486) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(16,110) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(12,774) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
435 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,520) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(17,859) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Closing valuation | 94,351 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
3,554 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
36,742 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
134,647 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
98,561 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
3,394 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
48,298 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
150,253 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Closing book cost | 95,044 | 3,040 | 44,164 | 142,248 | 89,083 | 2,427 | 50,234 | 141,744 |
| Closing fair value adjustment | (693) | 514 | (7,422) | (7,601) | 9,478 | 967 | (1,936) | 8,509 |
| 94,351 | 3,554 | 36,742 | 134,647 | 98,561 | 3,394 | 48,298 | 150,253 |
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| 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 |
89,083 9,478 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 98,561 |
2,427 967 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 3,394 |
50,234 320 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 50,554 |
141,744 10,765 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 152,509 |
87,541 22,627 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 110,168 |
2,951 532 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 3,483 |
50,347 5,483 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 55,830 |
140,839 28,642 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 169,481 |
| Movements in year: Purchases at cost Sales – proceeds |
33,103 (36,212) |
1,456 (1,139) |
4,565 (7,808) |
39,124 (45,159) |
22,678 (29,524) |
– (647) |
6,795 (14,319) |
29,473 (44,490) |
| – realised gains/(losses) on sales Transfer to/(from) unquoted investments (cost) |
8,561 509 |
296 – |
(2,318) (509) |
6,539 – |
6,420 1,968 |
123 – |
9,379 (1,968) |
15,922 – |
| Transfer to/(from) unquoted investments (unrealised loss) (Decrease)/increase in fair |
– | – | – | – | (375) | – | 375 | – |
| value adjustment Closing valuation Closing book cost Closing fair value adjustment |
(10,171) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 94,351 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 95,044 (693) |
(453) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 3,554 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 3,040 514 |
(5,492) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 38,992 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 44,164 (5,172) |
(16,116) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 136,897 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 142,248 (5,351) |
(12,774) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 98,561 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 89,083 9,478 |
435 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 3,394 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 2,427 967 |
(5,538) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 50,554 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 50,234 320 |
(17,877) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 152,509 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc 141,744 10,765 |
| 94,351 | 3,554 | 38,992 | 136,897 | 98,561 | 3,394 | 50,554 | 152,509 |
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 of £346,000 of the fair value of Level 3 assets (2015: £nil).
During the year, the valuations of the following Level 3 assets were reduced: Buried Hill Energy (Cyprus) (£142,000), Claremont Alpha (£97,000), Lamp Group (£122,000), Equus Petroleum (£681,000), Reaction Engines (£1,608,000), MBA Polymers (£386,000), Maison Seven (£789,000), Chateau Lafite Rothschild 2009 (£16,000), Chateau Lafite Rothschild 2010 (£15,000), Starcount (£3,986,000), Physiolab Technologies (£1,340,000), Hot Can (£544,000) and MWB Group Holdings (£96,000).
During the year, Ceramic Fuel Cells, which was valued at £500,000 at 30 April 2015, was sold during the year for proceeds of £458,000 and Lynton Holding Asia which was valued at £7,068,000 was sold for £6,760,000. Ten Alps loan stock, held at £508,000 was converted into AIM listed shares during the year.
| 2016 £'000 |
2015 £'000 |
|
|---|---|---|
| Realised gains on sales of investments Decrease in fair value adjustment |
6,539 (16,110) |
15,922 (17,859) |
| (9,571) | (1,937) |
Included in purchases at cost and proceeds from sales are the following transaction costs:
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2016 | 2016 | 2015 | 2015 | |
| £'000 | £'000 | £'000 | £'000 | |
| Purchases | 152 | 142 | 71 | 63 |
| Sales | 43 | 41 | 45 | 42 |
| 195 | 183 | 116 | 105 |
| % of ordinary share capital held |
Principal activity | Country of incorporation and operation |
|
|---|---|---|---|
| Alpha Securities Trading Limited | 100 | Investment dealing | England and Wales |
Investment in the subsidiary undertaking is held at fair value, which is deemed to be its net assets. It holds a portfolio of listed investments for short term appreciation which are measured at their quoted bid prices. During the year the company made an unrealised gain of £40,000 (2015: loss of £63,000) and a dealing loss of £94,000 (2015: loss of £4,000) which are included in the 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 |
IFRS 10 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.
Annual Financial report
The Company qualifies as an "Investment Entity" as:
Other characteristics of the Company supporting this classification is that there are multiple investments and many underlying investors. Additionally investors are not exclusively related parties and the underlying investment positions taken are commonly in the form of equity.
At 30 April 2016 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 | |
|---|---|---|
| Avation | Ordinary | 4.52% |
| Be Heard Group | Ordinary | 6.30% |
| Betex Group | Ordinary | 4.69% |
| Ceramic Fuel Cells | Ordinary | 5.00% |
| Charlemagne Capital | Ordinary | 4.34% |
| Claremont Alpha* | Ordinary | 100.00% |
| Duke Royalty | Ordinary | 5.97% |
| Eden Reseach | Ordinary | 6.66% |
| Flying Brands Fox Marble |
Ordinary A Ordinary |
3.59% 5.80% |
| Gaming Realms | Ordinary | 4.55% |
| Gift-Library.com+ (Gift-Library.com Limited)+ | A Ordinary | 100.00% |
| Non-Voting | 2.04% | |
| Gresham Computing | A Ordinary | 3.40% |
| Gundaline | Ordinary | 12.00% |
| Hardlyever (Hardlyever Limited)+ | Ordinary | 65.21% |
| Hardlyever | Ordinary | 8.67% |
| Houseology Design | Ordinary | 12.65% |
| Hot2Go | Ordinary | 15.70% |
| Infusion 2002 | Ordinary | 13.00% |
| Ironveld | Ordinary | 3.86% |
| Lamp Group | Ordinary | 6.93% |
| Lansdowne Oil & Gas Liontrust Asset Management |
Ordinary Ordinary |
6.49% 4.40% |
| Maison Seven | Ordinary | 19.56% |
| Martinco | Ordinary | 7.84% |
| Metapack | Ordinary | 4.40% |
| Mobile Streams | Ordinary | 8.08% |
| Mporium | Ordinary | 3.35% |
| N+1 Singer | Ordinary | 6.78% |
| Orchard Funding Group | Ordinary | 7.02% |
| Penna Consulting | Ordinary | 3.86% |
| Physiolab Technologies | Ordinary | 13.70% |
| Pittards | Ordinary | 16.20% |
| Reaction Engines | Ordinary | 4.32% |
| Starcount (Starcount Pte Limited, incorporated in Singapore) | A Ordinary | 20.96% |
| Ten Alps | Ordinary | 15.57% |
| URICA (URICA Limited) | Ordinary | 29.11% |
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.
+ The Company holds less than 50 per cent of the total voting rights of these companies and therefore does not exercise control.
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2016 | 2016 | 2015 | 2015 | |
| £'000 | £'000 | £'000 | £'000 | |
| Amounts due from brokers | 276 | 249 | 1,181 | 1,181 |
| Prepayments and accrued income | 218 | 208 | 275 | 267 |
| Taxation recoverable | 12 | 12 | 10 | 10 |
| 506 | 469 | 1,466 | 1,458 |
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2016 | 2016 | 2015 | 2015 | |
| £'000 | £'000 | £'000 | £'000 | |
| Amounts due to brokers | 1,379 | 1,353 | 64 | – |
| Accrued expenses | 329 | 325 | 439 | 435 |
| Amounts due to subsidiary undertakings | – | 834 | – | 438 |
| 1,708 | 2,512 | 503 | 873 |
| 2016 Shares |
2016 £'000 |
2015 Shares |
2015 £'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 |
42,165,142 734,000 6,862,677 |
422 7 69 |
42,840,877 578,294 6,862,942 |
428 6 69 |
| 498 | 503 |
| Shares | £'000 | |
|---|---|---|
| Movements in ordinary shares during the year: | ||
| Ordinary shares in issue on 1 May 2015 | 42,840,877 | 428 |
| Repurchases of ordinary shares into treasury | (676,000) | (6) |
| Issue of ordinary shares upon exercise of subscription shares | 265 | – |
| Ordinary shares in issue on 30 April 2016 | 42,165,142 | 422 |
Annual Financial report
The movements in ordinary shares held in treasury during the year are as follows:
| 2016 | 2016 | 2015 | 2015 | |
|---|---|---|---|---|
| Shares | £'000 | Shares | £'000 | |
| Balance brought forward | 578,294 | 6 | 3,842,409 | 38 |
| Repurchases of ordinary shares | 676,000 | 6 | 368,200 | 4 |
| Cancellation of ordinary shares | (520,294) | (5) | (3,632,315) | (36) |
| Balance carried forward | 734,000 | 7 | 578,294 | 6 |
During the year ended 30 April 2016, a total of 676,000 ordinary shares were repurchased by the Company at a total cost, including transaction costs, of £1,576,000 for placement in treasury (2015: 368,200 ordinary shares were repurchased for placement in treasury for £1,051,000).
The movements in subscription shares during the year are as follows:
| Shares | £'000 | |
|---|---|---|
| Balance brought forward | 6,862,942 | 69 |
| Conversion of subscription shares into ordinary shares | (265) | – |
| Balance carried forward | 6,862,677 | 69 |
During the year, holders of 265 (2015: 2,292) subscription share exercised their rights to covert those shares into ordinary shares at a price of 345 pence per ordinary share, giving a total consideration received of £1,000 (2015: £8,000).
Holders of the remaining subscription shares may exercise their right to convert those shares into ordinary shares at a price of 345 pence per ordinary share as at the close of business on the last business day in either June or December each year to 31 December 2017, whereupon rights under the subscription shares will lapse.
| Group | Company | |||||
|---|---|---|---|---|---|---|
| Capital reserve – realised £'000 |
Capital reserve – unrealised £'000 |
Total capital reserve £'000 |
Capital reserve – realised £'000 |
Capital reserve – unrealised £'000 |
Total capital reserve £'000 |
|
| Balance at 1 May 2015 | 81,264 | (681) | 80,583 | 80,822 | 1,575 | 82,397 |
| Decrease in fair value adjustment | – | (16,110) | (16,110) | – | (16,116) | (16,116) |
| Net gain on realisation of investments | 6,539 | – | 6,539 | 6,539 | – | 6,539 |
| Currency losses on capital items | (41) | – | (41) | (41) | – | (41) |
| Costs charged to capital (net of tax relief) | (1,091) | – | (1,091) | (1,095) | – | (1,095) |
| Transfer between reserves | 1,135 | (1,135) | – | 1,135 | (1,135) | – |
| Balance at 30 April 2016 | 87,806 | (17,926) | 69,880 | 87,360 | (15,676) | 71,684 |
| Balance at 1 May 2014 | 68,835 | 14,980 | 83,815 | 68,410 | 17,254 | 85,664 |
| Increase in fair value adjustment | – | (17,859) | (17,859) | – | (17,877) | (17,877) |
| Net gain on realisation of investments | 15,922 | – | 15,922 | 15,922 | – | 15,922 |
| Currency losses on capital items | (4) | – | (4) | (4) | – | (4) |
| Costs charged to capital (net of tax relief) | (1,291) | – | (1,291) | (1,308) | – | (1,308) |
| Transfer between reserves | (2,198) | 2,198 | – | (2,198) | 2,198 | – |
| Balance at 30 April 2015 | 81,264 | (681) | 80,583 | 80,822 | 1,575 | 82,397 |
The net asset value per share is based on the net assets of £127,941,000 (2015: £139,783,000) and on 42,165,142 (2015: 42,840,877) 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 no (2015: nil) subscription shares were exercised (as the undiluted net asset value is lower than the exercise price of 345 pence) resulting in a total of ordinary shares in issue of 42,165,142 (2015: 42,840,877).
At 30 April 2016, the Group and Company did not have any financial commitments which had not been accrued (2015: none).
As detailed on page 15, 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 revolving credit facility 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, 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 2016 are disclosed in the investment portfolio set out on pages 11 to 13.
The portfolio has a number of investments denominated in currencies other than sterling and the income and capital value of these 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 2016 £'000 |
Net monetary assets at 30 April 2016 £'000 |
Investments at 30 April 2015 £'000 |
Net monetary assets at 30 April 2015 £'000 |
|
|---|---|---|---|---|
| US Dollar | 3,113 | – | 11,890 | – |
| Canadian Dollar | 2,336 | 4 | 3,489 | – |
| Australian Dollar | 1,804 | – | 1,540 | – |
| Euro | 1,220 | 11 | – | 10 |
| Norwegian Kroner | 219 | – | 592 | – |
| Swiss Franc | 109 | – | 383 | – |
| Danish Krone | – | – | 7,068 | – |
| Total | 8,801 | 15 | 24,962 | 10 |
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 £441,000 (2015: £1,248,000). A 5 per cent decrease in sterling would have an equal and opposite effect.
Annual Financial report
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 2016 (2015: 0.5 per cent).
The Company has a 5 year multi-currency revolving credit facility of £30,000,000 of which £8,500,000 was drawn down at 30 April 2016 (2015: £14,500,000). 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 2016 | 30 April 2015 | |||||
|---|---|---|---|---|---|---|
| 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 | 2,750 | 0.87 | 2.18 | 3,099 | 0.22 | 1.20 |
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. The value of equities is dependent on a number of factors arising from the performance of the individual company and also wider macro-economic matters. As part of the ongoing review of the portfolio, the Investment Manager monitors these factors. A 5 per cent increase in the value of the Group's investments would have the effect of increasing net assets by £6,732,000 (2015: £7,513,000). 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 trading on AIM or are unquoted and these may not be readily realisable. As a result, the Company may not be able to realise some of its investments quickly at their fair value to meet any further liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer. 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 AIFM has a liquidity management policy for the Company which is intended to ensure that the Company's investment portfolio maintains an appropriate level of liquidity in view of the Company's expected outflows, including share buy backs, dividends and operational expenses. This policy involves an assessment of the prices or values at which it expects to be able to realise its assets over varying periods in varying market conditions, taking into account the sensitivity of particular assets to particular market risks and other relevant factors. This requires the AIFM to identify and monitor investment in asset classes which are considered to be relatively illiquid. Illiquid assets of the Company are likely to include investments in unquoted companies. The majority of the Company's investment portfolio is invested directly in listed equities and is monitored on an ongoing basis to ensure that it is adequately diversified. The liquidity management policy is reviewed and updated, as required, on at least an annual basis.
There were no material changes to the liquidity management policy during the year ended 30 April 2016. In addition, none of the Company's assets are subject to any special arrangements linked to their liquidity.
The Group primarily finances its operations through equity, retained profits and bank borrowings. As at 30 April 2016, the Company had drawn down £8,500,000 of its committed £30,000,000 multi-currency revolving credit facility with The Royal Bank of Scotland plc (30 April 2015: £14,500,000). 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 2016 was 2.21 per cent per annum (2015: 2.21 per cent per annum). There was no interest rate risk associated with other short-term creditors at 30 April 2016 or 30 April 2015. 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 a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.
This risk is managed as follows:
The amounts paid to the Investment Manager and amounts outstanding at the year end are disclosed in Note 3. However, the existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party.
All other transactions with subsidiary undertakings were on an arms length basis. During the year transactions in securities between the Company and its subsidiary undertakings amounted to £nil (2015: £nil). During the year the Company paid its subsidiary undertaking interest on the intercompany loan amounting to £7,000 (2015: £22,000). 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 Fund Managers Limited, Cassini House, 57 St James's Street, London SW1A 1LD on Wednesday, 5 October 2016 at 11.30 am 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:
issued ordinary share capital as at 6 July 2016);
provided that this authority shall expire at the conclusion of the next annual general meeting of the Company to be held in 2017, 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:
of members of the Company on a fixed record date in proportion (as nearly as may be practicable) to their respective holdings of ordinary shares and/or subscription shares but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to treasury shares, fractional entitlements or any legal or practical problems arising under the laws of, or the requirements of, any territory or any regulatory or governmental body or authority or stock exchange;
subscription share shall be 1 pence per share being the nominal value thereof;
By order of the Board:
6 July 2016
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 cost 12p per minute plus your phone company's access charge. If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales).
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 Asset Services, 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 cost 12p per minute plus your phone company's access charge. If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales).
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 RA10) no later than 48 hours (excluding non working days) before the time of the AGM 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 close of business on 3 October 2016 (or, if the AGM is adjourned, at close of business 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.
A personalised form of proxy will be sent to each registered shareholder with the Annual Financial Report and instructions on how to vote will be contained therein.
Information regarding the AGM, including information required by section 311A of the Act, and a copy of this notice of AGM is available on the website: artemisalphatrust.co.uk.
As at 6 July 2016 (being the latest practicable date prior to the publication of this notice) the Company's issued share capital consisted of 42,899,142 ordinary shares, carrying one vote each of which 846,000 are held in treasury and 6,862,677 subscription shares, which carry no voting rights. Therefore, the total voting rights in the Company as at 6 July 2016 were 42,053,142 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.
If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes of those proxies are cast, and the voting rights in respect of those discretionary proxies, when added to the interests in the Company's ordinary shares already held by the Chairman, result in the Chairman holding such number of voting rights that he has a notifiable obligation under the Disclosure and
Transparency Rules, the Chairman will make the necessary notifications to the Company and the Financial Conduct Authority. As a result, any member holding 3 per cent or more of the voting rights in the Company who grants the Chairman a discretionary proxy in respect of some or all of those voting rights and so would otherwise have a notification obligation under the Disclosure and Transparency Rules, need not make a separate notification to the Company and the Financial Conduct Authority.
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 Fund Managers Limited, 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.
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.
The biographies of the Directors standing for reelection are set out on page 18 of the Company's Annual Financial Report for the year ended 30 April 2016.
As soon as practicable following the AGM, the results of the voting at the AGM will be announced via a Regulatory Information Service and the number of votes cast for and against and the number of votes withheld in respect of each resolution will be placed on the website: artemisalphatrust.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 AGM; 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 AGM 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: Capita Asset Services, Shareholder Enquiries, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or by calling 0871 664 0300 (calls cost 12p per minute plus your phone company's access charge. If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales).
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: Capita Asset Services, Shareholder Enquiries, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or by calling 0871 664 0300 (calls cost 12p per minute plus your phone company's access charge. If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales).
The Company currently conducts its affairs so that the shares in issue can be recommended by financial advisors 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 website (artemisalphatrust.co.uk), including a factsheet which is updated monthly. Shareholders can also contact the Chairman to express any views on the Company or to raise any questions they have using the email address [email protected].
Subscription shareholders can exercise their subscription shares at a price of 345 pence per share on 30 June and 31 December each year, up to 31 December 2017.
If you received subscription shares when they were issued, for the purposes of UK taxation, the issue of subscription shares is treated as a reorganisation of the Company's share capital. Such reorganisations do not trigger a chargeable disposal for the purposes of the taxation of capital gains, but they do require shareholders to reallocate the base cost of their ordinary shares between their ordinary shares and subscription shares received.
At the close of business on 13 December 2010 the middle market prices of the Company's ordinary shares and subscription shares were as follows:
Ordinary shares: 308.25 pence
Subscription shares: 62.75 pence
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 13.22 pence 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.
A number of disclosures are required to be made under the AIFMD as follows:
Any material changes to this information is required to be reported in the Company's Annual Financial Report. There have been no material changes from the prior year to the information above which requires disclosure to shareholders.
Artemis may be required to make certain disclosures regarding remuneration which will be disclosed at the appropriate time.
New legislation was introduced in the UK on 1 January 2016 implementing the Organisation for Economic Co-operation and Development's Common Reporting Standard for Automatic Exchange of Financial Account Information (the 'Common Reporting Standard').
This requires the Company to provide information annually to HM Revenue & Customs ("HMRC") on the tax residencies of those certificated shareholders that are tax resident in countries outwith the UK that have signed up to the Common Reporting Standard.
All new shareholders, excluding those whose shares are held in CREST, that enter the share register from 1 January 2016 will be sent a certification form by the Registrar to complete. Existing shareholders may also be contacted by the Registrar should any extra information be needed to correctly determine their tax residence.
Failure to provide this information may result in the holding being reported to HMRC.
For further information, please see HMRC's Quick Guide: Automatic Exchange of Information – information for account holders;
gov.uk/government/publications/exchangeofinformationaccount-holders.
Year End 30 April
Interim: December Annual: July
February and August
Annual General Meeting
October
Cassini House 57 St James's Street London SW1A 1LD
Website: artemisalphatrust.co.uk
Artemis Fund Managers Limited 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] registrar
Capita Asset Services Shareholder Enquiries The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Shareholder enquiries: 0871 664 0300 (calls cost 12p per minute plus your phone company's access charge. If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales)
J.P. Morgan Europe Limited 25 Bank Street Canary Wharf London E14 5JP
J.P. Morgan Chase Bank N.A. 25 Bank Street Canary Wharf London E14 5JP
J.P. Morgan Europe Limited 25 Bank Street Canary Wharf London E14 5JP
KPMG LLP Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
Cantor Fitzgerald One America Square, 3rd Floor 17 Crosswall London EC3N 2LB
Dickson Minto W.S. Broadgate Tower Primrose Street London EC2A 2EW
An investment company as defined under section 833 of the Companies Act 2006. Registered in England No. 253644
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