Annual Report • Apr 30, 2017
Annual Report
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Annual Financial report for the year ended 30 April 2017
| Financial Highlights | 2 |
|---|---|
| Strategic Report | |
| Chairman's Statement | 4 |
| Investment Manager's Review | 6 |
| Twenty-Five Largest Investments | 9 |
| Portfolio of Investments | 10 |
| Strategy and Business Review | 16 |
| Key Performance Indicators | 16 |
| Other Matters | 17 |
| Directors and Corporate Governance | |
| Directors | 19 |
| Directors' Report | 20 |
| Directors' Remuneration Policy and Report | 27 |
| Statement of Directors' Responsibilities in respect of the Annual Financial Report | 29 |
| Audit Information | |
| Report of the Audit Committee | 30 |
| Independent Auditor's Report to the members of Artemis Alpha Trust plc | 32 |
| Financial Statements | |
| Statement of Comprehensive Income | 36 |
| Statement of Financial Position | 37 |
| Statement of Changes in Equity | 38 |
| Statement of Cash Flows | 39 |
| Notes to the Financial Statements | 40 |
| Shareholder Information | |
| Notice of Annual General Meeting | 53 |
| Information for Shareholders | 58 |
| Glossary | 60 |
| Investment Manager, Company Secretary and Advisers | 61 |
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% 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% 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% of its gross assets in other investment companies listed on the main market of the London Stock Exchange.
| Total returns | Year ended 30 April 2017 |
Year ended 30 April 2016 |
|---|---|---|
| Net asset value (diluted) Share price FTSE All-Share Index |
20.9% 26.7% 20.1% |
(6.1)% (13.2)% (5.7)% |
| Revenue and dividends | ||
| Revenue earnings per ordinary share (diluted) Dividends per share |
6.31p | 4.75p |
| Ordinary | 4.30p | 3.90p |
| Special | 2.00p | – |
| Ongoing charges (excluding performance fees) | 0.9% | 0.9% |
| Capital | As at 30 April 2017 |
As at 30 April 2016 |
| Net asset value (diluted) | 361.90p | 303.43p |
| Share price | 293.50p | 235.50p |
| Gearing | 6.0% | 5.4% |
Source: Artemis/Datastream
| Total returns to 30 April 2017 | 3 years | 5 years | 10 years | Since 1 June 2003* |
|---|---|---|---|---|
| Net asset value (diluted) | 12.1% | 24.1% | 70.6% | 488.1% |
| Share price | 2.4% | 10.3% | 38.9% | 393.8% |
| FTSE All-Share Index | 21.8% | 58.6% | 68.9% | 226.4% |
* 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.
strategic report
Annual Financial report
In the year to 30 April your Company's net asset value per share rose by 20.9% and its share price by 26.7% compared with an increase in the FTSE All-Share Index of 20.1% (on a total return basis). The performance during the second half of the year was particularly strong with an increase of 17.6% in the net asset value.
Both the unquoted and quoted portions of the portfolio added value over the year, the unquoted holdings increasing by 10.9% while the quoted holdings increased by 22.8%.
I am pleased to be able to report this improvement in recent performance. After a period of outstanding returns achieved when Artemis was originally appointed as Investment Manager, the performance over the last three and five years in particular has been disappointing for reasons that have been well documented. The Board is acutely aware of the need for performance markedly and consistently to be improved in order to regain the confidence of our shareholders, many of whom have been long-term and patient supporters of the fund managers and their distinctive approach.
Despite a slight narrowing of the discount from 22.4% at the start of the year to 18.5% at the end, we remain concerned at the absolute level of the discount. Although the planned reduction in the level of unquoted investments should contribute to a narrowing of the discount, we believe that only improved performance ultimately will reduce this significantly. As I explained last year, for a company of our size, a formal and concerted programme of buying back shares disadvantages shareholders, by reducing the size of the Company and the liquidity of its shares, and by increasing the proportion of the assets held in unquoted investments.
We will however continue to buy back shares on a tactical basis to address any imbalances between supply and demand. During the year the Company bought back just over a million shares, representing 2.5% of those in issue at the start of the year, at an average discount of 24.3% and a cost of £2.4m. There have been occasions this year when price-sensitive developments affecting our larger unquoted investments have prevented us from buying back shares.
The Board and Investment Manager are highly aware of the continuation vote which is to be put to shareholders at next year's AGM, in the autumn of 2018. We recognise our responsibilities to shareholders and will be consulting them over the course of the next few months, as we did last year.
As I reported in October, the Company's quoted holdings in real estate and financial companies underperformed following the Brexit vote. In the last six months of the year, however, they recovered strongly.
Our largest exposure to any particular sector is to financial companies which account for 37.5% of the portfolio. These are mainly fund management companies and specialist lenders (rather than banks) which are mostly quoted but also include some unquoted companies. The performance of Liontrust Asset Management and Polar Capital, two of our largest holdings, made a positive contribution to our returns during the year. This is an area where our fund managers have particular insights and experience resulting from their involvement in Artemis' highly successful fund management business. Our fund managers are able to draw on the expertise of the other investment teams at Artemis in this as well as other areas and sectors.
A quarter of the portfolio is now invested in large or medium cap companies which our fund managers believe represent sound investment opportunities as individual stocks, mostly as a result of perceived undervaluation. Although these choices are not driven by the desire for income they have been partly responsible for an increase in income over the year.
In last year's annual report, we stated our intention to reduce the Company's exposure to unquoted investments to below 10% before the continuation vote due to be held in the autumn of 2018. As at 30 April 2017, on a valuation basis, the Company's exposure to unquoted investments stood at 25.2%, down from 27.3% at the previous year end. The overall value of these holdings increased from £36.7m to £38.3m, as positive developments prompted upward revisions to the valuations of URICA, Metapack, Gundaline, Retail Money Market, N+1 Singer and Oxford Sciences Innovation. There was, however, a fall in the valuation of Starcount, following a fundraising at a price lower than the Company's carrying value.
There were two full realisations over the period, of Equus Petroleum and Infusion 2002. As reported at the interim stage, there was also one significant partial realisation: Oxford Nanopore Technologies. In total, these realisations raised £4.3m, in line with carrying value and compared to a cost of £1.9m.
The Board and Investment Manager remain committed to reducing the Company's exposure to unquoted investments, and will actively seek realisations at valuations the Investment Manager considers fair and in shareholders' best interest. Further information on the 10 largest unquoted investments is set out in the schedule on page 15.
Revenue earnings for the year were 6.31p per share, an increase of 32% on the previous year (2016: 4.75p). This significant jump was due to the higher level of income from the portfolio and, in particular, large increases from some of the financial holdings. The Company's policy is to seek to increase the dividend by around 10% each year. In line with this target, a second interim dividend of 2.75p (2016: 2.50p) per share has been declared by the Board. The Company's interim dividends for the year total 4.30p per share (2016: 3.90p), an increase of 10%.
Given the substantial increase in net revenue from last year, the Board has decided to declare a special dividend of 2.00p per share. This is due to the exceptional level of income received this year from a number of investments and is also required to satisfy the investment trust rules. This means that total dividends for the year will be 6.30p per share, an increase of 62% over the 2016 payment.
Both the second interim and special dividends will be paid on Friday 25 August 2017 to shareholders on the register as at Friday 28 July 2017, with an ex-dividend date of Thursday 27 July 2017.
I am very pleased to welcome Jamie Korner as a nonexecutive director with effect from 6 April 2017. He has extensive experience of markets and investment management having managed funds at both M&G and Newton and he will be a valuable addition to the Board. Further information on Jamie is set out in his biography on page 19.
The Company's AGM will take place on Thursday, 5 October 2017 at 12.30 pm at a different venue this year, due to renovations at the office of the Investment Manager. It will be held at The Science Room, The Royal
Society of Chemistry, Burlington House, Piccadilly, London W1J 0BA. 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 question both the Board and the fund managers. Light refreshments 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.
During the period under review, stock markets have had to cope with an extraordinary succession of unexpected events: Britain's decision to leave the EU, the election of President Trump and the U.K. general election. Inevitably these events have had implications for your Company and its investee companies, as well as for currencies and markets generally. However, we follow a stock-specific investment policy which, while having regard to markets, does not claim to derive returns from predicting economic or political events.
The uncertainty surrounding the Brexit negotiations and the results of the general election are likely to contribute to unsettled conditions for at least the next couple of years. Against this background the Board and the Investment Manager will concentrate on continuing to deliver improved returns for shareholders by seeking out opportunities which offer the prospect of good returns despite those uncertainties.
Chairman 20 July 2017
As shareholders know, the Company has a very broad investment remit and is not restricted by sector or market cap limits. This suits the fund managers' investment approach which is to invest on a stock specific bottom-up basis. In recent years it has principally focused on UK companies and had significant exposure to small cap including AIM and unquoted investments. These are areas which are well suited to the closed-end structure of the Company which allows the Investment Manager to invest over the longer term. Whilst investments in these areas will continue to feature in the portfolio, the unconstrained remit will inevitably see investments being made in other areas where we have identified good opportunities. This does mean that the portfolio bears little resemblance to the stock and sector weightings of the FTSE All-Share Index. As indicated in the Chairman's Statement we have increased our exposure to large caps during the year.
We continue to believe that this investment flexibility differentiates the Company from other trusts and will produce good returns for investors over time. It is pleasing to report an improvement in performance for the period under review.
During the year under review, the Company's net asset value rose by 20.9% on a total return basis, versus a rise of 20.1% in the FTSE All-Share Index.
There was a significant improvement in performance in the second half of the Company's financial year. That was particularly the case in the listed portfolio, where share prices recovered from the post Brexit uncertainty. As discussed in the Chairman's statement, the unquoted part of the portfolio also made a positive contribution.
Source Artemis/Datastream, total returns.
The Company's share price rose by more than its net asset value over the year. We believe this reflects both the improvement in performance of the portfolio and a general narrowing of discounts across the investment trust sector as markets have risen.
The contribution from listed investments and unquoted investments can be seen below.
| Contribution % | |
|---|---|
| Listed | 19.0 |
| Unquoted | 3.3 |
| Net income/(expenses) | (1.4) |
The five largest stock contributors and detractors, along with an industry contribution analysis, are summarised in the tables below.
| Company | Market | Contribution % |
|---|---|---|
| Hurricane Energy | AIM | 4.6 |
| Liontrust Asset Management | LSE | 2.8 |
| URICA | Unquoted | 2.5 |
| Avation | LSE | 1.3 |
| Gresham Technologies | LSE | 1.0 |
| Company | Market | Contribution % |
|---|---|---|
| Starcount Group | Unquoted | (1.3) |
| Gaming Realms | AIM | (0.6) |
| Redcentric | AIM | (0.6) |
| Vectura Group | LSE | (0.6) |
| GLI Finance | AIM | (0.5) |
| Industry | Contribution % |
|---|---|
| Financials | 10.8 |
| Oil & Gas | 6.3 |
| Consumer Goods | 2.7 |
| Industrials | 2.6 |
| Technology | 1.0 |
| Basic Materials | 0.3 |
| Telecommunications | 0.2 |
| Utilities | – |
| Health Care | (0.5) |
| Consumer Services | (1.1) |
By industry, the largest contribution came from the Company's holdings in the financial services sector. There was also a strong recovery in some of the oil and gas holdings. Weakness at a sector level tended to be as a result of stock-specific issues.
In the listed portfolio, the biggest positive contribution came from Hurricane Energy. This has been a longstanding investment for the Company. Initially bought as an unquoted investment, it floated on AIM in February 2014. After struggling for several years to raise the capital it needed to drill test wells to the west of Shetland, it finally raised sufficient money (primarily from a specialist oil investor) earlier in the financial year. The result was a highly successful drilling campaign that enabled Hurricane substantially to increase its estimated reserves to more than one billion barrels of oil to bring the field into production. Subsequent to the year end the company raised \$520m to fund the next stage of the development of its Lancaster field.
Amid generally strong performance from the Company's financial holdings, the standout performer was Liontrust. Its funds continue to perform well which, coupled with helpful stock markets and its strong distribution capabilities, meant it was able to increase its funds under management. Its acquisition of Alliance Trust Investments brought £2.3bn of assets and a highly regarded investment team with a long-term pedigree. The acquisition increased the group's assets under management to £8bn; by the end of March 2017 this had grown to £9bn. It has also had the effect of diversifying Liontrust's product range and improving the quality of its earnings. Despite the strong performance in Liontrust's shares since the deal was announced, it still trades at a discount to its peers. We feel this is unjustified and so retain a holding.
Another longstanding holding in the fund management sector was Polar Capital Holdings. After a couple of lean years, the successful launch of a new UK equity product and the announcement of a new chief executive with a formidable reputation, Gavin Rachussen (formerly of J O Hambro), saw its shares make a strong recovery. Polar Capital has been suffering from net outflows over the last couple of years but we are hopeful that Mr Rachussen will turn the business around.
Elsewhere, aircraft-leasing business Avation performed strongly. It sold a number of its aircraft at a premium to book value at a time when the stock market was valuing its portfolio at a discount to net asset value. The sale of these aircraft has helped to narrow the discount between Avation's share price and its value on a sum-of-parts basis. We believe this re-rating can continue.
Meanwhile, many of the UK domestic shares that performed poorly following the Brexit referendum – such as Helical, St. Modwen Properties and Telford Homes – recovered strongly in the second half of the Company's financial year. In many cases, the shares have rebounded to levels that are higher than they were before the referendum. The portfolio also benefited from a bid for Market Tech Holdings, the Camden-based property developer, from its founder Teddy Sagi.
On the negative side, Gaming Realms, a mobile gaming company, continued to struggle. We have been reducing our holding. Redcentric was hit by accounting irregularities although we had largely exited our position before the problem was discovered.
Elsewhere, GLI Finance, the owner of a number of online lending platforms, continued to perform poorly. The shares are trading at a substantial discount to the net asset value so we are inclined to hold on at this time. Another disappointment was Vectura Group. After completing the takeover of Skyepharma, there were a number of disappointments in its drug pipeline. That we were already selling down the position, however, helped to mitigate the impact.
Overall, the performance from the Company's unquoted holdings was much stronger compared to the previous year. Their overall value increased by almost 11%, with total realisations exceeding £4m.
The strongest performance came from URICA, which provides SMEs with early settlement of their invoices in real time through its online platform. Following initial funding from the UK Government (via the Business Finance Partnership) in collaboration with other credit providers it has now expanded its business from the UK to include France. To fund this growth, URICA raised further capital in April, a small part of which the Company provided. The resulting uplift in valuation added around 2.5% to the Company's net asset value.
Elsewhere, Metapack, the dominant provider of fulfilment software services to online retailers in the UK and Europe, continued to perform strongly: its sales grew by 20%. The business is forecast to become increasingly profitable in the financial year to March 2018. Other strong performers included Gundaline, an Australian farming business, the value of whose water rights has increased and N+1 Singer, a small-cap London broker.
Two other investments raised new equity at valuations above the Company's previous carrying values. The first was Oxford Sciences Innovation, a business created to work with Oxford University to commercialise its intellectual property assets. The second was Retail Money Market, one of the UK's leading peer-to-peer lenders. Both businesses are now well funded and their carrying values reflect the uplifts achieved in these recent funding rounds.
On the negative side, we had to write down the carrying value of the Company's holding in Starcount Group after a heavily discounted fundraising. The underlying position and momentum in the business, however, is improving. It has been engaged by two new major blue-chip clients and these contracts are generating revenues as planned.
We continued our efforts to reduce the Company's overall exposure to unquoted holdings by selling out of Equus Petroleum and Infusion 2002. There was also a partial realisation of our holding in Oxford Nanopore Technologies.
More information on the Company's ten largest unquoted investments is set out on page 15.
The Company's largest sector exposure remains financials, which account for 37.5% of its total assets. We do not invest, however, in banks, preferring fund managers, wealth managers and specialist lenders. Although these investments have, in general, been made for stock-specific reasons, rising equity markets and a stronger than expected economy have certainly been helpful. Nonetheless, we continue to see value in this part of the market.
One aspect that we should highlight is that a quarter of the portfolio is now invested in large- and mid-caps. These holdings are all interesting on a stock level but they also help to increase the liquidity and flexibility of the portfolio. We have, meanwhile, drawn on the knowledge of Artemis' other investment teams to make a selected number of investments. Examples include Rocket Internet, a German 'incubator' of internet businesses, and Nintendo, a Japanese manufacturer of games consoles.
New investments over the year included Bovis Homes. A profits warning and the subsequent departure of its chief executive allowed us to pick up its shares at a substantial discount to its peers. This came in addition to other holdings in the sector including M J Gleeson, a housebuilder focused on northern England, and Telford Homes (although we sold this down following a strong run). We continued to add to our property holdings in the weakness that followed the Brexit vote, particularly St. Modwen Properties and Helical.
We also participated in the IPO market, buying shares in Ramsdens Holdings, a Middlesbrough-based pawnbroker and travel money broker now expanding nationwide. We also subscribed to an offering by FreeAgent Holdings, which provides (cloud-based) accounting software to small businesses. Shares in both have performed well since their listings.
Other deals we participated in included the restructuring of IGas Energy, an onshore oil and gas company. The company has substantial fracking coverage that is ascribed no value by the stock market despite much of the company's costs being carried by Total and INEOS on its substantial work programme. Lastly we bought Attraqt, which provides search and merchandising solutions to online retailers in the UK and US.
On the sell side, we sold our holdings in BP and Dalata Hotel Group. We also took profits in a number of longterm holdings such as Brewin Dolphin, Telford Homes and Vectura Group. We locked in profits made on Booker Group after Tesco announced its intention to buy it (subject to approval from the competition authorities).
We sold a number of smaller holdings from the tail of the portfolio during the year, predominately those that had become very small in size. No new investments were made in unquoteds other than some small follow-on investments into existing holdings.
The strategy remains the same. On the Company's behalf, we invest in a range of companies, predominantly in the UK but also drawing on the global expertise of Artemis' wider investment team where necessary. We have made progress in reducing the overall percentage of the portfolio accounted for by unquoted holdings. Although we are committed to making further disposals in this area in the year ahead, we still believe that the potential of many of these investments is exciting and will look to exit where these meet our valuation assessment.
As investors have attempted to anticipate what the recent general election and its aftermath might mean for Brexit and, by extension, the UK economy, politics is exercising a greater influence than usual over the UK market. As the prospect of a comfortable majority for the Conservatives faded and vanished, Sterling fell. Dovish comments from the Bank of England's Mark Carney added to the downward pressure on the pound. As overseas earners, the mega caps of the FTSE 100 Index have been beneficiaries of this weakness. But returns from smalland mid-caps, which tend to be domestic earners – and which dominate the Company's portfolio – have been more modest.
In broad terms, the election has made it more likely that there will be some form of 'transitional' deal for the UK after the two-year negotiating period with the EU comes to an end in March 2019. This reduces the risk of a 'no deal' or 'hard' Brexit. A further positive for the economy is that inflation should start to drop, helped by progressively easier year-on-year comparisons for the oil price. This, in turn, should reduce the squeeze on the real incomes of consumers. That ought to help stocks with a domestic focus. At the same time, the UK market's overseas earners, most of which are large caps, have benefited from strong earnings momentum because of Sterling's fall since the referendum. A weak pound has, in some cases, masked weak underlying performance. These companies could be exposed once support from the currency fades. There are reasons to hope that the Company's bias to small caps – and away from mega caps – won't remain a handicap for much longer.
We are, however, stock-pickers rather than political commentators or currency traders. That politics and other macro matters continue to exercise so much influence over the market is frustrating. But history suggests that it won't last: in time, underlying company fundamentals always prevail. So our focus remains on monitoring the Company's existing holdings and seeking new opportunities.
Fund managers Artemis Fund Managers Limited 20 July 2017
| Investment | Business activity | Market Value £'000 |
% of total investments |
|---|---|---|---|
| Liontrust Asset Management | Asset management | 7,480 | 4.8 |
| URICA2,3 | Global payment network for SMEs | 6,896 | 4.4 |
| Hurricane Energy1 | West of Shetland oil & gas exploration | 5,875 | 3.7 |
| Gleeson (M.J.) Group | Urban regeneration & land trading | 5,838 | 3.7 |
| Polar Capital Holdings1 | Asset management | 5,417 | 3.5 |
| Metapack2 | Delivery optimisation technology | 5,248 | 3.3 |
| Avation | Aircraft leasing | 4,312 | 2.7 |
| Vectura Group | Drug delivery specialist | 4,233 | 2.7 |
| Claremont Alpha2 | Taiwan casino developments | 3,822 | 2.4 |
| Gresham Technologies | Financial software services | 3,243 | 2.1 |
| Reaction Engines2 | Rocket propulsion systems | 3,217 | 2.1 |
| Starcount Group2 | Social media data analytics | 3,119 | 2.0 |
| St. Modwen Properties | Property development & investment | 2,833 | 1.8 |
| Tesco | Retailer | 2,794 | 1.8 |
| Halley Asian Prosperity Fund | Asian investment fund | 2,638 | 1.7 |
| Gundaline2 | Australian agriculture | 2,601 | 1.7 |
| Helical | Property development & investment | 2,565 | 1.6 |
| City of London Investment Group | Emerging markets asset management | 2,506 | 1.6 |
| Ramsdens Holdings1 | Financial services provider and retailer | 2,505 | 1.6 |
| Rocket Internet | Online retail and food delivery | 2,455 | 1.6 |
| Sports Direct International | UK sports retailer | 2,454 | 1.6 |
| Majestic Wine1 | Specialist wine retailer | 2,442 | 1.6 |
| Attraqt Group1 | Online visual merchandising | 2,436 | 1.6 |
| Oxford Sciences Innovation2 | Oxford University spin-out companies | 2,200 | 1.4 |
| Nintendo | Video games | 2,081 | 1.3 |
| Top 25 investments | 91,210 | 58.3 |
1 AIM quoted
2 Unquoted, delisted or suspended investment
| Investment Business activity incorporation £'000 investments Financials Brewin Dolphin Holdings Private client & wealth management UK 1,472 0.9 Charles Stanley Stockbroking & investment management UK 1,733 1.1 City of London Investment Group Emerging markets asset management UK 2,506 1.6 GLI Finance1 Peer-to-peer lending investments UK 1,140 0.7 Halley Asian Prosperity Fund Asian investment fund Luxembourg 2,638 1.7 Hawk Group2 SME finance solutions Luxembourg – – Helical Property development & investment UK 2,565 1.6 JRP Group Specialist retirement products & services UK 1,493 1.0 K3 Capital Group1 Corporate finance UK 868 0.6 Lamp Group2 Healthcare & specialist insurance UK 1,356 0.9 Liontrust Asset Management Asset management UK 7,480 4.8 LumX Group Asset Management Switzerland 1,433 0.9 Market Tech Holdings Property and technology holding company UK 1,634 1.0 Miton Group1 Asset management UK 1,110 0.7 |
|---|
| N+1 Singer2 Stockbroking UK 1,360 0.9 |
| Newriver Retail 1 UK retail property investments UK – – |
| Orchard Funding Group1 Professional fee funding solutions UK 1,006 0.6 |
| Oxford Sciences Innovation2 Oxford University spin-out companies UK 2,200 1.4 |
| Park Group1 Retail vouchers & gift cards UK 1,257 0.8 |
| Path Investments Turkish oil & gas investments UK 21 – |
| Plus5001 Online trading platform UK 1,584 1.0 |
| Polar Capital Holdings1 Asset management UK 5,417 3.5 |
| Property Franchise Group1 Estate agent services UK 1,938 1.2 |
| Ramsdens Holdings1 Financial services provider and retailer UK 2,505 1.6 |
| Randall & Quilter1 Global non-life insurance activities UK 685 0.4 |
| Retail Money Market 2 Peer-to-peer lender UK 2,012 1.3 |
| St. Modwen Properties Property development & investment UK 2,833 1.8 |
| URICA2,3 Global payment network for SMEs UK 6,896 4.4 |
| Waverton Southeast Asian Fund Asian investment fund Luxembourg 1,726 1.1 |
| Total Financials 58,868 37.5 |
| Consumer Services |
| Be Heard Group1 Digital marketing network UK 639 0.4 |
| Booker Group Food wholesaler UK 1,455 0.9 |
| Carpetright Floor coverings & bed retailer UK 364 0.2 |
| Claremont Alpha2 Taiwan casino developments Isle of Man 3,822 2.4 |
| Entertainment One Media distribution company UK 606 0.4 |
| Flying Brands2 Multi brand home shopping group Jersey – – |
| Gaming Realms1 Online bingo & gaming UK 1,658 1.1 |
| Hardlyever2 Online portal selling pre-owned luxury goods UK 971 0.6 |
| Maison Seven2 Online fashion retailing UK – – |
| Majestic Wine1 Specialist wine retailer UK 2,442 1.6 |
| Millennium & Copthorne Hospitality & hotel group UK 1,462 0.9 |
| ROK Entertainment 2 Global mobile entertainment group USA – – |
| ROK Global 2 Global mobile entertainment group UK – – |
| Sports Direct International UK sports retailer UK 2,454 1.6 |
| Starcount Group2 Social media data analytics UK 3,119 2.0 |
| Tesco Retailer UK 2,794 1.8 |
| Zinc Media Group1 Media Production UK 760 0.5 |
| Total Consumer Services 22,546 14.4 |
1 AIM quoted
2 Unquoted, delisted or suspended investment
| Investment | Business activity | Country of incorporation |
Market value £'000 |
% of total investments |
|---|---|---|---|---|
| Industrials Augean1 Avation Fox Marble1 Gama Aviation1 IWG MBA Polymers2,3 Metapack2 Rated People2 Reaction Engines2 Utilitywise1 Volex |
Specialist waste management Aircraft leasing Kosovo marble mining Aviation services Business office facilities Post-consumer recycled plastics producer Delivery optimisation technology Home maintenance services Rocket propulsion systems Energy management solutions Power & data cabling solutions |
UK UK UK UK UK USA UK UK UK UK UK |
1,280 4,312 1,069 1,017 1,462 137 5,248 802 3,217 607 467 |
0.8 2.7 0.6 0.7 0.9 0.1 3.4 0.5 2.1 0.4 0.3 |
| Total Industrials | 19,618 | 12.5 | ||
| Consumer Goods Bovis Homes Group Chateau Lafite Rothschild 20092 Chateau Lafite Rothschild 20102 Chateau Rieussec 20102 Gundaline2 Hornby1 Houseology Design Group2 Gleeson (M.J.) Group Nintendo Pittards1 Telford Homes1 |
National housebuilder Physical wine holding Physical wine holding Physical wine holding Australian agriculture Hobby & toy products Home interiors & furniture design Urban regeneration & land trading Video games High performance leather goods London housing developments |
UK France France France Australia UK UK UK Japan UK UK |
1,943 401 347 18 2,601 867 876 5,838 2,081 2,006 1,378 |
1.2 0.3 0.2 – 1.7 0.5 0.6 3.7 1.3 1.3 0.9 |
| Total Consumer Goods | 18,356 | 11.7 | ||
| Oil & Gas Africa Oil Buried Hill Energy (Cyprus)2 Ceramic Fuel Cells2 Energy Equity Resources (Norway)2 Homeland Renewable Energy2 Hurricane Energy1 IGas Energy1 Lansdowne Oil & Gas1 Leed Resources2 PetroHunter Energy2 Providence Resources1 Trinity Exploration & Production1 |
East Africa oil & gas exploration Turkmenistan oil & gas exploration Electric fuel cells African oil & gas exploration US renewable energy production West of Shetland oil & gas exploration UK onshore gas production Irish gas storage & exploration Natural resources investments US oil & gas exploration Irish gas storage & exploration Oil & gas exploration |
Canada Cyprus Australia UK USA UK UK UK UK USA Ireland UK |
1,170 809 – – – 5,875 2,018 239 – – 289 1,382 |
0.7 0.5 – – – 3.7 1.3 0.2 – – 0.2 0.9 |
| Total Oil & Gas | 11,782 | 7.5 | ||
| Technology Attraqt Group1 Coretx Holdings1 Emis Group1 Fitbit FreeAgent Holdings1 |
Online visual merchandising Data & network infrastructure Medical software supplier Provider of health and fitness devices Online accounting software provider |
UK UK UK USA UK |
2,436 1,017 1,878 663 797 |
1.6 0.7 1.2 0.4 0.5 |
1 AIM quoted
2 Unquoted, delisted or suspended investment
Annual Financial report
| Investment | Business activity | Country of incorporation |
Market value £'000 |
% of total investments |
|---|---|---|---|---|
| Technology (continued) Gresham Technologies Mporium Group1 Rocket Internet |
Financial software services Mobile retail design Online retail and food delivery |
UK UK Germany |
3,243 1,750 2,455 |
2.1 1.1 1.6 |
| Total Technology | 14,239 | 9.2 | ||
| Health Care Eden Research1 hVIVO1 Oxford Nanopore Technologies2 Physiolab Technologies2,3 Quantum Pharma1 Summit 1 Vectura Group |
Agricultural chemicals Vaccine testing Nanopore DNA sequencing Cryotherapy technology Pharmaceutical developer, manufacturer and supplier Drug development Drug delivery specialist |
UK UK UK UK UK UK UK |
1,352 870 822 1,327 645 680 4,233 |
0.9 0.6 0.5 0.8 0.4 0.4 2.7 |
| Total Health Care | 9,929 | 6.3 | ||
| Basic Materials Duke Royalty1 Eastcoal 2 Ironveld1 |
Mining royalty payment investments Ukrainian coal mining South African iron mining |
UK Canada UK |
733 – 352 |
0.5 – 0.2 |
| Total Basic Materials | 1,085 | 0.7 | ||
| Telecommunications Mobile Streams1 |
Mobile content store | UK | 186 | 0.1 |
| Total Telecommunications | 186 | 0.1 | ||
| Total equity investments | 156,609 | 99.9 | ||
| Forward currency contracts Buy Sterling 2,448,171 dated 15/08/2017 Sell Australian Dollars 4,000,000 dated 15/08/2017 |
1.6 (1.5) |
|||
| Total forward currency contracts |
147 | 0.1 | ||
| Total investments | 156,756 | 100.0 |
1 AIM quoted
2 Unquoted, delisted or suspended investment
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
| 2017 % of total |
2016 % of total |
|
|---|---|---|
| Country of incorporation | investments | investments |
| UK | 86.8 | 87.8 |
| Luxembourg | 2.8 | 2.6 |
| Isle of Man | 2.4 | 2.7 |
| Australia | 1.7 | 1.5 |
| Germany | 1.6 | – |
| Japan | 1.3 | – |
| Switzerland | 0.9 | 0.1 |
| Canada | 0.7 | 1.5 |
| Cyprus | 0.5 | 0.6 |
| France | 0.5 | 0.4 |
| USA | 0.5 | 0.5 |
| Ireland | 0.2 | 1.3 |
| Finland | – | 1.0 |
| Forward currency contracts | 0.1 | – |
| 100.0 | 100.0 |
Portfolio has been analysed using ICB industry classifications.
| Name | Valuation £'000 |
% of total investments |
% of equity held |
Market cap (m) |
Date of first investment |
Website |
|---|---|---|---|---|---|---|
| URICA | 6,896 | 4.4% | 28.3% | £23.8 | June 2013 | urica.com |
| and recently in launched a fund in France. | URICA provides SME companies with early settlement of their invoices through its own real time online platform. The fund is based in the UK, | |||||
| Metapack | 5,248 | 3.4% | 4.4% | £139.7 | May 2011 | metapack.com |
| Metapack is a software as a service ("SaaS") company that has developed a platform that manages the home delivery process for online retailers. The company is the dominant provider of fulfilment software services with a 70% share of the top 100 online retailers in the UK. |
||||||
| Claremont Alpha | 3,822 | 2.4% | 40.5% | £9.5 | November 2011 | – |
| assets in New York and Taiwan. | Claremont Group was set up to identify, develop and monetise early stage opportunities in the gaming sector. The company owns real estate | |||||
| Reaction Engines | 3,217 | 2.1% | 3.4% | £95.1 | September 2009 | reactionengines.co.uk |
| Reaction Engines is a technology company that is developing innovative lightweight heat exchangers for space and hypersonic propulsion systems. The company has received grant funding from the UK Space Agency and has BAE as a strategic investor. |
||||||
| Starcount | 3,119 | 2.0% | 14.6% | £20.0 | January 2013 | starcount.com |
| Starcount is a social media data analytics business run by Edwina Dunn and Clive Humby who were behind the company DunnHumby, which pioneered the analysis of consumer data to inform strategic decisions. Starcount is looking to leverage social media data sets to provide insights in to decision making for brands, retailers and financial institutions. |
||||||
| Gundaline | 2,601 | 1.7% | 12.0% | £21.6 | January 2014 | – |
| ML of groundwater entitlements which command significant values due to the scarcity of secure water. Australia uniquely operates a liquid market in tradable water rights. |
Gundaline is the holding company for a 15,000 hectare soft commodities farm located in New South Wales, Australia. The farm owns 16,000 | |||||
| Oxford Sciences Innovation | 2,200 | 1.4% | 0.3% | £704.0 | June 2015 | oxfordsciencesinnovation.com |
| Physical and Life Sciences Division (MPLS) and Medical Sciences Division (MSD). | Oxford Sciences was established to work with Oxford University to commercialise the IP assets of the University derived from its Mathematical, | |||||
| Retail Money Market | 2,012 | 1.3% | 2.1% | £195.0 | March 2015 | ratesetter.com |
| Retail Money Market trades as RateSetter which is one of the largest peer-to-peer (P2P) lender in the UK. | ||||||
| N+1 Singer | 1,360 | 0.9% | 6.8% | £21.4 | March 2010 | n1singer.com |
| mid cap sectors. | N+1 Singer is an independent UK stockbroker that specialises in corporate advisory and sales, research and trading services in the small and | |||||
| Lamp Group | 1,356 | 0.9% | 6.9% | £20.0 | January 2005 | lampinsurance.com |
| Lamp is a boutique insurance company that underwrites risk in the areas of legal expenses, healthcare, and miscellaneous financial losses. |
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 in accordance with the policy set out on page 2.
The Company uses gearing as part of its investment strategy. The Articles of Association (the "Articles") permit the Company to borrow up to 25% 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 employ borrowings of up to 20% of net assets. The Company has a £30.0m borrowing facility with The Royal Bank of Scotland plc, of which £13.0m (2016: £8.5m) 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 2017, together with its prospects for the future, is set out in the Chairman's Statement on pages 4 and 5 and Investment Manager's Review on pages 6 to 8. The Board's principal focus is the delivery of positive long-term returns for shareholders 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 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 | Diluted Net asset value |
Share price |
FTSE All-Share Index |
|---|---|---|---|
| 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)% |
| 2017 | 20.9% | 26.7% | 20.1% |
| Year ended 30 April | Pence per ordinary share |
Increase |
|---|---|---|
| 2013 | 3.05p | 3.4% |
| 2014 | 3.20p | 4.9% |
| 2015 | 3.55p | 10.9% |
| 2016 | 3.90p | 9.9% |
| 2017* | 6.30p | 61.5% |
* Includes special dividend of 2.00p
■ Ongoing charges as a proportion of shareholders' funds (excluding performance fees)
| As at 30 April | Ongoing charges |
|---|---|
| 2013 | 0.9% |
| 2014 | 1.0% |
| 2015 | 0.9% |
| 2016 | 0.9% |
| 2017 | 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 reviewed regularly 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.
A summary of the key areas of risk is set out below:
■ Strategic: investment objective and policy are not appropriate in the current market and not favoured by investors.
The investment objective and policy of the Company is set by the Board and is subject to ongoing review and monitoring in conjunction with the Investment Manager. This includes the views expressed by the Company's shareholders.
■ Investment: the Company's investments are selected on their individual merits and the performance of the portfolio is not likely to track the wider UK market (FTSE All-Share Index). The Company invests in small cap (listed), AIM traded and unquoted investments which can be subject to a higher degree of risk than larger quoted investments. The Company may also have significant exposure to particular industry sectors from time to time.
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. 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.
■ Regulatory: failure to comply with the requirements of a framework of regulation and legislation, within which the Company operates.
The Company relies on the services of the Company Secretary and Investment Manager to monitor ongoing compliance with relevant regulations and legislation.
■ Operational: disruption to, or failure of, the Investment Manager's and/or any other third party service
providers' systems which could result in an inability to report accurately and monitor the Company's financial position.
Both the Investment Manager and the Administrator have established business continuity plans to facilitate continued operation in the event of a major service disruption or disaster.
Further information on risks and the management of them are set out in the notes to the financial statements on pages 50 and 51.
In accordance with the UK Corporate Governance Code, the Board has considered the longer term prospects for the Company. The period assessed is the five years to 30 April 2022. 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 to be held in October 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 2022, subject to shareholders approving the continuation of the Company at the annual general meeting in 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% of the shares in issue at last year's AGM. This has been 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 1,040,706 ordinary shares, representing 2.5% of the issued share capital as at 1 May 2016 (2016: 676,000). The Company has repurchased a further 152,500 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 2017.
3,539 ordinary shares were issued during the year as a result of the exercise of subscription shares (2016: 265).
The Directors of the Company and their biographical details are set out on page 19.
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 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 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% of its net assets (equivalent to 125% under the commitment and gross ratios in the AIFMD). The Company is permitted to have additional leverage of up to 100% of its net assets, which results in permitted total leverage of 225% under both ratios. Artemis as 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 2017, the Company's leverage was 107.0% as determined using the gross method and 108.7% under the commitment method.
The Investment Manager requires prior Board approval to:
The financial statements of the Company are included on pages 36 to 52 of this report.
For and on behalf of the Board,
Chairman
20 July 2017
Duncan Budge, aged 61, 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, BioPharma Credit 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 55, 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.
Blathnaid Bergin, aged 42, joined Aviva in 2017 as Chief Finance Operations Officer. Prior to that she was Group Financial Controller for RSA Insurance Group plc. Before 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 driving change and transformation. She 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.
Ms Bergin is the Company's Senior Independent Director.
Tom Cross Brown, aged 69, 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.
Jamie Korner, aged 62, is a partner of Stanhope Capital LLP. A Cambridge graduate, he joined Inchcape in 1978 and worked both overseas and in the UK, following a period in farming. After working at stockbroker Fielding Newson Smith and as a manager of institutional funds at M&G, he moved to Newton Investment Management in 1995. He led the charity and smaller institutional business of Newton until his retirement in 2011. He is a nonexecutive director of Henderson Alternative Strategies Trust plc, a trustee of the Foyle Foundation and other charities as well as an adviser to other institutions in the arts and education fields.
Appointed as a non-executive Director on 6 April 2017.
Mr Budge, Mr Ayton and Ms Bergin were considered independent of the Investment Manager throughout the year ended 30 April 2017 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 Korner was both considered independent of the Investment Manager upon appointment and up to the date of this report. He was appointed to the Audit, Nomination and Management Engagement Committees on 6 April 2017.
The Directors have pleasure in presenting their report, together with the audited financial statements of the Company for the year ended 30 April 2017.
The results for the year are set out in the Statement of Comprehensive Income on page 36. The Board has declared dividends for the year totalling 6.30 pence per ordinary share. This is made up of a first interim dividend of 1.55 pence, a second interim dividend of 2.75 pence and a special dividend of 2.00 pence. The second interim dividend and a special dividend for the year ended 30 April 2017 will be paid on 25 August 2017 to shareholders who are on the register at the close of business on 28 July 2017 with an ex dividend date of 27 July 2017.
The Company's investments are managed by Artemis Fund Managers Limited ("Artemis"), subject to an Investment Management Agreement dated 15 July 2014 (the "Agreement"). Pursuant to the Agreement, Artemis is entitled to a management fee of 0.75% per annum of the average monthly market capitalisation of the Company, payable quarterly in arrears. In addition, a performancerelated fee may be payable equal to 15% 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 annum, measured over a rolling three year period.
The performance fee payable each year cannot exceed 2.5% 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%) 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 2017 or 30 April 2016. At 30 April 2017, the share price would have had to be higher than 525 pence per share in order for a performance fee to become payable (2016: 438 pence per share).
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% 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 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 2017 had £25.5 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 Korner, having been appointed on 6 April 2017, is due to stand for election at the first AGM following his appointment, and therefore is proposed for election at this years' AGM.
Mr Barron retired as a Director of the Company on 5 October 2016.
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 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 2017 the Company had 41,127,975 ordinary shares (2016: 42,899,142) and 6,859,138 subscription shares (2016: 6,862,677) in issue.
The Company made market purchases of its own ordinary shares totalling 1,040,706 (2016: 676,000) during the year for an aggregate consideration of £2,376,000 (2016: £1,576,000). This represented 2.5% of issued ordinary share capital at the start of the period, with a nominal value of £10,407. The shares were bought at an average discount of 24.3% (2016: 23.1%) and are currently held in treasury.
During the year the Company issued and allotted 3,539 (2016: 265) 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 1,223,706 shares held in treasury (2016: 734,000). 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 551,000 treasury shares were cancelled (2016: 520,294).
Since the year end a further 152,500 ordinary shares have been purchased into treasury and 2,792 subscription shares were exercised and a corresponding number of ordinary shares issued and allotted. As at 20 July 2017, the Company had 42,099,473 ordinary shares and 6,856,346 subscription shares in issue. Of these, 1,121,206 ordinary shares are held in treasury, and therefore the Company's total voting rights are 40,978,267.
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.
Holders of the Company's subscription shares should note that the last business day in December 2017 is the last occasion on which they can exercise their subscription rights. We will be writing to all registered holders of these shares later in the year with a reminder of the final exercise date and information on what happens to any subscription rights that remain unexercised at expiry.
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 declare dividends provided such dividends are not in excess of any
dividends recommended by the Directors by ordinary resolution. 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% of the voting rights attaching to the ordinary shares in issue.
| Shareholder | Number of ordinary shares held as at 20 July 2017 |
20 July 2017 % of voting rights |
|---|---|---|
| 1607 Capital Partners | 4,523,700 | 11.04 |
| Mr John Dodd | 2,660,955 | 6.49 |
| Mr Mark Tyndall | 2,125,590 | 5.19 |
| Mr Adrian Paterson | 1,750,000 | 4.27 |
| Schroders plc | 1,734,182 | 4.23 |
| Investec Wealth Investment | 1,683,799 | 4.11 |
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 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 pages 53 and 54. 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 2017 AGM are set out in the Chairman's Statement on page 5 and the Notice of Meeting on pages 53 and 54. Resolutions in relation to the re-issue of treasury shares and special business are set out below.
Annual Financial report
The Directors were authorised at the AGM in October 2016 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 £21,026 under a general authority to allot ordinary shares. These authorities will expire at the forthcoming AGM of the Company. Resolution 10, which will be proposed as an ordinary resolution, seeks to renew these authorities.
The current authority for Directors to allot shares in the Company without first offering them to existing shareholders, in accordance with statutory pre-emption procedures, will also expire at the forthcoming AGM. The Directors believe it to be in shareholders' interests to continue to have such an authority for the forthcoming year and will seek to renew the authority and to disapply pre-emption rights at the forthcoming AGM.
Accordingly, Resolution 11 will, if approved, authorise the Directors to allot new ordinary shares up to an aggregate nominal amount of £68,563 in respect of subscription shares and £20,489, under a general authority, representing approximately 16.7% and 5% of the Company's issued ordinary share capital as at the date of this report, for cash without first offering such shares to existing shareholders pro rata to their existing holdings. Resolution 11 will be proposed as a special resolution and the authorities will continue in effect until the conclusion of the AGM to be held in 2018. 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% of the issued ordinary and subscription share capital will expire at the forthcoming AGM. The Directors consider that the Company should continue to have authority to make market purchases of its own shares and accordingly Resolution 12 will be proposed as a special resolution at the forthcoming AGM to renew that authority.
Repurchased ordinary shares may be held in treasury or cancelled. All repurchased subscription shares will be cancelled.
The maximum price which may be paid for purchases of ordinary shares and subscription shares (as applicable) through the market will not exceed the higher of: (i) 5.0% 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 Board considers 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 the Directors 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 July 2016, 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 UK Corporate Governance Code insofar as they relate to the Company's business. The Board considers that in the course of the year, and up to the date of this report, the Company has complied with the AIC Code. 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.
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 19 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.
Ms Bergin is the Company's Senior Independent Director. 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 Mr Korner was appointed on 6 April 2017, he stands for election at the AGM. The Board recommends election of Mr Korner and the re-election 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 election/ re-election |
|
|---|---|---|
| Mr Ayton | 25 June 2015 | AGM 2017 |
| Ms Bergin | 9 July 2015 | AGM 2017 |
| Mr Budge | 19 November 2013 | AGM 2017 |
| Mr Cross Brown | 5 April 2006 | AGM 2017 |
| Mr Korner | 6 April 2017 | AGM 2017 |
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 19 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.
Annual Financial report
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 30 and 31 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 18, 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.
The following table sets out the Directors' attendance at the Board and Committee meetings held during the year to 30 April 2017.
| Board Meetings |
Audit Committee Meetings |
|
|---|---|---|
| Number of meetings held | 4 | 3 |
| Mr Ayton | 4/4 | 3/3 |
| Mr Barron^ | 2/2 | 1/1 |
| Ms Bergin | 4/4 | 3/3 |
| Mr Budge | 4/4 | 3/3 |
| Mr Cross Brown* | 4/4 | 3/3 |
| Mr Korner† | 0/0 | 0/0 |
^ Mr Barron retired on 5 October 2016.
* 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 Korner was appointed on 6 April 2017.
| Management Engagement Committee Meetings |
Nomination Committee Meetings |
|
|---|---|---|
| Number of meetings held | 1 | 1 |
| Mr Ayton | 1/1 | 1/1 |
| Mr Barron^ | 1/1 | 1/1 |
| Ms Bergin | 1/1 | 1/1 |
| Mr Budge | 1/1 | 1/1 |
| Mr Cross Brown* | 1/1 | 1/1 |
| Mr Korner† | 0/0 | 0/0 |
^ Mr Barron retired on 5 October 2016.
* 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 Korner was appointed on 6 April 2017.
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 independent consultant was engaged for the appointment of Mr Korner.
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 53 and 54 of this report.
Artemis has endorsed the UK Stewardship Code. This sets out the responsibilities of institutional investors in relation to the companies in which they invest and a copy of this can be found on the Investment Manager's website at artemisfunds.com.
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 artemisfunds.com.
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:
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 pages 16 and 17 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
20 July 2017
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 the 2017 AGM (being three years from the date of shareholder approval of the policy), and therefore the policy requires to be approved by shareholders at the AGM being held on 5 October 2017. Resolution 2, as set out in the Notice of Meeting on page 53, is being proposed as an ordinary resolution to seek to approve this policy for a further three years.
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.
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 2017. 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 32 to 35.
An ordinary resolution, Resolution 3, to approve this report will be put to shareholders at the AGM.
During the year ended 30 April 2017, 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 29 June 2017, it was agreed that the fees for each Director, for the year ending 30 April 2018, should remain unchanged.
The current annual fees are £28,000 (2016: £28,000) for the Chairman £22,000 (2016: £22,000) for the Chairman of the Audit Committee and £20,000 (2016: £20,000) for the other directors.
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 2017 and 30 April 2016 received the following emoluments:
| 2017 | 2016 |
|---|---|
| £16,978 | |
| £21,172 | |
| £17,041 | |
| £28,000 | |
| £20,000 | |
| £8,407 | |
| £1,404 | – |
| £100,850 | £111,598 |
| £20,000 £9,446 £22,000 £28,000 £20,000 – |
1 None of the Directors who are Directors of the Company's wholly owned subsidiary received any remuneration from this company.
2 Mr Barron retired on 5 October 2016.
3 Mr Dalrymple retired on 1 October 2015. 4 Mr Korner was appointed on 6 April 2017.
Annual Financial report
The performance graph above sets out the Company's ordinary share price total return (assuming re-investment of dividends) from 30 April 2009 to 30 April 2017 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 5 October 2016, in respect of the approval of the Directors' Remuneration Report:
| Votes cast | Number | |||
|---|---|---|---|---|
| Votes cast for | against | Total | of votes | |
| Number | % Number | % | votes cast | withheld |
| 15,199,128 | 98.06 301,436 | 1.94 | 15,500,564 | 37,920 |
The Directors' interests in the capital of the Company who held office at 30 April 2017 were as follows:
| 30 April 2017 | 1 May 2016 | ||||
|---|---|---|---|---|---|
| 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 | – | |
| Mr Korner | 10,000 | – | – | – |
| 30 April 2017 | 1 May 2016 | ||||
|---|---|---|---|---|---|
| Non- | Non | ||||
| Beneficial | beneficial Beneficial | beneficial | |||
| Mr Ayton | – | – | – | – | |
| Mr Barron | 713 | – | 713 | – | |
| Ms Bergin | – | – | – | – | |
| Mr Budge | – | – | – | – | |
| Mr Cross Brown | 6,331 | – | 6,331 | – | |
| Mr Korner | – | – | – | – |
There have been no changes to the above holdings between 30 April 2017 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 2017, the review undertaken and the decisions made regarding the fees paid to the Board.
For and on behalf of the Board
Chairman 20 July 2017
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 18). Therefore no separate management report has been included.
The Directors are responsible for preparing the Annual Financial Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with IFRS as adopted by the EU and applicable law.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of their profit or loss for that period. In preparing each of the financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that 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 Company 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. Responsibility for the maintenance and integrity of the corporate and financial information relating to the Company on this website has been delegated to the Investment Manager by the Directors. 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
20 July 2017
Annual Financial report
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 non-audit 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 representatives of the Company's Auditor 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 in accordance with new regulations a tender will be undertaken ahead of the year ending 30 April 2018 in which KPMG will 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 Catherine Burnet rotated off the Company's audit ahead of the 2017 year end and has been replaced as engagement leader by Phil Merchant.
As noted in the Directors' Report on page 22, 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. However an audit tender process will take place before the next year end and KPMG is eligible to participate in this process. 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 representatives of the Company's Auditor at the Audit Committee meeting held on 29 June 2017 to discuss any matters arising from the annual audit. An unqualified audit opinion on the financial statements has been provided, which is set out on pages 32 to 35.
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% 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, PwC was appointed 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. Previously KPMG provided this service, but under the Statutory Audit Amending Directive and Regulation which came into force on 17 June 2016, the provision of non-audit services by the auditor were restricted. The engagement has been approved by the Audit Committee.
By order of the Board
Chairman of the Audit Committee 20 July 2017
opinions and conclusions arising from our audit
We have audited the financial statements of Artemis Alpha Trust plc for the year ended 30 April 2017 set out on pages 36 to 52. In our opinion the financial statements:
| Overview | ||||
|---|---|---|---|---|
| Materiality: | £1.6m (2016: £1.4m) | |||
| financial statements as a whole |
1% (2016: 1%) of Total Assets | |||
| Risks of material misstatement | vs 2016 | |||
| Recurring risks | Valuation of unquoted investments |
◄► | ||
| Carrying amount of quoted investments |
◄► |
In arriving at our audit opinion above on the financial statements, the risks of material misstatement that had the greatest effect on our audit, in decreasing order of audit significance, were as follows (unchanged from 2016):
(£41.0m; 2016: £39.0m)
Refer to pages 30 and 31 (report of the Audit Committee), pages 40 and 41 (accounting policy) and pages 36 to 52 (financial disclosures).
Subjective valuation
The risk Our response
Our procedures included:
Artemis Alpha trust plc
Annual Financial report
| The risk | Our response | |
|---|---|---|
| — Comparing valuations: Where a recent transaction has been used to value a holding, we obtained an understanding of the circumstances surrounding the transaction and whether it was considered to be on an arms-length basis and suitable as an input into a valuation. |
||
| — Assessing transparency: 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. |
||
| Carrying amount of | Low risk, high value | Our procedures included: |
| quoted investments (£118.4m; 2016: £97.9m) Refer to pages 30 and 31 |
The company's portfolio of quoted investments makes up 72.1% of the company's total assets (by value) and is one of the key drivers of results. We (report of the Audit do not consider these investments to be at a high risk of significant misstatement, or to be subject to a significant level of judgement because |
— Control design: Documenting and assessing the processes in place to record investment transactions and to value the portfolio; |
| Committee), pages 40 and 41 (accounting policy) and pages 36 to 52 (financial disclosures). |
— Tests of detail: Agreeing the valuation of 100 per cent of investments in the portfolio to externally quoted prices; and |
|
| they comprise liquid, quoted investments. However, due to their materiality in the context of the financial statements as a whole, they are considered to be one of the areas which had the greatest effect on our overall audit strategy and allocation of resources in planning and completing our audit. |
— Enquiry of custodians: Agreeing 100 per cent of investment holdings in the portfolio to independently received third party confirmations from investment custodians. |
Materiality for the financial statements as a whole was set at £1.6m (2016: £1.4m), determined with reference to a benchmark of total assets, of which, it represents 1% (2016: 1%).
We reported to the Audit Committee any uncorrected identified misstatements exceeding £82k (2016: £69k), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Our audit of the company was undertaken to the materiality level specified above and was all performed at our offices in Edinburgh.
Total Assets Materiality £164.1m (2016: £139.0m) £1.6m (2016: £1.4m)
£1.6m Whole financial statements materiality (2016: £1.4m)
£1.2m Performance materiality (2016: £1.0m)
£82k
Misstatements reported to the audit committee (2016: £69k)
In our opinion:
Based solely on the work required to be undertaken in the course of the audit of the financial statements and from reading the Strategic Report and the Directors' Report:
Based on the knowledge we acquired during our audit, we have nothing material to add or draw attention to in relation to:
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 29, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the Company's members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/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.
for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Saltire Court, 20 Castle Terrace Edinburgh EH1 2EG
20 July 2017
| Year ended | Year ended 30 April 2017 30 April 2016 |
||||||
|---|---|---|---|---|---|---|---|
| Notes | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Investment income | 2 | 3,184 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
3,184 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,590 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,590 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Total revenue Gains/(losses) on investments Currency gains/(losses) |
3,184 – – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– 24,515 7 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
3,184 24,515 7 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,590 – – cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– (9,577) (41) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,590 (9,577) (41) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Total income/(loss) | 3,184 | 24,522 | 27,706 | 2,590 | (9,618) | (7,028) | |
| Expenses Investment management fee Other expenses |
3 4 |
(76) (420) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(688) (13) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(764) (433) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(80) (429) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(722) (7) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(802) (436) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) before finance costs | |||||||
| and tax Finance costs |
5 | 2,688 (36) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
23,821 (323) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
26,509 (359) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,081 (41) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(10,347) (366) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,266) (407) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) before tax Tax |
6 | 2,652 (37) |
23,498 – |
26,150 (37) |
2,040 (11) |
(10,713) – |
(8,673) (11) |
| Profit/(loss) for the year | 2,615 | 23,498 | 26,113 | 2,029 | (10,713) | (8,684) | |
| Earnings/(loss) per ordinary share (undiluted) |
8 | 6.31p | 56.70p | 63.01p | 4.75p | (25.09)p | (20.34)p |
| Earnings/(loss) per ordinary share (diluted) |
8 | 6.31p | 56.70p | 63.01p | 4.75p | (25.09)p | (20.34)p |
The total column of this statement represents the Statement of Comprehensive Income of the Company, 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 | 2017 £'000 |
2016 £'000 |
|
|---|---|---|---|
| Non-current assets | |||
| Investments | 9 | 156,756 | 134,647 |
| Investments in subsidiary undertaking | 10 | 2,719 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,250 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 159,475 | 136,897 | ||
| Current assets | |||
| Other receivables | 12 | 645 | 469 |
| Cash and cash equivalents | 4,012 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
1,587 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Total assets | 164,132 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
138,953 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Current liabilities | |||
| Other payables | 13 | (1,129) | (2,512) |
| Bank loan | 18 | (13,000) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,500) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| (14,129) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(11,012) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
||
| Net assets | 150,003 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
127,941 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Equity attributable to equity holders | |||
| Share capital | 14 | 492 | 498 |
| Share premium | 657 | 645 | |
| Special reserve | 50,646 | 53,022 | |
| Capital redemption reserve | 98 | 92 | |
| Retained earnings – revenue | 2,928 | 2,000 | |
| Retained earnings – capital | 15 | 95,182 | 71,684 |
| Total equity | 150,003 | 127,941 | |
| Net asset value per ordinary share (undiluted) | 16 | 364.72p | 303.43p |
| Net asset value per ordinary share (diluted) | 16 | 361.90p | 303.43p |
These financial statements were approved by the Board of Directors and signed on its behalf on 20 July 2017 by:
Chairman
Annual Financial report
| Share capital |
Share premium |
Special reserve |
Capital redemption reserve |
Revenue | Retained earnings Capital |
Total | |
|---|---|---|---|---|---|---|---|
| For the year ended 30 April 2017 At 1 May 2016 |
£'000 498 |
£'000 645 |
£'000 53,022 |
£'000 92 |
£'000 2,000 |
£'000 71,684 |
£'000 127,941 |
| Total comprehensive income: Profit for the year Transactions with owners recorded directly to equity: |
– | – | – | – | 2,615 | 23,498 | 26,113 |
| Repurchase of ordinary shares into treasury Cancellation of ordinary shares from treasury Conversion of subscription shares |
– (6) – |
– – 12 |
(2,376) – – |
– 6 – |
– – – |
– – – |
(2,376) – 12 |
| Dividends paid | – | – | – | – | (1,687) | – | (1,687) |
| At 30 April 2017 | 492 | 657 | 50,646 | 98 | 2,928 | 95,182 | 150,003 |
| 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 ordinary shares from treasury Conversion of subscription shares |
– (5) – |
– – 1 |
(1,576) – – |
– 5 – |
– – – |
– – – |
(1,576) – 1 |
| Dividends paid | – | – | – | – | (1,583) | – | (1,583) |
| At 30 April 2016 | 498 | 645 | 53,022 | 92 | 2,000 | 71,684 | 127,941 |
| 2017 £'000 |
2016 £'000 |
|
|---|---|---|
| Operating activities | ||
| Profit/(loss) before tax | 26,150 | (8,673) |
| Interest payable | 359 | 407 |
| (Gains)/losses on investments | (24,515) | 9,577 |
| Currency (gains)/losses | (7) | 41 |
| (Increase)/decrease in other receivables Decrease in other payables |
(150) (144) |
57 (110) |
| cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | |
| Net cash inflow from operating activities before interest and tax |
1,693 | 1,299 |
| Interest paid | (359) | (407) |
| Irrecoverable overseas tax suffered | (37) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(11) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash inflow from operating activities | 1,297 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
881 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Investing activities | ||
| Purchases of investments | (45,795) | (37,988) |
| Sales of investments | 46,574 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
46,091 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash inflow from investing activities | 779 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
8,103 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Financing activities | ||
| Repurchase of ordinary shares into treasury | (2,593) | (1,359) |
| Conversion of subscription shares | 12 | 1 |
| Dividends paid | (1,687) | (1,583) |
| Increase in inter-company loan | 110 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
396 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net cash outflow from financing activities | (4,158) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(2,545) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net (increase)/decrease in net debt | (2,082) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
6,439 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net debt at the start of the year | (6,913) | (13,311) |
| Effect of foreign exchange rate changes | 7 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(41) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Net debt at the end of the year | (8,988) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(6,913) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Bank loans | (13,000) | (8,500) |
| Cash and cash equivalents | 4,012 | 1,587 |
| (8,988) | (6,913) |
(a) Basis of preparation. The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The principal accounting policies adopted by the Company are set out below.
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 and updated in January 2017 is consistent with the requirements of IFRS, the financial statements have been prepared in accordance with the SORP.
The financial statements have been prepared applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IFRS 28) which was adopted by the European Union for account periods commencing on or after 1 January 2016.
This amendment removes the requirement to consolidate subsidiaries, where these subsidiaries can themselves be classified as investment entities in their own right and instead the subsidiary is treated as an investment at fair value through profit or loss. As the Company's dealing subsidiary, Alpha Securities Trading Limited, meets the criteria to be treated as an investment entity, the Company is now required to prepare its financial statements on a stand alone basis.
There is no impact on the net asset value per ordinary share resulting from this change, nor on the total earnings per ordinary share for the current or prior periods.
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 30 April 2017.
The financial statements are presented in Sterling, which is the currency of the primary environment in which the Company operates. All values are rounded to the nearest thousand pounds (£'000) except where 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(b) below.
(b) Investments. Investments are designated as fair value through profit or loss upon initial recognition. Listed investments are measured initially at cost, and are recognised at trade date. Investments in subsidiary undertakings are stated in the Company's financial statements at fair value, which is deemed to be the net assets of each subsidiary.
For financial assets acquired, the cost is the fair value of the consideration. Subsequent to initial recognition, all listed investments are measured at their quoted bid or SETS prices without deduction for the estimated future selling costs. Unquoted investments are valued at fair value which is determined by the Board, through discussion with the Investment Manager and with reference to the valuation guidelines issued by the International Private Equity and Venture Capital Valuation Board. Valuation techniques employed include: price of recent investment; earnings multiples; net assets; discounted cash flow techniques; industry valuation benchmarks; and available market prices.
Income held at fair value through profit or loss and gains and losses on disposal are recognised in the Statement of Comprehensive Income 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.
(c) 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.
(d) Expenses and finance costs. All expenses and interest payable are recognised on an accruals basis. Expenses are charged through the revenue column in the Statement of Comprehensive Income except as follows:
Investment management fees, performance fees and finance costs are allocated on the basis of 10% to revenue and 90% 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.
(e) Taxation. Taxation represents the sum of taxation payable, any withholding tax suffered and any deferred tax. Taxation is charged or credited in the Statement of Comprehensive Income. Any taxation payable is based on the Company's profit for the year, calculated using tax rates in force at the balance sheet date. 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.
(f) 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.
(g) 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 date of the Statement of Financial Position. 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.
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 Company:
Annual Financial report
| Year ended 30 April 2017 £'000 |
Year ended 30 April 2016 £'000 |
|
|---|---|---|
| Investment income* | ||
| UK dividend income | 2,208 | 2,109 |
| UK fixed interest | 28 | 21 |
| Overseas dividend income | 942 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
454 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 3,178 | 2,584 | |
| Other income | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Bank interest | 6 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
6 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| 6 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
6 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
|
| Total income | 3,184 | 2,590 |
| Income from investments | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc | cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| UK quoted investments | 1,894 | 1,858 |
| UK unquoted investments | 342 | 272 |
| Overseas quoted investments | 942 | 454 |
| 3,178 | 2,584 |
* 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 2017 |
Year ended 30 April 2016 |
||||||
|---|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| Investment management fee | 76 | 688 | 764 | 80 | 722 | 802 |
Details of the terms of the investment management fee and performance fee are set out in the Directors' Report on page 20. As at 30 April 2017, £69,000 was outstanding in respect of amounts due to the Investment Manager (2016: £235,000). 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 (2016: nil).
| Year ended 30 April 2017 |
Year ended 30 April 2016 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Director's remuneration (excluding VAT and NIC) Auditor's remuneration (excluding VAT): |
110 | – | 110 | 112 | – | 112 |
| – Fee for the audit of the Company's financial report | 25 | – | 25 | 20 | – | 20 |
| – Non-audit services – taxation | – | – | – | 10 | – | 10 |
| Other expenses* | 285 | 13 | 298 | 287 | 7 | 294 |
| 420 | 13 | 433 | 429 | 7 | 436 |
* Other expenses include stock exchange listing fees, directors' insurance, AIC membership fees, administration fees, registrars' fees, corporate broker fee, depositary fees, and printing/postage.
In addition the subsidiary had an audit fee of £1,869 (2016: £1,850) excluding VAT.
| Year ended 30 April 2017 |
Year ended 30 April 2016 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Loan interest* | 20 | 183 | 203 | 26 | 233 | 259 |
| Loan commitment fee | 3 | 27 | 30 | 3 | 27 | 30 |
| Loan non-utilisation fee | 12 | 109 | 121 | 11 | 100 | 111 |
| Overdraft interest* | 1 | 4 | 5 | 1 | 6 | 7 |
| 36 | 323 | 359 | 41 | 366 | 407 |
* Interest on financial liabilities that are not held at fair value through profit or loss.
| Year ended 30 April 2017 |
Year ended 30 April 2016 |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
||||
| Irrecoverable overseas tax | 37 | – | 37 | 11 | – | 11 | |||
| 37 | – | 37 | 11 | – | 11 |
| Year ended 30 April 2017 |
Year ended 30 April 2016 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Profit/(loss) before tax | 2,652 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
23,498 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
26,150 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
2,040 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(10,713) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(8,673) cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Profit/(loss) on ordinary activites multiplied by the standard rate of UK corporation tax of 19.92% |
||||||
| (2016: 20.00%) | 528 | 4,681 | 5,209 | 408 | (2,143) | (1,735) |
| Non-taxable capital (gains)/losses | – | (4,885) | (4,885) | – | 1,924 | 1,924 |
| Non-taxable UK dividends | (440) | – | (440) | (422) | – | (422) |
| Non-taxable overseas dividends | (154) | – | (154) | (91) | – | (91) |
| Unutilised management expenses | 99 | 204 | 303 | 105 | 219 | 324 |
| Irrecoverable overseas tax | 37 | – | 37 | 11 | – | 11 |
| Income taxed in different years | (33) | – | (33) | – | – | – |
| 37 | – | 37 | 11 | – | 11 |
The Company has excess management expenses and surplus loan relationship deficits of £14,594,000 (2016: £13,527,000) 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.
Annual Financial report
Set out below are the total dividends recognised in respect of the financial year ended 30 April 2017.
| Year ended 30 April 2017 £'000 |
Year ended 30 April 2016 £'000 |
|
|---|---|---|
| 2016 second interim dividend of 2.50p per ordinary share (2015: 2.30p) 2017 first interim dividend of 1.55p per ordinary share (2016: 1.40p) |
1,050 637 |
985 598 |
| 1,687 | 1,583 |
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 2017 reflects the second interim dividend for the year ended 30 April 2016 which was paid on 19 August 2016. For the year ended 30 April 2017, a first interim dividend of 1.55p has been paid on 27 January 2017 and a second interim dividend of 2.75p together with a special dividend of 2.00p will be paid on 25 August 2017.
Set out below are the total dividends paid/payable in respect of the financial year ended 30 April 2017.
| Year ended 30 April 2017 £'000 |
Year ended 30 April 2016 £'000 |
|
|---|---|---|
| First interim dividend of 1.55p per ordinary share (2016: 1.40p) Second interim dividend of 2.75p per ordinary share (2016: 2.50p) Special dividend of 2.00p per ordinary share (2016: nil) |
637 1,127 820 |
598 1,054 – |
| 2,584 | 1,652 |
The revenue earnings per ordinary share is based on the revenue profit for the year of £2,615,000 (2016: £2,029,000) and on 41,443,082 (2016: 42,694,142) ordinary shares, being the weighted average number of ordinary shares in issue during the year.
The capital return per ordinary share is based on the capital return for the year of £23,498,000 (2016: capital loss £10,713,000) and on 41,443,082 (2016: 42,694,142) 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 2017 (2016: 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 derived from market prices; and
Level 3 – investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data.
The investments held at the balance sheet date fell in to the categories, Level 1, Level 2 and Level 3. The values in these categories are summarised as part of this note. Any investments that are delisted or suspended from a listed stock exchange are transferred from Level 1 to Level 3.
| 2017 £'000 |
2016 £'000 |
|
|---|---|---|
| UK quoted investments (level 1) – UK listed – AIM quoted – Preference shares Overseas quoted investments (level 1) Mutual funds (level 2) Forward currency contracts (level 2) Unquoted investments (level 3) – Equities and warrants – Fixed interest – Preference shares |
52,370 53,732 – 7,802 4,364 147 34,200 587 3,554 |
43,895 47,553 227 2,676 3,554 – 32,743 2,750 636 |
| – Other | – 156,756 |
613 134,647 |
| 2017 | 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| (Level 1) £'000 |
(Level 2) £'000 |
(Level 3) £'000 |
Total £'000 |
(Level 1) £'000 |
(Level 2) £'000 |
(Level 3) £'000 |
Total £'000 |
|
| Opening book cost | 92,784 | 3,040 | 46,424 | 142,248 | 89,083 | 2,427 | 50,234 | 141,744 |
| Opening fair value adjustment | 1,567 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
514 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(9,682) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(7,601) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
9,478 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
967 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(1,935) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
8,510 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Opening valuation | 94,351 | 3,554 | 36,742 | 134,647 | 98,561 | 3,394 | 48,299 | 150,254 |
| Movements in year: | ||||||||
| Purchases at cost | 42,617 | – | 2,046 | 44,663 | 33,103 | 1,456 | 4,565 | 39,124 |
| Sales – proceeds | (41,427) | 5 | (5,178) | (46,600) | (36,212) | (1,139) | (7,808) | (45,159) |
| – realised gains/(losses) on sales | 5,325 | (5) | (5,139) | 181 | 8,561 | 296 | (2,318) | 6,539 |
| Transfer to/(from) unquoted | ||||||||
| investments (cost) | (2,912) | – | 2,912 | – | (1,751) | – | 1,751 | – |
| Transfer to/(from) unquoted | ||||||||
| investments (unrealised loss) | 3,053 | – | (3,053) | – | 2,260 | – | (2,260) | – |
| Increase/(decrease) in fair | ||||||||
| value adjustment | 12,897 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
957 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
10,011 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
23,865 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(10,171) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(453) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(5,487) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
(16,111) ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Closing valuation | 113,904 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
4,511 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
38,341 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
156,756 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
94,351 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
3,554 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
36,742 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
134,647 ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Closing book cost | 96,387 | 3,040 | 41,065 | 140,492 | 92,784 | 3,040 | 46,424 | 142,248 |
| Closing fair value adjustment | 17,517 | 1,471 | (2,724) | 16,264 | 1,567 | 514 | (9,682) | (7,601) |
| 113,904 | 4,511 | 38,341 | 156,756 | 94,351 | 3,554 | 36,742 | 134,647 |
For Level 3 investments IFRS 7 requires that if the effect of changing one or more of the inputs to reasonably possible alternative assumptions would be to change the fair value significantly it should be disclosed. The information used in determination of the fair value of Level 3 investments is specific to each investee company and is in accordance with the methodologies set out in the accounting policies in Note 1(e). The investments have been reviewed and, where reasonable possible alternatives have been identified, these have been applied to each investment. The potential impact to the net assets of the Company by using the reasonably possible alternative assumptions would be an increase of £341,000 (2016: £346,000) of the fair value of Level 3 assets.
During the year, the valuations of the following Level 3 assets were reduced: Buried Hill Energy (Cyprus) (£47,000), Lamp Group (£308,000), MBA Polymers (£173,000), Path Investments (£164,000), Starcount (£1,609,000).
Annual Financial report
During the year, Equus Petroleum, which was valued at £436,000 at 30 April 2016, was sold during the year for proceeds of £426,000 and Infusion 2002, which was valued at £479,000 at 30 April 2016 was sold for £510,000. In addition, there was a partial sale of Oxford Nanopore Technologies, 86,897 shares with a value of £3,476,000 at 30 April 2016 were sold for £3,360,000.
Included in purchases at cost and proceeds from sales are the following transaction costs:
| 117 | 183 | |
|---|---|---|
| Purchases Sales |
90 27 |
142 41 |
| 2017 £'000 |
2016 £'000 |
| % 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.
| 2017 £'000 |
2016 £'000 |
|
|---|---|---|
| Historic book cost of investment in subsidiary undertaking Opening fair value adjustment |
– 2,250 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
– 2,255 cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc |
| Opening valuation Increase/(decrease) in fair value adjustment |
2,250 469 |
2,255 (5) |
| Closing valuation | 2,719 | 2,250 |
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 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 2017 the Company held shares amounting to 3% 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 | |
|---|---|---|
| Attraqt Group | Ordinary | 21.53% |
| Avation | Ordinary | 3.60% |
| Ceramic Fuel Cells | Ordinary | 3.53% |
| Claremont Alpha* | Ordinary | 100.00% |
| Duke Royalty | Ordinary | 3.76% |
| Eden Research | Ordinary | 6.66% |
| Flying Brands | Ordinary | 3.59% |
| Fox Marble | Ordinary | 6.54% |
| Gaming Realms | Ordinary | 4.37% |
| Gresham Technologies | A Ordinary | 3.21% |
| Gundaline | Ordinary | 12.00% |
| Hardlyever+ | A Ordinary | 65.21% |
| Hardlyever | Ordinary | 10.43% |
| Hornby | Ordinary | 3.19% |
| Houseology Design | Ordinary | 16.94% |
| Lamp Group | Ordinary | 6.93% |
| Lansdowne Oil & Gas | Ordinary | 4.07% |
| Liontrust Asset Management | Ordinary | 3.55% |
| LumX Group | Ordinary | 6.03% |
| Maison Seven | Ordinary | 19.56% |
| Metapack | Ordinary | 4.40% |
| Mobile Streams | Ordinary | 7.37% |
| N+1 Singer | Ordinary | 6.78% |
| Orchard Funding Group Physiolab Technologies |
Ordinary Ordinary |
5.39% 15.03% |
| Pittards | Ordinary | 17.19% |
| Property Franchise Group | Ordinary | 4.88% |
| Ramsdens Holdings | Ordinary | 7.13% |
| Reaction Engines | Ordinary | 4.32% |
| Starcount Group | A Ordinary | 22.40% |
| Trinity Exploration & Production | Ordinary | 3.63% |
| URICA | Ordinary | 28.32% |
| Zinc Media Group | Ordinary | 12.26% |
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% of the total voting rights of this company and therefore does not exercise control.
| 2017 £'000 |
2016 £'000 |
|
|---|---|---|
| Amounts due from brokers Prepayments and accrued income Taxation recoverable |
275 333 37 |
249 208 12 |
| 645 | 469 |
Annual Financial report
| 2017 £'000 |
2016 £'000 |
|
|---|---|---|
| Amounts due to brokers Accrued expenses Amounts due to subsidiary undertakings |
4 181 944 |
1,353 325 834 |
| 1,129 | 2,512 |
| 2017 Shares |
2017 £'000 |
2016 Shares |
2016 £'000 |
|
|---|---|---|---|---|
| Allotted, called up and fully paid: | ||||
| Ordinary shares of 1p each | 41,127,975 | 411 | 42,165,142 | 422 |
| Ordinary shares of 1p each held in treasury | 1,223,706 | 12 | 734,000 | 7 |
| Subscription shares of 1p each | 6,859,138 | 69 | 6,862,677 | 69 |
| 49,210,819 | 492 | 49,761,819 | 498 |
| Shares | £'000 | |
|---|---|---|
| Movements in ordinary shares during the year: | ||
| Ordinary shares in issue on 1 May 2016 | 42,165,142 | 422 |
| Repurchases of ordinary shares into treasury | (1,040,706) | (11) |
| Issue of ordinary shares upon exercise of subscription shares | 3,539 | – |
| Ordinary shares in issue on 30 April 2017 | 41,127,975 | 411 |
The movements in ordinary shares held in treasury during the year are as follows:
| 2017 | 2017 | 2016 | 2016 | |
|---|---|---|---|---|
| Shares | £'000 | Shares | £'000 | |
| Balance brought forward | 734,000 | 7 | 578,294 | 6 |
| Repurchases of ordinary shares | 1,040,706 | 11 | 676,000 | 6 |
| Cancellation of ordinary shares | (551,000) | (6) | (520,294) | (5) |
| Balance carried forward | 1,223,706 | 12 | 734,000 | 7 |
During the year ended 30 April 2017, a total of 1,040,706 ordinary shares were repurchased by the Company at a total cost, including transaction costs, of £2,376,000 for placement in treasury (2016: 676,000 ordinary shares were repurchased for placement in treasury for £1,576,000).
The movements in subscription shares during the year are as follows:
| Shares | £'000 | |
|---|---|---|
| Balance brought forward Conversion of subscription shares into ordinary shares |
6,862,677 (3,539) |
69 – |
| Balance carried forward | 6,859,138 | 69 |
During the year, holders of 3,539 (2016: 265) subscription shares exercised their rights to covert those shares into ordinary shares at a price of 345 pence per ordinary share, giving a total consideration received of £12,000 (2016: £1,000).
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 December 2017, whereupon rights under the subscription shares will lapse.
| Capital reserve – | Capital reserve – | Total capital | |
|---|---|---|---|
| realised | unrealised | reserve | |
| £'000 | £'000 | £'000 | |
| Balance at 1 May 2016 | 87,360 | (15,676) | 71,684 |
| Increase in fair value adjustment | – | 24,334 | 24,334 |
| Net gain on realisation of investments | 181 | – | 181 |
| Currency gains on capital items | 7 | – | 7 |
| Costs charged to capital (net of tax relief) | (1,024) | – | (1,024) |
| Transfer between reserves | 790 | (790) | – |
| Balance at 30 April 2017 | 87,314 | 7,868 | 95,182 |
| Balance at 1 May 2015 | 80,822 | 1,575 | 82,397 |
| Decrease in fair value adjustment | – | (16,116) | (16,116) |
| Net gain on realisation of investments | 6,539 | – | 6,539 |
| Currency losses on capital items | (41) | – | (41) |
| Costs charged to capital (net of tax relief) | (1,095) | – | (1,095) |
| Transfer between reserves | 1,135 | (1,135) | – |
| Balance at 30 April 2016 | 87,360 | (15,676) | 71,684 |
The net asset value per share is based on the net assets of £150,003,000 (2016: £127,941,000) and on 41,127,975 (2016: 42,165,142) 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 6,859,138 (2016: nil) subscription shares were exercised (as the undiluted asset value is higher than the exercise price of 345 pence) resulting in a total of ordinary shares in issue of 47,987,113 (2016: 42,165,142).
At 30 April 2017, the Company did not have any financial commitments which had not been accrued (2016: nil).
As detailed on page 2, the principal investment objective of the Company is to achieve above average rates of total return over the longer term and to achieve a growing dividend stream.
The Company'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 Company 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 Company's investment portfolio. It is the Board's policy that the Company 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 2017 are disclosed in the investment portfolio set out on pages 10 to 12.
Annual Financial report
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 Company 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. Therefore, a proportion of the net assets that are not priced in Sterling may be covered by forward currency contracts, so that the Company's exposure to currency risk is reduced.
An analysis of the Company's currency exposure is detailed below:
| Investments at 30 April 2017 £'000 |
Net monetary assets at 30 April 2017 £'000 |
Total at 30 April 2017 £'000 |
Investments at 30 April 2016 £'000 |
Net monetary assets at 30 April 2016 £'000 |
Total at 30 April 2016 £'000 |
|
|---|---|---|---|---|---|---|
| US Dollar | 5,416 | 152 | 5,568 | 3,113 | – | 3,113 |
| Australian Dollar | 2,601 | (2,301) | 300 | 1,804 | – | 1,804 |
| Euro | 2,455 | 37 | 2,492 | 1,220 | 11 | 1,231 |
| Swiss Franc | 1,433 | – | 1,433 | 109 | – | 109 |
| Canadian Dollar | 1,170 | – | 1,170 | 2,336 | 4 | 2,340 |
| Danish Krone | – | (3) | (3) | – | – | – |
| Norwegian Krone | – | – | – | 219 | – | 219 |
| Total | 13,075 | (2,115) | 10,960 | 8,801 | 15 | 8,816 |
A 5% increase in Sterling against the relevant foreign currencies would have the effect of reducing the profit or loss and the net assets by £548,000 (2016: £441,000). A 5% decrease in Sterling would have an equal and opposite effect.
The majority of the Company'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 0.25% at 30 April 2017 (2016: 0.5%).
The Company has a 5 year multi-currency revolving credit facility of £30,000,000 of which £13,000,000 was drawn down at 30 April 2017 (2016: £8,500,000). Interest is charged at variable rates equivalent to 1.70% 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 2017 | ||||||
|---|---|---|---|---|---|---|
| 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 | 587 | 4.09 | 0.74 | 2,750 | 0.87 | 2.18 |
Other price risk is the risk that the value of an instrument will fluctuate as a 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% increase in the value of the Company's investments would have the effect of increasing net assets by £7,974,000 (2016: £6,845,000). A 5% decrease would have an equal and opposite effect.
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial commitments. A proportion of the Company'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 Company'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 2017. In addition, none of the Company's assets are subject to any special arrangements linked to their liquidity.
The Company primarily finances its operations through equity, retained profits and bank borrowings. As at 30 April 2017, the Company had drawn down £13,000,000 of its committed £30,000,000 multi-currency revolving credit facility with The Royal Bank of Scotland plc (30 April 2016: £8,500,000). 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 2017 was 1.96% per annum (2016: 2.21% per annum). There was no interest rate risk associated with other short-term creditors at 30 April 2017 or 30 April 2016. 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:
Annual Financial report
The amounts paid to the Investment Manager and amounts outstanding at the year end are disclosed in Note 3. However, the existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party.
The Company surrendered excess management expenses without payment to Alpha Securities Trading Limited of £445,000 (2016: £nil). 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 (2016: £nil). During the year the Company paid its subsidiary undertaking interest on the intercompany loan amounting to £nil (2016: £7,000). 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 Science Room, The Royal Society of Chemistry, Burlington House, Piccadilly, London W1J 0BA on Thursday, 5 October 2017 at 12.30 pm for the purpose of transacting the following business:
To consider and, if thought fit, to pass the following as ordinary resolutions:
To consider and, if thought fit, to pass the following as an ordinary resolution:
(ii) up to an aggregate nominal value of £20,489 (approximately 5% of the aggregate nominal amount of the issued ordinary share capital as at 20 July 2017);
provided that this authority shall expire at the conclusion of the next annual general meeting of the Company to be held in 2018, 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:
subscription share shall be 1 pence per share, being the nominal value thereof;
By order of the Board:
Secretary 20 July 2017
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 they wish.
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.
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 2017 (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 20 July 2017 (being the latest practicable date prior to the publication of this notice) the Company's issued share capital consisted of 42,099,473 ordinary shares, carrying one vote each, of which 1,121,206 are held in treasury and 6,856,346 subscription shares, which carry no voting rights. Therefore, the total voting rights in the Company as at 20 July 2017 were 40,978,267 votes.
Any person holding 3% or more of the total voting rights of the Company who appoints a person other than the Chairman of the AGM as their 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% 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 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 19 of the Company's Annual Financial Report for the year ended 30 April 2017.
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.
Annual Financial report
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 will have a final opportunity to exercise their subscription shares on the last business day in 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
October
If the share price of an investment trust is lower than the net asset value per share, the shares are said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage of the net asset value per share. If the share price is higher than the net asset value per share, the shares are said to be trading at a premium.
Gearing is the process whereby changes in the total assets of a company have an exaggerated effect on the net assets of that company's ordinary shares due to the use of borrowings.
Leverage is defined in the AIFMD as any method by which an AIFM increases the exposure of an Alternative Investment Fund it manages, whether through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means.
There are two measures of calculating leverage:
Net asset value represents the total value of the Company's assets less the total value of its liabilities, and is normally expressed on a per share basis.
Total expenses (excluding finance costs, performance fees and taxation) incurred by the Company as a percentage of average net asset values.
The total return on an investment is made up of capital appreciation (or depreciation) and any income paid out (which is deemed to be reinvested) by the investment. Measured over a set period, it is expressed as a percentage of the value of the investment at the start of the period.
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]
Capita Asset Services Shareholder Enquiries The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
(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
PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX
Cantor Fitzgerald Europe One Churchill Place Canary Wharf London E14 5RB
Dickson Minto W.S. Broadgate Tower Primrose Street London EC2A 2EW
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