TIDMATS
Artemis Alpha Trust plc (the 'Company')
LEI: 549300MQXY2QXEIL3756
Annual Report for the year ended 30 April 2023
Financial Highlights
Year ended Year ended
30 April 2023 30 April 2022
Total returns
Net asset value per ordinary share* 1.3% (21.9)%
Ordinary share price* (1.2)% (24.8)%
FTSE All-Share Index 6.0% 8.7%
Revenue and dividends
Revenue earnings per ordinary share 6.74p 6.29p
Dividends per ordinary share 6.20p 5.60p
Ongoing charges* 1.08% 1.01%
As at As at
30 April 2023 30 April 2022
Capital
Net Assets (£'000) 119,817 124,101
Net asset value per ordinary share 366.02p 367.65p
Ordinary share price 319.00p 329.00p
Net gearing* 13.4% 9.4%
Total returns to 3 years 5 years 10 years Since 1 June 2003**
30 April 2023
Net asset value 23.5% 0.1% 41.8% 553.4%
per ordinary
share*
Ordinary share 34.4% 7.2% 28.3% 500.5%
price*
FTSE All-Share 45.2% 24.1% 80.7% 338.3%
Index
** The date when Artemis was appointed as Investment Adviser
* Alternative Performance Measure
Source: Artemis/Datastream
Chairman's Statement
Performance
During the year ended 30 April 2023, your Company's net asset value per share
rose by 1.3% and its share price fell 1.2% (on a total return basis). In
comparison the benchmark FTSE All- Share Index rose by 6.0%. The second half of
the year showed a stronger relative performance than the first half.
Although the FTSE All-Share Index is your Company's formal benchmark, a
significant proportion of the companies in the portfolio are relatively small
and form part of the FTSE 250 Index which declined by 3.3% over the year. As we
have reminded shareholders in the past, the portfolio bears little relationship
to the FTSE All-Share and the stock-selection is not constrained by it. As the
last two years have shown, short-term performance is likely to bear very little
resemblance to the benchmark; our aim remains to out-perform it over the long
term.
During the year global markets were dominated by Russia's invasion of Ukraine
and the resulting sharp increase in energy prices, inflation and interest rates.
The uncertainty caused by Brexit was exacerbated by the mishandling of the
economy by the Truss government, resulting in weakened sentiment towards the UK
market and, in particular, the consumer-orientated stocks which feature strongly
in our portfolio.
However, the Manager remains confident in the prospects for individual stocks
and convinced of the under-valuation of many UK companies. Although the
portfolio remains dominated by exposure to UK companies such as retailers, banks
and housebuilders, the Manager has also initiated positions in some non-UK
companies including out-of-favour digital companies such as Nintendo, Alphabet
and Meta.
Revenue earnings and dividends
We are pleased to be able to deliver growth in dividends at a rate in excess of
inflation, in line with our policy.
The Board has declared a final dividend of 3.87p (2022: 3.46p) per share, which
will be subject to approval by shareholders at the Company's Annual General
Meeting. The final dividend, if approved by shareholders, will be paid on 29
September 2023 to those shareholders on the register at 25 August 2023, with an
ex-dividend date of 24 August 2023.
Total dividends declared for the year will therefore amount to 6.20p per share
(2022: 5.60p), an increase of 10.7% on the previous year and ahead of the
increase in the Consumer Prices Index (9.0% as at April 2022), in line with our
target.
Investment income from our investee companies fell during the year by 1.5%. The
subsidiary company continues to have healthy reserves with which to support the
Company's earnings and dividends, if required.
Revenue earnings per share stand at 6.74p for the year to 30 April 2023, an
increase of 7.2% on the 6.29p of the prior year.
Share buy backs/discount
The discount to underlying asset value averaged 10.1% over the course of the
year, ranging from 4% to 14%, and at the year end stood at 12.8%. In general,
discounts of investment trusts, including our own peer group, have widened over
the last few months as a result of adverse market conditions.
During the year, the Company bought back a total of 1,019,766 ordinary shares at
a total cost of £3.1 million and an average discount of 11.1%, adding
approximately 1.19p to the net asset value per share. The policy of buying back
shares when in the best interests of our shareholders will continue. We aim to
do so in a pragmatic fashion, taking into account both market conditions and the
discounts prevailing amongst our peer group; we believe this to be the most
effective way of addressing any imbalance in the supply and demand for our
shares.
Board Succession
As noted last year, Blathnaid Bergin, having joined the Board in July 2015,
retired at the Annual General Meeting in October 2022. Blathnaid had served as
Chair of the Audit Committee and Senior Independent Director throughout that
time. I am pleased that Victoria Stewart has agreed to take on the role of
Senior Independent Director.
The Board spent a significant amount of time with its external advisers in
choosing the right candidate to replace Blathnaid Bergin as Chair of the Audit
Committee. The Board recognises the importance of achieving a balance of skills
and experience whilst paying close attention to the tenure of directors and the
level of diversity. Details of these discussions and the process followed can be
found within the Annual Report. This process resulted in Tom Smethers joining
the Board in March of this year; he brings outstanding and relevant experience
and I welcome him to the Board.
Annual General Meeting
Your Company's Annual General Meeting ("AGM") will take place on Thursday, 21
September 2023 at 10.00 a.m. at the London offices of Artemis Fund Managers,
Cassini House, 57 St. James's Street, London, SW1A 1LD. The Directors look
forward to welcoming shareholders.
The Investment Manager will make a presentation and answer any questions on the
portfolio performance and strategy.
I would encourage you to make use of your proxy votes by completing and
returning the form of proxy.
Outlook
Despite continued uncertainty and volatility in markets, our policy remains one
of picking individual stocks in pursuit of returns over the long term. Our
Investment Manager is confident in the prospects for these companies and the
opportunities arising from the current market dislocation.
Contact us
Shareholders can keep up to date with Company performance by visiting
artemisalphatrust.co.uk where you will find information on the Company, a
monthly factsheet and detailed quarterly updates from the Investment Manager.
The Board is always keen to hear from shareholders. Should you wish to, I can be
contacted by email on alpha.chairman@artemisfunds.com.
Duncan Budge
Chairman
11 July 2023
Investment Manager's Review
In the year ended April 2023, the Company's NAV increased by 1.3% compared to a
6.0% increase in the FTSE All-Share Index. In the last 6-month period since our
interim report, performance improved with NAV rising by 17.0%, compared to a
12.5% increase in its benchmark.
Key factors which influenced equity markets and our portfolio in the period
included:
· Energy prices rose sharply in response to the impact of the Russia/Ukraine
war on European gas supply, increasing the cost pressures affecting consumers
and corporates, before falling more recently.
· UK politics faced a crisis of confidence in September following the Liz
Truss budget. This caused extreme volatility in UK government bond yields and
forced an abrupt U-turn from the new government under Rishi Sunak.
· Inflation remained higher than expected in the United Kingdom, Europe and
the US, although economic activity proved more resilient to interest rate
increases than first expected.
· Interest rates rose sharply as a result, and a high degree of uncertainty
remains over their future path.
This series of events has damaged consumer, corporate and investor confidence.
Confusingly, despite this, employment trends have remained robust and corporate
profitability has been better than expected.
Idiosyncratic events in the UK hurt sentiment that was already fragile since
Brexit. Markets are now pricing an idiosyncratic inflation problem in the UK,
leaving the UK with higher long-term bond yields than Greece or Italy.
We continue to anticipate attractive prospective returns from our portfolio
owing to a combination of macroeconomic and bottom-up factors:
· Inflation is likely to fall markedly to the benefit of consumers and
businesses worldwide.
· Discounted UK asset valuations should lead to higher future returns.
· Durable equity franchises are attractively valued and provide a long-term
hedge against inflation.
· Capital cycles are leading to increased profitability in capital intensive
and cyclical sectors.
· The impact of share buybacks at a time of low valuations should be very
positive.
The current portfolio is characterised by exposures to capital cycle
beneficiaries, structural growth opportunities, and discounted UK assets.
Airlines (easyJet/Ryanair) and retailers (Frasers/Currys) stand to see higher
returns from limited capacity / consolidation. Financials (Lloyds/Natwest,
Plus500, Hargreaves Lansdown) should be beneficiaries of interest rates
remaining higher than they have been in recent years whilst the UK housebuilders
should benefit if interest rates ease from current levels. Out-of-favour digital
winners (Nintendo, Delivery Hero, and Alphabet) continue to benefit from
structural trends that should improve their business economics.
Another reason we are confident in the prospective returns of the portfolio is
the result of the diversification in the sources of excess return that we have
identified. The portfolio also retains considerable liquidity, with over 80% of
the Company able to be sold within one day, which enables us to take advantage
of movements in the market.
We judge the greatest visible risks to our outlook to reside in energy markets
and geopolitics. Energy markets are fundamentally tight due to underinvestment
following the 2014/15 downturn and disruptions to European gas supply provoked
by the war. Higher demand or an unforeseen reduction in supply would be damaging
to economies with limited domestic supply. Both the UK and US will have
elections next year and US-China relations remain strained.
Inflationary pressures likely to ease
UK inflation markets suggest that inflation will be 4% over the next 3 years and
3.6% over the next 10 years. Our view is more sanguine.
Energy prices have fallen markedly in recent months. Luck has played its part as
Europe experienced an unusually warm winter. Russian oil production has also
proven more resilient than many feared. Following the re-opening of China, the
last pandemic-induced distortions to supply chains have eased. These factors
suggest downward pressure on goods inflation, when mathematically, inflation
should decline from its peak level, as the high rates of inflation seen in the
second half of 2023 cease to form part of calculations.
UK labour market tightness has showed signs of easing. In 2022, net migration
reached a record net 603,000 against many predictions of a fall following
Brexit. The widespread decline in real spending power caused by inflation is
providing incentives to seek employment and so the ratio of vacancies to job
seekers is falling.
Monetarists were amongst the few correctly to predict higher inflation following
the abnormal increase in money supply in response to the pandemic. They are now
highlighting marked contractions in money supply growth in both the US and
Europe resulting from the increase in interest rates and note that current
levels of interest rates would be consistent with the inflation rates seen in
the 2010s.
The importance of inflation targeting when making historic comparisons is a
factor that is seemingly overlooked. Inflation targeting was introduced in 1992,
ahead of the Bank of England becoming independent in 1997. The average annual
increase in CPI in the 28 years to 2020 was exactly 2.0%. In the prior 20-year
period, the average was 9%.
This illustrates the effectiveness of central banks that have the intent and
authority to target inflation over the long- term. Whilst a profound policy
mistake was made during the pandemic, central banks remain determined to
reassert credibility and have the authority to do what it takes to bring
inflation back down to target levels. We are sceptical, consequently, both about
expectations of inflation remaining above target and are wary of falling prey to
the excessive pessimism currently on display in financial markets as a result of
recent difficulties.
A decline in inflation and interest rate expectations should be supportive of
risk assets by lowering discount rates and by enabling debt markets to function
effectively, even if the cost in the short term is higher interest rates and
recession. A re-opening of debt and capital markets would be likely to lead to a
pick-up in corporate and private equity activity.
Low valuations in the UK should lead to higher returns
The equity risk premium is a measure of the premium you receive in return for
accepting the uncertainty of investing in equities and demonstrates the
cheapness of the UK market. At current levels, the earnings yield on the FTSE
All-Share is 11%. UK 10-year index linked government bonds yield 0.5%. This
implies an equity risk premium of over 10%.
Using the same methodology, the current US and European equity market risk
premia are 4% and 7%, respectively. In our judgement, this difference is not
justified by the long-term fundamental prospects for corporate profit growth but
reflects weak sentiment towards UK markets. Whilst this point might have been
made at any point in the last five years, it remains valid.
Our holdings in Natwest and Lloyds illustrate the significant value on offer.
Both banks trade on earnings yields in excess of 15% (equating to PE ratios of
less than 7x) and at a discount to their book value. This is despite being large
and enduring franchises that are also beneficiaries of a normalisation in
interest rates. Their combined net interest income in 2023 is forecast to be 40%
(>£7bn) more than in 2019.
All of our holdings across the UK housebuilders, with the exception of Berkeley
Group, trade below book value. This is attractive for businesses that have
consistently achieved returns on capital of over 15%. The UK faces an
accumulated supply deficit of over 1 million homes, which has worsened owing to
an increasingly difficult environment for planning permissions.
Higher interest rates have reduced demand in the short-term, but this does not
impact household formation, which continues every year. Demand for housing is
deferred, not eliminated, when it is not fulfilled immediately, and so it is
logical to expect industry volumes to recover, as and when mortgage rates
stabilise.
The takeover of Dignity highlights the neglected value in UK equities. We have
written extensively about the company's irreplicable position within the end-of
-life industry as the only vertically integrated provider of funerals (725
branches, #2 share), cremations (46 crematoria, #1 share) and pre-need plans
(£1.2bn assets, #1 share).
The Board recommended an offer for the business at an enterprise value of £789m
(550p). We have historically noted that the crematoria assets alone generate
£48m of EBITDA, implying a value of £820m-£960m based on the comparable
multiples of European infrastructure (17-20x). As the bidder offered an
opportunity to roll existing shareholdings into a new private vehicle, the
Takeover Panel required Morgan Stanley to provide an independent valuation. This
was publicly available and indicated a range of 660-990p, 20-80% above the offer
price.
We reduced our holding into the cash offer, but we have retained a considerable
exposure to the publicly quoted equity roll-over vehicle ("Castelnau") as we see
significant value in the business.
Durable equity franchises are attractively valued long-term hedges against
inflation
Equity valuation multiples initially contracted sharply in response to higher
interest rates, reflecting the fact that higher discount rates reduce equity
values. However, higher inflation also acts favourably for equities which
display durable pricing power. In our view, this is the primary explanation for
the resilience of equity markets that many have found surprising.
The Company has a number of holdings in durable equity franchises such as
Nintendo, GSK and EssilorLuxottica each of which enjoys significant pricing
power.
Nintendo made considerable progress in the year in its strategy to become a
broad entertainment business, allowing it to improve monetisation of its
uniquely popular intellectual property. This was evident in the success of the
Super Mario Brothers movie, which has become the second most popular animated
movie of all time with global box office receipts of over $1.3bn.
GSK has successfully strengthened its balance sheet with the spin-off of its
consumer staples business Haleon. The company had a major pipeline success with
its RSV (Respiratory Syncytial Virus) vaccine, which has more than 90% efficacy
in adults over the age of 50, the cohort at the greatest risk of hospitalisation
with the disease.
EssilorLuxottica is the largest global eyewear business, operating in a
structurally growing industry and with an R&D budget larger than their four
closest competitors combined. This enables the group to provide innovative
essential eye care solutions to an ageing global population.
The share prices of Just Eat Takeaway and Delivery Hero have been weak as their
growth trends were impacted by consumer confidence and pandemic-related
distortions. Both companies have stemmed their losses far more quickly than the
market expected, despite declining order volumes. Ultimately, we believe the
industry remains in the early stages of long-term adoption and will be able to
achieve levels of profitability higher than are anticipated by investors.
The Company's principal focus in the year was to take advantage of volatility to
add new holdings in businesses characterised by the long duration of their
earnings potential.
In July, the Company initiated a holding in global infrastructure operator
Vinci. The company has a portfolio of world-class infrastructure assets (toll
roads and airports) with inflation- linked revenues. Vinci has funded these
investments from its cash generative contracting business that is benefitting
from significant tailwinds from the energy transition.
In August, the Company initiated a holding in Berkeley Group, a company with a
unique 16-year land bank and strong record of operational excellence including a
counter cyclical approach to buying land. London is a structurally under
-supplied market in the <£1m price range. The government estimates demand for
London housing to be c.90,000 units per annum, and in the last 3 years
deliveries have been less than 30,000 per annum.
The Company received shares in Haleon when the global personal care business was
spun out of GSK. The Company doubled its holding in August as we judged concerns
over the potential impact of Zantac litigation to be exaggerated. Haleon owns a
number of market-leading brands in oral care (Sensodyne), pain relief
(Panadol/Advil) and vitamins (Centrum) that have the potential to grow reliably
above GDP owing to trends such as ageing populations, self-medication, and
premiumisation.
In the second half of the year, the Company repurchased a holding in Meta and
initiated a position in Alphabet as we felt that investor pessimism was
excessive in the light of the stability of, respectively, their globally
dominant franchises in social media and internet search. The digital advertising
market has grown rapidly in recent years but remains underpenetrated in many
geographies and industry verticals. Meta and Alphabet are amongst the global
leaders in the field of artificial intelligence and stand to benefit from the
opportunities its development presents.
A new position was started in Hargreaves Lansdown in January as the stock was de
-rated sharply in response to slowing industry growth. The company retains an
attractive position with a >40% share of the UK direct-to-consumer (D2C)
investment market. The entire D2C market has total assets of £300bn, which is
only 5% of total UK household wealth of £15tn. We expect the market to grow as
costs fall and ageing populations move towards greater personal involvement in
their financial planning.
Capital cycles are leading to increased profitability in capital intensive and
cyclical sectors
Disruption from the pandemic and volatile demand patterns have created tough
conditions in many industries meaning a lack of capital investment is leading to
higher returns for those that survive.
In our view, this is most evident in the aviation industry, which was one of the
hardest hit sectors through the pandemic as demand evaporated and government
support was limited.
Boeing and Airbus combined produced almost 2,000 fewer planes than expected
during the pandemic and have full order books to the end of the decade. Demand
has rebounded strongly, resulting in a strong pricing environment where it is
hard to see how supply can respond.
Our holdings in low-cost airlines easyJet and Ryanair have been strong
performers as earnings expectations have been revised upwards owing to their
ability to increase fares significantly without loss of volume. Our judgement is
that valuations fail to capture the new environment of higher profitability and
the operational gearing of their business models to higher prices.
Retail is another sector that has seen dramatic changes owing to the shift to
online retail, forced store closures during the pandemic and unpredictable
demand. Frasers Group has outshone its peers through prudent cost management and
retaining a strong value proposition for customers.
The company has used its strong cash generation to take advantage of commercial
distress to acquire several businesses such as Studio Retail, Gieves & Hawkes,
Missguided, and Sportsmaster. The company's efficient infrastructure and
distribution platforms, combined with its frugal approach to cost, allow it to
extract value from businesses which previously struggled. The current
environment continues to create new opportunities for the business.
Impact of share buybacks underestimated
Share repurchases are an alternative way of returning cash to shareholders whose
value is theoretically equivalent to a reinvestment of dividends. In practice,
share buybacks can offer a number of advantages:
· Corporates can use share repurchases to distribute excess capital they might
not otherwise pay out as dividends.
· Capital gains taxes are lower than income tax in the UK.
· The resulting growth in earnings per share may be valued more highly by the
market than capital returns.
To illustrate the last point, consider a company that trades on 10x earnings and
grows earnings by 5% per annum over 10 years. Assuming a constant multiple, if
35% of net income is used to repurchase shares, the company's growth in earnings
per share doubles from 5% to 10%.
This highlights how lower valuations increases the compounding effect of share
repurchases, which in our view is relevant to the UK equity market and our
portfolio today and why Charlie Munger once said, "Pay close attention to the
cannibals - the businesses that are eating themselves by buying back their
stock."
Plus500 is one such example within the portfolio. The company's business model
allows it to grow earnings with limited capital required. Since our investment
in 2016, it has invested £330m in repurchasing its own shares and this has
helped it reduce its share count by 21% and grow its grown earnings by 17% per
annum. Plus500 continues to expand into new geographies and business areas,
including the US market, which has exciting potential.
Portfolio companies, which account for 45% of NAV, are repurchasing shares. This
segment of the portfolio trades on a weighted average multiple of 10x earnings.
Whilst the running dividend yield of the portfolio is 2%, including pro-rata
share repurchases, the aggregate distribution yield is close to 5%. We believe
that such characteristics offer a sound body for future returns to shareholders.
John Dodd and Kartik Kumar
Fund managers
Artemis Fund Managers Limited
11 July 2023
April 2023 -
Key Sector
Exposures
Sector 2023 2022 Companies
General retail 14.8% 16.0% Currys, Frasers
Housebuilding 13.2% 11.5% Barratt, Bellway, Berkeley, Redrow, Springfield
Airlines 12.8% 12.7% easyJet, Ryanair
Video games & 9.1% 10.5% Nintendo, Hornby
hobbies
Banking 7.7% 5.9% Lloyds, NatWest
Funerals 6.8% 10.1% Dignity
Food delivery 6.2% 8.0% Delivery Hero, Just Eat Takeaway.com
Financial 6.1% 3.5% Singer Capital Markets
services
Technology 5.9% - Alphabet, Darktrace, Meta
Aerospace & 5.4% 5.2% Reaction Engines
defence
Trading 5.0% 5.2% Plus500
platform
Consumer 4.1% 2.0% EssilorLuxottica, Haleon
staples
Pharmaceuticals 4.1% 5.6% GSK
China 3.0% 4.9% Prosus
technology
Industrials 2.1% 1.4% Vinci
Energy 0.9% - BP, Shell
Basic materials 0.9% - Anglo American
Property 0.7% 0.7% Claremont Alpha
Serviced - 3.1% IWG
offices
Leisure - 2.7% Flutter Entertainment, J D Wetherspoon
Source: Artemis
ESG & Stewardship at Artemis
Introduction
Artemis believes stewardship activities contribute to improvement in company
performance and to consequently higher returns for our clients.
Stewardship is a fundamental element of our approach across all investment
strategies. Whilst individual strategies are distinctive, views and ideas are
shared across investment teams. The Stewardship team supports fund managers by
providing insight, research and analysis, discussion, and challenge on ESG and
stewardship matters.
In 2022 Artemis set goals for the Net Zero Asset Managers initiative, covering
80% of AuM. Additionally, we published our first Corporate Social Responsibility
report and achieved signatory status from the FRC. We have developed extensive
internal tools to inform and guide our Stewardship focuses and continue to
strengthen our controls, processes, and actions.
Approach to Stewardship
Our stewardship team is specifically dedicated to supporting our fund managers
by providing insight, research and analysis, discussion, and challenge on ESG
and stewardship matters including:
· Identifying and incorporating a wider set of risks and opportunities into
investment processes including ESG factors
· Monitoring and escalating issues with companies and exercising shareholder
rights at company meetings, and
· Working collaboratively to develop and promote best practice internally and
across the industry.
Artemis Alpha Stewardship approach
The Company employs a long-term value investing strategy to pick stocks. The
framework is based on valuing companies using fundamental analysis and sizing
positions according to the attractiveness of share prices relative to our view
of their value. The Company's strategy is underpinned by a core principle that
the key driver of long-term value is achieving a high and sustainable return on
capital employed.
Investee companies that do not adhere to strong governance, look after their
employees, or fail to recognise environmental and societal harm risk inhibiting
their long-term potential. The investment process requires a focus on the ESG
risks and opportunities present in each business and industry.
Risk mitigation
Our view is that ESG factors are most pertinent in their contribution when
creating the risk of a permanent loss of capital, usually through obsolescence,
excessive leverage, misjudged investment value, misallocations of capital, and
regulation.
This is evident in the portfolio where we are significantly underweight
controversial sectors (as defined by ESG data providers), and therefore are less
exposed to key ESG risks that may affect the prospects of these businesses.
We actively monitor ESG risks and opportunities primarily through our
fundamental and bottom-up driven research process for monitoring existing and
evaluating prospective investments. We frequently engage with management teams
on strategy, capital allocation, incentive alignment and communication.
Engagement and voting
The Fund Manager has expanded his engagement with current and potential
holdings, ensuring appropriate monitoring and due diligence for the portfolio.
During the year, the Fund Manager conducted 220 (vs 114 last year) company
meetings, 127 with existing and 93 with prospective investments.
During the year we met with the investor forum to improve the engagement and
disclosure of easyJet, and to represent our views on the company's capital
allocation. Additionally we raised concerns about the Board's oversight and
responded to concerns about remuneration and share issuance. As a result of this
initiative the company's chair agreed to meet with investors more regularly.
The team used its voting powers to express its dissatisfaction with
company/management policy. The number of votes that were not in line with
management guidance grew over the year 6x to 33, with the proportion of votes
not in line with recommendations rising from 2% to 8%. Votes against were
focussed on compensation, directors, and non-routine business.
Portfolio carbon emissions
The portfolio's carbon emissions relative to its benchmark, the FTSE All-Share
Index, have remained elevated since the onset of COVID-19 in early 2020. This is
because our airline holdings are still recovering from depressed revenues that
penalised their carbon intensity statistics based on emissions per revenue.
Furthermore, expectations of a strong recovery in revenue have resulted in
increases in their share prices, leading to an increased weighting in the
portfolio of their temporarily inflated carbon intensity figures. We expect this
measure to normalise somewhat as airline revenues fully recover in 2023.
Strategy and Business Review
Culture, Purpose & Values
The Directors drive the culture, purpose and values of Artemis Alpha Trust plc
("the Company") and by doing so seek to ensure that these three elements
underpin the delivery of strategy.
Culture
The Company is an externally managed investment trust and as such its culture is
created by the Board of Directors and the Investment Manager, Artemis Fund
Managers Limited.
Purpose
Our purpose is to provide our shareholders, large or small, with a diversified
and cost-effective investment opportunity to achieve long-term growth.
Values
The Company provides access to a portfolio of investments which the Board
expects to be managed with integrity, transparency and accountability and with
appropriate due diligence to environmental, social and governance matters. The
constructive and openly discursive nature of the relationship between the Board
and the Investment Manager helps ensure their respective values are aligned and
focused on delivering the strategy for our shareholders.
The core values that contribute to the Board culture include:
· Integrity: the Board seeks to comply with all applicable laws and
regulations, both to the letter and in spirit.
· Accountability: the Board recognises the need to explain the Company's
performance to investors and to highlight the risks in a clear and open manner.
The Board has a key role to encourage and challenge the performance of its
Investment Manager and its other service providers to help ensure the Company
continues to provide shareholder value.
· Respect & Transparency: the Board seeks to communicate clearly and openly
with shareholders and service providers respecting individual opinions and
expectations. Contact by shareholders via the Chairman's email address is
welcomed.
· Environmental, Social and Governance ("ESG") issues: We are stewards of our
shareholders' capital; both the Board and Investment Manager recognise that this
comes with responsibilities. ESG considerations are integrated within the
investment process.
An overview of the Investment Manager's culture, values and stewardship
activities can be found on the website at www.artemisfunds.com.
Corporate strategy & policy
The Company is incorporated in England as a public company limited by shares.
Its business as an investment trust is to buy and sell investments with the aim
of achieving the investment objective and in accordance with the policy.
Gearing
The Company uses gearing (i.e. borrowing) as part of its investment strategy.
The Company's Articles of Association limit borrowing to 50 per cent of the
Company's net assets. However, the investment policy limits this to 25 per cent
of net assets. Subject to compliance with this restriction, 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 per cent of net
assets. The Company had no borrowing facility as at 30 April 2023 or the prior
year. 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. At
the year end, net gearing was created through the use of contracts for
difference and stood at 13.4 per cent (9.4 per cent as at 30 April 2022).
Leverage
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 has an agreement with Northern Trust to utilise contracts
for difference as a form of leverage. A result of 100 per cent indicates that no
leverage has been used. The Company is permitted by its Articles to borrow up to
50 per cent; however the Company's investment policy restricts this to 25 per
cent. The Company is permitted to have additional leverage of up to 100 per cent
of its net assets, which results in permitted total leverage of 225 per cent
under both ratios. 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 year. At 30 April 2023, the Company's
leverage was 134.2 per cent as determined using the gross method and 115.7 per
cent under the commitment method.
The Investment Manager requires prior Board approval to:
(i) enter into any stocklending agreements;
(ii) borrow money against the security of the Company's investments; or
(iii) create any charges over any of the Company's investments.
Operating environment
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.
Current & future developments
A summary of the Company's developments during the year ended 30 April 2023,
together with its prospects for the future, is set out in the Chairman's
Statement and the Investment Manager's Review in the Annual Report. 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.
Key Performance Indicators ("KPIs")
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 and remain unchanged from the
prior year are:
Discrete annual total returns
Year ended 30 April Net asset value* Share price* FTSE
All-Share
Index
2018 11.0% 13.2% 8.2%
2019 (8.6)% (8.9)% 2.6%
2020 (11.3)% (12.5)% (16.7)%
2021 56.0% 80.8% 26.0%
2022 (21.9)% (24.8)% 8.7%
2023 1.3% (1.2)% 6.0%
Source: Artemis/Datastream
* Alternative Performance Measure
Dividends per ordinary share
Year Ordinary Special Total pence Ordinary Total
ended 30 per ordinary increase increase/
April (decrease)
share
2018 4.75p 1.60p 6.35p 10.4% 0.8%
2019 5.00p 0.50p 5.50p 5.3% (13.4)%
2020 5.20p - 5.20p 4.0% (5.5)%
2021 5.30p - 5.30p 1.9% 1.9%
2022 5.60p - 5.60p 5.6% 5.6%
2023 6.20p - 6.20p 10.7% 10.7%
Ongoing charges as a proportion of shareholders' funds
As at 30 April Ongoing charges*
2018 0.90%
2019 0.93%
2020 0.95%
2021 0.93%
2022 1.01%
2023 1.08%
* Alternative Performance Measure
Discount management
In addition to the above KPIs, the Board monitors the discount to the underlying
net asset value at which the shares trade. The discount levels throughout the
financial year are shown within the Financial Highlights in the Annual Report.
No specific discount target has been set, but the Board sets the share buyback
policy and has given the Investment Manager discretion to exercise the Company's
authority to buyback its own shares from time to time to address any imbalances
between the supply and demand in the Company's shares or at times where it is
believed this is the best use of available capital to increase NAV per share.
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 Company will also provide tender offers every three
years. The first tender offer was due in 2021, for 25 per cent of the ordinary
shares then in issue. However, following a shareholder vote, this did not take
place. The next proposal for a tender offer will be in 2024.
Principal risks and risk management
As required by the 2018 UK Code of Corporate Governance, the Board has carried
out a robust assessment of the principal and emerging risks facing the Company.
Following consideration of the investment, regulatory and operational risks, the
Board has concluded that there are no emerging risks facing the Company that
require to be added to the principal risks.
The Board, in conjunction with the Investment Manager, has developed a risk map
which sets out the principal risks faced by the Company and the controls
established to mitigate these risks. This is an ongoing process and the risk
map, including any emerging risks, is formally reviewed every six months. The
Board has given particular attention to those risks that might threaten the long
-term viability of the Company. Further information on the Company's internal
controls is set out in the corporate governance section in the Annual Report. 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, their movement during the year and their
mitigation is set out below:
Movement Principal risk Mitigation/control
No change Strategic risk The investment objective and policy of the Company
is set by the Board and is subject to ongoing
Investment review and monitoring in conjunction with the
objective and Investment Manager. Views expressed by the
policy are not Company's shareholders are also taken into account.
appropriate in
the current
market and not
favoured by
investors.
No change Investment The Board considers that this risk is justified by
risk the longer-term nature of the investment objective
and the Company's closed-ended structure, and that
The Company's such investments should be a source of positive
investments returns for shareholders. Risks are diversified
are selected through having a range of investments in the
on their portfolio covering various sectors. The Board
individual discusses the investment portfolio with the
merits and the Investment Manager at each Board meeting, and at
performance of each month end between Board meetings, and part of
the portfolio this discussion includes a detailed review of the
is not likely Company's unquoted investments, their valuations
to track the and future prospects together with their portfolio
wider UK weighting.
market (FTSE
All-Share The Board receives management information
Index). Whilst concerning the geographical sector split of the
the focus is portfolio. The Company is not materially exposed to
on large cap foreign currency risk.
companies the
Company also All borrowing arrangements entered into require the
invests in prior approval of the Board and gearing levels,
small cap provided by the use of contracts for difference,
(listed), AIM are regularly discussed and reviewed by the Board
traded and and Investment Manager.
unquoted
investments
which can be
subject to a
higher degree
of risk than
that of larger
quoted
investments.
From time to
time, the
Company may
also have
significant
exposure to
particular
industry
sectors.
The Investment
Manager's high
conviction
approach leads
to a
concentrated
portfolio,
typically
containing
between 25 and
60 stocks,
carrying a
higher degree
of stock
-specific risk
than a more
diversified
portfolio.
The Company's
functional and
reporting
currency is
Sterling.
However, the
investment
objective and
policy may
result in a
proportion of
the Company's
portfolio
being invested
in overseas
equities
denominated in
currencies
other than
Sterling. As a
result,
movements in
exchange rates
may affect the
Sterling value
of these
investments
and their
returns.
The Company
may borrow
money for
investment
purposes or
use
derivatives to
similarly
increase
exposure. If
the
investments
fall in value,
any
borrowings/use
of derivatives
will magnify
the extent of
the losses.
No change Legal and The Investment Manager provides investment, company
regulatory secretarial, administration and accounting services
risk through the use of qualified professionals.
A breach of The Board receives internal control reports from
s1158 the Investment Manager confirming compliance with
Corporation regulations. These reports also highlight any
Tax Act 2010 matter that the Compliance team feel should be
could lead to brought to the Board's attention along with any
a loss of items discussed during internal audit review.
investment
trust status The Board meets each year with the Risk and
and the Compliance team to discuss the areas of risk
resultant appropriate to the Company and the control
taxation of environment.
realised
capital gains.
The principal
laws and
regulations
the Company is
required to
comply with
are the
Companies Act
2006, the
Alternative
Investment
Fund Managers'
Directive, the
Market Abuse
Regulation,
the UK Listing
Rules and the
Disclosure
Guidance and
Transparency
Rules.
A breach of
the FCA
listing rules
could lead to
suspension of
the Company's
shares. A
breach of the
Companies Act
2006 could
lead to
criminal
proceedings
and
reputational
and financial
damage.
No change Operational Both the Investment Manager and the Administrator
risk have established business continuity plans to
facilitate continued operation in the event of a
Disruption to, major service disruption or disaster.
or failure of,
the Investment All of the Investment Manager's and Administrator's
Manager's staff can work from home with no impact to
and/or any operations.
other third
-party service The move to Northern Trust was planned in detail
providers' with contingencies in place as required. The move
systems which has now been completed and the risk returned to the
could result prior year level.
in an
inability to
report
accurately and
monitor the
Company's
financial
position.
Northern Trust
became
administrator,
custodian and
depositary
during the
year taking
over from JP
Morgan Europe.
There was a
temporary
additional
risk in
relation to
this move due
to the
operational
changes
required.
No change Cyber risk The Company benefits from the cyber security
precautions in place at the Investment Manager and
Failure or also those in place at the third-party suppliers
disruption of such as the registrar and depositary.
the Investment
Manager's and/ The Board receives regular updates from the
or any other Investment Manager and its service providers which
third-party describe the protective measures taken to enhance
service security.
providers'
systems as a
result of a
cyber-attack,
data theft,
service
disruption,
etc. Whilst
the risk of a
direct
financial loss
by the Company
is low, the
risk of
reputational
damage and the
risk of loss
of control of
sensitive
information is
more
significant.
No change Climate change The Investment Manager takes such risks into
account, along with the downside risk to any
Globally, company (whether in the form of its business
climate change prospects or market valuation or sustainability of
effects are dividends) that is perceived to be making a
already detrimental contribution to climate change. The
emerging in Company invests in a broad portfolio of businesses
the form of with operations spread geographically, which should
changing limit the impact of location- specific weather
weather events.
patterns.
Extreme
weather events
could
potentially
impair the
operations of
individual
investee
companies,
potential
investee
companies,
their supply
chains and
their
customers.
Increased Geopolitical The Board discusses such risks as they arise and
risk continues to monitor the impact on the Company and
its investments through discussion with the
There is an Investment Manager as and when required.
increasing
risk to market The Company does not have any direct investments in
stability from countries where there is geopolitical conflict.
geo-political However, the Board is provided with information
conflicts, from the Investment Manager on the measures it
such as takes to assess the potential impact of
between Russia geopolitical events, both on itself and other
and Ukraine. service providers, and any action taken.
Increased Inflationary The Board and its Investment Manager have regular
risk discussions to assess the likely impact of
inflation rates on the economy, corporate
Central Bank profitability and asset prices.
decisions, the
war in Ukraine
or any other
economic or
political
factors or
global events,
may result in
increasing
levels of
inflation
directly
affecting
economic
growth and the
underlying
investment
values.
The Pandemic risk noted in the 2022 Annual Report is no longer considered an
emerging or principal risk.
Further information on risks and the management of them are set out in the notes
to the financial statements
Long-term Viability
Viability statement
In accordance with the Association of Investment Companies (the "AIC") Code of
Corporate Governance, the Board has considered the longer-term prospects for the
Company beyond the twelve months required by the going concern basis of
accounting. The period assessed is for five years to 30 April 2028. The Board
has concluded that this period is appropriate, carefully taking into account the
inherent risk with equities and the long-term investor outlook.
As part of its assessment of the viability of the Company, the Board has
discussed and considered each of the principal risks, including matters relating
to geopolitical events and inflationary pressures, and their impact on the
Company. Although the damage to the economy through the total impact of
inflation and the geopolitical effect of Russia/ Ukraine cannot be known with
certainty, the Board has considered these risks and does not believe they affect
the long-term viability of the Company and its portfolio. The Investment Manager
carried out stress testing scenarios in connection with a longer-lasting damage
to the economy, of the withdrawal of liquidity by the financial authorities and
of a significant and sustained fall in 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 results demonstrated the impact on the
Company's NAV throughout the five year period and on its expenses and
liabilities. The Board have concluded, given the realisable nature of the
majority of the investments, the level of ongoing expenses and the availability
of gearing that the Company will continue to be in a position to cover its
liabilities.
The Board also made the below assumptions when considering the viability of the
Company:
· Investors will continue to wish to have exposure to UK listed companies
· There will be continued demand for investment trusts
· Regulation will not increase to such an extent as to hinder operational
efficiency
The Directors do not expect there to be any significant change in the current
principal risks and the associated mitigating controls other than the decreased
risk in relation to Covid-19. The Directors also do not envisage any change in
strategy or objectives that would prevent the Company from continuing to operate
over the five-year period. The Company's assets are liquid, its commitments
limited, and it intends to continue as an investment trust.
The 2024 tender offer of up to 25% of the share capital has been considered by
the Board when assessing the continuing viability of the Company.
Taking into account the results of the above review, 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 2028.
Life of the Company
The Company operates a triennial liquidity event for shareholders. The tender
offers may be made every three years, with the next event proposed in 2024,
subject to shareholder approval. Each tender offer will be for up to 25 per cent
of the ordinary shares then in issue (excluding Treasury Shares), save that the
Board may, at its sole discretion, decide not to proceed with a tender offer if
the ordinary shares are trading at a premium to the estimated tender price.
Share capital
Shareholders authorised the Company to buyback up to 14.99 per cent of the
shares in issue at the 2022 AGM.
During the year the Company bought back 1,019,766 ordinary shares. As at 30
April 2023, 4,525,566 ordinary shares bought back during the year are held in
treasury.
A resolution to renew the Company's buyback authority will be put to
shareholders at the AGM on 21 September 2023.
No ordinary shares were issued during the year.
Duty to Promote the Success of the Company
How the Directors discharge their duties under s172 of the Companies Act
Under section 172 of the Companies Act 2006, the Directors have a duty to act in
a way they consider, in good faith, would be likely to promote the success of
the Company for the benefit of its shareholders as a whole, and in doing so have
regard to:
a) the likely consequences of any decision in the long term;
b) the interests of the Company's employees;
c) the need to foster the Company's business relationships with suppliers,
customers and others;
d) the impact of the Company's operations on the community and the
environment;
e) the desirability of the Company maintaining a reputation for high
standards of business conduct; and
f) the need to act fairly as between members of the Company.
As an externally managed investment trust, the Company has no employees or
physical assets, our stakeholders include our shareholders and service
providers, such as the Investment Manager.
The below tables describe the impact of engagement with our stakeholders that
has taken place during the year:
Engagement with key stakeholders
Stakeholders Engagement Impact
Shareholders The Board is responsible for Through the
and potential promoting the long-term publication of
investors sustainable success and the Annual
strategic direction of the Report and the
Company for the benefit of the Half-Yearly
Company's shareholders. Whilst Report,
certain responsibilities are monthly
delegated, Directors' factsheets and
responsibilities are set out in Fund Manager
the schedule of matters reserved updates to the
for the Board and the terms of Company's
reference of its committees, website,
which are reviewed regularly by shareholders
the Board. are kept
informed of
To help the Board in its aim to Company
act fairly as between the performance
Company's members, it encourages and portfolio
communications with all activities.
shareholders. The Annual and
Half-Yearly reports are issued Shareholders
to shareholders and are are encouraged
available on the Investment to raise
Manager's website together with questions and
other relevant information communicate
including monthly factsheets. with the
The Board receives regular Chairman and
feedback on shareholder meetings the Fund
from the Company's broker and Manager.
any shareholder communications
are reviewed and discussed by
the Board to ensure that
shareholder views are taken into
consideration as part of any
decisions taken by the Board.
The Chairman is available to
contact via email:
alpha.chairman@artemisfunds.com.
The Board considers
communication with shareholders
an important function and
Directors are always available
to respond to shareholder
queries. For further information
see `Relations with
shareholders'.
Artemis as The Board has set the parameters During the
Investment within which the Investment year the
Manager Manager operates and these are performance of
set out in the Investment the Company
· Fund Management Agreement and agreed fell against
management by the Board. its benchmark.
· Company Buybacks were
secretarial The Board receives regular performed
· Financial updates from the Investment during the
reporting Manager and other service year to help
· Sales & providers and ensures that maintain and
marketing information pertaining to its narrow the
· stakeholders is provided, as discount. The
Compliance and required, as part of the liquidity in
internal information presented in regular the market for
control Board meetings. During the year, the Company's
functions additional monthly performance shares
· Internal updates were held between the continued to
audit Board and Investment Manager to increase on
· discuss the continuing impact of the prior
Investment geopolitical, inflationary and year, further
administration market movements events on the detail can be
(outsourced to Company and its portfolio. The found within
Northern Trust) Board, with the support of its the Chairman's
Management Engagement Committee, Statement and
regularly reviews the Investment
performance of the Investment Manager's
Manager and other service Review.
providers to ensure that
services provided to the Company The Fund
are managed efficiently and Manager worked
effectively for the benefit of on a number of
the Company's shareholders. initiatives to
raise the
The Board has reviewed and profile of the
discussed plans for the future Company and
marketing and development of the generate
Company with the Investment interest with
Manager during the year. new investors;
taking part in
various
shareholder in
-person events
and webinars
during the
year.
During the
year, the
investment
administrator
changed from
JP Morgan to
Northern
Trust. This
was discussed
in advance by
the Board and
approval was
given.
Other third As an investment company, all The
-party service services are outsourced to third performance of
providers -party service providers. The the third
Board considers the Depositary, -party service
· Northern the Custodian, the Broker, the providers is
Trust as Registrar and Auditor to be key continually
Depositary and stakeholders. monitored
Custodian throughout the
· Singer The Board relies on the year. As and
Capital Markets Investment Manager to work when
as alongside these key stakeholders appropriate,
Broker to meet the requirements of the third-party
· Link Group Company. The Management providers
as Registrar Engagement Committee reviews the present to the
· Johnston performance of these service Board.
Carmichael LLP providers, along with their fee
as Auditor levels, and provides Following
recommendations to the Board as formal review
required. by the
Management
The Investment Manager has Engagement
constant interaction with the Committee and
service providers and provides Board at the
feedback to and from the Board year end, it
as required. was concluded
that the
Annual assurance reports are service
received to assist the review of providers were
the internal control operating
environments of the Depositary effectively
and Custodian. and provided a
good level of
The FRC performs and publishes service.
audit quality reviews on a
sample of audit firms and audits Following the
each year. move of
administration
services,
Depositary and
Custodian
services are
now provided
by Northern
Trust.
Investee The Board sets the investment The engagement
companies objective and discusses stock of the Fund
selection, asset allocation, and Manager with
the ESG qualities of investee the investee
companies with the Fund Manager companies aids
at each Board meeting. awareness and
understanding
The Fund Manager engages with of the ESG
the investee companies, prior to environment in
investment and on an on-going operation as
basis. well as the
valuation and
The Fund Manager has a dedicated prospects of
Stewardship Team which supports their
the Fund Manager in the businesses.
investment process.
The Association The Company is a member of the The Board
of Investment AIC which is an organisation chooses to
Companies that represents the interests of report under
("AIC") investment trusts, VCTs and the AIC Code
other closed-end funds. of Corporate
Governance.
This Code
better
reflects the
nature of an
investment
trust in the
context of
good corporate
governance.
Board discussions and decisions
The following are the key discussions and decisions made by the Board during the
year ended 30 April 2023:
Topic Background & Decision
discussion
Share buyback policy The level of The Board weighs up the
buybacks and effectiveness of the buyback
their effect on policy in helping to
the discount is maintain/reduce the discount to
discussed at NAV against its impact on the
each Board Company and the liquidity of its
meeting. shares. In light of market
developments, buybacks were
The strategy in conducted at a reduced pace in
relation to the period.
buybacks and
investor The Board decided to reduce the
feedback thereon monetary amount of buybacks and
is discussed and continue to monitor the rate in
monitored by the line with discount and liquidity
Board. The requirements.
economic
environment had
worsened over
the period from
when the initial
extended buyback
programme had
been put in
place.
Environmental, social and The Board The Board received reporting on
governance matters (`ESG') discussed its ESG, sustainability and voting
responsibilities records quarterly. A
for ESG and how representative of the Risk team
Artemis, as presents as required to the
Investment Board.
Manager,
undertook the It was decided that ESG was
required steps appropriately incorporated
to ensure ESG within the Artemis investment
was incorporated process and the Board would
within the continue to discuss and monitor
investment on an on-going basis.
process.
The Board made
enquiries of the
Investment
Manager as to
the ESG
credentials of
the underlying
portfolio. The
Investment
Manager
confirmed
engagement with
investee boards
helped gain an
understanding of
the governance
in place.
Administration, Depositary The Board The Board confirmed satisfaction
and Custodian arrangements considered and with the progress on the
discussed the migration of third parties and
progress of the the change of responsibilities
change of was completed on 6 March 2023.
administrator,
depositary and
custodian to
Northern Trust.
Gearing The Board The Board decided that this
discussed the policy continues to provide
current policy gearing at a reduced cost
of providing compared to a conventional bank
gearing through loan.
Contracts for
Difference.
Internal audit The Audit The Audit Committee and Board
Committee decided the Company should
discussed the continue to place reliance on
possibility of the internal audit function
the Company performed by the Investment
having its own Manager.
internal audit
function.
Director succession The Board It was agreed to enlist the
discussed the services of Nurole as an
succession of external, independent
Directors taking recruitment consultant to assist
into account the with the replacement of Ms
number of years Bergin.
served, the mix
of skills Mrs Stewart became interim
required to Chairman of the Audit Committee
perform the role in October 2022 and became
and the Senior Independent Director on
diversity 28 June 2023.
requirements of
the new Mr Smethers offered the sought
legislation. after financial and audit skills
and was agreed to be an
The recruitment excellent addition to the skills
process to already present on the Board.
replace Ms The Board approved the
Bergin was recruitment of Mr Smethers and
discussed. A his role as Chairman of the
comprehensive Audit Committee.
list of
applicants for While the Board acknowledges
the role of that it has not been compliant
Chairman of the with the gender diversity
Audit Committee guidelines during the second
was received half of the year, its firm
from Nurole. intention is to return to a
These were position of compliance.
reviewed and
discussed at
length to ensure
the right
candidates were
chosen for
interview. The
Board were keen
to see
candidates with
commercial
financial and
audit skills as
well as those
from a more
conventional
investment trust
background.
The Board's primary focus is to promote the long-term success of the Company for
the benefit of the Company's shareholders. In doing so, the Board has regard to
the impact of its actions on other stakeholders as described above.
Directors & Diversity
The Directors of the Company and their biographical details are set out in the
Annual Report.
No Director has a contract of service with the Company.
The Board supports the recommendations of the Hampton-Alexander Review on gender
diversity and the Parker Review on ethnic representation on Boards.
The Board recognises the principles of diversity in the boardroom and
acknowledges the benefits of having greater diversity, including gender, social
and ethnic backgrounds, and cognitive and personal strengths. When setting a new
appointment brief, the Nomination Committee considers diversity alongside
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, based on merit
and objective criteria.
The Board is currently comprised of four male Directors and one female Director.
The FCA announced a new policy statement on diversity and inclusion on company
boards in April 2022. Companies are required to comply with the targets or
explain the reasons for non-compliance. Outlined below is an overview of the
targets and the Company's compliance as at 30 April 2023 in accordance with
Listing Rule 9.8.6R(9):
· 40% of the Board is represented by women: 40% of the individuals on the
Board were women up to 13 October 2022, the date of Ms Bergin's retirement. From
that point to 15 March 2023, 25% of the Board were women and from 15 March 2023
to 30 April 2023, 20% of the Board were women. As at 30 April 2023, the Company
does not meet this diversity target and a further explanation is given in the
Annual Report.
· One woman in a senior position: as at 30 April 2023 no woman was in a
senior position. In the absence of Executive roles, the Company also considers
the role of Chairman of the Audit Committee, along with the role of Senior
Independent Director, to qualify as a senior position. Ms Bergin held these
roles throughout the year until retirement on 13 October 2022 at which point Mrs
Stewart became interim Chairman of the Audit Committee until 15 March 2023 and
the appointment of Mr Smethers to the role. The Company therefore does not meet
this diversity target as at 30 April 2023. Mrs Stewart subsequently became
Senior Independent Director on 28 June 2023.
· One individual from a minority ethnic background: as at 30 April 2023, no
individuals on the Board are from a minority ethnic background. The Company does
not therefore meet this diversity target and a further explanation is given in
the Annual Report.
The following tables set out the data on the diversity of the Directors on the
Company's Board in accordance with Listing Rule 9.8.6R(10) as at 30 April 2023.
This data has been collected through consultation with the Board. Subsequent to
the record date of 30 April 2023, Mrs Stewart became the Senior Independent
Director.
Number of Percentage Number of senior Number in Percentage of
Board of the positions on the executive executive
members Board Board management2 management2
Men 4 80% 21 N/A N/A
Women 1 20% 0 N/A N/A
Not N/A N/A N/A N/A N/A
specified/
prefer
not to
say
1 Duncan Budge is the Chairman of the Board, a senior position as defined by the
Listing Rules and Mr Smethers is Chairman of the Audit Committee.
2 Not applicable as the Company does not have an executive management team.
Number of Percentage Number of senior Number in Percentage of
Board of the positions on the executive executive
members Board Board management1 management1
White 5 100% 2 N/A N/A
British
or
other
White
Mixed/Mult 0 0% 0 N/A N/A
iple
ethnic
groups
Asian/Asia 0 0% 0 N/A N/A
n
British
Black/Afri 0 0% 0 N/A N/A
can/Carib
bean/Black
British
Other 0 0% 0 N/A N/A
ethnic
group,
including
Arab
Not N/ N/A N/A N/A N/A
specified/ A
prefer
not to
say
1 Not applicable as the Company does not have an executive management
team.
Modern Slavery Act 2015
The Company does not fall within the scope of the Modern Slavery Act 2015 as its
turnover is less than £36m. Therefore, no slavery and human trafficking
statement is included in the Annual Report.
Sustainability and Environmental, social and governance
(`ESG') matters
The Board recognises that the most material way in which the Company can have an
impact on ESG is through responsible ownership of its investments. The Board has
appointed Artemis as Investment Manager, who engages actively with investee
companies undertaking extensive evaluation and engagement on a variety of
matters such as strategy, performance, risk, dividend policy, governance and
remuneration. All risks and opportunities are considered as part of the
investment process in the context of enhancing the long-term value of
shareholders' investments. This will include matters relating to material
environmental, human rights and social considerations that will ultimately
impact the profitability of a company or its stock market rating and hence these
matters are an integral part of Artemis' thinking as investors. The ESG and
stewardship engagement of Artemis is detailed in the Annual Report.
Financial Statements
The financial statements of the Company are included in the Annual Report.
For and on behalf of the Board,
Duncan Budge
Chairman
11 July 2023
Statement of Directors' Responsibilities in respect of the Annual Report
Management Report
Listed companies are required by the Financial Conduct Authority's Disclosure
Guidance 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 in the Annual Report. Therefore no separate management report has been
included.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual 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 UK-adopted international accounting standards.
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:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable
· and prudent;
· state whether they have been prepared in accordance with UK-adopted
international accounting standards; and
· prepare the financial statements on a going concern basis unless it is
inappropriate to presume that the Company will continue in business.
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 comply 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.
Directors' confirmations
Each of the Directors listed in the Annual Report confirm that, to the best of
their knowledge:
a) the financial statements, prepared in accordance with the applicable set
of UK-adopted international accounting standards, give a true and fair view of
the assets, liabilities and financial position of the Company as at 30 April
2023, and of the profit or loss of the Company for the year then ended;
b) the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces; and
c) the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for Shareholders to assess
the Company's position and performance, business model and strategy.
In the case of each Director in office at the date the Directors' Report is
approved:
a) so far as the Director is aware, there is no relevant audit information
of which the Company's Auditor is unaware; and
b) they have taken all steps that they ought to have taken as a Director in
order to make themselves aware of any relevant audit information and to
establish that the Company's Auditor is aware of that information.
For and on behalf of the Board
Duncan Budge
Chairman
11 July 2023
Financial Statements
Statement of Comprehensive Income
For the year ended 30 April 2023
Year Year
ended ended
30 30
April April
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment 3,052 - 3,052 3,099 - 3,099
income
Total revenue 3,052 - 3,052 3,099 - 3,099
Losses on - (4,609) (4,609) - (30,511) (30,511)
investments
Net - 4,134 4,134 - (7,770) (7,770)
gains/(losses)
on derivatives
Currency - 140 140 - (16) (16)
gains/(losses)
Total 3,052 (335) 2,717 3,099 (38,297) (35,198)
income/(loss)
Expenses
Investment (154) (615) (769) (219) (875) (1,094)
management fee
Other expenses (456) (8) (464) (492) (74) (566)
Profit/(loss) 2,442 (958) 1,484 2,388 (39,246) (36,858)
before finance
costs and tax
Finance costs (115) (461) (576) (9) (36) (45)
Profit/(loss) 2,327 (1,419) 908 2,379 (39,282) (36,903)
before tax
Tax (101) - (101) (118) - (118)
Profit/(loss) 2,226 (1,419) 807 2,261 (39,282) (37,021)
and total
comprehensive
income/(expense)
for the year
Earnings/(loss) 6.74p (4.30p) 2.44p 6.29p (109.28p) (102.99p)
per ordinary
share
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.
Statement of Financial Position
As at 30 April 2023
2023 2022
£'000 £'000
Non-current assets
Investments 109,979 119,612
Investments in subsidiary undertaking 4,264 4,231
114,243 123,843
Current assets
Derivative assets 2,187 492
Other receivables 2,208 781
Collateral held - 1,970
Cash and cash equivalents 7,653 2,389
Total assets 126,291 129,475
Current liabilities
Derivative liabilities (106) (308)
Collateral pledged (1,930) -
Other payables (4,438) (5,066)
Total liabilities (6,474) (5,374)
Net assets 119,817 124,101
Equity attributable to equity holders
Share capital 373 373
Share premium 676 676
Special reserve 18,779 21,964
Capital redemption reserve 217 217
Retained earnings - revenue 3,437 3,117
Retained earnings - capital 96,335 97,754
Total equity 119,817 124,101
Net asset value per ordinary share 366.02p 367.65p
These financial statements were approved by the Board of Directors and signed on
its behalf on 11 July 2023:
Duncan Budge
Chairman
Statement of Changes in Equity
For the year ended 30 April 2023
Share Share Special Capital Retained
capital premium reserve redemption earnings
£'000 £'000 £'000 reserve
£'000
Revenue Capital Total
£'000 £'000 £'000
For the year
ended 30
April 2023
At 1 May 2022 373 676 21,964 217 3,117 97,754
124,101
Total
comprehensive
income:
Profit/(loss) - - - - 2,226 (1,419) 807
for the year
Transactions
with owners
recorded
directly to
equity:
Repurchase of - - (3,185) - - -
(3,185)
ordinary
shares into
treasury
Dividends - - - - (1,906) -
(1,906)
paid
At 30 April 373 676 18,779 217 3,437 96,335
119,817
2023
For the year
ended 30
April 2022
At 1 May 2021 382 676 40,738 208 2,788 137,036
181,828
Total
comprehensive
income:
Profit/(loss) - - - - 2,261 (39,282)
(37,021)
for the year
Transactions
with owners
recorded
directly to
equity:
Repurchase of - - (14,683) - - -
(14,683)
ordinary
shares into
treasury
Repurchase (9) - (4,091) 9 - -
(4,091)
and
cancellation
of ordinary
shares
Dividends - - - - (1,932) -
(1,932)
paid
At 30 April 373 676 21,964 217 3,117 97,754
124,101
2022
The notes in the Annual Report form part of these financial statements.
Statement of Cash Flows
For the year ended 30 April 2023
2023 2022
£'000 £'000
Operating activities
Profit/(loss) before tax 908 (36,903)
Interest payable 576 45
Losses on investments 4,609 30,511
Net (gains)/losses on (4,134) 7,770
derivatives
Currency (gains)/losses (140) 16
Increase in other receivables (6) (56)
Decrease in accrued expenses (12) (96)
Net cash inflow from operating 1,801 1,287
activities before interest and
tax
Interest paid (576) (45)
Irrecoverable overseas tax (101) (118)
suffered
Net cash inflow from operating 1,124 1,124
activities
Investing activities
Purchase of investments (24,601) (25,087)
Sale of investments 28,584 49,583
Sale/(purchase) of derivatives 583 (6,656)
Collateral pledged/(held) 3,900 (2,800)
Net cash inflow from investing 8,466 15,040
activities
Financing activities
Repurchase of ordinary shares (3,251) (14,617)
into treasury
Repurchase and cancellation of - (4,091)
ordinary shares
Dividends paid (1,906) (1,932)
Increase in intercompany loan 691 404
Net cash outflow from financing (4,466) (20,236)
activities
Net decrease/(increase) in net 5,124 (4,072)
funds
Net funds at the start of the 2,389 6,477
year
Effect of foreign exchange rate 140 (16)
changes
Net funds at the end of the year 7,653 2,389
Cash and cash equivalents 7,653 2,389
Notes to the Financial Statements
1. Accounting policies
The financial statements have been prepared on a going concern basis under the
historical cost convention modified by the revaluation of financial assets and
liabilities held at fair value through profit or loss, in accordance with UK
-adopted international accounting standards ("IFRSs") which comprise standards
and interpretations issued by the International Accounting Standards Board
("IASB"), as applied in accordance with the provisions of the Companies Act
2006. 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 July 2022 is consistent with the
requirements of IFRS, the financial statements have been prepared in accordance
with the SORP.
The accounting policies which follow set out those policies which apply in
preparing the financial statements for the year ended 30 April 2023 have been
applied consistently, other than where new policies have been adopted.
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.
2. Income
Year ended Year ended
30 April 30 April
2023 2022
£'000 £'000
Investment income*
UK dividend income 1,812 1,920
Overseas dividend income 662 860
2,474 2,780
Other income
Bank interest 62 25
Derivative income 507 294
Liquidity fund income 9 -
578 319
Total income 3,052 3,099
* 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.
A number of UK quoted investments are domiciled in other countries for tax
purposes.
3. Dividends paid and proposed
Set out below are the total dividends recognised in respect of the financial
year ended 30 April 2023.
Year ended Year ended
30 April 30 April
2023 2022
£'000 £'000
2022 final dividend of 3.46p 1,140 1,189
per ordinary share (2021:
3.19p)
2023 interim dividend of 2.33p 766 743
per ordinary share (2022:
2.14p)
1,906 1,932
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 2023 reflects the final dividend
for the year ended 30 April 2022 which was paid on 21 October 2022. For the year
ended 30 April 2023, a first interim dividend of 2.33p has been paid on 26
January 2023 and a final dividend of 3.87p has been proposed for payment on 29
September 2023. The final dividend is proposed for approval by the shareholders
at the forthcoming AGM.
Set out below are the total dividends paid/proposed in respect of the financial
year ended 30 April 2023.
Year ended Year ended
30 April 30 April
2023 2022
£'000 £'000
First interim dividend of 2.33p 766 743
per ordinary share (2022: 2.14p)
Final dividend of 3.87p per 1,267 1,168
ordinary share (2022: 3.46p)
2,033 1,911
4. Earnings/(loss) per share
The revenue earnings per ordinary share is based on the revenue profit for the
year of £2,226,000 (2022: £2,261,000) and on 33,033,940 (2022: 35,994,478)
ordinary shares, being the weighted average number of ordinary shares in issue
during the year.
The capital loss per ordinary share is based on the capital loss for the year of
£1,419,000 (2022: £39,282,000) and on 33,033,940 (2022: 35,944,478) ordinary
shares, being the weighted average number of ordinary shares in issue during the
year.
5. Share capital
(a) Share capital
2023 2023 2022 2022
Shares £'000 Shares £'000
Allotted, called up
and fully paid:
Ordinary shares of 1p 32,734,908 327 33,754,674 338
each
Ordinary shares of 1p 4,525,566 45 3,505,800 35
each held in treasury
37,260,474 373 37,260,474 373
(b) Ordinary shares
Shares £'000
Movements in ordinary shares during the year:
Ordinary shares in issue on 1 May 2022 33,754,674 373
Repurchase of ordinary shares into treasury (1,019,766) (45)
Ordinary shares in issue on 30 April 2023 32,734,908 327
The movements in ordinary shares held in treasury during the year are as
follows:
2023 2023 2022 2022
Shares £'000 Shares £'000
Balance brought forward 3,505,800 35 - -
Repurchases of ordinary shares 1,019,766 10 3,505,800 35
Balance carried forward 4,525,566 45 3,505,800 35
During the year ended 30 April 2023, the Company repurchased 1,019,766 shares
into treasury (2022: 3,505,800). There were no subscription shares in issue at
30 April 2023 (2022: nil).
6. Net asset value per ordinary share
The net asset value per share is based on the net assets of £119,817,000 (2022:
£124,101,000) and on 32,734,908 (2022: 33,754,674) ordinary shares, being the
number of ordinary shares in issue at the year end.
7. Transactions with the Investment Manager and related parties
The amounts paid to the Investment Manager and amounts outstanding at the year
end are disclosed in the Annual Report.
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.
Fees payable during the year to the Directors and their interest in shares of
the Company are considered to be related party transactions and are disclosed
within the Directors Remuneration Report, included in the Annual Report.
All transactions with subsidiary undertakings were on an arm's length basis.
During the year, transactions in securities between the Company and its
subsidiary undertakings amounted to £nil (2022: £nil). The subsidiary did not
pay a dividend to Artemis Alpha Trust plc during the year to 30 April 2023
(2022: £nil). Following the increase in lending rates over the year, interest
payable by Artemis Alpha Trust to Alpha Securities Trading in respect of the
intercompany loan over the period is recognized.
8. Events after the reporting period
As at 11 July 2023, a further 21,756 shares had been bought back at a cost of
£69,000.
9. Annual Report
This Annual Report announcement does not constitute the Company's statutory
accounts for the years ended 30 April 2023 and 30 April 2022 but is derived from
those accounts. Statutory accounts for the year ended 30 April 2022 have been
delivered to the Registrar of Companies. The statutory accounts for the year
ended 30 April 2023 and the year ended 30 April 2022 both received an audit
report which was unqualified and did not include a reference to any matters to
which the auditor drew attention by way of emphasis without qualifying the
report and did not include statements under section 498 of the Companies Act
2006. The statutory accounts for the year ended 30 April 2023 have not yet been
delivered to the Registrar of Companies and will be delivered following the
Annual General Meeting.
The audited Annual Report for the year ended 30 April 2023 will be available to
shareholders shortly. Copies may be obtained from the Company's registered
office at Cassini House, 57-59 St James's Street, London SW1A 1LD or at the
website atartemisalphatrust.co.uk (http://www.artemisonline.co.uk/).
A copy of the Annual Report will also be submitted to the FCA's National Storage
Mechanism and will soon be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual General Meeting of the Company will be held onThursday, 21 September
2023at 10:00a.m.
For further information, please contact:
Artemis Fund Managers Limited
Company Secretary
Telephone: 0131 225 7300
12 July 2023
This information was brought to you by Cision http://news.cision.com
END
(END) Dow Jones Newswires
July 12, 2023 02:00 ET (06:00 GMT)
Grafico Azioni Artemis Alpha (LSE:ATS)
Storico
Da Apr 2024 a Mag 2024
Grafico Azioni Artemis Alpha (LSE:ATS)
Storico
Da Mag 2023 a Mag 2024
