Annual Financial Report

RNS Number : 6509I

Artemis Alpha Trust PLC

04 July 2013

 



Artemis Alpha Trust plc (the "Company")

Annual Financial Report for the year ended 30 April 2013

This announcement contains regulated information

Financial Highlights

Returns for the year ended 30 April 2013

	Year ended 30 April 2013	Year ended 30 April 2012
Total returns
Net asset value per ordinary share	(2.8)%	(4.6)%
Ordinary share price	4.5%	(13.9)%
FTSE All-Share Index	17.8%	(2.0)%
Revenue and dividends
Revenue earnings per ordinary share	2.24p	1.76p
Dividends per ordinary share	3.05p	2.95p
Ongoing charges (excluding performance fees)	0.9%	1.0%
Capital	As at 30 April 2013	As at 30 April 2012
Net asset value per ordinary share	296.32p	307.64p
Ordinary share price	293.00p	283.25p
Gearing	17.3%	10.5%

Total returns	3 years	5 years	Since 1 June 2003*
Net asset value per ordinary share	14.4%	23.5%	360.4%
Ordinary share price	17.9%	34.6%	370.5%
FTSE All-Share Index	31.3%	31.1%	142.5%

Source: Artemis/Datastream

* The date when Artemis was appointed as Investment Manager.

Chairman's Statement

Performance

The year to 30 April 2013 was a disappointing one for the Company. The net asset value total return was (2.8) per cent, with the net asset value falling by 4.2 per cent in the second half of the year. This performance came against a background of an improving stockmarket. The FTSE All-Share Index, which we consider a good proxy for an investment in the UK, rose by 17.8 per cent over the year.

As shareholders are aware, the Company's investment remit is broad and the stock-picking focus of the Investment Manager means that returns are unlikely to track any index. As can be seen from the portfolio composition, there is significant exposure to particular industry sectors and to unquoted investments, reflecting the Investment Manager's high-conviction style of investing. Whilst this has been successful over the long term, it can, as has been the case this year, result in performance that diverges from that of the market and the peer group.

Performance was adversely affected by our exposure to unquoted investments, valuations for a number of which were revised down, and by the portfolio's significant exposure to the oil & gas sector. In addition, the AIM market, on which a significant proportion of the Company's investments are listed, had a poor year in relative terms, falling by 8.3 per cent. Further details on the portfolio and performance can be found in the Investment Manager's Review.

I would remind shareholders that an investment in the Company should be seen as long-term in nature. On 1 June 2013, the Company marked 10 years under the management of Artemis, during which time the net asset value has risen by 376.6 per cent. An investment in the UK market over the same period would have produced a return of 142.5 per cent.

Unquoted investments

As I have indicated above, the carrying values of a number of the Company's unquoted investments were lowered during the year. The largest of these, Hurricane Energy and Vostok Energy, had been working on plans to float or sell their businesses. These plans, however, are taking longer than expected to reach completion. This prompted the Investment Manager to recommend to the Board that the valuations assigned to these investments be lowered. The aggregate impact of these reductions was over 8 per cent of the net asset value. This serves as a reminder of the realisation risks associated with investing in unquoted companies.

There was, however, better news elsewhere in the unquoted portfolio, with upward valuation revisions for The Hut Group and Reaction Engines, both of which raised new money through share issues. This added around 4 per cent to the Company's net asset value.

One of the attractions of the Company is that investors can obtain exposure to interesting investment ideas not readily accessible through the quoted stockmarkets. The closed-ended nature of the Company makes it well suited to this type of investment, allowing the Investment Manager to take a long-term view of the investee company. We continue to believe that, over the longer term, shareholders will benefit from investment in these types of companies, as they have in the past.

There is more discussion of the unquoted investments, including an overview of the valuation process, in the Investment Manager's Review.

Gearing

The Company has a £30 million revolving loan facility with the Royal Bank of Scotland. At the year-end, £26.5 million was drawn down and £24 million was invested, delivering a gearing level of 17.3 per cent. The Investment Manager has discretion to vary the level of gearing, subject to gearing not being greater than 20 per cent of net assets. The Company's gearing range is zero to 20 per cent.

Dividends

Your Board has declared a second interim dividend of 1.85p (2012: 1.75p) per ordinary share, bringing total dividends for the year ended 30 April 2013 to 3.05p (2012: 2.95p), an increase of 3.4 per cent. This dividend will be paid on 16 August 2013 to shareholders on the register on 26 July 2013.

Discount

The Company bought back 1,535,128 ordinary shares during the year, 3.2 per cent of the share capital, at a cost of £4.3 million and an average discount to the prevailing net asset value of 9.6 per cent. The Board and the Investment Manager are fully committed to having the Company's shares trade at a low and stable discount to the net asset value and will continue to buy back shares whenever required to achieve this. Indeed, between the year end and the date of this report are further 1,751,800 ordinary shares have been bought back.

At the time of writing, the share price stood at a discount of 9.7 per cent to the net asset value.

Regulatory matters

The Alternative Investment Fund Managers Directive (AIFMD), a European directive that seeks to introduce further protection for investors, comes into force in the UK on 22 July 2013. There is, however, a one-year transitional period and therefore the Company needs to comply with AIFMD by 22 July 2014. Compliance with AIFMD will have an impact on a number of operational matters, as well as the contractual arrangements between the Company and the Investment Manager. We are discussing this new regulation with the Investment Manager and the Company's lawyers to ensure that compliance is achieved in the most efficient and cost effective way.

Board composition

I plan to step down at next year's AGM. I joined the Board in 2003 and have served as Chairman for the best part of ten years. The appointment of a successor and a replacement director will be addressed by the Board in the coming months.

The annual review also concluded that each of the Directors of the Company should now stand for re-election on an annual basis. Accordingly resolutions for this are being proposed at the Annual General Meeting.

Annual General meeting ("AGM")

The Company's AGM will take place on Thursday, 12 September 2013 at 12.30 pm at the offices of Artemis Investment Management LLP, Cassini House, 57 St James's Street, London SW1A 1LD. The Notice of Meeting, containing full details of the business to be conducted at the meeting, is included in the Annual Financial Report.

The Directors look forward to welcoming you to the AGM. The fund managers, John Dodd and Adrian Paterson, will make a short presentation at the meeting. There will be light refreshments following the meeting, at which shareholders will have an opportunity to meet the Directors and fund managers. Should you be unable to attend the AGM in person, the Board would encourage you to use your proxy votes by completing and returning the form of proxy enclosed with the Annual Financial Report.

Investment Plan and ISA

Shareholders are reminded that the Investment Manager operates an Investment Plan and an ISA which enable investors to acquire shares in the Company through lump sum or regular investments.

Outlook

Although a lack of clarity over future monetary policy has resulted in some volatility since the end of the reporting period, markets have broadly moved higher since the New Year. The gains have been underpinned by improvements in the global macro-economic picture and an increase in investor appetite for equities, given the meagre returns available on other asset classes.  The US economy is growing again, albeit slowly, but growth in the UK remains stubbornly slow. As events in Cyprus illustrated, there remain unresolved problems in the eurozone. On the other hand, economic trends in emerging Asia, to which the Company has increased its exposure, appear more positive. Overall, although markets can continue to rise, macro headwinds seem likely to persist.

Whilst the Company had a disappointing year, the Investment Manager has, over the course of its 10-year tenure, demonstrated its ability to generate considerable value for shareholders. We therefore remain confident in its ability to continue to produce attractive returns for shareholders over the longer term.

And finally…

Your Board is always keen to hear from shareholders. Should you wish to do so, you can contact me at [e-mail]. You can find regularly updated information on the Company, including a factsheet and performance data, on the Company's dedicated web pages at artemis.co.uk.

Simon Miller

Chairman

4 July 2013

Investment Manager's Review

Performance

The performance of your Company over the year to 30 April 2013 saw its net asset value fall by 2.8 per cent versus a rise of 17.8 per cent in the FTSE All-Share Index. A write-down in the values ascribed to some of its unquoted investments was a contributing factor. The largest negative revaluation was to its holding in Vostok Energy, accounting for a 5.2 per cent reduction in the Company's net asset value.

We discuss later in this report the methods we use to determine fair value for unquoted investments, such as Vostok Energy. But we would emphasize that, despite the poor performance of a number of our unquoted holdings over the last year, these types of investment have been positive contributors to performance over the longer term.

Total returns	3 years	5 years	Since 1 June 2003*
Net asset value per ordinary share	14.4%	23.5%	360.4%
Ordinary share price	17.9%	34.6%	370.5%
FTSE All-Share Index	31.3%	31.1%	142.5%

Source: Artemis/Datastream

* The date when Artemis was appointed as Investment Manager. All figures are total return to 30 April 2013.

Review

Following a turbulent summer, stockmarkets rallied strongly through the latter part of 2012 and into early 2013. The main trigger for the rally was Mario Draghi's statement that he would do "whatever it takes" to prevent a break-up of the eurozone. After months of uncertainty - and some nail-biting parliamentary votes across southern Europe - investors welcomed the new, as yet untested, steadfastness of policymakers. Yields on bonds issued by peripheral eurozone economies began to fall from alarmingly high levels.

As worries about the future of the eurozone receded, equity prices surged higher despite the macro-economic headwinds. Along with Mr Draghi's reassuring comments, the gains were driven by a combination of additional quantitative easing, reasonable valuations and low interest rates.

Portfolio

The portfolio has settled down to core holdings in around 60 stocks, which together account for around 93 per cent of the total portfolio. The main investment themes in the portfolio are oil & gas, companies using the internet for their businesses, such as online retailers and social media, and other financials - predominantly fund and wealth managers.

Set out below are the five largest stock contributors and detractors to absolute performance over the year:

Five largest stock contributors

Company	Market	Contribution %
The Hut Group	Unquoted	3.5
Africa Oil	Toronto SE	1.8
Telford Homes	AIM	1.6
Polar Capital Holdings	AIM	1.5
Oxford Catalysts	AIM	1.2

Five largest stock detractors

Company	Market	Contribution %
Vostok Energy	Unquoted	(5.2)
Hurricane Energy	Unquoted	(3.0)
New Britain Palm Oil	LSE	(2.2)
Lynton Holding Asia	Unquoted	(1.6)
Madagascar Oil	AIM	(0.9)

Online retailing remains an area of interest for the Company. A growing number of consumers are choosing to shop using the internet rather than on the high street and online retailers are enjoying very strong top-line growth compared to their traditional 'bricks-and-mortar' peers. And, because their property costs are far lower, online retailers also benefit from a significant inbuilt cost advantage. While there are very few listed online retailers at present, the portfolio has exposure through holdings in three private companies - Gift Library, Hardlyever and The Hut Group.

The Hut Group was the year's standout performer. It raised equity in December to acquire a specialist online bike-retailing business to slot alongside its existing niche businesses. This fund raising also brought a new investor into the business and, together with a smaller equity issuance earlier in the year, added just over 3.5 per cent to the Company's net asset value over the review period. The intention remains to float the business. Given that quoted comparators are trading on high valuations despite inferior growth profiles, we believe there is still further upside here.

Elsewhere we have invested in All The Worlds Entertainment, which is a social entertainment business. Its main focus is to aggregate information gathered from social media sites like Facebook and Twitter and use the data to create social entertainment charts across a wide range of genres and people. The company is developing rapidly and we have seen an uplift in our valuation since we first invested. We believe that this as an exciting area for the future.

Following a strong showing in 2012, the portfolio's holdings in the oil & gas sector have been rather becalmed over recent months. That said, two stocks - Africa Oil and Providence Resources - performed well. Africa Oil discovered large amounts of oil in Kenya and is now drilling in adjacent areas. Providence Resources, having made a sizeable discovery (Barryroe) in the southern Irish Sea, is now involved in a formal farmout process following the publication of the independent competent persons report. Drilling is being carried out at Dunquin, another prospective well. We expect positive news soon.

On the negative side, two of our larger unquoted positions, namely Vostok Energy and Hurricane Energy were written down in value. In regard to Vostok Energy, the company has been in advanced discussions to sell itself to a third party, but had begun to lose faith in the negotiations owing to the long period of time that had elapsed since talks had commenced. Consequently, it was considered appropriate to write down the value of the holding, reflecting the appraisal of the discussions and the possible outcomes. The cost to the net asset value of this adjustment was approximately 5.2 per cent.

In the case of Hurricane Energy, there has been a frustrating period of inactivity, which is now set to continue with the planned drilling operations for 2013 having been cancelled.  The drilling rig that Hurricane Energy had contracted would be delivered late as a result of the current operator suffering severe delays in another operation.  The late delivery of the rig leaves insufficient time to allow the company to carry out its drilling and testing programme ahead of the onset of winter weather, which in turn could compromise the test results and expose the company to further costs and so the rig contract was cancelled.  The focus for the company has turned to the 2014 appraisal work for its West of Shetland assets. As a consequence of the cancellation of the 2013 drilling programme, the company's intention to IPO will not proceed at this time.  It remains committed to seeking an AIM listing, but the approach and timetable require to be reviewed in light of developments. 

Whilst oil & gas will remain a theme in the portfolio, exposure has been reduced over the year. As we make realisations from this part of the portfolio, we intend to reinvest the proceeds in those sectors where we see the best prospects for future growth, including online retailers and other financial companies.

Two other profitable areas for the portfolio, particularly towards the end of the review period, were its investments in the fund and wealth-management sectors. In fund management we have built decent positions in Polar Capital and Liontrust Asset Management; both are benefiting from strong inflows and rising equity markets. These businesses are at a tipping point where operational gearing is really starting to kick in, leading to strong profit growth. In wealth management, the portfolio has holdings in Brewin Dolphin and Ashcourt Rowan. Both are well positioned to take market share from smaller advisers following the implementation of the Retail Distribution Review.

Our longstanding holding in Telford Homes is also worthy of mention. It is a niche housebuilder specialising in East London. The Olympic Games put this part of London on the map and the appetite of overseas buyers to invest in property there has been voracious.

There were some other negatives too. Our palm oil holdings performed poorly. This came against a background of weakness in the underlying commodity price resulting from high stock levels in Malaysia. But we expect stock levels to fall as the year progresses and believe the structural increase in demand from Asia makes palm oil a very attractive area in which to invest.

Lynton Holding Asia, another of our unquoted holdings, had previously been valued based on an equity fund raising, and it was partially written down to an earnings basis of valuation to better reflect the recent trading position of the company.

Five largest sector contributors

Sector		Contribution %
General Retailers		3.5
Financial Services		2.3
Household Goods & Home Construction		2.1
Software & Computer Services		1.8
Chemicals		1.2

Five largest sector detractors

Sector		Contribution %
Oil & Gas Producers		(8.0)
Mining		(2.9)
Food Producers		(2.5)
Personal Goods		(1.0)
Aerospace & Defence		(0.5)

Valuation of unquoted investments

Given that unquoted investments made a negative contribution to the Company's returns over the review period a short overview of the process we use to determine the valuations of unquoted investments may be useful.

Accounting rules require that the Company's unquoted investments be valued at fair value. As the bases of valuation and the inputs used to determine fair value can vary, there is a degree of subjectivity to this process. Valuation bases may include, for example, recent transaction prices, earnings multiples or net assets.

The Investment Manager's process for valuing the unquoted investments is summarised as follows. Each investment is covered by at least one fund manager, who has the responsibility for monitoring this investment and producing a valuation proposal. This is then submitted to a review panel for discussion. The panel consists of Artemis' chief investment officer and two further experienced fund managers, neither of whom have direct responsibility for producing the initial valuation proposals. This panel carefully considers the recommendations before making the final determination of the proposed valuations.

As the Board has ultimate responsibility for the valuation of the unquoted investments, the panel's recommendations are then presented to the Board at each quarterly meeting where they are discussed and approved. Should there be any significant developments between these quarterly reviews, a revised valuation recommendation will be proposed by the Investment Manager, for the Board's approval.

The net asset value is then updated to reflect the revised unquoted valuations as soon as practicably possible after the Board's approval.

Gearing

We increased the Company's level of gearing through the year as we identified further investment opportunities and our confidence in equities grew. By the end of the period, borrowings represented 17.3 per cent of net assets. As fund managers, we consider that the borrowing powers give us additional flexibility in managing the portfolio. So, in our pursuit of shareholder returns, we will continue to use this flexibility within the parameters set by the Board.

Outlook

After a good run, markets have become more volatile. The lack of economic growth, despite the vast amounts of liquidity central banks have pumped into the system, has come into focus again. The crisis in the eurozone remains unresolved. But, as we have stated before, we don't invest in economies or countries - but in companies. We continue to find investment opportunities and we believe that our unconstrained, high conviction approach to stock selection will continue to produce value for shareholders over the longer term. We will, no doubt, encounter some headwinds along the way, but we remain confident in our ability to produce positive returns for shareholders.

John Dodd and Adrian Paterson

Fund managers

Artemis Investment Management LLP

4 July 2013

Principal risks and risk management

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. As an investment company the main risks relate to the nature of the individual investments and the investment activities generally. These include market price risk, foreign currency risk, interest rate risk, credit risk and liquidity risk.

A summary of the key areas of risk is set out below:

■   Investment: the Company's investments are selected on their individual merits and the performance of the portfolio is not likely to track the wider UK market (FTSE All-Share Index). The Board believes this approach will continue to generate good long-term returns for shareholders. Currently 31.0 per cent (2012: 28.0 per cent) of the Company's investments (at market value) is represented by unquoted companies and these investments can carry a higher degree of risk. The Board considers that this risk is justified by the longer term nature of the investment objective and the Company's closed-ended structure, and that such investments will continue to be a source of positive returns for shareholders. The Company may also have significant exposure to particular industry sectors from time to time. Risk will be diversified through a broad range of investments being held. The Board discusses the investment portfolio with the Investment Manager at each Board meeting and part of this discussion includes a detailed review of the Company's unquoted investments and their valuations.

■   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: failure of the Investment Manager's and/or any third party service providers' systems which could result in an inability to accurately report and monitor the Company's financial position. The Investment Manager has established a business continuity plan to facilitate continued operation in the event of a major service disruption or disaster.

■   Financial: any failings in the Investment Manager's and/or third party service providers' controls which could lead to the Company's assets being misappropriated. Failure to comply with appropriate accounting standards could result in a reporting error or breach of regulations or legislation.

Statement of Directors' responsibilities in respect of the Annual Financial Report

The Directors are responsible for preparing the Annual Financial Report and the group and parent company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare group and parent company financial statements for each financial year. Under that law they are required to prepare the group financial statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the Directors are required to:

■  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 IFRS as adopted by the EU; and

■  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Financial Statements are published on a website, artemis.co.uk, maintained by the Company's Investment Manager, Artemis Investment Management LLP. The maintenance and integrity of the corporate and financial information relating to the Company is the responsibility of the Investment Manager. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

(a) the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities and financial position of the Company and the Group, and of the profit or loss of the Group; and

(b) the Report of the Directors includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Simon Miller

Chairman

4 July 2013

Consolidated Income Statement

For the year ended 30 April 2013

	Year ended 30 April 2013			Year ended 30 April 2012
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment income	1,760	-	1,760	2,018	-	2,018
Other income	(21)	-	(21)	35	-	35
	----------------	----------------	----------------	----------------	-------------	-------------
Total revenue	1,739	-	1,739	2,053	-	2,053
	----------------	----------------	----------------	----------------	-------------	-------------
Losses on investments	-	(4,013)	(4,013)	-	(7,274)	(7,274)
Losses on current asset investments	(140)	-	(140)	(638)	-	(638)
Currency losses	-	(21)	(21)	-	(68)	(68)
	----------------	----------------	----------------	----------------	-------------	-------------
Total income/(loss)	1,599	(4,034)	(2,435)	1,415	(7,342)	(5,927)
	----------------	----------------	----------------	----------------	-------------	-------------
Expenses
Investment management fee	(102)	(920)	(1,022)	(103)	(929)	(1,032)
Performance fee	-	-	-	40	363	403
Other expenses	(380)	(2)	(382)	(407)	(6)	(413)
	----------------	----------------	----------------	----------------	-------------	-------------
Profit/(loss) before finance costs and tax	1,117	(4,956)	(3,839)	945	(7,914)	(6,969)
Finance costs	(44)	(400)	(444)	(63)	(568)	(631)
	----------------	----------------	----------------	----------------	-------------	-------------
Profit/(loss) before tax	1,073	(5,356)	(4,283)	882	(8,482)	(7,600)
Tax	(12)	-	(12)	(24)	-	(24)
	----------------	----------------	----------------	----------------	-------------	-------------
Profit/(loss) for the year	1,061	(5,356)	(4,295)	858	(8,482)	(7,624)
	----------------	----------------	----------------	----------------	-------------	-------------
Earnings/(loss) per share	2.24p	(11.31)p	(9.07)p	1.76p	(17.44)p	(15.68)p

The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

All income is attributable to the equity shareholders of Artemis Alpha Trust plc. There are no minority interests.

Balance Sheets

As at 30 April 2013

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Non-current assets
Investments	162,121	163,291	162,480	163,811
Current assets
Investments held by subsidiary	950	-	1,635	-
Other receivables	547	405	664	853
Cash and cash equivalents	2,530	2,514	404	517
	----------------	----------------	----------------	----------------
	4,027	2,919	2,703	1,370
	----------------	----------------	----------------	----------------
Total assets	166,148	166,210	165,183	165,181
	----------------	----------------	----------------	----------------
Current liabilities
Other payables	(1,300)	(1,362)	(834)	(832)
Bank loan	(26,500)	(26,500)	(16,000)	(16,000)
	----------------	----------------	----------------	----------------
	(27,800)	(27,862)	(16,834)	(16,832)
	----------------	----------------	----------------	----------------
Net assets	138,348	138,348	148,349	148,349
	----------------	----------------	----------------	----------------
Equity attributable to equity holders
Share capital	554	554	557	557
Share premium	635	635	630	630
Special reserve	65,334	65,334	69,649	69,649
Capital redemption reserve	36	36	33	33
Retained earnings - revenue	1,621	870	1,956	1,044
Retained earnings - capital	70,168	70,919	75,524	76,436
	----------------	----------------	----------------	----------------
Total equity	138,348	138,348	148,349	148,349
	----------------	----------------	----------------	----------------
Net asset value per share	296.32p	296.32p	307.64p	307.64p

These financial statements were approved by the Board of Directors and signed on its behalf on

4 July 2013 by:

Simon Miller

Director

Statements of Changes in Equity

For the year ended 30 April 2013

						Retained earnings
		Share capital	Share premium	Special reserve	Capital redemption reserve	Revenue	Capital	Total
Group		£'000	£'000	£'000	£'000	£'000	£'000	£'000
For the year ended 30 April 2013
At 1 May 2012		557	630	69,649	33	1,956	75,524	148,349
Total comprehensive income:
Profit/(loss) for the year		-	-	-	-	1,061	(5,356)	(4,295)
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury		-	-	(4,315)	-	-	-	(4,315)
Cancellation of ordinary shares from treasury		(3)	-	-	3	-	-	-
Conversion of subscription shares		-	5	-	-	-	-	5
Dividends paid		-	-	-	-	(1,396)	-	(1,396)
		-----------	-----------	-----------	--------------	-------------	----------	-----------
At 30 April 2013		554	635	65,334	36	1,621	70,168	138,348
		-----------	-----------	-----------	--------------	-------------	----------	-----------
For the year ended 30 April 2012
At 1 May 2011		557	69,136	2,807	33	2,485	84,006	159,024
Total comprehensive income:
Profit/(loss) for the year		-	-	-	-	858	(8,482)	(7,624)
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury		-	-	(1,730)	-	-	-	(1,730)
Conversion of subscription shares		-	66	-	-	-	-	66
Cancellation of share premium		-	(68,572)	68,572	-	-	-	-
Dividends paid		-	-	-	-	(1,387)	-	(1,387)
		-----------	-----------	-----------	--------------	-------------	----------	-----------
At 30 April 2012		557	630	69,649	33	1,956	75,524	148,349
		-----------	-----------	-----------	--------------	-------------	----------	-----------
						Retained earnings
		Share capital	Share premium	Special reserve	Capital redemption Reserve	Revenue	Capital	Total
Company		£'000	£'000	£'000	£'000	£'000	£'000	£'000
For the year ended 30 April 2013
At 1 May 2012		557	630	69,649	33	1,044	76,436	148,349
Total comprehensive income:
Profit/(loss) for the year		-	-	-	-	1,222	(5,517)	(4,295)
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury		-	-	(4,315)	-	-	-	(4,315)
Cancellation of ordinary shares from treasury		(3)	-	-	3	-	-	-
Conversion of subscription shares		-	5	-	-	-	-	5
Dividends paid		-	-	-	-	(1,396)	-	(1,396)
		-----------	-----------	-----------	--------------	-------------	----------	-----------
At 30 April 2013		554	635	65,334	36	870	70,919	138,348
		-----------	-----------	-----------	--------------	-------------	----------	-----------
For the year ended 30 April 2012
At 1 May 2011		557	69,136	2,807	33	983	85,508	159,024
Total comprehensive income:
Profit/(loss) for the year		-	-	-	-	1.448	(9,072)	(7,624)
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury		-	-	(1,730)	-	-	-	(1,730)
Conversion of subscription shares		-	66	-	-	-	-	66
Cancellation of share premium		-	(68,572)	68,572	-	-	-	-
Dividends paid		-	-	-	-	(1,387)	-	(1,387)
		-----------	-----------	-----------	--------------	-------------	----------	-----------
At 30 April 2012		557	630	69,649	33	1,044	76,436	148,349
		-----------	-----------	-----------	--------------	-------------	----------	-----------

Cash Flow Statements

For the year ended 30 April 2013

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Operating activities
Loss before tax	(4,283)	(4,283)	(7,600)	(7,600)
Interest payable	444	444	631	631
Losses on investments	4,013	4,174	7,274	7,864
Losses on current asset investments	140	-	638	-
Currency losses	21	21	68	68
Decrease/(increase) in other receivables	271	260	(87)	(90)
Decrease in other payables	(23)	(23)	(441)	(422)
	------------------	------------------	------------------	------------------
Net cash inflow from operating activities before interest and tax	583	593	483	451
Interest paid	(444)	(444)	(631)	(631)
Irrecoverable overseas tax suffered	(12)	(12)	(24)	(24)
	------------------	------------------	------------------	------------------
Net cash inflow/(outflow) from operating activities	127	137	(172)	(204)
	------------------	------------------	------------------	------------------
Investing activities
Purchases of investments	(53,258)	(51,895)	(53,526)	(51,082)
Sales of investments	50,484	48,672	69,240	73,325
	------------------	------------------	------------------	------------------
Net cash (outflow)/inflow from investing activities	(2,774)	(3,223)	15,714	22,243
	------------------	------------------	------------------	------------------
Financing activities
Repurchase of ordinary shares into treasury	(4,315)	(4,315)	(1,730)	(1,730)
Conversion of subscription shares	5	5	66	66
Dividends paid	(1,396)	(1,396)	(1,387)	(1,387)
Increase/(decrease) in inter-company loan	-	310	-	(6,195)
	------------------	------------------	------------------	------------------
Net cash outflow from financing activities	(5,706)	(5,396)	(3,051)	(9,246)
	------------------	------------------	------------------	------------------
Net (increase)/decrease in net debt	(8,353)	(8,482)	12,491	12,793
	------------------	------------------	------------------	------------------
Net debt at the start of the year	(15,596)	(15,483)	(28,019)	(28,208)
Effect of foreign exchange rate changes	(21)	(21)	(68)	(68)
	------------------	------------------	------------------	------------------
Net debt at the end of the year	(23,970)	(23,986)	(15,596)	(15,483)
	------------------	------------------	------------------	------------------
Bank loans	(26,500)	(26,500)	(16,000)	(16,000)
Cash	2,530	2,514	404	517
	------------------	------------------	------------------	------------------
	(23,970)	(23,986)	(15,596)	(15,483)
	------------------	------------------	------------------	------------------

Notes:

1.     Accounting policies

Basis of preparation

The Group's Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The Company's Financial Statements have also been prepared in accordance with IFRSs as adopted by the EU and in accordance with the provisions of the Companies Act 2006 (the "Act"). The principal accounting policies adopted by the Group and by the Company are set out below. The Company has taken advantage of the exemption provided under Section 408 of the Act not to publish its Income Statement and related notes.

2.     Income

	2013 £'000	2012 £'000
Investment income*
UK dividend income	1,341	1,167
UK fixed interest	157	295
Overseas dividend income	139	485
UK scrip dividend income	62	-
UK REIT income	61	71
	------------------	------------------
	1,760	2,018
	------------------	------------------
Other income
Underwriting commission	13	-
Bank interest	2	3
Subsidiary undertaking's dealing (losses)/profits	(36)	32
	------------------	------------------
	(21)	35
	------------------	------------------
Total income	1,739	2,053
	------------------	------------------
Total income comprises:
Dividends and interest from investments	1,760	2,018
Bank interest	2	3
Other income and dealing (losses)/profits	(23)	32
	------------------	------------------
	1,739	2,053
	------------------	------------------
Income from investments
UK quoted investments	1,607	1,253
UK unquoted investments	14	280
Overseas quoted investments	139	485
	------------------	------------------
	1,760	2,018
	------------------	------------------

* All investments are designated at fair value through profit or loss on initial recognition, therefore all investment income arises on investments at fair value through profit or loss.

3.     Investment management and performance fees

	2013			2012
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee	102	920	1,022	103	929	1,032
Performance fee	-	-	-	(40)	(363)	(403)

As at 30 April 2013, £347,000 was outstanding in respect of amounts due to the Investment Manager (2012: £322,000). As the performance in this period did not meet the criteria required, no performance fee was due (2012: nil).

4.   Dividends paid and proposed

Dividends paid and proposed

	2013 £'000	2012 £'000
2012 second interim dividend of 1.75p per ordinary share (2011: 1.65p)	831	803
2013 first interim dividend of 1.20p per ordinary share (2012: 1.20p)	565	584
	------------------	------------------
	1,396	1,387
	------------------	------------------

Dividends payable in respect of the year

	2013 £'000	2012 £'000
First interim dividend of 1.20p per ordinary share (2012: 1.20p)	565	584
Second interim dividend of 1.85p per ordinary share (2012: 1.75p)	864	844
	------------------	------------------
	1,429	1,428
	------------------	------------------

5.   Earnings per ordinary share

The basic revenue return per ordinary share is based on the revenue profit for the year of £1,061,000 (2012: £858,000) and on the 47,350,570 (2012: 48,635,430) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

The basic capital return per ordinary share is based on the capital loss for the year of £5,356,000 (2012: £8,482,000) and on the 47,350,570 (2012: 48,635,430) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

There was no dilution to the returns for the year ended 30 April 2013 (2012: none).

6.     Share capital

(a)       Share capital

	2013 Number	2013 £'000	2012 Number	2012 £'000
Allotted, called up and fully paid:
Ordinary shares of 1p each	46,688,812	467	48,222,422	482
Ordinary shares of 1p each held in treasury	1,847,176	18	622,048	6
Subscription shares of 1p each	6,865,616	69	6,867,134	69
		------------------		------------------
		554		557
		------------------		------------------

 (b)     Ordinary shares

	Number	£'000
Movements in ordinary shares during the year:
Ordinary shares in issue on 1 May 2012	48,222,422	482
Repurchase of ordinary shares into treasury	(1,535,128)	(15)
Issue of ordinary shares on exercise of subscription shares	1,518	-
	------------------	------------------
Ordinary shares in issue on 30 April 2013	46,688,812	467
	------------------	------------------

The movements in ordinary shares held in treasury during the year are as follows:

	2013		2012
	Number	£'000	Number	£'000
Balance brought forward	622,048	6	-	-
Repurchases	1,535,128	15	622,048	6
Shares cancelled	(310,000)	(3)	-	-
	------------------	------------------	------------------	------------------
Balance carried forward	1,847,176	18	622,048	6
	------------------	------------------	------------------	------------------

 (c)     Subscription shares

	Number	£'000
Balance brought forward	6,867,134	69
Conversion of subscription shares into ordinary shares	(1,518)	-
	------------------	------------------
Balance carried forward	6,865,616	69
	------------------	------------------

7.     Net asset value per ordinary share

The net asset value per ordinary share is based on the net assets of £138,348,000 (2012: £148,349,000) and on 46,688,812 (2012: 48,222,422) ordinary shares, being the number of ordinary shares in issue at the year end.

The diluted net asset value per ordinary share has been calculated on the assumption that nil (2012: nil) subscription shares were exercised resulting in a total of 46,688,812 ordinary shares in issue (2012: 48,222,422).

8.     Transactions with the Investment manager and related parties

The existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party. All other transactions with subsidiary undertakings were on an arms length basis. During the year transactions in securities between the Company and its subsidiary undertakings amounted to £nil (2012: £nil).

9.     This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 April 2013 and 30 April 2012 but is derived from those accounts. Statutory accounts for the year ended 30 April 2012 have been delivered to the Registrar of Companies.  The statutory accounts for the year ended 30 April 2012 and the year ended 30 April 2013 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 2013 have not yet been delivered to the Registrar of Companies and will be delivered following the Annual General Meeting.

The audited Annual Financial Report for the year ended 30 April 2013 will be available to shareholders shortly. Copies may be obtained from the Company's registered office at Cassini House, 57 St James's Street, London, SW1A 1LD or at the Investment Manager's website at artemis.co.uk.

The Annual General Meeting of the Company will be held on Thursday, 12 September 2013.

For further information, please contact:

Artemis Investment Management LLP

Company Secretary

Telephone: [phone]

4 July 2013

 

END

 

 

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