Annual Financial Report

RNS Number : 4326L

Artemis Alpha Trust PLC

03 July 2014

 



Artemis Alpha Trust plc (the "Company")

Annual Financial Report for the year ended 30 April 2014

This announcement contains regulated information

Financial Highlights

Returns for the year ended 30 April 2014

	Year ended 30 April 2014	Year ended 30 April 2013
Total returns
Net asset value per ordinary share	13.3%	(2.8)%
Ordinary share price	3.1%	4.5%
FTSE All-Share Index	10.5%	17.8%
Revenue and dividends
Revenue earnings per ordinary share	6.16p	2.24p
Dividends per ordinary share	3.20p	3.05p
Ongoing charges (excluding performance fees)	1.0%	0.9%
Capital	As at 30 April 2014	As at 30 April 2013
Net asset value per ordinary share	332.55p	296.32p
Ordinary share price	298.75p	293.00p
Gearing	17.4%	17.3%

Total returns	3 years	5 years	Since 1 June 2003*
Net asset value per ordinary share	5.1%	84.6%	421.8%
Ordinary share price	(7.3)%	77.5%	382.0%
FTSE All-Share Index	27.6%	98.2%	168.0%

Source: Artemis/Datastream

* The date when Artemis was appointed as Investment Manager. - Source: Artemis/Datastream

Strategic Report

This Strategic Report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, which Artemis Alpha Trust plc (the "Company") is required to comply with for the first time for the year ended 30 April 2014.

Corporate strategy & policy

The Company is incorporated in England. Its business as an investment trust is to buy and sell investments with the aim of achieving the corporate policy outlined below.

Objective & Investment Policy

The objective of the Company is to achieve above average rates of total return over the longer term and to achieve a growing dividend stream. In pursuit of this objective, the Company's portfolio is actively managed by the Investment Manager and comprises largely UK equities, with selected overseas investments. The Investment Manager takes a stock-specific approach in managing the portfolio and, therefore, sector weightings are of secondary consideration. As a result of this approach the portfolio will not track any stockmarket index. There is no restriction on the number of investments that can be held in the portfolio.

The Company also invests in unquoted companies. The Investment Management Agreement provides that at the time of investment these investments shall represent no more than 30 per cent of net assets. For the purpose of measuring this, unquoted investments will be measured by the lower of their cost or current valuation.

In addition, the Company can invest up to 30 per cent of its net assets in hedge funds and/or other unregulated collective investment schemes. The Company will not invest more than 15 per cent of its gross assets in other investment companies listed on the main market of the London Stock Exchange.

Gearing

The Company uses gearing as part of its investment strategy. The Articles of Association (the "Articles") permit the Company to borrow up to 25 per cent of its adjusted capital and reserves. Subject to this being complied with, the level of borrowing is a matter for the Board, whilst the utilisation of borrowings is delegated to the Investment Manager. This utilisation may be subject to specific guidelines established by the Board from time to time. The current guidelines permit the Investment Manager to utilise borrowings of up to 20 per cent of net assets. The Company has a £30 million borrowing facility with The Royal Bank of Scotland plc, of which £26.5 million was drawn down at the year end. The use of gearing by the Investment Manager will vary from time to time, reflecting its views on the potential returns from stockmarkets. The Company's gearing is reviewed by the Board and Investment Manager on an ongoing basis.

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 for the year ended 30 April 2013 and future periods, subject to the Company continuing to meet the eligibility conditions and ongoing requirements of the regulations. The Board will manage the Company so as to continue to meet these conditions.

The Group has no employees and delegates most of its operational functions to service providers, details of which are set out in the report.

Current and future developments

A summary of the Company's developments during the year ended 30 April 2014, together with its prospects for the future, is set out in the Chairman's Statement and Investment Manager's Review. The Board's principal focus is the delivery of positive long-term returns for shareholders. This will be dependent on the success of the investment strategy, in the context of both economic and stockmarket conditions. The investment strategy, and factors that may have an influence on it, are discussed regularly by the Board and the Investment Manager. The Board regularly considers the ongoing development and strategic direction of the Company, including its promotion and the effectiveness of communication with shareholders.

Strategic Report - Chairman's Statement

Performance

The Company's net asset value increased by 13.3 per cent during the year ended 30 April 2014. This compares to an increase over the same period of 10.5 per cent in the FTSE All-Share Index.

Dividends

The Board has declared a second interim dividend of 2.00p (2013: 1.85p) per ordinary share, bringing the total for the year ended 30 April 2014 to 3.20p (2013: 3.05p), an increase of 4.9%. This is the result of two factors: first, the investment portfolio has produced a higher level of income this year due to dividends from its financial holdings; and second, the Company's dealing subsidiary had a very successful year and generated in excess of £1 million in profits which has boosted the overall amount available for dividends.

The second interim dividend will be paid on 15 August 2014 to those shareholders on the register as at 25 July 2014. Any shareholders wishing to re-invest their dividends can do so using the dividend re-investment plan.

Portfolio

For some time now, Artemis Alpha has had a significant exposure to the oil & gas sector which has delivered good returns over the longer term. However, over the last two years, against a backdrop of a high oil price, there has been very mixed performance within the sector. The best performance has come from production companies, whereas those focused on exploration and that have limited financial resources have as a result performed badly in share price terms.

The portfolio is now more diversified than it has been for a number of years, with the largest sector exposure now financial services where the Company has holdings in a number of investment management companies. It also has a substantial investment in companies which use the internet to create a competitive advantage in their industry, primarily internet retailers.

The Company's exposure to unquoted companies was maintained during the year and is well diversified by industry and stage of development. Their contribution played an important role within the portfolio.

Share price & discount

3,482,409 ordinary shares were bought back during the year, representing 7.4 per cent of the share capital, at a cost of £9.7m and an average discount to the prevailing net asset value of 11 per cent. Buying back shares at a discount does have the effect of adding value for remaining shareholders, and in the year to 30 April 2014 the uplift from buybacks was equivalent to 2.50p per ordinary share.

Gearing

As reported in the half-yearly statement, the Company entered into a new £30 million five-year, multi-currency revolving loan facility with The Royal Bank of Scotland in November 2013. The Board believes that this will provide flexibility over the medium term at a competitive rate.

Gearing was maintained at broadly the same level throughout the year and this was accretive to performance. At the year-end, borrowings represented 17.4 per cent of net assets.

Alternative Investment Fund Managers Directive ("AIFMD")

As highlighted in previous reports, the Company is required to comply with AIFMD by July 2014. Artemis Fund Managers Limited, a company in the same group as the current Investment Manager, will be appointed as Investment Manager and Alternative Investment Fund Manager to the Company. The investment management agreement between the Company and the Investment Manager will be updated to reflect the requirements of AIFMD. A further requirement of AIFMD is to appoint a depositary that will be, inter alia, responsible for the safe keeping of the Company's assets, and the Board has appointed J.P. Morgan Chase to fulfil this role. There is a small annual fee, based on the value of the assets, payable to J.P. Morgan Chase, otherwise there are not expected to be any significant additional costs to shareholders as a result of complying with AIFMD.

Board composition

As reported in the last annual report, I intend to retire as a Director and Chairman of the Company at the conclusion of the Annual General Meeting on 2 October 2014. I have thoroughly enjoyed my time on the Board and am confident in the future of Artemis Alpha. Duncan Budge will succeed me as Chairman.

Annual General Meeting

The Company's AGM will take place on Thursday, 2 October 2014 at 12.30 pm at the offices of Artemis Investment Management LLP, Cassini House, 57 St James's Street, London SW1A 1LD.

The 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 report.

Outlook

Stockmarkets have recovered strongly since the depths of the financial crisis in 2009. But how much of this performance is due to the monetary policy of central banks is not yet clear. Valuations have increased faster than corporate earnings, and are starting to appear high for some companies. Sterling has also been a strong performer, which may affect a number of the portfolio's holdings which have international operations.

It is encouraging that the UK is one of the fastest growing economies in the developed world and, having built up cash over the past few years, companies are now starting to invest and levels of corporate activity have increased. This should create a positive background for markets.

Simon Miller

Chairman

3 July 2014

Strategic Report - Investment Manager's Review

Performance

Over the year to 30 April 2014, the Company's net asset value rose by 13.3 per cent compared with a rise of 10.5 per cent in the FTSE All-Share Index.

This was a significant improvement on the previous financial year, when the value ascribed to a number of the Company's unquoted holdings was written down, weighing on the Company's relative returns. The Company's long-term performance remains good.

Total returns	3 years	5 years	Since 1 June 2003*
Net asset value	5.1%	84.6%	421.8%
Ordinary share price	(7.3)%	77.5%	382.0%
FTSE All-Share Index	27.6%	98.2%	168.0%

Source: Artemis/Datastream

* The date when Artemis was appointed as Investment Manager. All figures are total return to 30 April 2014.

Review

Over the last 12 months, economies around the world have started to show signs of recovery. In combination with a prolonged period of low interest rates, this has enabled equities - and a number of other asset classes - to continue rising.

The UK's economic recovery has been notable. Unemployment is falling, growth is returning and house prices in some parts of the country are rising. The question now becomes when will interest rates go up. Expectations of higher rates have already led to a substantial rise in sterling over the last few months, endangering the competitiveness of the UK's exporters. In general, though, corporate profitability remains strong and consumers remain confident.

Portfolio

We have always had a strong emphasis on bottom-up stock picking and this continues to be the case. Over this financial year, the portfolio has had an increased focus around three core themes: other financials, online businesses and oil & gas. Both other financials and online businesses are seeing strong structural growth elements.

Five largest stock contributors

Company		Market	Contribution %
Metapack		Unquoted	3.1
Polar Capital Holdings		AIM	2.2
Brewin Dolphin		LSE	2.1
Skyepharma		LSE	1.8
Liontrust Asset Management		LSE	1.7

Five largest stock detractors

Company		Market	Contribution %
Providence Resources		AIM	(4.7)
Hurricane Energy		AIM	(3.4)
Lansdowne Oil & Gas		AIM	(1.2)
Salamander Energy		LSE	(0.9)
Praetorian Resources		AIM	(0.8)

Of the three themes, oil & gas has been the most challenging over the period and, while it remains a core theme, a decision was made some months ago to reduce the overall exposure in this area. This sector now accounts for around 15 per cent of the portfolio, down from nearer 40 per cent two years ago. This is an area in which we have some specialist expertise and, despite some short-term setbacks, we continue to believe that, selectively, the longer term growth prospects are good.

The best stock performer over the 12 month period was Metapack, one of the portfolio's unquoted online businesses. It has developed software to manage the home delivery process for online retailers and is the only company that provides a single point of integration for all UK and European couriers. It has a dominant position in the UK market: it counts 70 of the top 100 retailers among its clients. As an increasing proportion of retail business moves online, Metapack is seeing strong growth in both its top and bottom lines. The event that triggered the revaluation of our holding was the acquisition of 20 per cent of the company's equity by Index Ventures, a private equity firm that specialises in the technology sector. This transaction occurred at a substantial premium to our carrying value. Although we sold part of our holding at this level, we still have high expectations for Metapack.

In the other financials sector, the holdings in two asset managers, Polar Capital and Liontrust, performed strongly. Both companies are benefitting from rising equity markets and strong flows into their funds. These businesses have worked hard over the last couple of years to diversify their product offerings and to attract high-calibre individuals, for whom the opportunity to own a stake in a successful, growing business is appealing. Furthermore, both are benefitting from the high levels of operational gearing, with margins increasing as assets under management grow.

The other investment in this area that has performed well is Brewin Dolphin, the wealth manager. Its profit margins have risen rapidly under the guidance of an excellent management team installed 18 months ago. Rigorous attention to costs and streamlining of the business has enabled the company to attain similar financial performance to that of its main competitors and now the focus is on how to drive revenues forward. By forcing many of the industry's smaller players out of the market, the increased costs of regulation should benefit the more established companies in this sector. Brewin Dolphin should be in an excellent position to grow its assets under management in the years ahead.

Other strong performers included Telford Homes, the specialist east London house builder, and a new holding, Skyepharma. This is an oral and inhalation drug delivery company receiving royalties from a portfolio of products partnered with major pharmaceutical companies. Its asthma product, Flutiform, is showing tremendous potential having been approved in 21 countries.

Five largest sector contributors

Sector		Contribution %
Financial Services		7.2
Industrial Transportation		4.4
Pharmaceuticals & Biotechnology		3.2
Household Goods & Home Construction		2.3
General Retailers		1.2

Five largest sector detractors

Sector		Contribution %
Oil & Gas Producers		(8.5)
Beverages		(1.2)
Mobile Telecommunications		(0.7)
Travel & Leisure		(0.6)
Electricity		(0.5)

Among the unquoted holdings, there were positive revaluations to the carrying values of the All The Worlds Entertainment and Gift Library, as external investors injected fresh equity to enable these businesses to grow. The valuation of Reaction Engines, which has developed a revolutionary lightweight heat exchanger for space and hypersonic propulsion systems, also increased. The company is part of the consortium developing the Sabre space plane engine with the European Space Agency that would enable an unpiloted vehicle to enter and return from space at a fraction of the cost of traditional expendable launch vehicles. Reaction Engines was boosted by the UK government's decision to provide it with a £60m drawdown facility which the company will be able to access shortly.

On the negative side, the main disappointments were in the oil & gas sector. As noted above, we have taken a strategic decision to reduce exposure to this area. This year's biggest detractor was Providence Resources. Despite its substantial discovery in the Barryroe field, talks with potential partners over a farm-out agreement have stalled. The company insists it is still in discussions with a number of parties but the extended negotiations have unnerved investors. This has had a knock-on effect on Lansdowne Oil & Gas, another of the Company's holdings, which has a carried interest in Barryroe.

Although Hurricane Energy listed successfully on AIM in February, the subsequent fall in share price detracted from performance during the year. However since the Company's year end Hurricane has re-drilled an appraisal well at its Lancaster prospect. The flow test results exceeded management's expectations and the shares rose strongly. We believe this re-rating will continue once the pressure data has been analysed.

There was also weakness in Salamander Energy's share price during the year under review. However, since the year end the company announced it was putting itself up for sale and we have used the subsequent share price strength to exit the position in its entirety.

In other sectors, Emis Group, a healthcare information technology company, disappointed after losing its chief executive. However, the business has continued to trade well and the shares have performed strongly since the period end.

In terms of transactions the largest new investment (other than Skyepharma) was another online business called GLI Finance. This company has bought holdings in a number of private peer-to-peer lending businesses. As a consequence of the reluctance of the major banks to lend to individuals and small businesses, peer-to-peer lending is one of the fastest growing areas in the UK economy. A number of platforms have been set up to match borrowers with lenders, ensuring that high quality borrowers can access loans at an appropriate interest rate. This industry appears to be a win-win for both borrowers and lenders alike. It has strong government support, and although some of the bigger peer-to-peer businesses might float over the next 18 months, GLI Finance is the only quoted company in the UK that gives investors access to this exciting growth area.

Other new investments included Martin & Co, a property lettings business aiming to grow in a highly fragmented market. On the unquoted side, we bought Gundaline, an agricultural business which owns a large parcel of land in New South Wales and focuses on growing cotton primarily for export to China and the Far East.

On the disposal side, we sold Madagascar Oil and Continental Farmers Group in their entirety and partial sales were made in Genel Energy, Africa Oil and Igas Energy. Among the other financials, profits were taken in Brewin Dolphin, Liontrust, Polar Capital and Ashcourt Rowan.

Following these transactions, the portfolio is as concentrated as it has been for some time. This reflects the high levels of conviction we have in these holdings.

Outlook

Markets have continued to move upwards in 2014 thanks to very low interest rates and an improving economic background. Meanwhile, the prospects for realising value from the unquoted portfolio have improved significantly. Conditions for value realisation have been difficult over the last few years, but the recent surge in corporate activity, and the strength of the IPO market, should assist in our efforts to realise more of the unquoted portfolio. Therefore we remain optimistic about the year ahead.

John Dodd and Adrian Paterson

Fund managers

Artemis Investment Management LLP

3 July 2014

Strategic Report - Key Performance indicators ("KPIs")

The performance of the Company is reviewed regularly by the Board and it uses a number of key performance indicators ("KPIs") to assess the Company's success in meeting its objective. The KPIs which have been established for this purpose are:

·      Discrete annual total returns

·      Dividends per ordinary share

·      Ongoing charges as a proportion of shareholders'funds (excluding performance fees)

In addition to the above KPIs, the Board monitors the discount at which the shares trade at against the underlying net asset value. Whilst no specific discount target has been set, the Board has given the Investment Manager discretion to exercise the Company's authority to buy-back its own shares from time to time to address any imbalances between the supply and demand of the Company's shares in order to achieve a stable discount. The Board will also use its authority to issue new ordinary shares from time to time should there be excess demand for the Company's shares.

Strategic Report - other matters

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 32.1 per cent (2013: 26.5 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 as they have been to date. 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 report accurately 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.

Life of the Company

The Company's Articles provide that, at the AGM to be held in 2018 and at every fifth AGM thereafter, a vote on whether the Company should continue in existence as an investment trust will be proposed as an ordinary resolution.

Share capital management

During the year the Company repurchased a total of 3,482,409 ordinary shares, representing 7.4 per cent of the issued share capital. The Company has not repurchased any further ordinary shares since the year end.

A resolution to renew the Company's buy-back authority will be put to shareholders at the Annual General Meeting on 2 October 2014.

Directors

No Director has a contract of service with the Company. The Board supports the principles of diversity in the boardroom. It acknowledges the benefits of having greater diversity, including gender, and considers this in seeking to ensure that the overall balance of skills and knowledge that the Board has remains appropriate so that it can continue to operate effectively. The Board's director selection policy will, first and foremost, seek to identify the person best qualified to become a director of the Company, but in so doing, consideration will be given to diversity, including gender. The Board is currently comprised of five male Directors. The Company does not have any employees.

Social & environmental matters

The Company has delegated the management of the Company's investments to Artemis which, in its capacity as Investment Manager, has a Corporate Governance and Shareholder Engagement document which sets out a number of principles that are intended to be considered in the context of its responsibility to manage investments in the financial interests of shareholders. Artemis undertakes extensive evaluation and engagement with company management on a variety of matters such as strategy, performance, risk, dividend policy, governance and remuneration. All risks and opportunities are considered as part of the investment process in the context of enhancing the long-term value of shareholders investments. This will include matters relating to material environmental, human rights and social considerations that will ultimately impact the profitability of a company or its stock market rating and hence these matters are an integral part of Artemis' thinking as investors.

As the Company has delegated the investment management and administration of the Company to third party service providers, and has no fixed premises, there are no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within the underlying investment portfolio.

For and on behalf of the Board

Simon Miller

Chairman

3 July 2014

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 Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

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

We confirm that to the best of our knowledge:

(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 as at 30 April 2014, and of the profit or loss of the Group for the year then ended; and

(b)      the Strategic Report 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

3 July 2014

Consolidated Income Statement

For the year ended 30 April 2014

			Year ended 30 April 2014						Year ended 30 April 2013
			Revenue £'000		Capital £'000		Total £'000		Revenue £'000		Capital £'000		Total £'000
Investment income			2,280		-		2,280		1,760		-		1,760
Other income			710		-		710		(21)		-		(21)
Total revenue			2,990		-		2,990		1,739		-		1,739
Gains/(losses) on investments			-		15,054		15,054		-		(4,013)		(4,013)
Gains/(losses) on current asset investments			392		-		392		(140)		-		(140)
Currency losses			(4)		(3)		(7)		-		(21)		(21)
Total income/(loss)			3,378		15,051		18,429		1,599		(4,034)		(2,435)
Expenses
Investment management fee			(96)		(864)		(960)		(102)		(920)		(1,022)
Other expenses			(403)		(29)		(432)		(380)		(2)		(382)
Profit/(loss) before finance costs  and tax			2,879		14,158		17,037		1,117		(4,956)		(3,839)
Finance costs			(59)		(511)		(570)		(44)		(400)		(444)
Profit/(loss) before tax			2,820		13,647		16,467		1,073		(5,356)		(4,283)
Tax			(98)		-		(98)		(12)		-		(12)
Profit/(loss) for the year			2,722		13,647		16,369		1,061		(5,356)		(4,295)
Earnings/(loss) per ordinary share			6.16p		30.90p		37.06p		2.24p		(11.31)p		(9.07)p

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

All items in the above statement derive from continuing operations.

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

Balance Sheets

As at 30 April 2014

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Non-current assets
Investments	167,207	169,481	162,121	163,291
Current assets
Investments held by subsidiary	1,263	-	950	-
Other receivables	551	492	547	405
Cash and cash equivalents	1,437	1,134	2,530	2,514
	3,251	1,626	4,027	2,919
Total assets	170,458	171,107	166,148	166,210
Current liabilities
Other payables	(274)	(923)	(1,300)	(1,362)
Bank loan	(26,500)	(26,500)	(26,500)	(26,500)
	(26,774)	(27,423)	(27,800)	(27,862)
Net assets	143,684	143,684	138,348	138,348
Equity attributable to equity holders
Share capital	539	539	554	554
Share premium	636	636	635	635
Special reserve	55,649	55,649	65,334	65,334
Capital redemption reserve	51	51	36	36
Retained earnings - revenue	2,994	1,145	1,621	870
Retained earnings - capital	83,815	85,664	70,168	70,919
Total equity	143,684	143,684	138,348	138,348
Net asset value per ordinary share	332.55p	332.55p	296.32p	296.32p

These financial statements were approved by the Board of Directors and signed on its behalf on 3 July 2014 by:

Simon Miller

Director

Statements of Changes in Equity

For the year ended 30 April 2013
Group	Share capital £'000			Share premium £'000		Special reserve £'000		Capital redemption reserve £'000		Retained earnings
										Revenue £'000		Capital £'000		Total £'000
For the year ended 30 April 2014
At 1 May 2013	554			635		65,334		36		1,621		70,168		138,348
Total comprehensive income:
Profit for the year	-			-		-		-		2,722		13,647		16,369
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury	-			-		(9,685)		-		-		-		(9,685)
Cancellation of ordinary shares from treasury	(15)			-		-		15		-		-		-
Conversion of subscription shares	-			1		-		-		-		-		1
Dividends paid	-			-		-		-		(1,349)		-		(1,349)
At 30 April 2014	539			636		55,649		51		2,994		83,815		143,684
For the year ended 30 April 2013
At 1 May 2012	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

Company	Share Capital £'000	Share premium £'000	Special reserve £'000	Capital redemption reserve £'000	Retained earnings		Total £'000
					Revenue £'000	Capital £'000
For the year ended 30 April 2014
At 1 May 2013	554	635	65,334	36	870	70,919	138,348
Total comprehensive income:
Profit for the year	-	-	-	-	1,624	14,745	16,369
Transactions with owners directly to equity:
Repurchase of ordinary shares into treasury	-	-	(9,685)	-	-	-	(9,685)
Cancellation of ordinary shares from treasury	(15)	-	-	15	-	-	-
Conversion of subscription shares	-	1	-	-	-	-	1
Dividends paid	-	-	-	-	(1,349)	-	(1,349)
At 30 April 2014	539	636	55,649	51	1,145	85,664	143,684
For the year ended 30 April 2013
At 1 May 2012	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

Cash Flow Statements

For the year ended 30 April 2014

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Operating activities
Profit/(loss) before tax	16,467	16,467	(4,283)	(4,283)
Interest payable	705	710	444	444
(Gains)/losses on investments	(15,054)	(16,158)	4,013	4,174
(Gains)/losses on current asset investments	(392)	-	140	-
Currency losses	3	3	21	21
(Increase)/decrease in other receivables	(136)	(136)	271	260
Decrease in other payables	(311)	(311)	(23)	(23)
Net cash inflow from operating activities before interest and tax	1,282	575	583	593
Interest paid	(705)	(710)	(444)	(444)
Irrecoverable overseas tax suffered	(98)	(98)	(12)	(12)
Net cash inflow/(outflow) from operating activities	479	(233)	127	137
Investing activities
Purchases of investments	(39,556)	(34,349)	(53,258)	(51,895)
Sales of investments	48,922	43,553	50,484	48,672
Net cash inflow/(outflow) from investing activities	9,366	9,204	(2,774)	(3,223)
Financing activities
Repurchase of ordinary shares into treasury	(9,587)	(9,587)	(4,315)	(4,315)
Conversion of subscription shares	1	1	5	5
Dividends paid	(1,349)	(1,349)	(1,396)	(1,396)
Increase in inter-company loan	-	587	-	310
Net cash outflow from financing activities	(10,935)	(10,348)	(5,706)	(5,396)
Net increase in net debt	(1,090)	(1,377)	(8,353)	(8,482)
Net debt at the start of the year	(23,970)	(23,986)	(15,596)	(15,483)
Effect of foreign exchange rate changes	(3)	(3)	(21)	(21)
Net debt at the end of the year	(25,063)	(25,366)	(23,970)	(23,986)
Bank loans	(26,500)	(26,500)	(26,500)	(26,500)
Cash	1,437	1,134	2,530	2,514
	(25,063)	(25,366)	(23,970)	(23,986)

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

	2014 £'000	2013 £'000
Investment income*
UK dividend income	1,689	1,341
UK fixed interest	202	157
Overseas dividend income	389	139
UK scrip dividend income	-	62
UK REIT income	-	61
	2,280	1,760
Other income
Subsidiary undertaking's dealing profits/(losses)	706	(36)
Bank interest	4	2
Underwriting commission	-	13
	710	(21)
Total income	2,990	1,739
Total income comprises:
Dividends and interest from investments	2,280	1,760
Bank interest	4	2
Other income and dealing profits/(losses)	706	(23)
	2,990	1,739
Income from investments
UK quoted investments	1,479	1,607
UK unquoted investments	412	14
Overseas quoted investments	389	139
	2,280	1,760

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

3.     Investment management and performance fees

	2014			2013
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee	96	864	960	102	920	1,022

As at 30 April 2014, £78,000 was outstanding in respect of amounts due to the Investment Manager (2013: £347,000). As the performance of the Company's share price did not meet the criteria required for the payment of a performance fee, no payment has been made (2013: nil).

4.   Dividends paid and proposed

Set out below are the total dividends recognised in respect of the financial year ended 30 April 2014.

	2014 £'000	2013 £'000
2013 second interim dividend of 1.85p per ordinary share (2012: 1.75p)	824	831
2014 first interim dividend of 1.20p per ordinary share (2013: 1.20p)	525	565
	1,349	1,396

Dividends are recognised in the period in which they are due to be paid and are shown through the Statement of Changes in Equity. Therefore, the Statement of Changes in Equity for the year ended 30 April 2014 reflects the second interim dividend for the year ended 30 April 2013 which was paid on 16 August 2013. For the year ended 30 April 2014, a first interim dividend of 1.20p has been paid and a second interim dividend of 2.00p per ordinary share will be paid on 15 August 2014.

Set out below are the total dividends paid/payable in respect of the financial year ended 30 April 2014.

	2014 £'000	2013 £'000
First interim dividend of 1.20p per ordinary share (2013: 1.20p)	525	565
Second interim dividend of 2.00p per ordinary share (2013: 1.85p)	864	824
	1,389	1,389

5.   Earnings per ordinary share

The basic revenue return per ordinary share is based on the revenue profit for the year of £2,722,000 (2013: £1,061,000) and on 44,162,066 (2013: 47,350,570) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

The basic capital return per ordinary share is based on the capital profit for the year of £13,647,000 (2013: capital loss of £5,356,000) and on 44,162,066 (2013: 47,350,570) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

There was no dilution to the returns for the year ended 30 April 2014 (2013: none).

6.     Share capital

(a)       Share capital

	2014 Number	2014 £'000	2013 Number	2013 £'000
Allotted, called up and fully paid:
Ordinary shares of 1p each	43,206,785	432	46,688,812	467
Ordinary shares of 1p each held in treasury	3,842,409	38	1,847,176	18
Subscription shares of 1p each	6,865,234	69	6,865,616	69
		539		554

 (b)     Ordinary shares

	Number	£'000
Movements in ordinary shares during the year:
Ordinary shares in issue on 1 May 2013	46,688,812	467
Repurchases of ordinary shares into treasury	(3,482,409)	(35)
Issue of ordinary shares on exercise of subscription shares	382	-
Ordinary shares in issue on 30 April 2014	43,206,785	432

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

	2014 Number	2014 £'000	2013 Number	2013 £'000
Balance brought forward	1,847,176	18	622,048	6
Repurchases of ordinary shares	3,482,409	35	1,535,128	15
Cancellation of ordinary shares	(1,487,176)	(15)	(310,000)	(3)
Balance carried forward	3,842,409	38	1,847,176	18

During the year ended 30 April 2014, a total of 3,482,409 ordinary shares were repurchased by the Company at a total cost, including transaction costs, of £9,685,000 for placement in treasury (2013: 1,535,128 ordinary shares were repurchased for placement in treasury for £4,315,000).

 (c)     Subscription shares

	Number	£'000
Balance brought forward	6,865,616	69
Conversion of subscription shares into ordinary shares	(382)	-
Balance carried forward	6,865,234	69

During the year, holders of 382 (2013: 1,518) subscription shares exercised their rights to covert those shares into ordinary shares at a price of 345.0 pence per ordinary share, giving a total consideration received of £1,000 (2013: £5,000).

Holders of the remaining subscription shares may exercise their right to convert those shares into ordinary shares at a price of 345.0 pence per ordinary share as at the close of business on the last business day in either June or December each year to 31 December 2017, whereupon rights under the subscription shares will lapse.

7.     Net asset value per ordinary share

The net asset value per ordinary share is based on the net assets of £143,684,000 (2013: £138,348,000) and on 43,206,785 (2013: 46,688,812) ordinary shares, being the number of ordinary shares in issue at the year end.

The diluted net asset value per share has been calculated on the assumption that nil (2013: nil) subscription shares were exercised resulting in a total of ordinary shares in issue 43,206,785 (2013: 46,688,812).

8.     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 Note 3. However, the existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party. The Company surrendered excess management expenses without payment to Alpha Securities Trading Limited of £353,000 (2013: £nil). All other transactions with subsidiary undertaking were on an arm's length basis. During the year transactions in securities between the Company and its subsidiary undertaking amounted to £nil (2013: £nil). During the year Artemis Alpha Trust paid its subsidiary, Alpha Securities Trading Limited, interest on the intercompany loan amounting to £7,000 (2013: £nil).

9.     This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 April 2014 and 30 April 2013 but is derived from those accounts. Statutory accounts for the year ended 30 April 2013 have been delivered to the Registrar of Companies.  The statutory accounts for the year ended 30 April 2013 and the year ended 30 April 2014 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 2014 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 2014 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, 2 October 2014.

For further information, please contact:

Artemis Investment Management LLP

Company Secretary

Telephone: [phone]

3 July 2014

 

END

 

 

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