Half-year Report

RNS Number : 0406L

Artemis Alpha Trust PLC

19 December 2018

 

ARTEMIS ALPHA TRUST PLC (the "Company")

LEI: 549300MQXY2QXEIL3756

Half-Yearly Financial Report for the six months ended 31 October 2018

This announcement contains regulated information

Chairman's Statement

Performance

In the six months to 31 October 2018 the Company's net asset value per share and share price declined by 9.2% and 8.0% respectively on a total return basis. The FTSE All-Share Index decreased by 3.5% over the same period.

The UK market has continued to be weak as a result of the extraordinary political uncertainties surrounding Brexit. October was particularly turbulent in markets with a heightened level of fear and volatility.

It is disappointing that our performance continues to suffer from the legacy unquoted holdings and that a number of our listed holdings have been negatively affected by market sentiment since the interim stage.

More detailed information on performance and the portfolio is set out in the Investment Manager's Review which follows.

Revised investment strategy

In June, the Company held a general meeting at which all resolutions put to shareholders in connection with the revised investment strategy were overwhelmingly approved. The background to this was described in the circular sent to shareholders in May and the new strategy is set out in the Half-Yearly Financial Report.

Unquoted investments

The unquoted percentage of the portfolio continued to reduce over the period under review, helped by the realisation of Metapack (4.5% of the portfolio) which made a positive contribution of 0.7% to the net asset value.

Conversely, the disappointing underperformance of Starcount Group contributed a loss of 1.6%, whilst the liquidation of URICA, as reported in the 2018 annual report, also detracted significantly from performance by 3.5%.

The Company's unquoted exposure as at 31 October 2018 had significantly reduced to 12.0% from the 20.7% level at the April 2018 year-end. With the completion of the sale of Gundaline in December, the unquoted exposure has reduced to 10.4%.

Our fund managers continue to look for realisation opportunities whilst mindful of the need to maximise value for shareholders.

Earnings & dividends

Revenue earnings per share for the six months to 31 October 2018 were 3.02p, an increase of 13.5% (2017: 2.66p). The Board has declared a first interim dividend of 2.00p per ordinary share (2017: 1.75p) which will be paid on 25 January 2019, to shareholders on the register as at 4 January 2019. This represents an increase of 14.3% over the equivalent dividend last year. Under our revised dividend policy, the Board targets an annual increase in the dividend in excess of the level of the Consumer Prices Index which stood at 2.2% as at April 2018.

Discount & share buy backs

The discount continued to narrow slightly and was 16.7% at 31 October 2018. The Company will consider buying back shares when this is necessary to address imbalances between supply and demand. No shares were bought back during the period.

Gearing

Although the revised investment policy implemented from 7 June 2018 allows the Company to employ gearing of up to 25% of net assets, there was no gearing as at 31 October 2018. In November the existing £30 million borrowing facility with the Royal Bank of Scotland was replaced by a £20 million one year facility.

Outlook

No doubt the UK market will continue to be volatile and valuations are likely to remain depressed while political uncertainty continues.

However, our fund managers believe that this volatility can provide opportunities in stocks which have been unfairly marked down.

Duncan Budge

Chairman

19 December 2018

 

Investment Manager's Review

Overview

The period was a challenging one for markets. Concerns mounted over the impact of rising interest rates in the US and political uncertainty in the UK and Europe. The FTSE All-Share, which gains a majority of its earnings overseas, fell by 3.5% - despite sterling falling by 7% against the US dollar. The UK domestically orientated FTSE 250 fell by 5.4%.

This Company's NAV fell by 9.2%. It suffered from its exposure to smaller companies, which tend to fall further than larger companies when markets go down. The legacy unquoted portfolio also had a negative impact of 4.9% in the period. The write-downs we suffered were in part a consequence of our decision not to invest further capital in certain companies that required funding but this was not supported by the investment case. Although this has affected our NAV in the short term, we think shareholders' capital is better invested elsewhere, and that this should result in more consistent and stronger performance over the longer term.

The portfolio continues to undergo significant change in line with the review of strategy previously announced. We have rationalised our active holdings from 79 to 58. That will allow us to manage the portfolio more efficiently and concentrate capital in areas of higher conviction. We have improved greatly the liquidity of the portfolio as our weighting in unquoted equities has fallen from 20.7% to 12.0% and as at the date of this report was 10.4%. Similarly, our weighting in mid and large cap equities has risen from 33.5% to 44.9% as we have been drawn to opportunities in those parts of the market.

We have also been net sellers of stocks as we perceived asset prices to be high and in order to provide us with flexibility to implement our revised investment strategy. The Company started the period with gearing of 7.1% and had 3.2% net cash by the end of September, before deploying cash in October's sell-off. That saw us end the period close to fully invested, with scope to employ leverage as we balance the time-lag between rationalising existing holdings and investing in new opportunities.

So we have made the portfolio more liquid, concentrated and efficiently managed. We are confident that this will not only benefit shareholders through improved NAV per share performance, but also help close the Company's discount to NAV, which started the period at 17.6% and ended at 16.7%, despite the changes made.

Review

Five largest stock contributors

	Market	Contribution %
Metapack	Unquoted	0.7
Miton Group	AIM	0.4
IGas Energy	AIM	0.4
Hornby	AIM	0.4
Augean	AIM	0.3

Five largest stock detractors

	Market	Contribution %
URICA	Unquoted	(3.5)
Starcount Group	Unquoted	(1.6)
Sports Direct International	LSE	(0.6)
FootAsylum	AIM	(0.6)
Lamp Group	Unquoted	(0.4)

The largest detractor in the period was the unquoted company URICA, which we have commented on before. We wrote down the majority of the investment in Starcount and generated modest proceeds from a sale of half of the investment. Management had failed to deliver against plans and required to raise money to which we were unwilling to contribute. The situation was similar in Lamp Group, an insurance company, and we wrote down the investment to zero.

In the listed portfolio Sports Direct International and FootAsylum cost us 1.2% in aggregate. Sports Direct fell due to negative sentiment towards the sector, whilst FootAsylum suffered from a profits warning. Despite the challenges facing the retail sector, we believe there will be winners and losers both of which we are following closely.

The top contributor in the period was Metapack, a private software business that provides retailers with logistic solutions. The company was sold to a US-listed company, Stamps.com, for a 24.8% premium to our carrying value. Miton Group, the boutique asset manager, rose 24.6% over the period as the business continues to generate strong performance and net inflows. IGas Energy, the UK-based shale operator, rose 40.1% due to developments in the sector and a strong oil price. Augean, the UK hazardous waste management company, rose 35.6% in response to stronger than expected trading. Hornby, the company which owns the Hornby, Scalectrix and Airfix brands, was up 27.5% as strategic initiatives outlined by new management were well received. We are encouraged by the company's actions to build a sustainable future for its hobby products through a reduction in discounting and a fresh focus on customers.

We have also been pleased by the operational progress made by other companies in the portfolio. Rocket Internet (5.9% of portfolio) raised capital in the public markets for two of its more mature portfolio companies and continued to make disposals of assets, leaving it in a position of significant liquidity. Tesco (5.0%) has traded well, demonstrating the resilience of grocery retail in a testing consumer market. Following work on its own label range, the company's price offering is the most competitive it has been in several years. In time we expect this to result in higher sales and cashflow. Hurricane Energy (4.1%) announced the farm-out of two licences (Lincoln and Warwick) to Spirit Energy which is likely to accelerate its field development.

Broadly speaking, we believe many of our companies continue to make underlying progress that is not being reflected in share prices. We think this is a good sign of value to come.

Transactions

In the period, we rationalised a significant portion of the portfolio and were net sellers of assets as we reduced gearing from 7.1% to zero. On the unquoted side, we sold Metapack as mentioned above (4.5%) and Oxford Sciences Innovation (1.7%).The sale of Gundaline was completed on 17 December (1.9%), meaning our unquoted exposure will be reduced to around 10% and nine holdings. On the listed side, we sold our holdings in Avation (previously 2.2%), BP (1.4%), Samarang Asian Prosperity Fund (1.4%), Dick's Sporting Goods (0.9%), Mountview Estates (0.9%), FreeAgent Holdings (0.9%) and City of London Investment Group (0.8%). These holdings did not fit our revised investment criteria.

The majority of the proceeds was invested in existing holdings. This is where we considered the most attractive opportunities to be. We added to holdings where we felt share price performance was most out of kilter with fundamentals. Our largest investment was in Dixons Carphone (2.4%). We are drawn to the business as it is the market leader by a considerable measure in retailing electric goods in the UK, Scandinavia and Greece. It has a substantial opportunity to address inefficiencies in its capital allocation. Over £1 billion of working capital is invested in the Carphone Warehouse business, earning a minimal return. As the entire company's market cap is £1.8 billion, a more productive allocation or distribution of some of this capital would make a substantial difference to overall returns. We believe new management is actively exploring this as well as the wider opportunity to leverage economies of scale over smaller competitors - in a tough market environment.

We increased our holding in Sports Direct by 2.1% to 4.1%. Its share price fell by 20% even though the company has continued to trade well. We think this is largely due to perceptions over Mike Ashley's governance of the company. We have monitored the business closely for at least three years and think that the reality is very different. Ashley is a skilled retailer who considers the needs of all stakeholders (consumers, employees and shareholders) in his management of the business. The core business has fundamentally attractive characteristics: a low cost base and dominant position in UK sports retail with strategic ownership of strong brands such as Everlast, Slazenger and Karrimor. We think the current valuation significantly undervalues the core UK retail business, whilst placing minimal value on the company's growing position in luxury retail (Flannels) and optionality in the US and UK department stores. We more than doubled our holding in the period.

Other existing holdings that we have continued to add to include Capital & Counties (1.5%), Rocket Internet (1.0%), Plus500 (0.9%), IWG (0.8%) and Dignity (0.6%).

Two new investments were made in Facebook (1.2%) and Just Eat (0.6%). We have continued to add to them both since the end of this reporting period. Facebook has fallen following fears over regulation and mismanagement. Rupert Murdoch once described newspapers as "rivers of gold"; and through its dominant position in social media, we think Facebook is effectively akin to the world's largest newspaper. It also has the additional financial benefits of having no newsrooms (its users make the content) and the technology to serve highly targeted advertisements. The resulting business should continue to achieve strong margins and has economies of scale that seem difficult to replicate.

The investment in Just Eat follows on from our investment in peer Delivery Hero (1.7%), both companies being online food delivery platforms operating in different markets. We are drawn to the sector as dominant operators benefit from network platform effects (more restaurants means more customers). And while the industry is in a relatively early stage of growth, share is taken from traditional channels and the frequency of orders is stimulated by improvements in customer experiences. The opportunity in Just Eat has come about following concerns that its UK business faced competitive threats from Uber Eats/Deliveroo. We think the market is large enough to have more than one operator serving different customer segments. We also believe there is a margin of safety arising from the company's Brazilian asset that is often overlooked in valuations as it is accounted for as a joint venture with minimal earnings.

We consider both companies to have attractive and resilient business models which bring diversified exposures to our existing portfolio. We had been looking for an entry point and used volatility in October to start modest positions. Facebook is representative of our stated objective to consider making more investments overseas than we had previously. A year ago, 9.4% of the portfolio was invested overseas, today this is 14.9%. We believe this brings important geographic and business model diversification to the portfolio.

Outlook

Recent months have seen a heightened level of fear and volatility in the market. We think this is a more attractive environment for investing, relative to the preceding period of unusual calm. Whilst we have been monitoring a number of potential holdings which reached attractive valuation levels, in the current environment we are minded to favour assets less exposed to the economic cycle.

Shareholders should continue to expect portfolio activity to be elevated in periods of volatility.

Investors' horizons tend to contract when bearish sentiment prevails. Currently this seems to be the case in certain segments, with the UK market being the most evident example: it suffers from the uncertainty of Brexit and UK politics. Our view is that when starting valuations are low, the prospect for future returns is high.

Although 85.1% of the portfolio is invested in UK-based companies, we estimate that only 48% is directly exposed to the domestic economy. We believe this is an appropriate balance between having diversified exposures and seeking to exploit particularly compelling valuations. We are pleased with the progress made in the underlying transition of the portfolio, optimistic about its prospects and remain flexibly positioned to take advantage of further opportunities presented.

John Dodd & Kartik Kumar

Fund managers

Artemis Fund Managers Limited

19 December 2018

Condensed income statement - for the six months ended

	Six months ended 31 October 2018 (unaudited)			Six months ended 31 October 2017 (unaudited)			Year ended 30 April 2018 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment income	1,566	-	1,566	1,387	-	1,387	3,250	-	3,250
Other income	12	-	12	1	-	1	-	-	-
Total revenue	1,578	-	1,578	1,388	-	1,388	3,250	-	3,250
(Losses)/gains on investments	-	(15,184)	(15,184)	-	3,624	3,624	-	13,454	13,454
Currency gain/ (losses)	-	15	15	-	11	11	-	(46)	(46)
Total income/(loss)	1,578	(15,169)	(13,591)	1,388	3,635	5,023	3,250	13,408	16,658
Expenses
Investment management fee	(52)	(469)	(521)	(46)	(410)	(456)	(92)	(829)	(921)
Other expenses	(227)	(88)	(315)	(218)	(16)	(234)	(433)	(24)	(457)
Profit/(loss) before finance costs and tax	1,299	(15,726)	(14,427)	1,124	3,209	4,333	2,725	12,555	15,280
Finance costs	(17)	(150)	(167)	(20)	(179)	(199)	(39)	(352)	(391)
Profit/(loss) before tax	1,282	(15,876)	(14,594)	1,104	3,030	4,134	2,686	12,203	14,889
Tax	(46)	-	(46)	(13)	-	(13)	(83)	-	(83)
Profit/ (loss) for the period per ordinary share	1,236	(15,876)	(14,640)	1,091	3,030	4,121	2,603	12,203	14,806
Earnings/(loss) for the period	3.02p	(38.74)p	(35.72)p	2.66p	7.39p	10.05p	6.35p	29.77p	36.12p

The total column of this statement represents the Statement of Comprehensive Income, 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.

 

Condensed statement of financial position

As at 31 October 2018

		31 October 2018 (unaudited) £'000	31 October 2017 (unaudited) £'000	30 April 2018 (audited) £'000
Non-current assets
Investments		141,482	158,864	169,206
Investment in subsidiary undertaking		3,368	3,094	3,213
		144,850	161,958	172,419
Current assets
Other receivables		376	206	734
Cash and cash equivalents		6,252	1,401	1,126
		6,628	1,607	1,860
Total assets		151,478	163,565	174,279
Current liabilities
Other payables		(1,351)	(1,822)	(1,559)
Bank loan		(5,000)	(10.000)	(11,000)
		(6,351)	(11,822)	(12,559)
Net assets		145,127	151,743	161,720
Equity attributable to equity holders
Share capital		410	481	480
Share premium		676	667	676
Special reserve		50,134	50,202	50,202
Capital redemption reserve		180	109	110
Retained earnings - revenue		2,218	2,072	2,867
Retained earnings - capital		91,509	98,212	107,385
Total equity		145,127	151,743	161,720
Net asset value per ordinary share (undiluted)		354.13p	370.30p	394.62p
Net asset value per ordinary share (diluted) 1,2		354.13p	366.67p	394.62p

1   As at 31 October 2018, there was no dilution effect as the subscription shares were converted into deferred shares and immediately cancelled on 18 June 2018.

2  As at 30 April 2018, there was no dilution effect as the rights attached to the subscription shares lapsed on 16 January 2018.

 

      Condensed statement of changes in equity

      For the six months ended 31 October 2018

	Six months ended 31 October 2018 (unaudited)
	Share capital £'000	Share premium £'000	Special reserve £'000	Capital redemption reserve £'000	Retained earnings		Total £'000
					Revenue £'000	Capital £'000
At 1 May 2018	480	676	50,202	110	2,867	107,385	161,720
Total comprehensive income:
Profit/(loss)for the period	-	-	-	-	1,236	(15,876)	(14,640)
Transactions with owners recorded directly to equity:
Cancellation of ordinary shares from treasury	(2)	-	-	2	-	-	-
Repurchase of deferred shares	-	-	(68)	-	-	-	(68)
Conversion of subscription shares to deferred shares	(68)	-	-	68	-	-	-
Dividends paid	-	-	-	-	(1,885)	-	(1,885)
At 31 October 2018	410	676	50,134	180	2,218	91,509	145,127

	Six months ended 31 October 2017 (unaudited)
	Share capital £'000	Share premium £'000	Special reserve £'000	Capital redemption reserve £'000	Retained earnings		Total £'000
					Revenue £'000	Capital £'000
At 1 May 2017	492	657	50,646	98	2,928	95,182	150,003
Total comprehensive income:
Profit for the period	-	-	-	-	1,091	3,030	4,121
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury	-	-	(444)	-	-	-	(444)
Cancellation of ordinary shares from treasury	(11)	-	-	11	-	-	-
Conversion of subscription shares	-	10	-	-	-	-	10
Dividends paid	-	-	-	-	(1,947)	-	(1,947)
At 31 October 2017	481	667	50,202	109	2,072	98,212	151,743

	Year ended 30 April 2018 (audited)
	Share capital £'000	Share premium £'000	Special reserve £'000	Capital redemption reserve £'000			Retained earnings			Total £'000
							Revenue £'000		Capital £'000
At 1 May 2017	492	657	50,646	98			2,928		95,182	150,003
Total comprehensive income:
Profit for the year	-	-	-	-			2,603		12,203	14,806
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury	-	-	(444)		-		-		-	(444)
Cancellation of ordinary shares from treasury	(12)	-	-		12		-		-	-
Conversion of subscription shares	-	19	-		-		-		-	19
Dividends paid	-	-	-		-		(2,664)		-	(2,664)
At 30 April 2018	480	676	50,202			110		2,867	107,385	161,720

Condensed statement of cash flows - for the six months ended 31 October 2018

	Six months ended 31 October 2018 (unaudited) £'000		Six months ended 31 October 2017 (unaudited) £'000	Year ended 30 April 2018 (audited) £'000
Operating activities
(Loss)/profit before tax	(14,594)		4,134	14,889
Interest payable	167		199	391
Losses/(gains) on investments	15,184		(3,624)	(13,454)
Currency (gains)/losses	(15)		(11)	46
Decrease/(increase) in other receivables	199		211	(179)
Increase in other payables		20	211	252
Net cash inflow from operating activities before interest and tax		961	1,120	1,945
Interest paid		(167)	(199)	(391)
Irrecoverable overseas tax suffered		(46)	(13)	(83)
Net cash inflow from operating activities		748	908	1,471
Investing activities
Purchase of investments		(25,789)	(24,051)	(52,510)
Sales of investments		38,105	25,904	53,337
Net cash inflow from investing activities		12,316	1,853	827
Financing activities
Repurchase of ordinary shares into treasury		-	(444)	(444)
Conversion of subscription shares		-	10	19
Repurchase of deferred shares		(68)	-	-
Dividends paid		(1,885)	(1,947)	(2,664)
Decrease in inter-company loan		-	(2)	(49)
Net cash outflow from financing activities		(1,953)	(2,383)	(3,138)
Net decrease/(increase) in net debt		11,111	378	(840)
Net debt at the start of the period		(9,874)	(8,988)	(8,988)
Effect of foreign exchange rate changes		15	11	(46)
Net funds/(debt) at the end of the period		1,252	(8,599)	(9,874)
Bank loan		(5,000)	(10,000)	(11,000)
Cash and cash equivalents		6,252	1,401	1,126
		1,252	(8,599)	(9,874)

 

Notes to the half-yearly financial report

1.       Accounting policies

The Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', the provisions of the Companies Act 2006 and with the guidance set out in the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts ("SORP") issued by the Association of Investment Companies in November 2014.

The Half-Yearly Financial Report has been prepared under the same accounting policies as the Annual Financial Statements for the year ended 30 April 2018.

2.       Earnings/(loss) per ordinary share

	Six months ended 31 October 2018	Six months ended 31 October 2017		Year ended 30 April 2018
Earnings/(loss) per ordinary share is based on:
Revenue earnings (£'000)	1,236	1,091	2,603
Capital (loss)/earnings (£'000)	(15,876)	3,030	12,203
Total (loss)/earnings (£'000)	(14,640)	4,121	14,806
Weighted average number of ordinary shares in issue during the period (basic and diluted)	41,980,974	41,006,257	40,992,533

3.       Net asset value per ordinary share

	As at 31 October 20181	As at 31 October 2017	As at 30 April 20182
Net asset value per ordinary share is based on:
Net assets (£'000)	145,127	151,743	161,720
Number of shares in issue at the end of the period (basic)	40,980,974	40,978,267	40,980,974
Number of shares in issue at the end  of the period (diluted)	40,980,974	47,834,613	40,980,974

1 There was no dilution to the Net Asset Value for the period ended 31 October 2018, as the subscription shares were converted into deferred shares and immediately cancelled on 18 June 2018.

2  There was no dilution to the Net Asset Value for the year ended 30 April 2018, as the rights attached to the subscription shares lapsed on 16 January 2018.

During the period the Company cancelled 152,500 shares from treasury (six months ended 31 October 2017: repurchased 152,500 shares into treasury; year ended 30 April 2018: repurchased 152,500 shares into treasury). 6,853,639 subscription shares were converted into deferred shares, repurchased for par value and immediately cancelled during the period (six months ended 31 October 2017: 2,792 subscription shares were exercised and the same number of ordinary shares were issued in respect of these; year ended 30 April 2018: 5,499 subscription shares were exercised and the same number of ordinary shares were issued in respect of these).

4.       Dividends

	Six months ended 31 October 2018 £'000	Six months ended 31 October 2017 £'000	Year ended 30 April 2018 £'000
Second interim dividend for the year ended	-	1,127	1,127
30 April 2017 - 2.75p
First interim dividend for the year ended	-	-	717
30 April 2018 - 1.75p
Second interim dividend for the year ended	1,229	-	-
30 April 2018 - 3.00p
Special dividend for the year ended
30 April 2018 - 1.60p  (2017: 2.00p)	656	820	820
	1,885	1,947	2,664

A first interim dividend for the year ending 30 April 2019 of £820,000 (2.00p per ordinary share) has been declared. This will be paid on 25 January 2019 to those shareholders on the register at close of business on 4 January 2019.

5.       Analysis of retained earnings - capital

	As at 31 October 2018 £'000	As at 31 October 2017 £'000	As at 30 April 2018 £'000
Retained earnings - capital (realised)	100,191	90,297	98,942
Retained earnings - capital (unrealised)	(8,682)	7,915	8,443
	91,509	98,212	107,385

6.       Comparative information

The financial information for the six months ended 31 October 2018 and 31 October 2017 has not been audited and does not constitute statutory financial statements as defined in Section 234 of the Companies Act 2006.

The information for the year ended 30 April 2018 has been extracted from the Audited Financial Statements for the year ended 30 April 2018. These financial statements contained an unqualified auditor's report and have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 of the Companies Act 2006.

7.       Principal risks and uncertainties

Pursuant to DTR 4.2.7R of the Disclosure Guidelines and Transparency Rules, the principal risks faced by the Company include general market price risk, liquidity risk, regulatory, and financial risks.

These risks, which have not materially changed since the Annual Financial Report for the year ended 30 April 2018, and the way in which they are managed, are described in more detail in the Annual Financial Report for the year ended 30 April 2018 which is available on the website artemisalphatrust.co.uk.

8.       Related party transactions

The amounts paid to the Investment Manager are disclosed in the Condensed income statement. 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.

9.       Valuation of investments

IFRS 7 'Financial Instruments: Disclosures' requires an entity to provide an analysis of investments held at fair value through profit and loss using a fair value hierarchy that reflects the significance of the inputs used in making the measurements of fair value. The hierarchy used to analyse the fair values of financial assets is set out below.

Level 1 - investments with quoted prices in an active market;

Level 2 - investments whose fair value is based directly on observable current market prices or is indirectly derived from market prices; and

Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data.

The investments held at the balance sheet date fell into the categories, Level 1, Level 2 and Level 3. The values in these categories are summarised as part of this note. Any investments that are delisted or suspended from a listed stock exchange are transferred from Level 1 to Level 3.

	As at 31 October 2018 £'000	As at 31 October 2017 £'000	As at 30 April 2018 £'000
UK quoted investments (Level 1)
- UK listed	63,075	54,083	61,789
- AIM quoted	40,297	46,580	49,472
Overseas quoted investments (Level 1)	21,136	14,920	19,222
Mutual funds (Level 2)	-	5,318	3,522
Forward foreign exchange contracts (Level 2)	-	100	73
Warrants (Level 2)	45	-	61
Unquoted investments (Level 3)
- Equities and warrants	15,819	33,609	30,563
- Fixed interest	200	700	950
- Preference shares	910	3,554	3,554
	141,482	158,864	169,206

The valuation of the Level 3 investments would not be significantly different had reasonably possible alternative valuation bases been applied.

Details of the movements in Level 3 assets during the six months ended 31 October 2018 are set out in the table below.	£'000
Level 3 investments
Opening book cost	37,430
Opening fair value adjustment	(2,363)
Opening valuation	35,067
Movements in the period:
Purchases at cost	50
Sales - proceeds	(9,096)
Sales - realised gains on sales	4,827
(Decrease)/increase in fair value adjustment	(13,919)
Closing valuation	16,929
Closing book cost	33,211
Closing fair value adjustment	(16,282)
	16,929

Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report

The Directors confirm that to the best of their knowledge, in respect of the Half-Yearly Financial Report for the six months ended 31 October 2018:

·  the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' issued by the International Accounting Standards Board as adopted by the EU;

·  having considered the expected cash flows and operational costs of the Company for the 18 months from the period end, the Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis of accounting continues to be used in the preparation of the Half-Yearly Financial Report;

·  the interim management report includes a fair review of the information required by:

(a)      Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months; and a description of the principal risks and uncertainties for the remaining six months of the year); and

(b)      Disclosure Guidance and Transparency Rule 4.2.8R (related party transactions).

The Half-Yearly Financial Report for the six months ended 31 October 2018 was approved by the Board and the above responsibility statement was signed on its behalf by:

Duncan Budge

Chairman

19 December 2018

Copies of the Half-Yearly Financial Report for the six months ended 31 October 2018 will be sent to shareholders shortly and will be available from the registered office at Cassini House, 57 St James's Street, London SW1A 1LD as well as on the website, artemisalphatrust.co.uk.

Artemis Fund Managers Limited

Company Secretary

For further information, please contact:

Artemis Fund Managers Limited

Telephone: [phone]

19 December 2018

 

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