Annual Financial Report

RNS Number : 3788U

Artemis Alpha Trust PLC

29 July 2020

 

Artemis Alpha Trust plc (the 'Company')

LEI: 549300MQXY2QXEIL3756

Annual Financial Report for the year ended 30 April 2020

Financial Highlights

 

Investment Objective

To provide long-term capital and income growth by investing predominantly in listed companies and to achieve a net asset value total return greater than the total return of the FTSE All-Share Index.

Investment policy

The Investment Manager follows an unconstrained and opportunistic approach with the aim of generating sustainable outperformance of the FTSE All-Share Index. The Investment Manager will seek to identify and invest in companies with the following characteristics: attractive valuations, strong business models, favourable long-term industry fundamentals and high quality management teams.

As a result of this approach, stock market capitalisations and sector and geographic weightings are of secondary consideration. Accordingly, there are no pre-defined maximum or minimum exposure levels for each individual sector, country or geographic region, but these exposures are reported to, and monitored by, the Board in order to ensure that the Company's portfolio is invested and managed in a manner consistent with spreading investment risk.

Given the Investment Manager's particular focus on the UK market, the majority of the portfolio is expected to be invested in UK listed companies. However, the overall geographical profile of the portfolio will change from time to time depending on where opportunities are found. The Company's policy is not to invest more than 10 per cent of net assets in any one investment. The total number of holdings in the portfolio will vary over time but the top positions will have a proportionally larger weighting.

There is no restriction on the amount of cash or cash equivalent instruments that the Company may hold and there may be times when the Investment Manager considers it appropriate for the Company to have a significant cash or cash equivalent position instead of being fully invested.

The Company may, but normally does not, invest up to 15 per cent of its total assets in other listed closed-ended investment funds.

Unquoted Investments

The Company will not invest more than 10 per cent of its total assets in unquoted companies, excluding follow-on investments that may be made in existing unquoted investments in order to preserve the Company's economic interests in such investments. Any new or follow-on investments in unquoted companies require the prior approval of the Board.

Derivatives and Hedging

The Company may use derivatives and similar instruments for the purpose of capital preservation, hedging currency risk and gearing.

Gearing

The Company may employ gearing of up to 25 per cent of net assets. The effect of gearing may be achieved without borrowing by investing in a range of different types of instruments, including derivatives.

General

Limits referred to in the investment policy are measured at the time of investment or, in the case of gearing, at the time of draw-down or/and when derivative transactions are entered into.

Dividend policy

The Company will seek to grow dividends paid in respect of each financial year at a rate greater than inflation, as defined by the UK Consumer Prices Index, in respect of the immediately preceding financial year of the Company.

Triennial tender offers/liquidity events

The obligation to propose a continuation resolution  at each fifth Annual General Meeting ('AGM') was removed  from the Company's Articles of Association as approved by shareholders on 7 June 2018. In its place, the Company will arrange tender offers every three years, starting in 2021, with each tender offer being for up to 25 per cent of the issued ordinary shares, which will be subject to shareholder approval at the relevant AGM. The Board may, at its sole discretion, decide not to proceed with a tender offer if the ordinary shares are trading at a premium to the estimated tender price. The tender price will be the prevailing NAV  (cum-income) per ordinary share (or, if the Board elects to use a tender realisation pool, the net proceeds of realising the assets in that pool) less the tender offer costs and less a  discount of  3 per cent.

Capital structure

The capital structure of the Company as at 30 April 2020 consisted of 39,580,474 ordinary shares of 1p each.

 

Returns for the year ended 30 April 2020
				Year ended		Year ended
Total returns				30 April 2020		30 April 2019
Net asset value per ordinary share*				(11.3)%		(8.6)%
Ordinary share price*				(12.5)%		(8.9)%
FTSE All-Share Index				(16.7)%		2.6%
Revenue and dividends
Revenue earnings per ordinary share*				4.90p		6.44p
Dividends per share**
	Ordinary			5.20p		5.00p
	Special			0.00p		0.50p
	Total			5.20p		5.50p
Ongoing charges*				0.9%		0.9%
				As at		As at
Capital				30 April 2020		30 April 2019
Net Assets (£000)				122,454		145,266
Net asset value per ordinary share				309.38p		354.47p
Ordinary share price				249.00p		290.00p
Net gearing*				5.3%		0.0%
						Since
Total returns to 30 April 2020		3 years	5 years		10 years	1 June 2003***
Net asset value per ordinary share*		(10.0)%	2.1%		31.4%	429.2%
Ordinary share price*		(9.7)%	(0.5)%		12.6%	346.8%
FTSE All-Share Index		(7.5)%	4.8%		63.4%	201.8%

*Alternative Performance Measure

** The final dividend for the year to 30 April 2020 will, if approved by shareholders, be paid on 16 October 2020.

*** The date when Artemis was appointed as Investment Manager.

Chairman's Statement

Performance

The Company's reporting period has been dominated by the events relating to COVID-19 which has had an impact on all of our daily lives in profound and unexpected ways. The severe falls in stock markets around the world in March were no less dramatic and, despite the subsequent recovery, it will take some time for the full extent of the impact of this crisis to be understood.

The early part of the year was dominated by concerns over Brexit and US/China trade wars, and these have for the most part been shelved whilst the battle against the virus is under way, but both will have to be addressed in due course.

The Company's Net Asset Value per share fell by 11.3% over the year ended 30 April 2020 on a total return basis and, whilst it is always disappointing to report a decline, it is some comfort to see that the portfolio outperformed the Company's benchmark, the FTSE All-Share Index, which declined by 16.7%. By way of comparison, the Company's share price fell by 12.5%.

Earnings and dividends

The Board has declared a final dividend of 3.10p (2019: 3.00p) per share, which will be subject to approval by shareholders at the Company's Annual General Meeting. This final dividend means that total dividends declared for the year amount to 5.20p per share (2019: 5.00p), an increase of 4.0% on the previous year and ahead of the increase in the Consumer Prices Index of 2%.

Dividend payments have been affected by COVID-19 with a large number of cancellations and suspensions. This has affected the Company's revenue for the year to 30 April 2020 which, after expenses and tax, has fallen by 24% to 4.90p per share. The Company has built up reserves equivalent to 10p per share over the years which provides flexibility to make payments in excess of current revenue. Whilst the near-term outlook for earnings is uncertain, we are adhering to our policy of targeting annual dividend growth in excess of the increase in CPI, despite the temporary shortfall in revenue.

The final dividend, if approved by shareholders, will be paid on Friday, 16 October 2020 to those shareholders on the register as at Friday, 11 September 2020, with an ex-dividend date of Thursday, 10 September 2020.

Share buy backs / discount

During the year, the Company bought back 1,400,500 ordinary shares for cancellation at a cost of £3.9 million and an average discount of 19.5%, adding approximately 2.38p to the net asset value per share.  

Annual General Meeting

The Company's Annual General Meeting ("AGM") will take place on Thursday, 8 October 2020 at 9.30 a.m. at the Edinburgh offices of Artemis Fund Managers Limited, 6th floor, Exchange Plaza, 50 Lothian Road, Edinburgh, EH3 9BY. Since the outlook for the lifting of COVID-19 restrictions is uncertain, the Board, upon advice, has decided reluctantly to proceed with a restricted AGM. The meeting will be restricted to the formal business set out in the Notice of the AGM and will follow the minimum legal requirements. In accordance with the provisions of the Company's Articles and Government guidance, the Company is imposing entry restrictions on attendance at the AGM, and therefore shareholders will not be allowed to attend the AGM in person. It should be noted that only sufficient Directors or their proxies propose to attend the AGM to ensure that the meeting will be quorate.

On this occasion, the representatives of the Investment Manager will not attend the meeting and a presentation will be pre-recorded and made available on the Company's website. In addition there will be no refreshments provided.

Shareholders will find enclosed a form of proxy for use in connection with the AGM and are requested to complete, sign and return the form of proxy as soon as possible, in accordance with the instructions printed on it. The Board would encourage all shareholders to exercise their votes in respect of the AGM.

We would invite you to email [e-mail] with any questions you wish to raise.

In the event that the situation surrounding COVID-19  should affect the plans to hold the AGM the Company will update shareholders through an announcement to the London Stock Exchange and will provide further details on the Company's website.

Outlook

The consequences of the measures taken by governments in response to the pandemic are unpredictable and the longer-term damage to the world economy has yet to be understood. There is no doubt that the substantial injection of liquidity and resulting indebtedness will dominate the outlook for some time to come.

The extent and timing of any recovery are also uncertain and markets are understandably grappling with which companies and sectors have most to gain or lose. More than ever, your managers' focus is on selecting stocks and, in particular, identifying which stand to benefit, as well as those which might have been unfairly marked down in these extraordinary circumstances.

Duncan Budge

Chairman

28 July 2020

Investment Manager's Review

 

Performance

The Company's net asset value per share ("NAV") fell by 11.3% over the last year, less than the 16.7% fall in the FTSE All-Share Index. Markets were flat in the first six months, with the Company's assets rising by 2.9%. In the second half, two events created considerable volatility. In the UK, political uncertainty was elevated in the lead-up to a General Election with a wide range of possible outcomes. As late as November, betting odds implied a more than 50% chance of a hung parliament. In December, the Conservative government won a landslide majority, creating the foundations for renewed political stability which led to a strong rally in UK asset prices.

However, starting in late January, concerns over the potential spread of coronavirus increased, leading to a decline in prices. In March, the extent of the crisis became clear as European governments started to mandate 'shelter-in-place' restrictions to stop the spread of the virus and to contain damaging economic consequences. This lead to an extraordinarily rapid and sharp decline in markets. Over the last six months under review, the FTSE All-Share Index fell by 17.0% and the value of the Company's assets declined by 13.8%.

Covid-19

Coronavirus has created an unusual economic crisis. Most crises, such as the financial crisis in 2008/9 or dot com crash in 2000/1, are caused by too much debt or misallocated capital. This requires a painful process to work off excesses which can take several years. The crisis today is caused by a temporary and exogenous shock. Politicians faced a tough trade-off between allowing the virus to spread and shutting off economies with lock-downs.  The cause of the crisis in this respect more resembles a natural disaster with a sudden stop in economic activity. The crisis has arisen not from the impact of the virus on health, but from the response to it. Stay-at-home restrictions have driven a forced reduction in demand with a devastating corresponding impact on supply. This has created economic conditions resembling a depression, with high unemployment and low activity.

Governments have responded with fiscal and monetary stimulus at unprecedented levels of speed and magnitude to boost corporate and household cashflows. For example, the UK government's job retention scheme has meant that 11 million jobs, or nearly one third of all those employed, are being supported by the government. The UK government's business interruption lending scheme has capacity to advance over £350bn to small and large businesses. Interest rates have been cut to  0.1%.  These measures are extraordinary by any historical precedent and will dampen the impact of the crisis on unemployment and bankruptcies.

The duration of the pandemic is still unknown, particularly with the possibility of a second wave. But there are over 100 vaccines in development with a number already in clinical trials, suggesting a reasonable probability of success. This implies that the duration of the virus will be finite, which is important when considering the impact on equity values. Equities are by definition long duration assets, providing thereby a holder with a perpetual claim on future cashflows. The discounted value of a perpetuity lies largely in cashflow generated over the long term. For example, if a security grows at 5% and is discounted at 10% per annum, 4% of the equity's value is derived from year one, and 13% in years one to three. This means that, even if the damage in the short term is as high and severe as it is in this crisis, the impact on overall value is limited.

In our assessment it is both possible to be objective and realistic about the significant negative impact of the virus whilst remaining optimistic about the prospects for businesses which can survive - and then thrive. Human biases when facing uncertainty means that there is a tendency to place an undue weighting on the short term over the long term. Aswath Damodaran (Stern Business School) has highlighted how perspective is the "first casualty in a crisis." In response to the spread of coronavirus, equity markets fell into a bear market in a record 22 days. Whilst the source of the crisis is unusual for all the reasons outlined, we think this market disorder is a fairly typical over-reaction by investors

In hindsight, we were too slow to move pre-emptively to reduce cyclical exposures ahead of sharp declines in prices. In response to the falling asset prices, we increased our overall equity exposure by employing gearing of 5.3% from a position of zero. Initially we added to positions such as GlaxoSmithKline, Prosus and Fevertree, where falls were in our view out of line with those businesses' resilience. We have also added to sectors impacted directly such as banks and airlines, where we  perceived the  loss of value to be significantly greater than the likely damage inflicted; and, crucially, where we judged there to be limited risk to the viability of our investments.

One of the clear long term impacts of the virus has been the broad acceleration of pre-existing trends. This is most clear in the adoption of digital services, where the conditions imposed by lockdown has forced early adoption and higher engagement. Microsoft's CEO Satya Nadella remarked recently: "We have seen two years of digital transformation in three months." This should provide a benefit to sectors in the portfolio exposed to online services which account for approximately 35% of NAV, such as food delivery and video games. In a recent call, the CEO of Uber made the following comment when asked about the impact of the virus: "The category [of food delivery] in general just looks like it is going to be substantially increased and some would say by multiples."

In sectors such as retail and airlines, which account for 17% of the Company's NAV, bankruptcies were elevated prior to the crisis as strong players adapted to change whilst weaker players failed. The stresses of the crisis and acceleration of change are likely to reinforce this process, leading to strong companies and survivors taking market share.

The portfolio is invested across a diversified range of sectors with the aim of delivering performance in a wide range of outcomes. Following a rationalisation process that has taken place in recent years, changes to the construction of the portfolio are important to note. The number of holdings has  been reduced to 39, thus reinforcing focus. The unquoted exposure has been reduced to 8.3%. In addition, 82% of NAV is invested in mid and large cap listed companies. This significant improvement in underlying liquidity means we have flexibility to respond to both opportunities and risks. We have 53% of NAV invested in companies with a net cash balance sheet, indicating financial strength.

We have a substantial exposure to liquid and resilient companies to that have limited (or even negative) correlation to the economic cycle such as Plus500 (financial software), Delivery Hero (food delivery), and Tesco (grocery). This is balanced against exposures that have positive correlations to the economy and market, but where we think valuation opportunities are greatest such as Frasers Group (retail), IWG (serviced offices) and easyJet (airlines). In the long term, if our fundamental judgements are right we expect both segments to appreciate in value. In the short term, we expect large changes in relative valuations as investors flock to safety or become optimistic about a recovery, which we can take advantage of by switching exposure in the opposing direction to market sentiment. In our view, liquidity is paramount to navigating uncertainty and capitalising on opportunity.

Sector exposure
Sector	2020			2019	Companies
Food delivery	11.3%			4.8%	Delivery Hero, Just Eat
Video games & hobbies	9.6%			6.2%	Hornby, Prosus, Nintendo
Discretionary retail	8.6%			9.3%	Frasers Group, Dixons Carphone
Banking	8.4%			2.5%	Barclays, Lloyd's
Airlines	7.9%			3.6%	easyJet, Ryanair
Financial software	6.7%			2.5%	Plus500
Technology	5.3%			7.0%	Rocket Internet
Serviced offices	5.3%			4.7%	IWG
Financial services	5.2%			11.6%	Polar Capital, Nplus1 Singer
Housebuilding	5.0%			5.1%	Redrow, Springfield
Grocery retail	4.2%			5.9%	Tesco
Aerospace & defence	4.2%			3.5%	Reaction Engines
Property	4.2%			5.5%	Capital & Counties, Claremont Alpha
Funerals	3.2%			4.2%	Dignity
Pharmaceuticals	3.1%			2.8%	GlaxoSmithKline
Consumer staples	3.0%			0.0%	Fevertree Drinks
Media	2.9%			2.2%	Facebook

Portfolio

Online food delivery (11.3% of NAV) has become our largest sector investment, following strong share price performance and additions to our Just Eat position earlier in the year. The space is attractive as eating is necessary and online penetration is low. Online food delivery for restaurants is like e-commerce for retailers, where investors have tended perennially to underestimate the impact of improvements in technology on growth and penetration. In the case of food delivery, as platforms expand, the convenience and choice offered to consumers increases significantly.

We have been invested in Delivery Hero since its IPO in 2017. Three years ago, the company was processing 0.5m orders per day and was valued at €4bn. Today, the company is valued at €17bn and processes over 3m orders per day - or more than 30 orders per second. For an indication of the potential, Meituan is the largest food delivery platform in China. That company processes over 25m orders per day and currently has a market value in excess of $100bn.

The prospects of the industry have attracted new entrants and capital. First mover and scale operators have exhibited powerful network effects to defend positions. We have been particularly pleased to see participants pursue rational and value-enhancing corporate actions to enhance their positions. Over the year, Delivery Hero announced a strategic partnership to merge with Woowa Brothers, the number one player in South Korea, which is one of the most attractive markets worldwide. Just Eat was subject to bids from Prosus and Takeaway.com, with the latter ultimately succeeding via an all-share merger. The combined group has strong market positions in a number of markets such as UK, Germany, Holland, Canada and Brazil. The management teams of both companies have created significant value through their capital allocation.

Video games and hobbies (9.6%) is our second largest investment with holdings in Hornby, Prosus and Nintendo. Hornby has spent the last few years in resolving historic issues and in re-energising its product development. It is now in a position to pursue a digital strategy for revenue growth. Games Workshop has been an extraordinarily successful case study in this respect. It has demonstrated how digital platforms can be used to find customers efficiently in a global market and build direct relationships of higher engagement and value. We supported Hornby in a fund-raising during March, and increased our position to 4.4% of NAV. We believe the company can grow efficiently and leverage its strong heritage brands with digital platforms to access a much larger market than would have been possible in the past.

In January, we started to build a position in Prosus, which is the European holding company of South Africa-listed Naspers. The company's primary asset is a stake in Tencent, the dominant social media and video games platform in China. Naspers invested $32m for a 47% stake in Tencent in 2001. Today their 31% position is worth over $150bn. The company has valuable experience  and knowledge in emerging market consumer technology. We acquired our position at a discount of over 35% to the value of Prosus's investments, which include attractive exposures in online classifieds and food delivery.

Our investment in the retail sector (8.6%) is primarily in Frasers Group (formerly Sports Direct) with a smaller position in Dixons Carphone. Our activity during the year was limited. Incumbent, store-based retailers face a number of structural headwinds and have broadly struggled with the transition to online shopping. Physical retail remains relevant for consumers; but only low cost and scale operations that are able to adapt to change are likely to succeed. Mike Ashley is used to change. Sports World changed its name to SportsDirect.com in 2008, indicating how management have understood the importance of the internet as a channel for some time. The company's recent change of name indicates a growing focus on the opportunity seen in luxury and 'experiential retail'. In the company's last set of results, operating cashflow grew by over 22%. Dixons reported that sales over the lockdown period were only down 16%, despite all stores being closed, as online sales grew 166%. The virus is likely to have accelerated the rationalisation of physical store space and costs. Both Frasers Group and Dixons are market leaders that seem well placed to adapt to the changing environment.

Banking (8.4%) has become a significant sectoral exposure following an investment in Lloyd's Bank in addition to our existing position in Barclays as we reduced our exposure to asset management and sold positions in Liontrust Asset Management and Premier Miton.

Retail banks are increasingly being priced for disruption. In contrast, our analysis suggests that technology, if anything, may be a tailwind in allowing incumbent banks to reduce their cost base. The stickiness of retail deposits, cost efficiencies of scale and lending know-how make the franchises of Barclays and Lloyd's hard to replicate.

For example, N26 is a German digital challenger bank that has raised over $680m and was allegedly the highest valued German start up at $3.5bn. In February it announced its departure from the UK current account market due to "Brexit uncertainties", despite entering the market only after the referendum. Metro Bank raised over £1.4bn in equity and over £15bn in deposits, and yet its equity is now close to worthless as it was unable to lend successfully. Lloyd's is the largest digital bank in the UK with over 16.9m customers. In time, both Barclays and Lloyd's should be able to leverage their large digital footprints to reduce costs and improve returns.

European low cost airlines (7.9%) is another sector where we have increased our exposure over the last year. We are invested in Ryanair and easyJet, as both businesses are able to achieve high returns on capital in a growing industry owing to company- specific competitive advantages: Ryanair's low cost base and easyJet's slot-constrained network.

Before the crisis, it was clear that the capital cycle was working in favour of strong players as the bankruptcy of Thomas Cook followed the demise of other weak carriers such as FlyBe, Monarch, Air Berlin, Aigle Azur and XL Airways. The shut-down of operations for three months and the reduction in consumer incomes evidently damage values as cashflow is lost. However, it seems likely that the relative competitive position for both companies will be strengthened as a result of the crisis. Legacy carriers such as Air France and Lufthansa have suffered higher losses in lockdown as their cost bases are larger and less flexible. Their long-haul operations are likely to be more affected by the impact to business travel than low cost carriers who focus on short-haul leisure travel. State bailouts may be necessary and will come with conditions. Lufthansa and Air France have both announced a reduction in short haul capacity which highlights the opportunity for easyJet and Ryanair to take market share over the medium term.

Plus500 (6.7%), the online trading platform, has been our best performer as the share price increased by nearly 200% over the year, thus contributing over 5% to the overall return for the year under review. From a portfolio perspective, we find it attractive that the company's earnings are positively correlated with volatility. This has meant the company has been a strong beneficiary of recent market conditions. In Q1 2020, the company made $230m of EBITDA compared to $355m in all of 2019. Plus500 is in a strong position to expand globally with industry leading technological capabilities and over $500m of net cash on its balance sheet.

Rocket Internet (5.3%), a company that builds and invests in technology companies, had a quiet year. Management have continued to realise existing investments meaning that it has close to €2bn of cash to deploy into new opportunities, but a market value of only €2.5bn. Falling asset prices would create opportunities for Rocket to deploy capital. In the last year, €320m was spent on share buy-backs and over the last two years the share count has declined by 17%.

IWG (5.3%), the leading provider of flexible workspaces, had an eventful year. It has taken steps to move to a franchised business model, selling its operations in Switzerland, Japan and Taiwan for proceeds of £440m, a multiple  of  3.2x  revenue.  Following the playbook of quick-service restaurants and hotel chains, we expect that re-franchising will accelerate the company's growth and unlock value as returns on capital rise. Coronavirus is likely to delay this process as operations are affected in the short term. However the virus is also likely to increase the demand for flexible workspace solutions. Unlike many peers, the company is in a strong financial position owing to the scale of its operations and balance sheet. We supported a fund-raising shortly after the period-end to enable consolidation and expansion. Mark Dixon, CEO of IWG, invested £93m in the fund-raising, one of the largest insider purchases we have seen. The business trades on a multiple of c.1.2x sales, illustrating the significant potential if the re-franchising strategy proves successful.

Tesco (4.2%) has continued to demonstrate momentum in its turnaround. The company disposed of its Asian business for £8bn in March, de-risking its balance sheet and allowing greater focus on core operations. The business has traded well through the crisis, with the expansion of its online business earlier in the year proving to be prescient.

Reaction Engines (4.2%), the aerospace technology company, achieved a significant milestone as it successfully tested its pre-cooler heat exchanger at airflow temperature conditions representing Mach 5, or five times the speed of sound.

Dignity (3.2%), the funeral services provider, was our largest detractor as the company's share price declined by over  50%. We continued to add to our position, as the company's network of funeral home and crematoria assets mean that it is uniquely positioned to succeed in an industry that will experience increased online penetration, price transparency and regulation.

Fevertree (3.0%), the premium mixer brand, was a new addition to the portfolio in the first quarter of 2020. The company's share price declined sharply following concerns about growth in the US market and maturity in the UK market. The business operates an 'asset light' model, outsourcing bottling  and  production. The combination of high returns on capital and strong growth potential are attractive. Premium mixers account for c.5% of mixers globally. In the UK, due to Fevertree's dominance, the share of premium mixers has risen from close to zero to approximately 40%. Competition is inevitable, but if Fevertree can participate in the growth of a market such as the US where penetration is about 7% currently, it is likely to be a much bigger company in the medium term

We continued the process of rationalisation outlined  in our strategy review. The number of holdings in the portfolio has fallen from 50 to 39, as we sold out of 17 holdings and started six. The top 20 investments account for 86% of NAV. A more narrow focus has been important in allowing us to better understand and monitor the short-term impact and long-term implications of the changing environment

John Dodd and Kartik Kumar  

Fund managers

Artemis Fund Managers Limited

28 July 2020

Top 15 holdings
				Valuation	% of
Name	Sector	Shares	Price	(£'000)	NAV
Plus500	Financial software	655,000	£12.51	8,191	6.7
Frasers Group	Discretionary retail	2,850,000	£2.60	7,410	6.1
Delivery Hero	Food delivery	110,000	€77.04	7,359	6.0
IWG	Serviced offices	2,736,950	£2.38	6,514	5.3
Rocket Internet (long CFD)	Technology	390,000	€19.21	6,506	5.3
Just Eat	Food delivery	80,000	£80.88	6,470	5.3
Barclays	Banking	5,450,000	£1.06	5,772	4.7
Hornby	Video games & hobbies	16,046,078	£0.34	5,375	4.4
Tesco (long CFD)	Grocery retail	2,200,000	£2.35	5,172	4.2
Reaction Engines	Aerospace & defence	160,833	£32.00	5,147	4.2
easyJet	Airlines	840,000	£6.03	5,067	4.1
Ryanair	Airlines	520,000	€10.32	4,660	3.8
Lloyds Banking Group	Banks	14,000,000	£0.32	4,514	3.7
Redrow	Housebuilding	907,454	£4.61	4,185	3.4
Polar Capital Holdings	Financial services	1,005,990	£4.00	4,024	3.3

Top 10 transactions
Purchases	% of NAV		Sales	% of NAV
Lloyds Banking Group	5.8		MJ Gleeson	4.4
easyJet	4.0		Liontrust Asset Management	4.4
Barclays	3.9		Inmarsat	2.9
Redrow	3.3		Helical	2.9
Dignity	3.0		Tesco	2.5
Just Eat	2.8		Miton Group	2.5
Prosus	2.6		Nintendo	2.1
Fevertree Drinks	2.4		Gresham Technologies	1.7
Ryanair Holdings	2.1		Vectura Group	1.7
IWG	1.5		Just Eat Takeaway.com	1.6

Top five contributors/detractors

Company	Return %	Contribution %	Company	Return %	Contribution %
Plus500	146.8	4.7	Dignity	(64.7)	(3.5)
Delivery Hero	89.3	2.8	Hurricane Energy	(75.2)	(2.3)
Nintendo	51.5	1.2	easyJet	(48.8)	(2.3)
Just Eat	33.4	1.2	Lloyds Banking	(44.8)	(2.0)
Lionstrust
Asset
Management	92.5	1.0	Barclays	(34.9)	(1.9)

Industry attribution
Industry	Contribution %
Technology	1.2
Health Care	0.6
Basic Materials	0.3
Telecommunications	0.0
Consumer Goods	(0.4)
Financials	(0.7)
Industrials	(2.5)
Oil & Gas	(2.9)
Consumer Services	(6.6)

Strategy and Business Review

Corporate strategy & policy

The Company is incorporated in England as a public company limited by shares. Its business as an investment trust is to buy and sell investments with the aim of achieving the objective and in accordance with the policy set out in the Annual Financial Report.

Gearing & Leverage

The Company uses gearing as part of its investment strategy. The Company's Articles  of  Association  limits  borrowing to 50 per cent of the Company's net assets. However, the investment policy limits this to 25 per cent of net assets. Subject to this being complied with, the level of borrowing is a matter for the Board, whilst the utilisation of borrowings is delegated to the Investment Manager. This utilisation may be subject to specific guidelines established by the Board from time to time. The current guidelines permit the Investment Manager to employ borrowings of up to 20 per cent of net assets. During the year, the Company's borrowing facility with The Royal Bank of Scotland plc ended. Since then the Company has entered into an agreement with JP Morgan to utilise contracts for difference as a form of leverage. The use of gearing by the Investment Manager will vary from time to time, reflecting its views on the potential returns from stock markets. The Company's gearing is reviewed by the Board and Investment Manager on an ongoing basis. At the year end, net gearing was 5.3%.

Leverage is defined in the Alternative Investment Fund Manager Directive ("AIFMD") as any method by which the Company can increase its exposure by borrowing cash or securities, or from leverage that is embedded in derivative positions. The Company is permitted by its Articles to borrow up to 50 per cent; however the Company's investment policy restricts this to 25 per cent. The Company is permitted to have additional leverage of up to 100 per cent of its net assets, which results in permitted total leverage of 225 per cent under both ratios. Artemis as the Alternative Investment Fund Manager ("AIFM"), monitors leverage limits on a daily basis and reviews them annually. No changes have been made to these limits during the period. At 30 April 2020, the Company's leverage was 122.3 per cent as determined using the gross method and 106.5 per cent under the commitment method.

The Investment Manager requires prior Board approval to:

(i)  enter into any stocklending agreements;

(ii)  to borrow money against the security of the Company's investments; or

(iii)  create any charges over any of the Company's investments.

Operating environment

The Company operates as an investment trust company and is an investment company within the meaning of section 833 of the Companies Act 2006 (the "Act").

The Company has been approved as an investment trust in accordance with the requirements of section 1158 of the Corporation Taxes Act 2010 which remains subject to the Company continuing to meet the eligibility conditions and ongoing requirements of the regulations. The Board will manage the Company so as to continue to meet these conditions.

The Company has no employees and delegates most of its operational functions to service providers.

Current & future developments

A summary of the Company's developments during the year ended 30 April 2020, together with its prospects for the future, is set out in the Chairman's Statement and Investment Manager's Review included in the Annual Financial Report. The Board's principal focus is the delivery of positive long-term returns for shareholders and this will be dependent on the success of the investment strategy. The investment strategy, and factors that may have an influence on it, such as economic and stock market conditions, are discussed regularly by the Board and the Investment Manager. The Board regularly considers the ongoing development and strategic direction of the Company, including its promotion and the effectiveness of communication with shareholders.

Key Performance Indicators ("KPIs")

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

Discrete annual total returns
			FTSE
	Net asset	Share	All-Share
Year ended 30 April	value	price	Index
2016	(6.1)%	(13.2)%	(5.7)%
2017	20.9%	26.7%	20.1%
2018	11.0%	13.2%	8.2%
2019	(8.6)%	(8.9)%	2.6%
2020	(11.3)%	(12.5)%	(16.7)

Source: Artemis/Datastream

Dividends per ordinary share
			Total
			pence per		Total
Year ended			ordinary	Ordinary	increase/
30 April	Ordinary	Special	share	increase	(decrease)
2016	3.90p	-	3.90p	9.9%	9.9%
2017	4.30p	2.00p	6.30p	10.4%	61.5%
2018	4.75p	1.60p	6.35p	10.4%	0.8%
2019	5.00p	0.50p	5.50p	5.3%	(13.4)%
2020	5.20p	-	5.20p	4.0%	(5.5)%

Ongoing charges as a proportion of shareholders' funds
As at 30 April	Ongoing charges
2016	0.9%
2017	0.9%
2018	0.9%
2019	0.9%
2020	0.9%

 

In addition to the above KPIs, the Board monitors the discount to the underlying net asset value at which the shares trade. No specific discount target has been set, but the Board sets the share buy-back policy and has given the Investment Manager discretion to exercise the Company's authority to buy-back its own shares from time to time to address any imbalances between the supply and demand in the Company's shares or at times where we believe this the best use of available capital to increase NAV per share. This is reviewed regularly by the Board. The Board will also use its authority to issue new ordinary shares from time to time should there be excess demand for the Company's shares. The Company will now also provide tender offers every three years commencing in 2021, for 25 per cent of the ordinary shares then in issue.

Principal risks and risk management

The Directors have carried out a robust assessment of the principal and emerging risks facing the Company.

The Board, in conjunction with the Investment Manager, has developed a risk map which sets out the principal risks faced by the Company and the controls established to mitigate these risks and is reviewed every six months. Further information on the Company's internal controls is set out in the governance section of the Annual Financial Report. As an investment company the main risks relate to the nature of the individual investments and the investment activities generally. These include market price risk, foreign currency risk, interest rate risk, credit risk and liquidity risk.

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

-   Strategic: investment objective and policy are not appropriate in the current market and not favoured by investors.

  The investment objective and policy of the Company is set by the Board and is subject to ongoing review and monitoring in conjunction with the Investment Manager. Views expressed by the Company's shareholders are taken into account.

-   Investment: the Company's investments are selected on their individual merits and the performance of the portfolio is not likely to track the wider UK market (FTSE All-Share Index). The Company invests in small cap (listed), AIM traded and unquoted investments which can be subject to a higher degree of risk than larger quoted investments. The Company may also have significant exposure to particular industry sectors from time to time.

As a result of the new investment objective and policy, the Company's portfolio has become more concentrated due to the Investment Manager's higher conviction approach. A concentrated portfolio carries a higher degree of stock-specific risk than a more diversified portfolio as a material decline in an investment may have a significantly adverse effect on the Company's overall performance, financial condition and prospects.

  The Board considers that this risk is justified by the longer term nature of the investment objective and the Company's closed-ended structure, and that such investments should be a source of positive returns for shareholders. Risk will be diversified through having a broad range of investments in the portfolio. The Board discusses the investment portfolio with the Investment Manager at each Board meeting and part of this discussion includes a detailed review of the Company's unquoted investments, their valuations and future prospects.

The Company's functional and reporting currency is Sterling. However, the new investment objective and policy may result in a greater proportion of the Company's portfolio being invested in overseas equities denominated in currencies other than Sterling and in Sterling-denominated securities of companies which may conduct all or much of their business in currencies other than Sterling. As a result, movements in exchange rates may affect the Sterling value of these investments and their returns and the Company's overall performance, favourably or unfavourably. Foreign exchange rate risk may also increase the volatility of the NAV per Ordinary Share.

The Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the extent of the losses. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings.

All borrowing arrangements entered into require the prior approval of the Board and gearing levels are regularly discussed by the Board and Investment Manager.

-   Regulatory: failure to comply with the requirements of a framework of regulation and legislation, within which the Company operates.

  The Company relies on the services of the Company Secretary and Investment Manager to monitor ongoing compliance with relevant regulations and legislation.

-   Operational: disruption to, or failure of, the Investment Manager's and/or any other third party service providers' systems which could result in an inability to report accurately and monitor the Company's financial position.

  Both the Investment Manager and the Administrator have established business continuity plans to facilitate continued operation in the event of a major service disruption or disaster.

  Since the introduction of restrictions due to COVID-19, all of the Investment Manager's staff have been working from home with no significant impact on operations.

· Cyber: Failure or disruption of the Investment Manager's and/ or any other third party service providers' systems as a result of a cyber attack, data theft, service disruption, etc. Whilst the risk of a direct financial loss by the Company is low, the risk of reputational damage and the risk of loss of control of sensitive information is more significant. The Company's service providers and the Board often have sensitive information regarding transactions or pricing and information regarded as inside information in regulatory terms.

The Board receives regular updates from its service providers which describe the protective measures.

· Brexit: At the date of this report, it is uncertain what the effect of a negotiated trade deal or no trade deal between the UK and the EU will be at the end of the transition period. As the Company's shares are not marketed in Europe, investee companies are predominantly listed in the UK and key counterparties of and service providers to the Company are UK domiciled with suitable contingency arrangements available as necessary, the Board does not expect the Company's operations or performance over the longer term, to be materially affected by Brexit.

· Climate Change: Globally, climate change effects are already emerging in the form of changing weather patterns. Extreme weather events could potentially impair the operations of individual investee companies, potential investee companies, their supply chains and their customers. The Investment Manager takes such risks into account, along with the downside risk to any company - whether in the form of its business prospects or  market  valuation  or  sustainability of dividends - that is perceived to be making a detrimental contribution to  climate  change.  The Company  invests  in a broad portfolio of businesses with operations spread geographically, which should limit the impact of location- specific weather events.

· Pandemic (COVID-19): The rapid spread of COVID-19 has caused governments to implement policies to restrict the gathering, interaction or movement of people. These policies have inevitably changed the nature of the operations of some aspects of the Company, its key service providers and the companies in which it invests. As cited in Market Risk, share prices respond to assessments of future economic activity as well as their own forecast performance and the Pandemic has had a materially negative impact on the economy and will continue do so for a period of time. The Board and its Investment Manager have regular discussions to assess this impact on both the investment portfolio and on its ability to generate income for shareholders.

Further information on risks and the management of them are set out in the notes to the financial statements included in the Annual Financial Report.

Other Matters

Viability Statement

In accordance with the UK Corporate Governance Code, the Board has considered the longer term prospects for the Company beyond the twelve months required by the going concern basis of accounting. The period assessed is for five years to 30 April 2025. The Board has concluded that this period is appropriate, carefully taking into account the inherent risk with equities and the long term investor outlook.

As part of its assessment of the viability of the Company, the Board has discussed and considered each of the principal risks, including matters relating to COVID-19, as stated in the Annual Financial Report, and the impact on the Company's portfolio of longer-lasting damage to the economy, of the withdrawal of liquidity by the financial authorities, of a significant fall in markets and changes in regulation. The Board has also considered the liquidity of the Company's portfolio to ensure that it will be able to meet its liabilities, as they fall due. They have concluded, given the realisable nature of the majority of the investments, the level of ongoing expenses and the availability of gearing that the Company will continue to be in a position to cover its liabilities.

There will be a tender offer in 2021 of up to 25% of the share capital; this has been taken into account by the Board when assessing the continuing viability of the Company.

Taking into account the results of the above review, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to 30 April 2025.

Life of the Company

The Company operates a triennial liquidity event for shareholders. The tender offers will be made every three years, commencing in 2021, with each tender offer being for up to 25 per cent of the ordinary shares then in issue (excluding Treasury Shares), save that the Board may, at its sole discretion, decide not to proceed with a tender offer if the ordinary shares are trading at a premium to the estimated tender price.

Share Capital

Shareholders authorised the Company to buy back up to 14.99 per cent of the shares in issue at the 2019 AGM.

During the year the Company bought back 1,400,500 ordinary shares. As at 30 April 2020, all ordinary shares bought back during the year have been cancelled.

A resolution to renew the Company's buy back authority will be put to shareholders at the AGM on 8 October 2020.

No ordinary shares were issued during the year.

Directors

The Directors of the Company and their biographical details are set out in the Annual Financial Report.

No Director has a contract of service with the Company.

The Board supports the principles of diversity in the boardroom and acknowledges the benefits of having greater diversity, including gender, social and ethnic backgrounds, and cognitive and personal strengths. The Board 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, based on merit and objective criteria. The Board is currently comprised of three male directors and two female directors.

Modern Slavery Act 2015

The Company does not fall within the scope of the Modern Slavery Act 2015 as its turnover is less than £36m. Therefore no slavery and human trafficking statement is included in the Annual Financial Report.

Social and environmental matters

The Company has no employees and has delegated the management of the Company's investments to Artemis which, in its capacity as Investment Manager, has a Corporate Governance and Shareholder Engagement document which sets out a number of principles that are intended to be considered in the context of its responsibility to manage investments in the financial interests of shareholders. Artemis undertakes extensive evaluation and engagement with company managements on a variety of matters such as strategy, performance, risk, dividend policy, governance and remuneration. All risks and opportunities are considered as part of the investment process in the context of enhancing the 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.

How the Directors discharge their duties under s172 of the Companies Act

Under section 172 of the Companies Act 2006, the directors have a duty to act in a way they consider, in good faith, would be likely to promote the success of the Company for the benefit of its shareholders as a whole, and in doing so have regard to:

a.)  the likely consequences of any decision in the long term,

b.)  the interests of the company's employees,

c.)  the need to foster the company's business relationships with suppliers, customers and others,

d.)  the impact of the company's operations on the community and the environment,

e.)  the desirability of the company maintaining a reputation for high standards of business conduct, and

f.)  the need to act fairly as between members of the company.

As an externally managed investment trust, the Company has no employees or physical assets, our stakeholders include our shareholders and service providers, such as the Investment Manager.

The Board is responsible for promoting the long-term sustainable success and strategic direction of the Company for the benefit of the Company's shareholders. Whilst certain responsibilities are delegated, directors' responsibilities are set out in the schedule of matters reserved for the Board and the terms of reference of its committees, both of which are reviewed regularly by the Board. The Board has set the parameters within which the Investment Manager operates and these are set out in the Investment Management Agreement and in Board minutes.

To help the Board in its aim to act fairly as between the Company's members, it encourages communications with all shareholders. The Annual and Interim reports are issued to shareholders and are available on the Investment Managers' website together with other relevant information including monthly factsheets. The Board receives regular feedback on shareholder meetings from the Company's broker and any shareholder communications are reviewed and discussed by the Board at Board meetings to ensure that shareholder views are taken into consideration as part of any decisions taken by the Board. The Chairman seeks to meet with the Company's major shareholders throughout  the  year  as  do the Board at the Annual General Meeting. The Board considers communication with shareholders an important function and Directors are always available to respond to shareholder queries.

The Board receives regular updates from the Investment Manager and other service providers and ensures that information pertaining to its stakeholders is provided, as required, as part of the information presented in regular Board meetings. During the period, the COVID-19 pandemic resulted in additional discussions being held between the Board and Investment Manager to discuss the impact on the Company. The Board, with the support of its Management Engagement Committee, regularly reviews the performance of the Investment Manager and other service providers to ensure that services provided to the Company are managed efficiently and effectively for the benefit of the Company's shareholders.

In 2018, the Board undertook a strategic review of the Company which included extensive consultation with the Company's shareholders. A revised investment objective and policy was adopted by shareholders on 7 June 2018. The Board has continued to monitor closely the implementation of this strategy and regularly engages with the Investment Manager to discuss progress against the revised strategy as the long term success of the Company will depend on this. In addition to discussing progress against the revised investment strategy, the Board has reviewed and discussed plans for the future marketing and development of the Company with the Investment Manager during the year.

Other matters considered by the Board during the year included:

A review of the Company's borrowing arrangements which resulted in replacing the existing bank loan facility with the use of contracts for difference. The Board discussed the benefits and drawbacks of this change including the expected cost savings over the longer term, the operational impacts on the Company's stakeholders, the Investment Manager and Administrator, as well as the changes in risks for the Company.

A review of the Board's composition and skills resulted in the appointment of Mrs Victoria Stewart as a non-executive director of the Company on 31 May 2019. Mrs Stewart has considerable experience in managing investments and is also a non-executive director of other public companies,  one of which is an investment trust. The Board continues to consider its composition and the need for the requisite skills and experience required to meet the long-term challenges and opportunities facing the Company.

The Directors also considered the impact of the Company's decisions on the environment and the community. The Board met with representatives from Artemis' Environmental, Social and Governance ('ESG') team during the year to  discuss how ESG factors are taken into account when selecting and retaining investments for the Company and engaging with investee companies on matters of concern Directors also considered the impact of the Company's decisions on the environment and the community. The Board met with representatives from Artemis' Environmental, Social and Governance ('ESG') team during the year to discuss how ESG factors are taken into account when selecting and retaining investments for the Company and engaging with investee companies on matters of concern.

The Board has given discretion to the Investment Manager to exercise the Company's voting rights. During the year, the Board met with representatives of Artemis' Stewardship team to discuss Artemis' approach to stewardship of the Company's investments. The Board has also sought to meet directly with representatives of some of the Company's portfolio investments.

The Board's primary focus is to promote the long term success of the Company for the benefit of the Company's shareholders. In doing so the Board has regard to the impact of its actions on other stakeholders as described above.

Financial Statements

The financial statements of the Company are included in the Annual Financial Report.

For and on behalf of the Board

Duncan Budge

Chairman

28 July 2020

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

Management Report

Listed companies are required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rules (the "Rules") to include a management report in their annual financial statements. The information required to be in the management report for the purpose of the Rules is included in the Strategic Report. Therefore no separate management report has been included in the Annual Financial Report.

Statement of Directors' Responsibility

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with IFRS as adopted by the EU and applicable law.

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

-   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 a going concern basis unless it is inappropriate to presume that the Company will continue in business.

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

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

The financial statements are published on a website, artemisalphatrust.co.uk, maintained by the Company's Investment Manager, Artemis. Responsibility for the maintenance and integrity of the corporate and financial information relating to the Company on this website has been delegated to the Investment Manager by the Directors. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

(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 as at 30 April 2020, and of the profit or loss of the Company 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, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Duncan Budge

Chairman

28 July 2020

Statement of Comprehensive Income
For the year ended 30 April 2020
	Year ended			Year ended
	30 April 2020			30 April 2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	2,773	-	2,773	3,347	-	3,347
Total revenue	2,773	-	2,773	3,347	-	3,347
Losses on
investments	-	(18,732)	(18,732)	-	(15,072)	(15,072)
Net gains on derivatives	-	822	822	-	-	-
Currency gains/(losses)	-	47	47	-	(41)	(41)
Total income/(loss)	2,773	(17,863)	(15,090)	3,347	(15,113)	(11,766)
Expenses
Investment
management fee	(174)	(695)	(869)	(95)	(854)	(949)
Other expenses	(492)	(2)	(494)	(451)	(101)	(552)
Profit/(loss) before
finance costs and
tax	2,107	(18,560)	(16,453)	2,801	(16,068)	(13,267)
Finance costs	(3)	(14)	(17)	(28)	(253)	(281)
Profit/(loss) before
tax	2,104	(18,574)	(16,470)	2,773	(16,321)	(13,548)
Tax	(138)	-	(138)	(132)	-	(132)
Profit/(loss) and
total
comprehensive
income/(expense)
for the year	1,966	(18,574)	(16,608)	2,641	(16,321)	(13,680)
Earnings/(loss) per
ordinary share	4.90p	(46.30)p	(41.40)p	6.44p	(39.83)p	(33.39)p

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

All items in the above statement derive from continuing operations.

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

Statement of Financial Position
As at 30 April 2020
	2020	2019
	£'000	£'000
Non-current assets
Investments	118,086	139,179
Investments in subsidiary undertaking	3,002	3,193
	121,088	142,372
Current assets
Derivative assets	70	-
Other receivables	1,005	908
Cash and cash equivalents	5,382	4,556
Total assets	127,545	147,836
Current liabilities
Derivative liabilities	(174)	-
Collateral pledged	(220)	-
Other payables	(4,697)	(2,570)
Total liabilities	(5,091)	(2,570)
Net assets	122,454	145,266
Equity attributable to equity holders
Share capital	396	410
Share premium	676	676
Special reserve	46,181	50,133
Capital redemption reserve	194	180
Retained earnings - revenue	2,517	2,803
Retained earnings - capital	72,490	91,064
Total equity	122,454	145,266
Net asset value per ordinary share	309.38p	354.47p

These financial statements were approved by the Board of Directors and signed on its behalf on 28 July 2020 by:

 

Duncan Budge

Chairman

Statement of Changes in Equity
For the year ended 30 April 2020
					Capital
	Share	Share		Special	redemption	Retained earnings
	capital	premium		reserve	reserve	Revenue	Capital	Total
	£'000	£'000		£'000	£'000	£'000	£'000	£'000
For the year ended
30 April 2020
At 1 May 2019	410	676	50,133		180	2,803	91,064	145,266
Total comprehensive
income/(expense):
Profit/(loss) for the year	-	-	-		-	1,966	(18,574)	(16,608)
Transactions with owners
recorded directly to
equity:
Repurchase of ordinary
shares from treasury	-	-	(2,144)		-	-	-	(2,144)
Cancellation of ordinary
shares from treasury	(8)	-	-		8	-	-	-
Repurchase of shares
for cancellation	(6)	-	(1,808)		6	-	-	(1,808)
Dividends paid	-	-	-		-	(2,252)	-	(2,252)
At 30 April 2020	396	676	46,181		194	2,517	72,490	122,454
For the year ended
30 April 2019
At 1 May 2018	480	676	50,202		110	2,867	107,385	161,720
Total comprehensive
income/(expense):
Profit/(loss) for the year	-	-	-		-	2,641	(16,321)	(13,680)
Transactions with owners
recorded directly to
equity:
Cancellation of ordinary
shares from treasury	(1)	-	-		1	-	-	-
Conversion of subscription shares to
deferred shares	(69)	-	-		69	-	-	-
Repurchase of
deferred shares	-	-	(69)		-	-	-	(69)
Dividends paid	-	-	-		-	(2,705)	-	(2,705)
At 30 April 2019	410	676	50,133		180	2,803	91,064	145,266

 

Statement of Cash Flows 

For the year ended 30 April 2020

	2020 £'000	2019 £'000
Operating activities
Loss before tax	(16,470)	(13,548)
Interest payable	17	281
Losses on investments	18,732	15,072
Net gains on derivatives	(822)	-
Currency (gains)/losses	(47)	41
Decrease/(increase) in other receivables	279	(2)
Increase/(decrease) in accrued expenses	14	(13)
Net cash inflow from operating activities before interest and tax	1,703	1,831
Interest paid	(17)	(281)
Irrecoverable overseas tax suffered	(138)	(132)
Net cash inflow from operating activities	1,548	1,418
Investing activities
Purchases of investments	(56,462)	(49,775)
Sales of investments	60,733	64,347
Sales of derivatives	1,054	-
Collateral pledged	220	-
Net cash inflow from investing activities	5,545	14,572
Financing activities
Repurchase of ordinary shares into treasury	(2,144)	-
Repurchase of shares for cancellation	(1,808)	-
Repurchase of deferred shares	-	(69)
Dividends paid	(2,252)	(2,705)
(Decrease)/increase in intercompany loan	(110)	1,255
Net cash outflow from financing activities	(6,314)	(1,519)
Net decrease in net debt	779	14,471
Net funds/(debt) at the start of the year	4,556	(9,874)
Effect of foreign exchange rate changes	47	(41)
Net funds at the end of the year	5,382	4,556
Cash and cash equivalents	5,382	4,556
	5,382	4,556

 

Notes to the Financial Statements

1.  Accounting policies

The financial statements have been prepared on a going concern basis under the historical cost convention modified by the revaluation of financial assets and liabilities held at fair value through profit or lost, in accordance with International Financial Reporting Standards ("IFRS") and interpretations issued by the IFRS Interpretations Committee adopted by the European Union and the Companies Act 2006 as applicable to companies reporting under IFRS. The principal accounting policies adopted by the Company are set out within the Notes to the Annual Financial Report.

Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts and venture capital trusts issued by the Association of Investment Companies ("AIC") in October 2019 is consistent with the requirements of IFRS, the financial statements have been prepared in accordance with the SORP.

The accounting policies which apply in preparing the financial statements for the year ended 30 April 2020 have been applied consistently, other than where new policies have been adopted.

The financial statements are presented in Sterling, which is the currency of the primary environment in which the Company operates. All values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.  

2.  Income

	Year ended	Year ended
	30 April 2020	30 April 2019
	£'000	£'000
Investment income*
UK dividend income	2,226	2,659
UK fixed interest	18	24
Overseas dividend income	509	625
	2,753	3,308
Other income
Bank interest	20	39
	20	39
Total income	2,773	3,347
Income from investments
UK quoted investments	2,493	2,844
UK unquoted investments	121	333
Overseas quoted investments	139	101
Overseas unquoted investments	-	30
	2,753	3,308

*  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 fees

	Year ended			Year ended
	30 April 2020			30 April 2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment
management fee	174	695	869	95	854	949

Details of the terms of the investment management fee are set out in the Directors' Report included within the Annual Financial Report. The 'Expenses and finance costs' accounting policy was updated from 1 May 2019, following Board discussion, to allocate investment management fees and finance costs on the basis of 20% to revenue and 80% to capital (previously 10% revenue; 90% capital). As at 30 April 2020, £275,000 was outstanding in respect of amounts due to the Investment Manager (2019: £289,000).

4.  Dividends paid and proposed

Set out below are the total dividends recognised in respect of the financial year ended 30 April 2020.

	Year ended	Year ended
	30 April	30 April
	2020	2019
	£'000	£'000
2019 final dividend of 3.00p per ordinary share (2018: 3.00p)	1,215	1,229
2020 interim dividend of 2.10p per ordinary share (2019: 2.00p)	834	820
Special dividend of 0.50p per ordinary share (2018: 1.60p)	203	656
	2,252	2,705

Dividends are recognised in the period in which they are declared and are shown through the Statement of Changes in Equity. Therefore, the Statement of Changes in Equity for the year ended 30 April 2020 reflects the second interim dividend for the year ended 30 April 2019 which was paid on 13 September 2019 together with a special dividend of 0.50p. For the year ended 30 April 2020, a first interim dividend of 2.10p has been paid on 24 January 2020 and a final dividend of 3.10p is proposed for approval by shareholders at the forthcoming AGM to be paid on 16 October 2020.

Set out below are the total dividends paid/proposed in respect of the financial year ended 30 April 2020.

	Year ended	Year ended
	30 April	30 April
	2020	2019
	£'000	£'000
Interim dividend of 2.10p per ordinary share (2019: 2.00p)	834	820
Final dividend of 3.10p per ordinary share (2019: 3.00p)	1,227	1,229
Special dividend of nil p per ordinary share (2019: 0.50p)	-	205
	2,061	2,254

5. Earnings per share

The revenue earnings per ordinary share is based on the revenue profit for the year of £1,966,000 (2019: £2,641,000) and on 40,111,037 (2019: 40,980,974) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

The capital loss per ordinary share is based on the capital loss for the year of £18,574,000 (2019: £16,321,000) and on 40,111,037 (2019: 40,980,974) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

6.  Share capital

(a) Share capital

	2020	2020	2019	2019
	Shares	£'000	Shares	£'000
Allotted, called up and fully paid:
Ordinary shares of 1p each	39,580,474	396	40,980,974	410
	39,580,474	396	40,980,974	410

 

(b) Ordinary shares

	Shares	£'000
Movements in ordinary shares during the year:
Ordinary shares in issue on 1 May 2019	40,980,974	410
Repurchase of ordinary shares into treasury	(771,000)	(8)
Repurchase of ordinary shares for cancellation	(629,500)	(6)
Ordinary shares in issue on 30 April 2020	39,580,474	396

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

	2020	2020	2019	2019
	Shares	£'000	Shares	£'000
Balance brought forward	-	-	152,500	1
Repurchases of ordinary shares	771,000	8	-	-
Cancellation of ordinary shares	(771,000)	(8)	(152,500)	(1)
Balance carried forward	-	-	-	-

During the year ended 30 April 2020, the Company repurchased and cancelled 771,000 shares from treasury (2019: cancelled 152,500 shares from treasury).

There were no subscription shares in issue at 30 April 2020 (2019: 6,853,639 subscription shares were converted into deferred shares, repurchased for par value and immediately cancelled).

7. Net asset value per ordinary share

The net asset value per share is based on the net assets of £122,454,000 (2019: £145,266,000) and on 39,580,474 (2019: 40,980,974) ordinary shares, being the number of ordinary shares in issue at the year end.

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 notes to the Annual Financial Report. 

However, the existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party.

Fees payable during the year to the Directors and their interest in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report.

All 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 (2019: £nil).

9. Events after the reporting period

The Company's investment in Retail Money Market which was valued at £276,000 at the period end, was subsequently written down to £nil.

10. Annual Financial Report

This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 April 2020 and 30 April 2019 but is derived from those accounts. Statutory accounts for the year ended 30 April 2019 have been delivered to the Registrar of Companies.  The statutory accounts for the year ended 30 April 2020 and the year ended 30 April 2019 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 2020 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 2020 will be available to shareholders shortly. Copies may be obtained from the Company's registered office at Cassini House, 57-59 St James's Street, London SW1A 1LD or at the website at artemisalphatrust.co.uk.

The Annual General Meeting of the Company will be held on Thursday, 8 October 2020 at 09.30 a.m.

For further information, please contact:

Artemis Fund Managers Limited

Company Secretary

Telephone: [phone]

28 July 2020

[END]

 

END

 

 

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