Annual Financial Report

RNS Number : 5971R

Artemis Alpha Trust PLC

07 July 2022

 

Artemis Alpha Trust plc (the 'Company')

LEI: 549300MQXY2QXEIL3756

Annual Financial Report for the year ended 30 April 2022

Financial Highlights

 

 

Returns for the year ended 30 April 2022
				Year ended		Year ended
Total returns				30 April 2022		30 April 2021
Net asset value per ordinary share*				(21.9)%		56.0%
Ordinary share price*				(24.8)%		80.8%
FTSE All-Share Index				8.7%		26.0%
Revenue and dividends
Revenue earnings per ordinary share*				6.29		5.92p
Dividends per share
	Ordinary			5.60p		5.30p
Ongoing charges*				1.01%		0.93%
				As at		As at
Capital				30 April 2022		30 April 2021
Net Assets (£000)				124,101		181,828
Net asset value per ordinary share				367.65p		476.17p
Ordinary share price				329.00p		442.50p
Net gearing*				9.4%		10.2%
						Since
Total returns to 30 April 2022		3 years	5 years		10 years	1 June 2003**
Net asset value per ordinary share*		8.1%	9.7%		36.2%	545.1%
Ordinary share price*		19.0%	22.8%		35.7%	507.5%
FTSE All-Share Index		14.1%	26.6%		100.8%	313.3%

** The date when Artemis was appointed as Investment Adviser

*Alternative Performance Measure

Source: Artemis/Datastream

 

 

 

Chairman's Statement

Performance

Your Company's Net Asset Value per share fell by 21.9% and the share price by 24.8% over the year ended 30 April 2022 (on a total return basis). In comparison the benchmark FTSE All-Share Index rose by 8.7%. This was a disappointing result particularly compared with the very strong relative performance in the previous year.

Although the FTSE All-Share Index is our formal benchmark, a significant proportion of the companies in the portfolio are relatively small and form part of the FTSE 250 Index which declined by 5.9% over the year. As we have reminded shareholders in the past, the portfolio bears little relationship to the FTSE All-Share and the stock-selection is not constrained by it. As the last two years have shown, short- term performance is likely to bear very little resemblance to the benchmark, but our aim remains to out-perform it over the long term.

Just as the stock selection added significant value last year, it detracted during the year under review as the economic situation deteriorated, inflation soared and Russia invaded Ukraine. Confidence in markets eroded and pressures on consumer spending grew. Our eclectic portfolio, relatively concentrated as it is in the "consumer discretionary" sector, has proved vulnerable to the down-turn. Larger companies particularly in certain sectors such as mining, commodities and oil/gas have been safe havens, hence the relative strength of the FTSE All-Share. However, our Investment Manager remains confident of the intrinsic value and potential returns from our portfolio and has, accordingly, made only limited changes. A detailed review of the portfolio appears in the Annual Financial Report.

Revenue earnings and dividends

The Board has declared a final dividend of 3.46p (2021: 3.19p) per share, which will be subject to approval by shareholders at the Company's Annual General Meeting. The final dividend, if approved by shareholders, will be paid on 21 October 2022 to those shareholders on the register at 16 September 2022, with an ex-dividend date of 15 September 2022.

Total dividends declared for the year will therefore amount to 5.60p per share (2021: 5.30p), an increase of 5.6% on the previous year and ahead of the increase in the Consumer Prices Index in the preceding year (1.5% as at April 2021), in line with our target.

Dividend receipts from our investee companies returned to pre-pandemic levels with a significant increase on the prior year. The subsidiary company still has healthy reserves with which to support the Company's earnings, if required.

Earnings per share for the year to 30 April 2022 were 6.29p, an increase of 6.2% on the 5.92p of the prior year.

General Meeting / Triennial tender offer

As reported at the half year stage, in November 2021 the Company held a General Meeting for shareholders to consider the Board's recommendation to suspend the 2021 tender offer and, instead, implement a continuous share repurchase programme. This was passed overwhelmingly with a 99.18% vote in favour of the resolution. The Board believed that the more dynamic and concerted programme which is now in place would provide shareholders with more predictable liquidity and a more stable and reduced discount.

Share buy backs/discount

The discount to underlying asset value averaged 5.9% over the course of the year. Although this had increased to 10.5% during the volatile markets conditions at the year end it has subsequently reduced to 7.8% at the time of this statement.

During the year, the Company bought back a total of 4,430,800 ordinary shares at a total cost of £18.7 million and an average discount of 6.1%, adding approximately 3.09p to the net asset value per share. The policy of buying back shares when in the best interests of our shareholders will continue; we believe this to be the most effective instrument in addressing any imbalance in the supply and demand for our shares.

Board Succession

The Board recognises the importance of succession planning to ensure that it has the right balance of skills and experience, paying close attention to the tenure of Directors and the level of diversity.

Blathnaid Bergin, who joined the Board in July 2015, will be retiring later this year and will not be standing for re-election at the Annual General Meeting. Blathnaid has also served as Chair of the Audit Committee and Senior Independent Director. On behalf of shareholders, I would like to thank her for her substantial contribution. We are currently in the process of recruiting a successor and look forward to introducing the new Director to shareholders in due course.

Annual General Meeting

Your Company's Annual General Meeting ("AGM") will take place on Thursday, 13 October 2022 at 11:30 a.m. at the London offices of Artemis Fund Managers, Cassini House, 57 St. James's Street, London, SW1A 1LD. The Investment Manager will make a presentation on the portfolio and the Directors look forward to welcoming shareholders back to the AGM. Should circumstances change and shareholders not be permitted to attend the AGM, further information will be made available through the Company's website and the London Stock Exchange regulatory news service.

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

 

Outlook

The level of uncertainty prevailing both in relation to economic disruption and inflation is extreme, compounded by the total unpredictability of geopolitical events. The extent to which markets have already discounted these extraordinary conditions is, as always, a fundamentally important but imponderable question. Our Investment Manager has been reluctant to make drastic changes to the portfolio in the face of macro-economic events, believing that carefully researched, individual companies offer the best prospect for delivering returns for shareholders over the long term.

 

Duncan Budge

Chairman

6 July 2022

Investment Manager's Review

 

Review

The Company's performance over the last year was disappointing. The NAV fell by 21.9% on a total return basis, compared to an  8.7% gain in the FTSE All-Share, its benchmark and a 5.9% decline in the FTSE 250, the UK domestic index which more closely resembles the Company's current portfolio.

We have noted before that since the rationalisation of the Company's portfolio four years ago, that its nature - its construction, stock selection and concentrated positioning - means that the portfolio bears little, if any relationship to the existing composition of its benchmark and, as a consequence, may produce very different returns, over limited periods, from this benchmark.

In the previous financial year, the portfolio (which has changed little in its composition for more than two years) had returns well ahead of its comparative index. In 2021/22, those same characteristics of the portfolio meant that it fell far short of its benchmark.

The second half of the year was particularly challenging as a confluence of macroeconomic factors created material short-term headwinds to earnings. These resulted in the market viewing many of the portfolio's long-held positions unfavourably.

Our most costly mistake was not hedging against the risk of an unexpected shift in monetary policy that we highlighted in last year's annual report. We also started 2022 close to fully invested, judging equity values to be attractive given the prospects of a strong economic recovery from Covid-19. The Russia/Ukraine crisis happened before this could play out, limiting our flexibility to respond to a decline in values, as we did in 2020.

The bear market valley we are in looks different to, and perhaps more daunting than others. That is due to the complexity of evaluating the persistence of inflation, policymakers' response to it, and the damage that might cause.

But there are clear similarities to other bear markets - elevated volatility, significant share price declines, risk aversion and a shortening of investors' horizons. Factors which together likely mean that prospective returns for the investor are higher even though few dared to say it at the time.

We have not bought any meaningful new holdings this year and sold few. This reflects two points that we will elaborate upon in this report.

Firstly, we know and like what we own. We have held 62% of the portfolio for over four years. We have investments in companies that tend to benefit from tougher times due to their strong leadership, that are reasonably insensitive to macro conditions and that have structural opportunities to improve profitability considerably.

Secondly, our investment process requires us to evaluate a stock's value independently of the market. Incorporating our best assessment of the likely damage from recent events, we see great upside to intrinsic values from current market prices.

Strong leadership

We first purchased shares in Frasers Group in 2016 and it is now the Company's largest investment following share price appreciation. It illustrates how strong management can create value by exploiting unpredictable opportunities that arise in times of stress.

Frasers acquired Flannels in 2017. It has grown Flannels' revenues by c.40% a year since, making it the key driver of the group's earnings growth. In recent years it has taken advantage of challenges in the retail sector to acquire Evans Cycles, Jack Wills, GAME and Sofa.com. More recently, it acquired Studio Retail and Missguided out of administration for £20m and £27m respectively. Studio Retail was a listed company that had a market capitalisation of £250m as recently as June 2021. It will give Frasers a platform to provide an integrated loyalty and credit offering to its customers, with the latter being a business that generates Next over £140m in annual profit.

Frasers also has a record of taking advantage of weakness in its own share price to repurchase shares from capital that the business generates. In the last year, the company has repurchased £208m of its own stock, representing 7% of the current market capitalisation. Since our first investment, the company has repurchased £460m worth of shares at an average price of 390p per share, meaning that the share count has declined by 20%. As Warren Buffet points out with Apple: "When they repurchase shares, our interest goes up and we don't lay out a dime."

We have held shares in Ryanair since 2018. This is another example of a good business that takes advantage of tough times. Unlike many other airlines, Ryanair successfully managed cash burn during the crisis, minimising the need to raise equity. Its share count is still lower than it was in 2018.

The business has continued to expand its fleet, enabling it to take advantage of the capacity withdrawal from failed airlines. In Italy, following the collapse of Alitalia, Ryanair is forecast to grow its market share from 30% pre-pandemic to 40% this summer.

Investing behind change

We first purchased shares in Dignity when its share price declined in 2018. The end-of-life industry is acyclical and growing. The holding was subsequently significantly increased in 2020, and it is now our second largest holding. That reflects our confidence in the opportunity and the scale of the potential reward.

Dignity owns 42 crematoria in the UK that generate £50m of earnings before interest and taxes with planning permission for a further six. These physical assets are hard to replicate and the income from them is highly predictable. The company has publicly stated how a valuation of over £1bn (for this division alone) would be justifiable based on the multiples of quoted infrastructure assets. This compares to the company's total enterprise value of £700m.

The company is a leader in 'pre-need funerals'. Regulation by the Financial Conduct Authority is leading to the exit of rogue operators in this market and should help increase adoption from its current low levels of 6% in the population aged over 50. We feel that the economic value to the Company from this business is misunderstood. Dignity has £1.1bn of assets held in trust relating to plans already sold. This is effectively deferred revenue that equates to five years' worth of current in-year revenue. Dignity shareholders are also entitled to the economic surplus generated from investment returns, which since 2020 have equated to approximately £127m.

Dignity's at-need funeral division requires the most attention and carries greatest risk following years of mismanagement. We supported a strategic change in April 2021 that has led to significant cultural change and a reduction in prices. In the first quarter of 2022, the early signs of this strategy were clear as, for the first time in at least 10 years, the company grew market share year on year from 11.5% to 12.8%.

Funeral provision is predominantly a fixed-cost business. This means that volume growth, even with lower prices, can significantly improve profitability due to the impact of operational gearing. For example, if 2/3rds of the cost base is fixed, then if the company were to increase volumes by 50%, costs would only increase by 17% meaning profit margins would expand. Applying this scenario to the company today would imply an increase in profits by over 200%. For context, this would mean that each branch would be doing three funerals a week, up from two.

Structural opportunities in digitalisation

We have held shares in Nintendo since 2017 and Hornby since 2016. Despite their different sizes ($55bn vs. £50m) the case for investing in them is strikingly similar. Both could benefit from using digitalisation to build direct relationships with customers.

Hornby produces many loved and heritage products. When it sells a £150 locomotive through a wholesaler it makes £50 - a 50% margin on the retailer's wholesale price. But when it sells direct to the consumer the gross profit rises to £105, as it captures the retail margin. Direct-to-consumer sales account for less than 12% of revenue today and various initiatives are underway to increase penetration.

Nintendo owns some of the most popular franchises in the video gaming industry but is behind peers in the digital distribution of software and adoption of subscriptions. In the most recent year, digital software sales accounted for 44% of Nintendo's total software revenue compared to approximately 70-80% for its peers. Higher penetration of digitally sold software increases revenue and margins.

Of the 107 million owners of Nintendo Switches, only 32 million - 30% - subscribe to its "Switch online" service. Rival Xbox has persuaded 68% of its customers to take up online subscriptions. We are encouraged by Nintendo's actions to make Switch Online more compelling by providing exclusive access to new content and its back catalogue. Higher penetration of subscriptions increases revenue visibility and margins.

We have held positions in food delivery companies Delivery Hero since 2017 and Just Eat Takeaway since 2018. We believe that online services for food remain in their early stages of adoption and there is significant potential for growth due to the convenience and value that technology brings.

Having been amongst the Company's strongest contributors over recent years, both stocks were the largest detractors over the last year. In the changing investment climate, high operating losses have left Delivery Hero and Just Eat vulnerable to being regarded as "concept stocks" with uncertain paths to profitability.

Our view is that the investment case is intact despite changes in the narrative and capital cycle. Many "pandemic winners" benefitted from a pull-forward in demand. If you ordered a sofa during lockdown, you are unlikely to need another one soon. This is not the case for food, and sector trading suggests that the industry is permanently larger following the pandemic. For example, to the end of 2021, we estimate two-year organic volume growth at Delivery Hero and Just Eat to have been 70% and 40% per annum.

On the subject of profitability, we retain confidence that current levels of losses are elevated due to investment spend that will subside as the industry matures. Further, there are levers to improve profitability such as improvements to route network efficiency, delivery fee optimisation and the introduction of advertising. On the last point, it is worth remembering that Amazon only started its advertising business in 2012; by 2018 it had grown to be the third largest business globally, with revenue of $31bn in 2021.

Opportunity in discounted UK assets

During 2020, the Company built up substantial positions in UK banks (Lloyds) and housebuilders (Bellway/Redrow/ Springfield) that together now account for 18% of NAV.

Our investment case for retail banks is that a period of close-to-zero interest rates veiled the pricing power that is inherent in deposit franchises, due to the inertia of customers. Lloyds first quarter results demonstrated the potential for earnings power to increase as interest rates normalise. Despite interest rates rising to 0.75%, deposit rates remain at 0.1% and net interest margins have consequently increased. Digitalisation should reduce the costs of serving customers too. Lloyds is valued at 0.8x tangible book value, indicating the potential for 15% annual returns if it achieves its guidance for a 12% return on equity.

As remarked in our half-year report, we sold our position in Barclays in August due to concerns over the investment banking cycle and management change.

Housebuilders' shares have declined as the sector faces headwinds from higher interest rates and fire safety regulation. Factors that underpin the sector's consistently strong cash generation and return on capital are unchanged. The planning process has only become more difficult since Covid-19 and presents a substantial barrier to entry. The structural undersupply of housing means there is an accumulated deficit of 1.6m homes in the UK, which grows ever year. In our view, this explains what is often considered a surprising resilience in demand and sector trading. For example, Bellway recently reported that its order book reached a record of £2.7bn, representing 65% of forecast year ahead revenue.

Both Redrow and Bellway trade at a discount to net asset value and have no gearing in their balance sheets, creating the potential for high returns with low risk. The net asset value primarily consists of land, which is a real asset that has appreciated significantly over recent years. Valuing these businesses below net asset value suggests that the companies are worth less than the value of their land and there is no value to the ongoing cash-generative franchises. In contrast, for the above reasons, we continue to see scope for the industry to generate mid-teen returns on capital, highlighting the prospective returns currently available.

Outlook/strategy

Unexpected inflation is a negative for all financial assets. But unlike bonds, whose coupons are fixed, equities offer the potential of growing earnings in nominal and real terms.

In the short-term the likely impact of inflation can be to damage nominal earnings growth due to an impact on margins that is hard to respond to. But over time, cash-generative franchises with duration find ways to adapt.

Our view is that we remain in a peculiar macroeconomic environment impacted by a war and a virus. For this reason, we are reluctant to make drastic changes, as one of the key lessons of the last few years must be how difficult it is to distinguish between temporary changes and permanent trends in such an environment. However, the underlying portfolio is highly liquid and so we retain considerable flexibility to respond to changes in risk and reward when we judge it to be appropriate.

Whilst share price correlation in the portfolio has converged in the current environment, we continue to believe the portfolio is well-positioned across its mix of market leading consolidators, structural growth opportunities, discounted UK assets and idiosyncratic recovery plays.

Our confidence in the portfolio's prospective return comes primarily from our understanding of the businesses we own that altogether trade at a significant discount to our judgement of intrinsic value. As Benjamin Graham once said: "The purpose of the margin of safety is to render the forecast unnecessary."

John Dodd and Kartik Kumar  

Fund managers

Artemis Fund Managers Limited

6 July 2022

Key sectoral exposures
Sector	2022	2021	Companies
General retail	16.0%	10.5%	Currys, Frasers Group, Hardly Ever
Airlines	12.7%	12.0%	easyJet, Ryanair Holdings
Housebuilding	11.5%	12.1%	Bellway (long CFD), Redrow, Springfield
Videogames & hobbies	10.5%	9.5%	Hornby, Nintendo ADR
Funerals	10.1%	8.7%	Dignity
Food delivery	8.0%	12.7%	Delivery Hero, Just Eat Takeaway.com
Banking	5.9%	4.9%	Lloyds Banking Group
Pharmaceuticals	5.6%	5.3%	Glaxosmithkline
Trading platform	5.2%	5.5%	Plus500
Aerospace & defence	5.2%	2.8%	Reaction Engines Limited
China technology	4.9%	5.8%	Alibaba Group Holding (long CFD), Prosus (long CFD)
Financial services	3.5%	1.9%	Singer Capital Markets
Serviced offices	3.1%	6.0%	IWG
Leisure	2.7%	-	Flutter Entertainment (long CFD), JD Wetherspoon
Consumer staples	2.0%	5.0%	EssilorLuxottica (long CFD)
Industrials	1.4%	-	Smiths Group, Spectris
Property	0.7%	0.6%	Claremont Alpha

ESG & Stewardship at Artemis

Introduction

As a firm, Artemis believes stewardship activities contribute to better performing companies and therefore returns for our clients. Stewardship is a fundamental element of our approach across all investment strategies. Whilst individual strategies are distinctive, views and ideas are shared across investment teams. The stewardship team supports fund managers by providing insight, research and analysis, discussion, and challenge on ESG and stewardship matters.

During 2021, we achieved signatory status from the FRC for our 2020 Stewardship Report. The 2021 Stewardship Report has been submitted to the FRC for consideration.

Approach to Stewardship

Our stewardship team is specifically dedicated to supporting our fund managers by providing insight, research and analysis, discussion, and challenge on ESG and stewardship matters including:

·     Identifying and incorporating a wider set of risks and opportunities into investment processes including ESG factors.

·     Monitoring and escalating issues with companies and exercising shareholder rights at company meetings.

·     Working collaboratively to develop and promote best practice internally and across the industry.

Artemis Alpha ESG approach

The fund employs a long-term value investing strategy to pick stocks. The framework is based on valuing companies using fundamental analysis and sizing positions according to the attractiveness of share prices relative to our view of their value. The fund's strategy is underpinned by a core principle that the key driver of long-term value is achieving a high and sustainable return on capital employed.

Companies that do not adhere to strong governance, look after their employees, or fail to recognise environmental and societal harm risk inhibiting their long-term potential. The investment process requires a focus on the ESG risks and opportunities present in each business and industry.

We actively monitor ESG risks and opportunities within our portfolio primarily through our fundamental and bottom- up driven research process for monitoring existing and evaluating prospective investments. We frequently engage with management teams on strategy, capital allocation, incentive alignment and communication.

During the year, the Fund Manager conducted 110 company meetings, 73 with existing and 37 with prospective investments. Examples on how the investment strategy integrates ESG factors within its approach include:

Redrow/Bellway/Springfield - several meetings were held with company management that included discussions to better understand how the industry will respond to the Future Homes Standards. The industry's approach to fire safety risk remediation was also discussed.

Frasers Group - a meeting was held to discuss the quantum and mechanism of remuneration award for the incoming CEO. Further social initiatives were discussed, including the company's "save the high street" initiative whereby it aims to regenerate declining urban areas with new stores, prioritising social impact over economic incentives.

Dignity - several meetings have been held with the company's CEO following initiatives that we supported last year to change its management team and strategy. We were also consulted with ahead of the appointment of various board members, including the company's chairman.

easyJet - meetings were held with the remuneration chair and chairman to discuss the company's revised remuneration policy. Discussions were held over the company's proposal to adopt a restricted share structure that prioritises employee retention with higher certainty of pay out, over specific performance hurdles.

Plus500 - meetings were held with the company's CEO and head of corporate strategy on approach to capital allocation. Drawing upon learnings from other investments, it was suggested that the company consider increasing reinvestment in its platform to enhance customer experience and enter new verticals, a change from its historic approach that has focused on capital return. The company was receptive to these proposals and has notably increased investment in both organic and inorganic opportunities.

Ryanair - meetings were held with the company's management team to discuss carbon taxes, fleet renewals and adoption of sustainable aviation fuels. The company's young fleet and typically high load factors means that its carbon efficiency is top quartile in the sector.

Hornby - a meeting was held with the company's CEO and board member to voice concerns over the pace of its digital transformation and strategy focus. This contributed to management change, with the search for a new CEO currently underway.

Just Eat Takeaway - several meetings were held with the company's management in which its approach to courier employment was discussed. The company has adopted a different approach to peers by largely pursuing an employment model, as opposed to the "gig economy" model where couriers are technically self-employed. This brings several benefits to employees - guaranteed wages, holiday and sick pay, as well as insurance, but with higher costs for the company.

Prosus - a meeting was held with the company to discuss management remuneration policies, reporting disclosure and approach to discount management.

Curry's - a meeting was held with the company's remuneration chair to discuss a revised remuneration proposal for senior executives put forward by a shareholder. Amongst other points, it was noted that the company's policy to increase share ownership through grants to its 16,000 employees was seen positively.

Flutter - several meetings were held with the company's management to discuss its approach to ensure responsible gambling. Our view is that the company is effectively pursuing a strategy of "self-regulation" by adhering to conservatively set internal limits around staking. Additionally, the company has taken steps to focus on low-staking recreational players over other customer segments.

Portfolio carbon emissions

The portfolio's carbon emissions relative to its benchmark, the FTSE All Share index, have remained elevated since the onset of Covid-19 in early 2020. This is primarily because our airline sector investment suffered from temporarily depressed revenues that are penalised in a measure that calculates carbon intensity based on emissions per £ of revenue. We expect this measure to normalise as airline revenues rebuild.

Voting & engagement

In the 12 months to April 2022, we voted against management 5 times (1.8% of votable items), primarily focusing on executive remuneration.

Portfolio of Investments as at 30 April 2022
				Global		Market
		Country of		exposure	% of	Value
Investment	Business activity	incorporation		£'000	NAV	£'000
Consumer Discretionary
Alibaba Group Holding (long CFD)	Chinese E-commerce company	Cayman Islands		3,096	2.5	200
Bellway (long CFD)	UK housebuilder	UK		5,364	4.3	(26)
Claremont Alpha 1	Taiwan land	Isle of Man		905	0.7	905
Currys	European electricals retailer	UK		4,292	3.5	4,292
Delivery Hero	Online food delivery company	Germany		4,540	3.7	4,540
Dignity	UK funeral services	UK		12,567	10.1	12,567
easyJet	European low-cost airline	UK		9,817	7.9	9,817
Frasers Group	Sports and general apparel retailer	UK		14,938	12.0	14,938
Hardly Ever 1	Apparel e-commerce platform	UK		570	0.5	570
Hornby 3	Hobby and toy brands	UK		5,651	4.6	5,651
Just Eat Takeaway.com	Online food delivery company	Netherlands		5,305	4.3	5,305
Nintendo, ADR	Video games	Japan		7,261	5.9	7,261
Redrow	UK housebuilder	UK		6,996	5.6	6,996
Rok Entertainment Group 2	Global mobile entertainment	USA		-	-	-
ROK Global 2	Global mobile entertainment	UK		-	-	-
Ryanair Holdings	European low-cost airline	Ireland		5,958	4.8	5,958
Springfield Properties 3	UK housebuilder	UK		2,030	1.6	2,030
Total Consumer Discretionary				89,290	72.0	81,004
Financials
Lloyds Banking Group	UK retail bank	UK		7,341	5.9	7,341
Plenti Group	Australian peer-to-peer lending platform	Australia		59	-	59
Plus500	Global online financial trading platform	Israel		6,481	5.2	6,481
Singer Capital Markets 1	UK investment bank	UK		4,306	3.5	4,306
Total Financials				18,187	14.6	18,187
Industrials
IWG	Global serviced offices provider	Jersey		3,843	3.1	3,843
MBA Polymers 2	Plastics recycling	USA		-	-	-
Rated People 1	UK home maintenance services platform	UK		554	0.4	554
Reaction Engines 1	Rocket propulsion systems	UK		6,433	5.2	6,433
Smiths Group	Industrial technology company	UK		739	0.6	739
Spectris	Industrial technology company	UK		1,005	0.8	1,005
Total Industrials				12,574	10.1	12,574
Health Care
EssilorLuxottica (long CFD)	Global eyeware manufacturer	France		2,477	2.0	26
GlaxoSmithKline	Global healthcare company	UK		6,918	5.6	6,918
Total Health Care				9,395	7.6	6,944
Consumer Services
Flutter Entertainment (long CFD)	Global sports betting and gambling operator	Ireland		2,195	1.8	24
J D Wetherspoon	UK pub operator	UK		1,103	0.9	1,103
Total Consumer Services				3,298	2.7	1,127
Technology
Prosus (long CFD)	China-focussed technology investment company	Netherlands		2,936	2.4	242
Total Technology				2,936	2.4	242
Energy
Energy Equity Resources (Norway) 2	African oil and gas exploration	UK		-	-	-
Leed Resources 2	Oil and gas exploration and production	UK		-	-	-
PetroHunter Energy 2	Oil and gas exploration and production	USA		-	-	-
Total Energy		-		-	-
Total investments (including CFDs)				135,680	109.4	120,078
Forward Currency Contracts
Buy £5,811,980 Sell €7,000,000						(80)
Buy £4,577,071 Sell $6,000,000						(202)
Forward Currency Contracts total						(282)
Portfolio fair value						119,796
Net other assets						4,305
Net assets						124,101

1  Unquoted investment 2  Delisted, suspended or investments in administration or liquidation 3  AIM quoted investment 4  CFDs are disclosed in Derivative assets/liabilities at market value in the Statement of Financial Position. Global exposure has been calculated in line with the guidelines issued by the European Securities and Markets Authority ('ESMA') and represents the market value of an equivalent position in the underlying investment of each derivative contract. For all other asset types the percentage of net assets has been calculated based on the valuation of each holding  Portfolio has been analysed using ICB industry classifications .

Strategy and Business Review

Culture, Purpose & Value

The Directors have considered the culture, purpose and values of Artemis Alpha Trust plc ("the Company"). By undergoing this exercise, the Directors seek to ensure that these three elements help drive forward the strategy.

Culture

The Company is an externally managed investment trust and as such its culture is created by the Board of Directors and the Investment Manager, Artemis Fund Managers Limited.

Purpose

Our purpose is to provide our shareholders, large or small, with a diversified and cost-effective investment opportunity to achieve long-term growth.

Values

The Company provides access to a portfolio of investments which the Board expects to be managed with integrity, transparency and accountability and with appropriate due diligence to environmental, social and governance matters. The constructive and openly discursive nature of the relationship between the Board and the Investment Manager helps ensure their respective values are aligned and focused on delivering the strategy for our shareholders.

The core values that contribute to the Board culture include:

·     Integrity: the Board seeks to comply with all applicable laws and regulations, both to the letter and in spirit.

·     Accountability: the Board recognises the need to explain the Company's performance to investors and to highlight the risks in a clear and open manner. The Board has a key role to encourage and challenge the performance of its Investment Manager and its other service providers to help ensure the Company continues to provide shareholder value.

·     Respect & Transparency: the Board seeks to communicate clearly and openly with shareholders and service providers respecting individual opinions and expectations. Contact by shareholders via the Chairman's email address is welcomed.

·     Environmental, Social and Governance ("ESG") issues: We are stewards of our shareholders' capital; both the Board and Investment Manager recognise that this comes with responsibilities. ESG considerations are integrated within the investment process.

An overview of the Investment Manager's culture, values and stewardship activities can be found on the website at www.artemisfunds.com.

 

Corporate strategy & policy

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

Gearing

The Company uses gearing (i.e. borrowing) as part of its investment strategy. The Company's Articles of Association limit borrowing to 50 per cent of the Company's net assets. However, the investment policy limits this to 25 per cent of net assets. Subject to compliance with this restriction, the level of borrowing is a matter for the Board, whilst the utilisation of borrowings is delegated to the Investment Manager. This utilisation may be subject to specific guidelines established by the Board from time to time. The current guidelines permit the Investment Manager to employ borrowings of up to 20 per cent of net assets. The Company had no borrowing facility as at 30 April 2022 or the prior year. The use of gearing by the Investment Manager will vary from time to time, reflecting its views on the potential returns from stock markets. The Company's gearing is reviewed by the Board and Investment Manager on an ongoing basis. At the year end, net gearing was created through the use of contracts for difference and stood at 9.4 per cent (10.2 per cent as at 30 April 2021).

Leverage

Leverage is defined in the Alternative Investment Fund Manager Directive ("AIFMD") as any method by which the Company can increase its exposure by borrowing cash or securities, or from leverage that is embedded in derivative positions. The Company has entered into an agreement with JP Morgan to utilise contracts for difference as a form of leverage. A result of 100 per cent indicates that no leverage has been used. The Company is permitted by its Articles to borrow up to 50 per cent; however the Company's investment policy restricts this to 25 per cent. The Company is permitted to have additional leverage of up to 100 per cent of its net assets, which results in permitted total leverage of 225 per cent under both ratios. Artemis, as the Alternative Investment Fund Manager ("AIFM"), monitors leverage limits on a daily basis and reviews them annually. No changes have been made to these limits during the period. At 30 April 2022, the Company's leverage was 146.0 per cent as determined using the gross method and 114.6 per cent under the commitment method.

The Investment Manager requires prior Board approval to:

(i)                enter into any stocklending agreements;

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

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

Operating environment

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

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

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

Current & future developments

A summary of the Company's developments during the year ended 30 April 2022, together with its prospects for the future, is set out in the Chairman's Statement and the Investment Manager's Review. The Board's principal focus is the delivery of positive long-term returns for shareholders and this will be dependent on the success of the investment strategy. The investment strategy, and factors that may have an influence on it, such as economic and stock market conditions, are discussed regularly by the Board and the Investment Manager. The Board regularly considers the ongoing development and strategic direction of the Company, including its promotion and the effectiveness of communication with shareholders.

Key Performance Indicators ("KPIs")

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

Discrete annual total returns
			FTSE
	Net asset	Share	All-Share
Year ended 30 April	Value*	Price*	Index
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)%
2021	56.0%	80.8%	26.0%
2022	(21.9)%	(24.8)%	8.7%

Source: Artemis/Datastream

*Alternative Performance Measure

Dividends per ordinary share
			Total
			pence per		Total
Year ended			ordinary	Ordinary	increase/
30 April	Ordinary	Special	share	increase	(decrease)
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)%
2021	5.30p	-	5.30p	1.9%	1.9%
2022	5.60p	-	5.60p	5.6%	5.6%

Ongoing charges as a proportion of shareholders' funds
As at 30 April	Ongoing charges*
2017	0.91%
2018	0.90%
2019	0.93%
2020	0.95%
2021	0.93%
2022	1.01%

*Alternative Performance Measure

 

Discount management

In addition to the above KPIs, the Board monitors the discount to the underlying net asset value at which the shares trade. No specific discount target has been set, but the Board sets the share buyback policy and has given the Investment Manager discretion to exercise the Company's authority to buyback its own shares from time to time to address any imbalances between the supply and demand in the Company's shares or at times where it is believed this is the best use of available capital to increase NAV per share. This is reviewed regularly by the Board. The Board will also use its authority to issue new ordinary shares from time to time should there be excess demand for the Company's shares. The Company will also provide tender offers every three years. The first tender offer was due in 2021, for 25 per cent of the ordinary shares then in issue. However, following a shareholder vote, this did not take place. The next proposal for a tender offer will be in 2024.

Principal risks and risk management

As required by the 2018 UK Code of Corporate Governance, the Board has carried out a robust assessment of the principal and emerging risks facing the Company.

The Board, in conjunction with the Investment Manager, has developed a risk map which sets out the principal risks faced by the Company and the controls established to mitigate these risks. This is an ongoing process and the risk map, including any emerging risks, is formally reviewed every six months. The Board has given particular attention to those risks that might threaten the long-term viability of the Company. Further information on the Company's internal controls is set out in the corporate governance section 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, their movement during the year and their mitigation is set out below:

Movement	Principal risk	Mitigation/control
No change	Strategic risk 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 also taken into account.
No change	Investment risk 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). Whilst the focus is on large cap companies the Company also invests in small cap (listed), AIM traded and unquoted investments which can be subject to a higher degree of risk than that of larger quoted investments. From time to time, the Company may also have significant exposure to particular industry sectors. The Investment Manager's high conviction approach leads to a concentrated portfolio, typically containing between 25 and 60 stocks, carrying a higher degree of stock-specific risk than a more diversified portfolio. The Company's functional and reporting currency is Sterling. However, the investment objective and policy may result in a proportion of the Company's portfolio being invested in overseas equities denominated in currencies other than Sterling. As a result, movements in exchange rates may affect the Sterling value of these investments and their returns. The Company may borrow money for investment purposes or use derivatives to similarly increase exposure. If the investments fall in value, any borrowings/use of derivatives will magnify the extent of the losses.	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. Risks are diversified through having a range of investments in the portfolio covering various sectors (see Investment Manager's Report for details). The Board discusses the investment portfolio with the Investment Manager at each Board meeting, and at each month end between Board meetings, and part of this discussion includes a detailed review of the Company's unquoted investments, their valuations and future prospects together with their portfolio weighting. The Board receives management information concerning the geographical sector split of the portfolio. The Company is not materially exposed to foreign currency risk. All borrowing arrangements entered into require the prior approval of the Board and gearing levels are regularly discussed and reviewed by the Board and Investment Manager.
No change	Legal and regulatory risk A breach of s1158 Corporation Tax Act 2010 could lead to a loss of investment trust status and the resultant taxation of realised capital gains. The principal laws and regulations the Company is required to comply with are the Companies Act 2006, the Alternative Investment Fund Managers' Directive, the Market Abuse Regulation, the UK Listing Rules and the Disclosure Guidance and Transparency Rules. A breach of the FCA listing rules could lead to suspension of the Company's shares. A breach of the Companies Act 2006 could lead to criminal proceedings and reputational and financial damage.	The Investment Manager provides investment, company secretarial, administration and accounting services through the use of qualified professionals. The Board receives internal control reports from the Investment Manager confirming compliance with regulations. These reports also highlight any matter that the Compliance team feel should be brought to the Board's attention along with any items discussed during internal audit review. The Board meets each year with the Risk and Compliance team to discuss the areas of risk appropriate to the Company and the control environment.
No change	Operational risk 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. During the Covid-19 pandemic, all of the Investment Manager's and Administrator's staff worked from home with no significant impact to operations.
No change	Cyber risk 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 Board receives regular updates from the Investment Manager and its service providers which describe the protective measures taken to enhance security.
No change	Brexit and other UK political risk The transition period ended on 31 December 2020 with the UK leaving the common market.	The Board reviews the impact of Brexit and any other UK political change as they emerge. 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 Company has not experienced any material effect on performance in the short term. The Board does not expect the Company's operations or performance over the longer term to be materially affected by Brexit.
No change	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.
Decreased risk	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. 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, the related change in consumer behaviour and on its ability to generate income for shareholders.
Emerging risks
Emerging / new risk included during the year	Geopolitical risk There is an increasing risk to market stability from geo-political conflicts, such as between Russia and Ukraine.	The Board discusses such risks as they arise and continues to monitor the impact on the Company and its investments through discussion with the Investment Manager as and when required. The Company does not have any direct investments in countries where there is geopolitical conflict. However, the Board is provided with information from the Investment Manager on the measures it takes to assess the potential impact of geopolitical events, both on itself and other service providers, and any action taken.
Emerging / new risk included during the year	Inflationary risk Central Bank / Government response to Covid-19, the war in Ukraine or any other economic or political factors or global events, may result in increasing levels of inflation directly affecting economic growth and the underlying investment values.	The Board and its Investment Manager have regular discussions to assess the likely impact of inflation rates on the economy, corporate profitability and asset prices.

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.

Long-term Viability

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 2027. 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 and inflationary pressures., and their impact on the Company. Although the damage to the economy through the total cost of Covid-19 and the geopolitical effect of Russia/Ukraine cannot be known with certainty, the Board has considered these risks and does not believe they affect the long-term viability of the Company and its portfolio. The Investment Manager carried out stress testing scenarios in connection with a longer-lasting damage to the economy, of the withdrawal of liquidity by the financial authorities and of a significant and sustained fall in markets. The Board has also considered the liquidity of the Company's portfolio to ensure that it will be able to meet its liabilities, as they fall due. The results demonstrated the impact on the Company's NAV throughout the five-year period and on its expenses and liabilities. The Board have concluded, given the realisable nature of the majority of the investments, the level of ongoing expenses and the availability of gearing that the Company will continue to be in a position to cover its liabilities.

The Board also made the below assumptions when considering the viability of the Company:

·     Investors will continue to wish to have exposure to UK listed companies

·     There will be continued demand for investment trusts

·     Regulation will not increase to such an extent as to hinder operational efficiency

The Directors do not expect there to be any significant change in the current principal risks and the associated mitigating controls. The Directors also do not envisage any change in strategy or objectives that would prevent the Company from continuing to operate over the five-year period. The Company's assets are liquid, its commitments limited, and it intends to continue as an investment trust. The revenue streams from investee companies have showed a strong recovery following the Covid-19 pandemic and the Board is comfortable that the Company has sufficient income reserves to fund the shortfall.

The possibility of a 2024 tender offer of up to 25% of the share capital has been considered by the Board when assessing the continuing viability of the Company.

Taking into account the results of the above review, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to 30 April 2027.

Life of the Company

The Company operates a triennial liquidity event for shareholders. The tender offers may be made every three years, with the next event proposed in 2024, subject to shareholder approval. Each tender offer will be for up to 25 per cent of the ordinary shares then in issue (excluding Treasury Shares), save that the Board may, at its sole discretion, decide not to proceed with a tender offer if the ordinary shares are trading at a premium to the estimated tender price.

Share capital

Shareholders authorised the Company to buyback up to 14.99 per cent of the shares in issue at the 2021 AGM.

During the year the Company bought back 4,430,800 ordinary shares. As at 30 April 2022, 3,505,800 ordinary shares bought back during the year are held in treasury.

A resolution to renew the Company's buyback authority will be put to shareholders at the AGM on 13 October 2022.

No ordinary shares were issued during the year.

Duty to Promote the Success of the Company

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

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

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

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

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

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

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

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

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

The below tables describe the impact of engagement with our stakeholders that has taken place during the year:

Engagement with key stakeholders

Stakeholders	Engagement	Impact
Shareholders and potential investors	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 which are reviewed regularly by the Board. 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 is available to contact via email: [e-mail]. The Board considers communication with shareholders an important function and Directors are always available to respond to shareholder queries.	Through the publication of the Annual Financial Report and the Interim Report and Accounts, monthly factsheets and Fund Manager updates to the Company's website, shareholders are kept informed of Company performance and portfolio activities. Shareholders are encouraged to raise questions and communicate with the Chairman and the Fund Manager. The Board and Chairman proactively sought feedback from investors regarding the proposed 2021 tender offer.
Artemis as Investment Manager ·     Fund management ·     Company secretarial ·     Financial reporting ·     Sales & marketing ·     Compliance and internal control functions ·     Internal audit ·     Investment administration (outsourced to JP Morgan)	The Board has set the parameters within which the Investment Manager operates and these are set out in the Investment Management Agreement and agreed by the Board 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, additional monthly performance updates were held between the Board and Investment Manager to discuss the impact of the pandemic and geopolitical events on the Company and its performance. 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. The Board has reviewed and discussed plans for the future marketing and development of the Company with the Investment Manager during the year.	During the year the performance of the Company fell against its benchmark. The discount of the share price to net asset value remained narrow through the use of buybacks. The liquidity in the market for the Company's shares continued to increase on the prior year. See the Chairman's Statement and Investment Manager Review for detail. The Fund Manager worked on a number of initiatives to raise the profile of the Company and generate interest with new investors. During the year, a change of investment administrator was proposed by the Investment Manager, with Northern Trust replacing JP Morgan. This was discussed by the Board and approval was given. The process of change is currently in the planning stages.
Other third-party service providers ·       JP Morgan as  Depositary and Custodian ·     Singer Capital Markets as Broker ·     Link Group as Registrar ·     Johnston Carmichael LLP as Auditor	As an investment company, all services are outsourced to third- party service providers. The Board considers the Depositary, the Custodian, the Broker, the Registrar and Auditor to be key stakeholders. The Board relies on the Investment Manager to work alongside these key stakeholders to meet the requirements of the Company. The Management Engagement Committee reviews the performance of these service providers, along with their fee levels, and provides recommendations to the Board as required. The Investment Manager has constant interaction with the service providers and provides feedback to and from the Board as required. Annual assurance reports are received to assist the review of the internal control environments of the Depositary and Custodian. The FRC performs audit quality reviews on a sample of audit firms and audits. Findings are published annually.	The performance of the third-  party service providers is continually monitored throughout the year. As and when appropriate, third-party providers present to the Board. Following formal review by the Management Engagement Committee and Board at the year end, it was concluded that the service providers were operating effectively and provided a good level of service. Following the move of administration services, Depositary and Custodian services will be provided by Northern Trust.
Investee companies	The Board sets the investment objective and discusses stock selection, asset allocation, and the ESG qualities of investee companies with the Fund Manager at each Board meeting. The Fund Manager engages with the investee companies, prior to investment and on an on-going basis. The Fund Manager has a dedicated Stewardship Team which supports the Fund Manager in the investment process.	The engagement of the Fund Manager with the investee companies aids awareness and understanding of the ESG environment in operation as well as the valuation and prospects of their businesses.
The Association of Investment Companies ("AIC")	The Company is a member of the AIC which is an organisation that represents the interests of investment trusts, VCTs and other closed-end funds.	The Board chooses to report under the AIC Code of Corporate Governance. This Code better reflects the nature of an investment trust in the context of good corporate governance.

Board discussions and decisions

The following are the key discussions and decisions made by the Board during the year ending 30 April 2022:

Topic	Background & discussion	Decision
Triennial  tender  offer and share buyback policy	As agreed by shareholder vote in 2018, the Company will undergo a tender offer every three years unless the ordinary shares are trading at a premium to the estimated tender price. Discussions were held to establish if the 2021 tender offer was in the best interests of the shareholders. The Company consulted with a number of shareholders who indicated that they would be unlikely to participate in the tender. The Board, mindful of the substantial fixed costs involved with a tender offer, proposed as an alternative a sustainable share buyback programme as a means to control the share price discount to NAV. The level of buybacks and their effect on the discount is discussed at each Board meeting.	It was decided to recommend to shareholders the suspension of the 2021 tender offer. As an alternative, on 11 November 2021, the Company's shareholders voted in favour of the Company undertaking a sustainable share buyback policy, with the target of maintaining a narrow discount, similar to the tender price. The next tender offer will be due in 2024, subject to shareholder approval. The Board considers the buyback policy is helping to maintain / reduce the discount to NAV. For further information see 'Discount management'.
Environmental, social and governance matters ('ESG')	The Board discussed its responsibilities for ESG and how Artemis, as Investment Manager, undertook the required steps to ensure ESG was incorporated within the investment process. The Board made enquiries of the Investment Manager as to the ESG credentials of the underlying portfolio. The Investment Manager confirmed engagement with investee boardshelpedgainanunderstandingofthe governance in place.	The Board received reporting on ESG, sustainability and voting records quarterly. A representative of the Risk team presents annually, or as required, to the Board. It was decided that ESG was appropriately incorporated within the Artemis investment process and the Board would continue to discuss and monitor on an on-going basis.
Registrar review	The Management Engagement Committee requested a review of the current registrar service provider, Link Group.	It was decided that the quality of service from Link Group merited continuing the agreement.
Administration, Depositary and Custodian arrangements	The Board considered and discussed the proposal made by the Investment Manager to move these services to Northern Trust.	The Board confirmed agreement with the proposal.
Gearing	The Board discussed the current policy of providing gearing through Contracts for Difference.	The Board decided that this policy continues to provide gearing at a reduced cost compared to a conventional bank loan.
Internal audit	The Audit Committee discussed the possibility of the Company having its own internal audit function.	The Audit committee and Board decided the Company should continue to place reliance on the internal audit function performed by the Investment Manager.
Director succession	The Board discussed succession of Directors taking into account the number of years served and the mix of skills required to perform the role.	The succession priorities of the Board were decided.

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

 

Directors & Diversity

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

No Director has a contract of service with the Company.

The Board supports the recommendations of the Hampton- Alexander Review on gender diversity and, although not a FTSE 350 Company, is comprised of 40% female representation. The Senior Independent Director is also female. The Board also supports the Parker Review on ethnic representation on Boards. The FCA announced a new policy statement on diversity and inclusion on company boards in April 2022 which the Company is cognisant of; working towards compliance for April 2023. The Board recognises the principles of diversity in the boardroom and acknowledges the benefits of having greater diversity, including gender, social and ethnic backgrounds, and cognitive and personal strengths. The Nomination Committee considers diversity alongside seeking to ensure that the overall balance of skills and knowledge that the Board has remains appropriate, so that it can continue to operate effectively. The Board's Director selection policy will, first and foremost, seek to identify the person best qualified to become a Director of the Company, based on merit and objective criteria. The Board is currently comprised of 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.

Sustainability and Environmental, social and governance ('ESG') matters

The Board recognises that the most material way in which the Company can have an impact on ESG is through responsible ownership of its investments. The Board has appointed Artemis as Investment Manager, who engages actively with investee companies undertaking extensive evaluation and engagement on a variety of matters such as strategy, performance, risk, dividend policy, governance and remuneration. All risks and opportunities are considered as part of the investment process in the context of enhancing the long-term value of shareholders' investments. This will include matters relating to material environmental, human rights and social considerations that will ultimately impact the profitability of a company or its stock market rating and hence these matters are an integral part of Artemis' thinking as investors. The ESG and stewardship engagement of Artemis is detailed in the Annual Financial Report.

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

6 July 2022

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 international accounting standards in conformity with the requirements of the Companies Act 2006 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 UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006; 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.

Directors' confirmations

Each of the Directors listed in the Annual Financial Report confirm that, to the best of their knowledge:

(a)  the financial statements, prepared in accordance with the applicable set of UK-adopted international accounting standards, give a true and fair view of the assets, liabilities and financial position of the Company as at 30 April 2022, and of the profit or loss of the Company for the year then ended;

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

(c)  the Annual Financial Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.

In the case of each Director in office at the date the Directors' Report is approved:

(a)  so far as the Director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and

(b)  they have taken all steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

For and on behalf of the Board

Duncan Budge

Chairman

6 July 2022

Statement of Comprehensive Income
For the year ended 30 April 2022
	Year ended			Year ended
	30 April 2022			30 April 2021
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	3,099	-	3,099	3,147	-	3,147
Total revenue	3,099	-	3,099	3,147	-	3,147
(Losses)/gains on
investments	-	(30,511)	(30,511)	-	59,998	59,998
Net (losses)/gains on derivatives	-	(7,770)	(7,770)	-	4,767	4,767
Currency (losses)/ gains	-	(16)	(16)	-	609	609
Total income/(loss)	3,099	(38,297)	(35,198)	3,147	65,374	68,521
Expenses
Investment
management fee	(219)	(875)	(1,094)	(196)	(785)	(981)
Other expenses	(492)	(74)	(566)	(411)	(15)	(426)
Profit/(loss) before
finance costs and
tax	2,388	(39,246)	(36,858)	2,540	64,574	67,114
Finance costs	(9)	(36)	(45)	(7)	(28)	(35)
Profit/(loss) before
tax	2,379	(39,282)	(36,903)	2,533	64,546	67,079
Tax	(118)	-	(118)	(210)	-	(210)
Profit/(loss) and
total
comprehensive
income/(expense)
for the year	2,261	(39,282)	(37,021)	2,323	64,546	66,869
Earnings/(loss) per
ordinary share	6.29p	(109.28p)	(102.99p)	5.92p	164.56p	170.48p

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 2022
	2022	2021
	£'000	£'000
Non-current assets
Investments	119,612	175,991
Investments in subsidiary undertaking	4,231	3,230
	123,843	179,221
Current assets
Derivative assets	492	162
Other receivables	781	848
Collateral held	1,970	-
Cash and cash equivalents	2,389	6,477
Total assets	129,475	186,708
Current liabilities
Derivative liabilities	(308)	(478)
Collateral pledged	-	(830)
Other payables	(5,066)	(3,572)
Total liabilities	(5,374)	(4,880)
Net assets	124,101	181,828
Equity attributable to equity holders
Share capital	373	382
Share premium	676	676
Special reserve	21,964	40,738
Capital redemption reserve	217	208
Retained earnings - revenue	3,117	2,788
Retained earnings - capital	97,754	137,036
Total equity	124,101	181,828
Net asset value per ordinary share	367.65p	476.17p

These financial statements were approved by the Board of Directors and signed on its behalf on 6 July 2022:

 

Duncan Budge

Chairman

Statement of Changes in Equity
For the year ended 30 April 2022
					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 2022
At 1 May 2021	382	676	40,738		208	2,788	137,036	181,828
Total comprehensive
income:
Profit/(loss) for the year	-	-	-		-	2,261	(39,282)	(37,021)
Transactions with owners
recorded directly to
equity:
Repurchase of ordinary
shares into treasury	-	-	(14,683)		-	-	-	(14,683)
Repurchase and cancellation of ordinary
shares	(9)	-	(4,091)		9	-	-	(4,091)
Dividends paid	-	-	-		-	(1,932)	-	(1,932)
At 30 April 2022	373	676	21,964		217	3,117	97,754	124,101
For the year ended
30 April 2021
At 1 May 2020	396	676	46,181		194	2,517	72,490	122,454
Total comprehensive
income:
Profit for the year	-	-	-		-	2,323	64,546	66,869
Transactions with owners
recorded directly to
equity:
Repurchase and cancellation of ordinary shares	(14)	-	(5,443)		14	-	-	(5,443)
Dividends paid	-	-	-		-	(2,052)	-	(2,052)
At 30 April 2021	382	676	40,738		208	2,788	137,036	181,828

Statement of Cash Flows 

For the year ended 30 April 2022

	2022 £'000	2021 £'000
Operating activities
(Loss)/profit before tax	(36,903)	67,079
Interest payable	45	35
Losses/(gains) on investments	30,511	(59,998)
Net losses/(gains) on derivatives	7,770	(4,767)
Currency losses/(gains)	16	(609)
Increase in other receivables	(56)	(307)
(Decrease)/increase in accrued expenses	(96)	81
Net cash inflow from operating activities before interest and tax	1,287	1,514
Interest paid	(45)	(35)
Irrecoverable overseas tax suffered	(118)	(210)
Net cash inflow from operating activities	1,124	1,269
Investing activities
Purchase of investments	(25,087)	(51,278)
Sale of investments	49,583	51,912
(Purchase)/sale of derivatives	(6,656)	5,057
Collateral (held)/pledged	(2,800)	610
Net cash inflow from investing activities	15,040	6,301
Financing activities
Repurchase of ordinary shares into treasury	(14,617)	-
Repurchase and cancellation of ordinary shares	(4,091)	(5,443)
Dividends paid	(1,932)	(2,052)
Increase in intercompany loan	404	411
Net cash outflow from financing activities	(20,236)	(7,084)
Net (increase)/decrease in net debt	(4,072)	486
Net funds at the start of the year	6,477	5,382
Effect of foreign exchange rate changes	(16)	609
Net funds at the end of the year	2,389	6,477
Cash and cash equivalents	2,389	6,477

 

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 UK adopted international accounting standards ("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 April 2021 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 2022 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 2022	30 April 2021
	£'000	£'000
Investment income*
UK dividend income	1,920	1,691
Overseas dividend income	860	1,107
	2,780	2,798
Other income
Bank interest	25	19
Derivative income	294	330
	319	349
Total income	3,099	3,147

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

A number of UK quoted investments are domiciled in other countries for tax purposes.

3.   Dividends paid and proposed

Set out below are the total dividends recognised in respect of the financial year ended 30 April 2022.

	Year ended	Year ended
	30 April	30 April
	2022	2021
	£'000	£'000
2021 final dividend of 3.19p per ordinary share (2020: 3.10p)	1,189	1,229
2022 interim dividend of 2.14p per ordinary share (2021: 2.11p)	743	823
	1,932	2,052

Dividends are recognised in the period in which they are due to be paid and are shown through the Statement of Changes in Equity. Therefore, the Statement of Changes in Equity for the year ended 30 April 2022 reflects the final dividend for the year ended 30 April 2021 which was paid on 22 October 2021. For the year ended 30 April 2022, a first interim dividend of 2.14p has been paid on 20 January 2022 and a final dividend of 3.46p has been proposed for payment on 21 October 2022. The final dividend is proposed for approval by shareholders at the forthcoming AGM.

Set out below are the total dividends paid/proposed in respect of the financial year ended 30 April 2022.

	Year ended	Year ended
	30 April	30 April
	2022	2021
	£'000	£'000
Interim dividend of 2.14p per ordinary share (2021: 2.11p)	743	823
Final dividend of 3.46p per ordinary share (2021: 3.19p)	1,168	1,218
	1,911	2,041

5. Earnings/(loss) per share

T he revenue earnings per ordinary share is based on the revenue profit for the year of £2,261,000 (2021: £2,323,000) and on 35,994,478 (2021: 39,224,610) 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 £39,282,000 (2021: capital profit £64,546,000) and on 35,944,478 (2021: 39,224,610) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

6.   Share capital

(a) Share capital

	2022	2022	2021	2021
	Shares	£'000	Shares	£'000
Allotted, called up and fully paid:
Ordinary shares of 1p each	33,754,674	338	38,185,474	382
Ordinary shares of 1p each held in treasury	3,505,800	35	-	-
	37,260,474	373	38,185,474	382

 

(b) Ordinary shares

	Shares	£'000
Movements in ordinary shares during the year:
Ordinary shares in issue on 1 May 2021	38,185,474	382
Repurchase of ordinary shares into treasury	(3,505,800)	(35)
Repurchase of ordinary shares for cancellation	(925,000)	(9)
Ordinary shares in issue on 30 April 2022	33,754,674	338

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

	2022	2022	2021	2021
	Shares	£'000	Shares	£'000
Balance brought forward	-	-	-	-
Repurchases of ordinary shares	3,505,800	35	-	-
Cancellation of ordinary shares	-	-	-	-
Balance carried forward	3,505,800	35	-	-

During the year ended 30 April 2022, the Company repurchased 3,505,800 shares into treasury (2021: no movements in ordinary shares held in treasury).

There were no subscription shares in issue at 30 April 2022 (2021: nil).

7. Net asset value per ordinary share

The net asset value per share is based on the net assets of £124,101,000 (2021: £181,828,000) and on 33,754,674 (2021: 38,185,474) 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 included in the Annual Financial 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 (2021: £nil). The subsidiary did not pay a dividend to Artemis Alpha Trust plc during the year to 30 April 2022 (2021: £725,000).

9. Events after the reporting period

As at 6 July 2022, a further 417,700 ordinary shares had been bought back at a cost of £1,301,000.

10. Annual Financial Report

This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 April 2022 and 30 April 2021 but is derived from those accounts. Statutory accounts for the year ended 30 April 2021 have been delivered to the Registrar of Companies.  The statutory accounts for the year ended 30 April 2022 and the year ended 30 April 2021 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 2022 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 2022 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 .

A copy of the Annual Financial Report will also be submitted to the FCA's National Storage Mechanism and will soon be available for inspection at:

https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual General Meeting of the Company will be held on Thursday, 13 October 2022 at 11:30a.m.

For further information, please contact:

Artemis Fund Managers Limited

Company Secretary

Telephone: [phone]

7 July 2022

[END]

 

END

 

 

FR UNABRUOUBRAR