TIDMAAM
RNS Number : 6188Y
Artemis VCT PLC
06 December 2017
Artemis VCT plc (the 'Company')
Annual Financial Report for the year ended 30 September 2017
This announcement contains regulated information
Financial Highlights
- Net asset value total return of 32.9% and share price total return of 47.5%.
- Total dividends paid and proposed for the year of 20.00 pence per share.
Year ended Year ended
30 September 30 September
Returns for the year 2017 2016
--------------------------------- ------------- -------------
Net asset value* 32.9% 28.0%
Revenue return (0.08)p 0.21p
Capital return 23.73p 17.36p
Total return 23.65p 17.57p
Dividends per ordinary share(++) 4.00p 4.00p
Special dividends per ordinary
share(++) 16.00p 12.00p
Cumulative dividends per
ordinary share(++) 92.20p 72.20p
Returns for the year
As at As at
30 September 30 September
Capital 2017 2016
----------------------------- ------------- -------------
Net assets GBP39.1m GBP38.4m
Net asset value per ordinary
share 73.60p 71.92p
Share price 68.75p 63.50p
Discount 6.6% 11.7%
VCT qualifying percentage 93.5% 83.8%
* Source: Artemis Fund Managers Limited ('Artemis').
(++) Includes special dividend of 6.00 pence per share and
special interim dividend of 2.00 pence per share in respect of the
year ended 30 September 2017 which were declared on 26 October
2017, in lieu of final dividend.
Total return for the periods ended 30 September 2017
Total
dividends
Opening paid in Closing %
NAV the period NAV gain
-------- ------------ -------- ------
1 year 71.92p 22.00p 73.60p 32.9%
3 years 72.62p 49.00p 73.60p 68.8%
5 years 59.79p 64.00p 73.60p 130.1%
Strategic Report
Chairman's Statement
Performance
I am pleased to report another year of strong returns for
shareholders. The Company's net asset value at 30 September 2017
was 73.60 pence, having started the year at 71.92 pence. This
increase, coupled with 22.00 pence of dividends paid in the year,
means that a total 23.68 pence per share of value has been
generated for shareholders over the year. This is equivalent to
32.9% of the starting net asset value.
This year's performance is a continuation of returns
shareholders have had over a number of years. Shareholders' returns
over three and five years have been 68.8% and 130.1% respectively.
Over the five years to 30 September 2017 total dividends paid to
shareholders amount to 64.00 pence per share. Over the life of the
company total dividends paid now stands at 92.20 pence per
share.
Results and dividends
The total return for the year was a gain of 23.68 pence per
share. In October the Board declared a further special dividend of
6.00 pence per share. The declaration of this second special
dividend at this time was as a result of the Investment Manager
realising further profits from the investment portfolio and
generating cash from these sales. It remains the case that there
are limited suitable opportunities to reinvest these funds and, as
there are technical constraints for VCT companies holding cash, the
Board decided to return a portion of these funds to shareholders at
the earliest opportunity. In view of the decision to pay a further
special dividend, and taking into account the cost and process for
paying dividends, the Board decided to also declare a second
interim dividend of 2.00 pence per share which is in lieu of a
final dividend. These dividends were paid to shareholders on 22
November 2017.
Earlier in the year the Board declared an interim dividend of
2.00 pence and a special dividend of 10.00 pence per share, both
paid to shareholders on 30 June 2017. Total dividends declared for
the financial year to 30 September 2017 were therefore 20.00 pence
per share (2016: 16.00 pence per share).
Shareholders will be aware that the Company has now paid special
dividends for a number of years. These dividends have arisen as a
result of the Investment Manager realising profits from the
portfolio as companies have been re-rated and thereby having large
amounts of cash. Changes to the VCT regulations have reduced both
the types of companies VCTs can invest in and the making of further
investments in existing holdings. This has resulted in the Company
distributing excess cash as special dividends to maintain its VCT
qualifying percentage above the required level, particularly when
there are no new suitable investment opportunities in which to
re-invest this excess cash.
It is the Board's view that should suitable investment
opportunities arise then new investments will continue to take
priority over special dividends. However, should the Company be in
a similar position in the future, having generated significant cash
balances, the Board will again consider whether these funds should
be returned to shareholders through special dividends.
Deal flow
The flow of deals that are compliant with the new VCT rules, as
reported last year, has continued to be limited. For us, valuations
continue to be an obstacle to investment. This has resulted in only
two new qualifying investments being made during the year, ECSC and
Velocity Composites. More information on these companies can be
found in the Investment Manager's Review. It is hoped deal flow
will improve and further new investments can be added to the
portfolio in the year to come.
Share buy backs
The Board has a policy for purchasing the Company's shares to
ensure it continues to be fair to existing shareholders and,
subject to having both the necessary shareholder authorities and
sufficient funds available, it will continue to purchase shares at
a 10% discount to net asset value.
Further details regarding the shares purchased during the year
are provided in the Share capital section of the Strategic
Report.
Annual General Meeting (AGM)
The AGM, which alternates between Edinburgh and London, will be
held on 7 February 2018, at Cassini House, 57 St James's Street,
London SW1A 1LD at 11.00 a.m.
The fund manager, Andy Gray, will make a short presentation at
the meeting and shareholders will then have an opportunity to meet
both him and the Directors. The Board would welcome your attendance
at the AGM as it provides shareholders with an opportunity to ask
questions of the Board and the fund manager. For those shareholders
who are unable to attend, I would encourage you to make use of your
proxy votes by completing and returning the form of proxy.
Re-election of Directors
The Board has agreed that each of the Directors should stand for
re-election on an annual basis. Accordingly resolutions for this
are being proposed at the AGM.
Outlook
The Budget statement, delivered by Philip Hammond in November,
had been awaited with great interest by the VCT sector as it was
expected that there would be legislative changes. While there are a
number of areas to consider for the sector as a whole, these are
generally positive and we do not envisage any material difference
to the way the Company is managed going forward. The most
significant and relevant changes for the Company are the increase
in the minimum percentage of total investments in qualifying
holdings and the time period to re-invest sales proceeds. The
minimum percentage is currently 70% and this will increase to 80%
for accounting periods beginning on or after 6 April 2019. For the
Company, this will be effective for the financial year ending 30
September 2020. To date, the Company has been managed so that the
level of qualifying holdings is generally in excess of 80%. The
time period to re-invest sales proceeds will be extended from six
months to twelve months, effective from 6 April 2019. This welcome
change will provide greater flexibility in retaining cash for
investment.
In the UK, the process of negotiating the exit from the EU is
underway although there is, as yet, little clarity on what the
post-Brexit environment will be. The Board is monitoring
developments and considering implications on our individual
investee companies as well as the Investment Manager. While the
changes that Brexit will bring are likely to have some impact on
our investee companies, these are now well-established, profitable
companies which, in the main, are reporting growing revenues and
which, we believe, are in a strong position to cope with the
political and economic uncertainty.
Contact us
The Board is always keen to hear from shareholders. Should you
wish to, you can contact me at vctchairman@artemisfunds.com. You
can also find regularly updated information on the Company,
including a factsheet and performance data, on the Company's
website at artemisvct.co.uk.
Fiona Wollocombe
Chairman
6 December 2017
Investment Manager's Review
Performance
We are pleased to report a continuation of the strong
performance of the year. The return for the year of 32.9% marks the
fifth consecutive year of double digit returns thereby delivering a
5 year return, including dividends, of 130.1%. In fact the 64.00
pence in tax-free dividends paid over this 5 year period is greater
than the starting net asset value which stood at 59.79 pence on 30
September 2012.
Five largest stock contributors
% of net Contribution
Company assets %
------------------------- -------- ------------
Gear4Music Holdings 1.7 8.1
Keywords Studios 3.2 7.1
ULS Technology 5.8 4.3
Yu Group 6.3 3.8
Fulcrum Utility Services 4.4 2.7
Five largest stock detractors
% of net Contribution
Company assets %
------------------------- -------- ------------
Instem 2.3 (2.9)
Belvoir Lettings* - (1.1)
Vitesse Media* - (0.3)
Sphere Medical Holdings* - (0.2)
ClearStar 1.8 (0.1)
* Holdings sold in the period
Review
Whilst the table above shows the top five contributors to
performance, as pleasing for us has been the number of stocks that
have contributed to performance. From the portfolio of thirty five
stocks held during the year twenty one saw their share prices rise
by more than 20% and of those, twelve rose by more than 50%.
The broad spread of performance is welcome but it is fair to say
some companies have captured the imagination of investors more than
others. In the low growth environment that exists today those
companies that can demonstrate strong levels of growth are highly
sought after. Add to that a large market opportunity that gives the
potential for this growth to be sustained for years to come and
investors are increasingly willing to ascribe significant valuation
premiums. Although we would argue that many companies within the
portfolio fit these criteria, two companies in particular have come
to the fore with share prices more than trebling in the last twelve
months, Gear4music and Keywords Studios - two of our top three
companies as we started the year.
The structural shift in consumer spending from physical stores
to online retailers is well documented and the purchase of musical
instruments is no different - a trend on which Gear4music is
capitalising.
In the company's AIM admission document the directors estimated
the top ten European retail markets to be worth approximately
GBP4.3 billion in 2012. Set in that context GBP56 million of
revenues is still just scratching the surface. Revenue growth in
this financial year is forecast to be in the region of 45% which
goes some way to explaining the p/e ratio of 82x at which the
company was valued at the period end. We don't doubt the growth
opportunity but with a market value of GBP176 million, the risk/
reward has shifted markedly from the IPO valuation of just GBP28
million a little over two years ago. Having invested GBP1.3 million
at IPO we have realised gains of over GBP3 million in the last
twelve months and retain a holding valued at GBP0.7 million at the
period end.
Keywords Studios is pursuing a strategy of organic and
acquisition led growth in building a business serving video games
companies globally. In a hugely fragmented market the company is
positioning itself as the market leader allowing its customers to
deal with a single provider for a full range of services from local
language translation to artwork.
The strategy is working. In its most recent interim results the
company reported a 17% growth in like-for-like revenues, increasing
to 50% when the contribution from acquisitions is included. Revenue
for the year ending December 2018 is forecast to be over EUR200m
but with an addressable market estimated at $2bn and growing there
is much to go for and with growth dynamics such as these investors
are willing to look further into the future to justify valuations.
That said, a 2018 p/e ratio of 38x at the period end is more than
double the 18x multiple of earnings we paid at IPO in 2013. For us,
this valuation discounts a fair amount of the prospective growth so
we have again been reducing the holding into this share price
strength. The realised gains to date matches that of Gear4music at
a little over GBP3 million and we retain a holding valued at over
GBP1.2 million.
Whilst the attributes of these two companies in particular have
attracted investors' attention there are a number of companies in
the portfolio that we feel offer the same potential but are not yet
widely recognised. Energy supplier Yu Group is one such company.
Although the shares have performed well over the last year we have
only trimmed the holding modestly such that it is our biggest
holding at the year end. The potential benefits to households of
switching energy supplier are widely known and for small and medium
sized business it is no different. Yu Group has quickly established
itself as a credible alternative to the 'Big Six'. At the time of
its IPO eighteen months ago the company had booked sales of a
little over GBP10 million. The interim results announced last month
revealed contracted and recognised revenue for 2017 of almost GBP40
million with order intake momentum if anything, accelerating
further.
Seeing the success of Keywords Studios in the past year it is
easy to forget how the company got off to an inauspicious start on
AIM, with a profit warning just a few months after its IPO. ECSC
Group recently suffered the same fate. Much like our more
successful investments described above we were attracted to ECSC
due its potential to grow quickly into the GBP3 billion cyber
security market with the IPO proceeds providing the investment
required to scale the business to meet demand. The results so far
have been disappointing. Early signs were encouraging so we were
surprised to read a cautious trading update from the company at the
end of June - we were, quite honestly, expecting the opposite. The
interim results announced in September showed little
improvement.
The company is currently trading below its IPO price of 167p but
our profit taking in May, at the height of the publicity
surrounding the NHS ransomware attack, means we are still showing a
profit on our initial investment.
Instem plc too has had a rocky twelve months. The Food and Drug
Administration ("FDA") in the US has in recent years mandated the
adoption of electronic regulatory submissions and Instem, as
experts in the field, look well placed to benefit. The market
however is still embryonic and in the meantime the more established
early stage clinical business has seen trading deteriorate. We are
confident that in time trading will improve but patience will be
required.
Investment activity
Transactions over the last twelve months have, once again, been
weighted towards disposals. We have made two new qualifying
investments, one in each half of the year. With our interim results
we highlighted our GBP0.85 million investment in ECSC Group plc and
in the second half of the year we invested GBP0.46 million in
Velocity Composites plc.
Velocity Composites plc is a specialist aerospace composite
materials kit supplier. The company has positioned itself between
the chemical manufacturers of composite raw materials and the
aerospace structural component makers by providing all materials,
from any supplier, kitted and engineered to pre-agreed shapes,
effectively ready to use. These are then delivered in time to the
customer's assembly line providing essential logistics and supply
chain efficiencies. As well as reducing the aircraft manufacturer's
costs, the use of kits speeds up the production process allowing
customers to more readily meet the significant increases in build
rates. The aerospace market is highly regulated and approvals are
also required from the airframe manufacturers such as Boeing and
Airbus which all translates into high barriers to entry. We would
have liked to invest more than we did but the IPO was significantly
oversubscribed.
In contrast to the limited acquisitions, we made over GBP14
million of disposals in the year, the vast majority focused around
profit taking, as described earlier. The table below shows our five
largest disposals in the period.
Disposal Realised
Company proceeds gain
Gear4music GBP4.3 million GBP3.1 million
Keywords Studios GBP3.0 million GBP2.6 million
Proactis GBP0.9 million GBP0.7 million
Belvoir Lettings GBP0.9 million GBP0.1 million
AB Dynamics GBP0.9 million GBP0.7 million
Although we rarely sell out of a holding completely due to
valuation, provided of course the fundamentals remain strong, we do
think it is prudent to manage portfolio weightings and realise
gains for shareholders on an ongoing basis.
We have also continued to focus on reducing the tail of stocks
in the portfolio and we exited our small holdings in Sphere Medical
and Vitesse Media in the second half of the year, as we did with
Photonstar and Imaginatik in the first six months. The portfolio
now comprises just thirty companies, down from thirty five a year
ago.
The absence of new qualifying investments that meet our criteria
does, however, mean that we, once again, had surplus cash. We
firmly support the Board's decision to return excess cash to
shareholders in the form of special dividends.
Outlook
Whilst our portfolio is diversified in terms of business
activity, the Company's investments largely share the common
characteristics of being small, high growth companies. They are
also relatively illiquid. As such although the businesses continue
to perform well we suspect their share prices are more closely
correlated than a scan of their respective end markets might
suggest.
As we highlighted earlier investors are increasingly willing to
ascribe high valuations for small growth companies and with the
portfolio comprising many such stocks we expect to benefit for as
long as this continues. That said we do remain disciplined on what
we are willing to pay for new investments and will continue to
capitalise on investor's enthusiasm, and the liquidity that comes
with it, to realise gains for our shareholders.
The good news is that with more and more of our portfolio
companies continuing to perform well they are increasingly
appearing on the radar screens of investors for whom that growth is
a feature worth paying handsomely for.
Andy Gray
Fund manager
6 December 2017
Strategy and Business Review
Corporate strategy and operating environment
The Company is incorporated in Scotland and its business as a
venture capital trust ('VCT') is to buy and sell investments with
the aim of achieving the objective and investment policy outlined
below.
Objective and investment policy
The objective of the Company is to achieve long-term capital and
income growth and to generate tax free capital and income
distributions. The Company's investment policy is to invest in a
diversified portfolio of growth orientated companies across a broad
range of industries, with a particular emphasis on companies whose
shares will be traded on AIM. Investments will also be in companies
whose shares are traded on ISDX and unquoted companies. The
Company's portfolio is managed in order to meet the investment
requirements of Section 274 of the Income Tax Act 2007 ('s274')
that, inter alia, requires at least 70% of the investments to be
qualifying holdings. Subject to maintaining a prudent margin of
safety over the 70% level, the Company's remaining assets may be
invested in cash or money market deposits, fixed interest
securities, unit trusts or UK listed securities without regard to
the market capitalisation of such companies.
Operating environment
The Company operates as a VCT and has to satisfy the
requirements of s274 (as outlined in the objective and investment
policy) on an ongoing basis. The Directors have managed, and
continue to manage, the business in order to comply with the
legislation applicable to VCTs so as to continue to meet these
conditions. As at 30 September 2017 the Company had 93.5% of its
assets in VCT qualifying holdings. Compliance is monitored through
regular reports from the Investment Manager and Administrator. In
addition, the Board has appointed a tax advisor to provide further
independent assurance of compliance with venture capital tax
legislation and to provide guidance on changes in tax legislation
affecting the Company.
The Company has no employees and delegates most of its
operational functions to a number of service providers.
Current and future developments
A summary of the Company's developments during the year ended 30
September 2017, 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. This will be dependent on the
success of the investment strategy, in the context of both economic
and stock market conditions. The investment strategy, and factors
that may have an influence on it, are discussed regularly by the
Board and the Investment Manager. The Board regularly considers the
ongoing development and strategic direction of the Company,
including 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 set out below.
-- Net asset value performance. The Board monitors the
performance of the net asset value of the Company through regular
updates from the Investment Manager on the performance of the
companies in the portfolio.
-- Share price performance. The Board monitors the performance
of the share price of the Company to ensure that it reflects the
performance of the net asset value. The Board believes this can
best be achieved by establishing a discount policy at which the
Company will buyback shares.
-- Dividends. The Board is aware of the attractiveness of
tax-free dividends for shareholders. The Board monitors the gains
realised by the Company and against this determines the dividends
to be paid by the Company to shareholders, while also being mindful
of retaining cash within the Company for potential future
investment opportunities.
-- Performance against the peer group. The Board monitors the
performance of the Company against the net asset value and share
price total returns from the Association of Investment Companies
('AIC') VCT AIM Quoted sector. These returns are provided below for
the periods ended 30 September 2017.
Net asset value total return
Sector Sector Sector
1 year ranking 3 years ranking 5 years ranking
------------------------ --------- -------- ------- -------- ------- --------
Artemis VCT plc 37.3% 3/9 99.0% 1/9 205.5% 1/9
Peer group
- Size weighted average 18.1% 38.9% 102.5%
- Highest return 43.6% 99.0% 205.5%
- Lowest return 7.6% 16.9% 60.5%
Share price total return
Sector Sector Sector
1 year ranking 3 years ranking 5 years ranking
------------------------ ------ -------- ------- -------- ------- --------
Artemis VCT plc 47.5% 1/9 122.4% 1/9 256.8% 1/9
Peer group
- Size weighted average 18.4% 41.0% 111.9%
- Highest return 47.5% 122.4% 256.8%
- Lowest return 8.9% 19.1% 59.8%
Source: Artemis/AIC.
-- Ongoing charges. The Board is mindful of the ongoing costs to
shareholders of running the Company and monitors operating expenses
on a regular basis. The Company's current ongoing charges figure is
2.2% (2016: 2.2%). The Company continues to have one of the lowest
ongoing charges in the AIC's VCT AIM Quoted sector (.)
Source: Latest published annual financial reports of VCTs in the
AIC's VCT AIM Quoted sector as at 30 September 2017.
Principal risks and risk management
The Board, in conjunction with the Investment Manager, has
developed a risk map which sets out the principal risks faced by
the Company. It is used to monitor these risks and to review the
effectiveness of the controls established to mitigate them. As a
VCT, the principal risks faced by the Company relate to the nature
of the individual investments and the investment activities
generally.
A summary of the other key areas of risk and uncertainties are
set out below, along with the controls in place to manage these
which are highlighted for each risk.
-- Strategic: investment objective and policy 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.
-- Investment: as the Company has a focus on AIM traded
companies, as well as general market price risk, market liquidity
in such companies can be limited and it may not always be possible
to realise investment positions in their entirety at prices which
the Investment Manager considers to be representative of their fair
value.
The nature of the investment universe of companies can carry a
higher degree of risk than investment in companies that are larger
and have more established businesses. Changes in economic
conditions and changes in interest rates can impact these
businesses and their valuation.
Investment risk is addressed through having a diversified
portfolio across a number of industrial sectors. The Board
discusses the investment portfolio and performance with the
Investment Manager at each Board meeting.
-- 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, and its VCT tax adviser, to monitor ongoing
compliance with relevant regulations and legislation.
The Company, and consequently its shareholders, can benefit from
certain tax reliefs extended to VCTs. The tax regulatory
environment is complex and, as noted earlier, the requirements that
need to be met to ensure compliance have become more restrictive.
Any breaches of these regulations could result in a loss of tax
benefits. Failure by the Company to meet the requirements of s274
could result in the Company becoming liable for tax on the net
capital gains it generates from the sale of investments and
shareholders would not be able to receive tax-free dividends.
The Board receives regular updates from the Company Secretary
and Investment Manager and its VCT tax adviser in order to monitor
compliance with applicable tax regulations.
Failure to comply with appropriate accounting standards could
result in a reporting error or breach of regulations or
legislation.
The Company relies on the services of the Company Secretary and
Investment Manager to monitor and report on any changes in
accounting standards. The Company's Independent Auditor also
provides an annual update on any accounting changes that affect the
Company.
-- Operational: disruption to, or failure of, the Investment
Manager's and/or any third party service providers' systems which
could result in an inability to accurately report and monitor the
Company's financial position.
The Investment Manager and other third party service providers
have established business continuity plans to facilitate continued
operation in the event of a major service disruption or
disaster.
In addition to these risks, the Board has also discussed the
UK's exit from the EU, which is referred to in the Chairman's
Statement.
Viability statement
In accordance with the AIC's Code of Corporate Governance (the
'AIC Code'), the Board has considered the longer term prospects for
the Company. Accordingly, the period assessed is the five years to
30 September 2022.
As part of its assessment of the viability of the Company, the
Board has considered each of the principal risks above and the
impact on the Company's portfolio of a significant fall in UK
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 conclusion of this review is that 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
September 2022.
Life of the Company
In accordance with the Company's Articles, the Directors are
required to put forward an ordinary resolution for the continuation
of the Company as a VCT every five years. The next continuation
vote will be held in 2022 and thereafter at five year
intervals.
Share capital
The Board monitors the activity in the Company's shares and the
discount to net asset value at which they may trade. The secondary
market for VCT shares remains limited and any significant sales may
have an adverse effect on the Company's share price and therefore
the discount. In order to address and mitigate this, the Company
makes periodic purchases of its own shares within guidelines
established by the Board from time to time for this purpose. The
current policy is to buy back shares at approximately a 10%
discount to the last published net asset value.
During the year the Company bought and cancelled 209,301 (2016:
614,520) shares at a cost of GBP142,000 (2016: GBP381,000). This
added 0.03 pence per share to the net asset value for continuing
shareholders.
A resolution for the Company to continue to be authorised to buy
back shares will be put to shareholders at the AGM on 7 February
2018. Approval of this resolution by shareholders will allow the
Directors to continue to manage the liquidity of the Company's
shares by buying back shares. Share buy backs will remain subject
to the Company having the necessary shareholder authorities in
place and having sufficient funds available for this purpose,
taking into account the ongoing cash requirements for investment
activities, the payment of dividends and operating expenses.
Directors
Each of the Directors held office throughout the year under
review.
No Director has a contract of service with the Company.
Appointments to the Board will be made on merit with due regard
to the benefits of diversity, including gender, skills and
experience. The priority in appointing a new director is to
identify the candidate with the best range of skills and experience
to complement existing directors.
The Board is currently comprised of one female and two male
Directors.
Modern Slavery Act 2016
The Company does not fall within the scope of the Modern Slavery
Act 2015 as its turnover is less than GBP36 million. Therefore no
slavery and human trafficking statement is included in the Annual
Financial Report.
Social and environmental matters
The Company has delegated the management of the Company's
investments to Artemis which, in its capacity as Investment
Manager, has a Corporate Governance and Shareholder Engagement
policy 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 may,
ultimately, impact the profitability of a company or its stock
market rating and hence these matters are an integral part of
Artemis' thinking as institutional investors.
As the Company has delegated the investment management and
administration of the Company to third party service providers, and
has no fixed premises, there are no greenhouse gas emissions to
report from its operations, nor does it have responsibility for any
other emissions-producing sources under the Companies Act 2006
(Strategic Report and Directors' Report) Regulations 2013,
including those within the underlying investment portfolio.
Leverage
Leverage is defined in the Alternative Investment Fund Managers
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, neither of which the Company
currently uses. The Company is permitted by its Articles to borrow
up to 15% of its net assets (115% under the Commitment and Gross
ratios used in the AIFMD). The Company is permitted to have
additional leverage of up to 100% of its net assets, which results
in permitted total leverage of 215% under both ratios. The
Alternative Investment Fund Manager (the 'AIFM'), Artemis, monitors
leverage values on a daily basis and reviews the limits annually.
No changes were made to these limits during the year ended 30
September 2017. At 30 September 2017, the Commitment ratio was
100.0% and the Gross ratio was 82.8%.
This Strategic Report has been prepared in accordance with the
Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013.
For and on behalf of the Board
Fiona Wollocombe
Chairman
6 December 2017
Statement of Directors' Responsibilities in respect of the
Annual Financial Report
Management Report
Listed companies are required by the Financial Conduct
Authority's ('FCA') Disclosure Guidance and Transparency Rules (the
'Rules') to include a management report on their financial
statements. The information required to be in the management report
for the purpose of the Rules is included in the Strategic Report.
Therefore a separate management report has not been included.
Statement of Directors' Responsibilities
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 have
elected to prepare the Financial Statements in accordance with UK
Accounting Standards, including Financial Reporting Standard
('FRS') 102 'The Financial Reporting Standard applicable in the UK
and the Republic of Ireland'.
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 the profit or
loss of the Company for that period. In preparing 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 applicable UK Accounting Standards have been
followed, subject to any material departures being disclosed and
explained in the Financial Statements; and
-- prepare the Financial Statements on the 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
the 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,
artemisvct.co.uk, maintained by the Company's Investment Manager,
Artemis. The maintenance and integrity of the corporate and
financial information relating to the Company is the responsibility
of the Investment Manager. Visitors to the website should note that
legislation in the UK governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
Responsibility Statement of the Directors in respect of the
Annual Financial Report
We confirm that, to the best of our knowledge:
(a) the Financial Statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit of the Company
taken as a whole; 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.
We consider 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 performance,
business model and strategy.
For and on behalf of the Board
Fiona Wollocombe
Chairman
6 December 2017
Financial Statements
Statement of Comprehensive Income
Year ended 30 September
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments - 13,096 13,096 - 9,757 9,757
Income 357 - 357 483 - 483
Investment management
fee (156) (469) (625) (145) (435) (580)
Other expenses (241) (1) (242) (225) (1) (226)
------- ------- ------- ------- ------- -------
(Loss)/return
on ordinary
activities before
taxation (40) 12,626 12,586 113 9,321 9,434
Taxation on
ordinary activities - - - - - -
------- ------- ------- ------- ------- -------
(Loss)/return
on ordinary
activities after
taxation (40) 12,626 12,586 113 9,321 9,434
------- ------- ------- ------- ------- -------
(Loss)/return
per share (pence) (0.08) 23.73 23.65 0.21 17.36 17.57
------- ------- ------- ------- ------- -------
The total column of this statement is the profit and loss
account of the Company.
All revenue and capital items in this statement derive from
continuing operations. No operations were acquired or discontinued
during the year.
The net (loss)/return for the year disclosed above represents
the Company's total comprehensive income.
Statement of Financial Position
As at 30 September
2017 2016
GBP'000 GBP'000
Non-current assets
Investments 32,207 31,800
-------- --------
Current assets
Debtors 93 67
Cash and cash equivalents 7,041 6,751
-------- --------
7,134 6,818
-------- --------
Total assets 39,341 38,618
Creditors - amounts falling
due within one year (223) (241)
-------- --------
Net assets 39,118 38,377
-------- --------
Capital and reserves
Share capital 5,315 5,336
Share premium 2,828 2,828
Capital reserve - realised 11,015 17,422
Capital reserve - unrealised 17,431 10,243
Capital redemption reserve 2,569 2,548
Revenue reserve (40) -
-------- --------
Equity shareholders' funds 39,118 38,377
-------- --------
Net asset value per share
(pence) 73.60 71.92
-------- --------
These financial statements were approved by the Board of
Directors and signed on its behalf on 6 December 2017.
Fiona Wollocombe
Chairman
Registered in Scotland Number: SC270952
Statement of Changes in Equity
Year ended 30 September 2017
Capital Capital Capital
Share Share Special reserve reserve redemption Revenue
capital premium reserve* - realised* - unrealised reserve reserve* Total
GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- -------- -------- ----------- ------------ ---------- ----------------- --------
At 30 September 2016 5,336 2,828 - 17,422 10,243 2,548 - 38,377
Repurchase of shares
for
cancellation (21) - - (142) - 21 - (142)
Return/(loss) on
ordinary
activities after
taxation - - - 4,253 8,373 - (40) 12,586
Transfer on disposal
of
investments - - - 1,185 (1,185) - - -
Dividends paid - - - (11,703) - - - (11,703)
------- -------- -------- ----------- ------------ ---------- ----------------- --------
At 30 September 2017 5,315 2,828 - 11,015 17,431 2,569 (40) 39,118
------- -------- -------- ----------- ------------ ---------- ----------------- --------
Year ended 30 September 2016
Capital Capital Capital
Share Share Special reserve reserve redemption Revenue
capital premium reserve* - realised* - unrealised reserve reserve* Total
GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- -------- -------- ----------- ------------ ---------- ----------------- --------
At 30 September 2015 5,398 2,828 9,523 12,004 6,763 2,486 - 39,002
Repurchase of shares
for
cancellation (62) - (270) (111) - 62 - (381)
Return on ordinary
activities
after taxation - - - 3,829 5,492 - 113 9,434
Transfer on disposal
of
investments - - - 2,012 (2,012) - - -
Dividends paid - - (9,253) (312) - - (113) (9,678)
------- -------- -------- ----------- ------------ ---------- ----------------- --------
At 30 September 2016 5,336 2,828 - 17,422 10,243 2,548 - 38,377
------- -------- -------- ----------- ------------ ---------- ----------------- --------
* The aggregate of these reserves, being GBP10,975,000,
represents the distributable reserves of the Company at 30
September 2017 (30 September 2016: GBP17,422,000).
Statement of Cash Flows
Year ended 30 September
2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Cash used in operations (496) (403)
Interest received 13 22
-------- -------
Net cash generated
from operating activities 13 22
Cash flow from investing
activities
Purchase of investments (1,316) (881)
Sale of investments 13,968 13,909
-------- -------
Net cash from investing
activities 12,652 13,028
Cash flow from financing
activities
Repurchase of shares
for cancellation (176) (347)
Dividends paid (11,703) (9,678)
-------- -------
Net cash used in
financing activities (11,879) (10,025)
-------- --------
Net increase in
cash and cash equivalents 290 2,622
-------- --------
Cash and cash equivalents
at start of the
year 6,751 4,129
Increase in cash
in the year 290 2,622
-------- --------
Cash and cash equivalents
at end of the year 7,041 6,751
-------- --------
Notes to the Financial Statements
1. Accounting policies
The financial statements have been prepared on a going concern
basis and in accordance with UK Generally Accepted Accounting
Practice ('UK GAAP'), including Financial Reporting Standard
('FRS') 102, and the Statement of Recommended Practice: Financial
Statements for Investment Trust Companies and Venture Capital
Trusts (the 'SORP') issued in November 2014 and updated in January
2017 by the Association of Investment Companies (the 'AIC').
The Company is not an investment company within the meaning of
Section 833 of the Companies Act 2006 (the 'Act'), having revoked
investment company status on 5 March 2008 in order to permit the
distribution of realised capital gains. The financial statements
are presented in accordance with Part 15 of the Act, and the
requirements of the SORP, where the requirements of the SORP are
consistent with the Act.
No significant estimates or judgements have been made in the
preparation of the financial statements.
2. Return per share (pence)
Year ended 30 September Year ended 30 September
2017 2016
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
--------- --------- ------ --------- --------- ------
(Loss)/return
per share
(pence) (0.08) 23.73 23.65 0.21 17.36 17.57
========= ========= ====== ========= ========= ======
Revenue loss per share is based on the net revenue loss
attributable to shareholders of GBP40,000 and on 53,202,246 shares,
being the weighted average number of shares in issue during the
year (2016: gain GBP113,000 and on 53,694,808 shares).
Capital return per share is based on net capital returns
attributable to shareholders of GBP12,626,000 and on 53,202,246
shares, being the weighted average number of shares in issue during
the year (2016: GBP9,321,000 and on 53,694,808 shares).
Total return per share is based on the total return attributable
to shareholders of GBP12,586,000 and on 53,202,246 shares, being
the weighted average number of shares in issue during the year
(2016: GBP9,434,000 and on 53,694,808 shares).
3. Net asset value per share (pence)
The net asset value per share at the year end is calculated in
accordance with the Company's Articles and is as follows:
As at As at
30 September 30 September
2017 2016
------------ ------------
Net asset value per share (pence) 73.60 71.92
------------ ------------
The net asset value per share is based on net assets of
GBP39,118,000 and 53,150,516 shares, being the number of shares in
issue at 30 September 2017 (2016: net assets of GBP38,377,000 and
53,359,817 shares in issue).
4. Transactions with the Investment Manager and related
parties
The existence of an independent Board of Directors demonstrates
that the Company is free to pursue its own financial and operating
policies and therefore, under FRS 102, the Investment Manager is
not considered to be a related party.
5. Annual Financial Report
This Annual Financial Report announcement does not constitute
the Company's statutory accounts for the years ended 30 September
2017 and 30 September 2016 but is derived from those accounts.
Statutory accounts for the year ended 30 September 2016 have been
delivered to the Registrar of Companies. The statutory accounts for
the year ended 30 September 2016 and the year ended 30 September
2017 both received an audit report which was unqualified and did
not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying the report and did
not include statements under Section 498 of the Act respectively.
The statutory accounts for the year ended 30 September 2017 have
not yet been delivered to the Registrar of Companies and will be
delivered following the AGM.
The audited Annual Financial Report for the year ended 30
September 2017, will be posted to shareholders shortly. Copies may
be obtained from the Company's registered office at 42 Melville
Street, Edinburgh EH3 7HA or at the Company's website,
artemisvct.co.uk.
The Annual General Meeting of the Company will be held on
Wednesday, 7 February 2018.
For further information, please contact:
Company Secretary
Tel: 0131 225 7300
Artemis Fund Managers Limited
6 December 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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