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Artemis European Opportunities Fund

All data as at 31 January 2017 except where specified
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The fund’s aims

The aim of the fund is to achieve long term growth from investments principally in European equities, excluding the UK.

Current prices and yield
(class I)

As at noon, 24 February 2017
Bid price (acc units)92.52p
Bid price (dist units)86.14p
Offer price (acc units)93.67p
Offer price (dist units)87.21p
Historic yield (acc units)1.29%
Historic yield (dist units)1.30%

Investment information
(class I)

Minimum lump sum investment£250,000
Ongoing charge (acc units)0.85%
Ongoing charge (dist units)0.85%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 0.75% and is shown as at the date of the Key Investor Information Document (KIID), where a full explanation of the fund's charges can be found.

Fund managers’ update

The start of the reporting season has been positive for the fund’s holdings. It outperformed its benchmark in January, returning 1.9% in sterling terms versus a rise of 0.7% in the index.

These businesses are as strong as ever and could compound earnings at a double-digit rate for the foreseeable future.

Dutch optical retailer Grandvision and Danish producer of enzymes Novozymes reported solid organic growth. Both companies’ guidance reassured investors about their ability to continue to expand sales and profits in 2017 and beyond. These businesses are as strong as ever and could compound earnings at a double-digit rate for the foreseeable future. Assuming no re-rating of the shares and adding a 2% dividend yield, both could produce healthy double-digit returns.

Swedish bank Nordea also reported strong profitability and a very solid capital position. This bodes well for the growth of its dividend. It currently yields close to 6% and we expect the dividend to increase by low-to-mid single-digit percentage points for the next five years. Assuming a modest contraction of the p/e, we estimate that the share could generate a 7% per annum total return.

The weakest stocks in the portfolio were the French satellite operator SES and the Swiss asset manager GAM, which were both down 14%. Shares in SES fell after Sky announced it would make its service available in the UK without the need for a satellite dish. We view the sell-off as an overreaction. The launch will only target subscribers in urban areas and satellite operators have long-term agreements with TV broadcasters. We still believe SES can grow its revenues by low single digits in the next five years. On a p/e of 15x and a yield of 7%, the shares are very attractively valued.

GAM was hurt by outflows from some of its largest funds over the fourth quarter, which put pressure on earnings. It has hired a new head of distribution to launch a range of ‘systematic’ funds. Provided the performance of these funds remains strong, the company could raise significant assets while generating meaningful performance fees. GAM is debt-free and yields 6.5%.

In activity, we sold two stocks and added to some of our existing holdings.
After a very strong run, we sold our position in the seismic data company TGS-Nopec, which sells data to the oil and gas industry. While we like the ‘asset-light’ and flexible business model, the stock had become too expensive. The share price has moved back to its 2014 high but the oil price is roughly 50% its level in 2014.

The other stock we sold was Hugo Boss. We had bought the share just a couple of months previously, after the CEO announced an overhaul of the strategy to ‘return Hugo Boss to its roots’. Sadly, it has become obvious that the management has only taken half measures and is still wasting money and time developing the Hugo brand as well as women’s clothing. In the meantime, the harmonisation of pricing across countries posed risks to its sales in Germany - its most profitable country. We took advantage of the release of stronger than expected numbers to sell the stock at a profit.

Finally, we added to our position in the Italian internet bank and asset gatherer Fineco. The share has been very weak because of uncertainty about the strategy of Unicredit, its main shareholder. Fineco offers its customers a ‘one-stop-shop’ for banking, trading and investing and its IT platform is the best in its class. The company has been gaining market share at the expense of traditional banks and we expect this trend to continue in the years to come. The bank generates a return on equity of 30% and it also has a dividend yield of 4.5%.

21 December 2016

Buying the dips …

Many investors are getting carried away with the idea of reflation and this is creating distortions in the market. A rich environment for stockpickers, say Mark Page and Laurent Millet.

Value of £1,000 invested at launch to 31 January 2017

Value of £1,000 invested at launch to 31 January 2017

Data from 28 October 2011. Source Lipper Limited, accumulation units, bid to bid in sterling to 31 January 2017. All figures show total returns with dividends reinvested.

Asset allocation

Asset allocation

Source: Artemis as at 31 January 2017. Please note figures may not add up to 100% due to rounding.

Percentage growth (class I)

20162015201420132012
12 months to 31 December14.3%11.7%0.6%26.9%24.3%
20172016201520142013
12 months to 31 January21.2%4.0%7.4%13.0%27.3%
Please remember that past performance is not a guide to the future. Source: Lipper Limited, accumulation units, bid to bid in sterling. All figures show total returns with dividends reinvested. All figures show total returns. As the fund was launched on 28 October 2011, complete five year performance data is not yet available.

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Buying the dips …





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Risk warnings

THIS INFORMATION IS FOR PROFESSIONAL ADVISERS ONLY and should not be relied upon by retail investors.
The fund may have a concentrated portfolio of investments.
The fund may use derivatives to meet its investment objective, to protect the value of the fund, to reduce costs and with the aim of profiting from falling prices. The fund may invest in the shares of small and medium sized companies.
FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trademark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE data is permitted without FTSE’s express written consent.
Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.
Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.

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