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Artemis UK Smaller Companies Fund

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

The aim of the fund is to achieve long-term capital growth. The emphasis of the fund will be investment in smaller companies listed, quoted and/or traded in the UK and in smaller companies which are headquartered or have a significant part of their activities in the UK which are quoted on a regulated market outside the UK.

Current prices and yield
(class I)

As at noon, 21 April 2017
Bid price (acc units)1556.60p
Bid price (dist units)1523.65p
Offer price (acc units)1605.00p
Offer price (dist units)1571.03p
Historic yield (acc units)1.62%
Historic yield (dist units)n/a

Investment information
(class I)

Minimum lump sum investment£250,000
Ongoing charge (acc units)0.84%
Ongoing charge (dist units)0.84%

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

March was another good month for the fund, which rose by 3.5% and added to its outperformance over the year to date. It was a busy month for company results, most of which were either in line with or ahead of our expectations. Somero (which makes laser-guided machinery for levelling concrete) posted excellent figures again: sales grew by 13% and earnings by 23% on the year. Its ‘capital-light’ business model meant these earnings translated into a growing pile of cash which now exceeds $20m. This should carry on growing and we expect the company to return some of it to shareholders. Because we are conscious that Somero had become a very large weighting in the fund and it is both operationally geared and cyclical, we continued to trim our holding slightly.

It was a busy month for company results, most of which were either in line with or ahead of our expectations.

There was also good news from Games Workshop (fantasy miniatures), which stated that sales are still improving and profits are likely to grow significantly more than previously expected. XP Power's (power supplies) full-year results were good and orders increased. Although the upgrades to forecasts following these results were modest, we can see potential for more if current trading persists.

The only major disappointment in the month came from Centaur Media, where a decline in advertising sales accelerated into the new year. Lost advertising revenue means lost profit so analysts downgraded their forecasts. While this is negative in the short term, this underlines why the management is moving the company away from advertising and towards recurring subscriptions and events, a transition it is looking to accelerate.

In activity, we had a busier month than usual. We sold our remaining holding in STV, the Scottish television company. We felt its shares had risen to a level that fully reflected the opportunities for the company but perhaps overlooked some potential negatives - such as a worsening pension deficit, cyclical risks, talk of a second Scottish referendum and possible competition from a new BBC Scotland channel. We also reduced our holding in price comparison website after the prime minister hinted at a potential capping of energy prices. We fear this increases the risk of making consumers less likely to shop around online. We also sold our modest holding of wealth manager Rathbones. Its shares had performed well and are now highly rated. Although Rathbones is an excellent company, we prefer Brooks Macdonald, which is growing more quickly from a smaller base and is cheaper. We also continued to trim our holding in North Sea oil explorer Hurricane Energy after another successful discovery west of the Shetlands. Although this could be one of the largest oil finds in recent decades, the company will need to raise a lot of money to develop the project.

In purchases, we added to the holding in NCC we initiated last month. We also bought more Computacenter. Not only did its results indicate that trading in the current year has improved but they were followed by its directors buying shares, a vote of confidence that we always welcome. We added to the holding in Keller, the ground engineer. Although its results were as poor as we had expected, we also felt they should provide a good base to grow in the current year. The impact of recent losses in Asia Pacific will fade and the rest of the group is still trading satisfactorily.

Our main purchase was Medica which we bought at IPO. It is the leader in teleradiology: its pool of radiologists provides rapid analysis of X-rays, CT and MRI scans to many NHS trusts. This business tends to be very ‘sticky’, the market is only just beginning to use outsourcing and is growing rapidly. Although it remains early days, the shares are off to a flying start.

16 December 2016

Mark Niznik: Companies with pricing power …

The weaker pound has pushed up the price of imports. This will potentially put pressure on operating margins. Mark Niznik, a manager of the Artemis Smaller Companies Fund, talks about choosing companies that can pass on increased costs to their customers.

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

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

Data from 3 April 1998. Source: Lipper Limited, data from 3 April 1998 to 1 September 2010 reflects class R accumulation units, and from 1 September 2010 to 31 March 2017 reflects class I accumulation units, bid to bid in sterling. All figures show total returns with dividends reinvested.

Asset allocation

Asset allocation

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

Percentage growth (class I)

12 months to 31 March25.0%12.5%-1.2%19.2%22.7%
12 months to 31 March25.0%12.5%-1.2%19.2%22.7%
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.

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Mark Niznik: Companies with pricing power …

Security Code

Risk warnings

THIS INFORMATION IS FOR PROFESSIONAL ADVISERS ONLY and should not be relied upon by retail investors.
The fund may invest in the shares of small and medium sized companies.
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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