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Private investors

Artemis UK Smaller Companies Fund

All data as at 31 January 2017 except where specified
  • Summary
  • About the fund
  • Performance (class R)
  • Performance (class I)
  • Composition
  • Key facts
  • Investment insights
  • Literature
  • How to invest


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 R)

As at noon, 24 February 2017
Bid price (acc units)1394.67p
Offer price (acc units)1493.94p
Historic yield (acc units)1.09%

Investment information
(class R)

Minimum lump sum investment£1,000
Ongoing charge (acc units)1.59%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 1.5% 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 year has started well. The fund rose by nearly 3% in January - well ahead of the index. It was a busy month with around a third of the portfolio providing updates on trading. The majority of these updates were positive.

Games Workshop, which makes and sells fantasy model games and figurines, announced a 13% improvement in underlying sales in the first half, which caused profits to double.

Games Workshop, which makes and sells fantasy model games and figurines, announced a 13% improvement in underlying sales in the first half, which caused profits to double. The following week they announced that continuing strong trading would mean higher profits for the full year (forecasts were increased by 17%). Encouragingly, the company is seeing growth across all areas of its business: retail, wholesale and online and in all of the countries in which they operate. This bodes well for what is one of the most vertically integrated businesses we follow.

Somero, the global leader in concrete-levelling machinery, saw a strong finish to the year, with sales and profits ahead of expectations. The prospects for this year look encouraging and could be further boosted by president Trump’s potential reforms to taxes and plans for higher spending. The shares continue to trade on a modest 11x current year earnings or a free cashflow yield of 7%. This still looks reasonable value despite the cyclical risk. The company has a rare global monopolistic position and a strong balance sheet (there is the prospect of a special dividend to return surplus cash later in the year). As the shares have performed so well, Somero has become one of our largest holdings so we have continued to trim our holding as the price has strengthened.

Centaur Media (business information and events) was one of our worst performing stocks last year. The fear that it would warn on profits again was so acute that when the company announced that revenue, profits and debt would be in line with expectations the shares bounced by 18%. The group is working hard to reduce its exposure to a slowing advertising market to concentrate on products where earnings are more predictable, such as subscriptions and events. Despite the move in the share price we think the market is still undervaluing the improved cash generation that these changes should bring.

Another good update was provided by Polar Capital, the fund manager. They reported that net outflows from their Japanese funds were more than offset by inflows in other areas. The shares responded well as the perception is that the worst may now be behind them. The group’s high operational gearing should mean a healthy future flow in cash and dividends. We added to our holding.

We only traded modestly during the month, largely adding to those holdings that had not performed particularly well, such as Biffa, U&I and Helical. These were funded by a continued trimming of our recent winners including CVS, Severfield and Mears.

It was interesting to see another cash bid for one of our holdings. The management of North Sea oil producer Ithaca Energy recommended a 120p bid from Delek Group, a 20% shareholder. We find the offer rather disappointing as it comes only a month ahead of the start-up of the group’s key Greater Stella production hub, which should produce $150m of free cashflow per year at the current oil price. This compares with a market value of the group of only $600m at the offer price. We believe the offer (and analysts’ price targets) may fully reflect the NAV of existing assets, but does not capture the potential value of future acquisitions of nearby fields which could then use Stella’s low-cost hub. While we hope for a better return for our investors, it is encouraging that others are seeing value in the portfolio of assets we own. This offer comes after the recent bids for our holdings in Creston and Source BioScience.

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 January 2017

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

Data from 3 April 1998. 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 R)

20162015201420132012
12 months to 31 December12.1%18.1%-4.9%30.2%21.6%
20172016201520142013
12 months to 31 January19.0%13.1%-4.5%23.4%24.3%
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.

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Mark Niznik: Companies with pricing power …





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About the fund

The Artemis UK Smaller Companies Fund harnesses the superior growth potential of smaller companies.

Its experienced manager uses fundamental research and company meetings to identify between 60 and 100 growing businesses that he believes will produce excellent risk-adjusted returns over the longer term.

  • Harnessing the power of smaller companies: research has shown that smaller companies tend to outperform their larger peers over the long term. The Artemis UK Smaller Companies Fund aims to exploit the ‘smaller companies effect’ by investing in stocks drawn from the bottom 10% of the UK market by value. 
  • Meeting management: manager Mark Niznik believes that a deep understanding of the companies is imperative for successful investing over the longer term. Company visits and careful assessment of management teams is a key element in his stock selection process.
  • Proven performer: launched in 1998, the Artemis UK Smaller Companies Fund has a strong long-term performance record. Mark Niznik has almost two decades’ experience of running smaller company funds.
  • A distinctive portfolio: a flexible approach to portfolio construction means that the fund’s largest holdings are those in which the manager has the highest degrees of conviction – not necessarily those that are largest in size.
  • Experience is key: Mark Niznik has many years experience in investing in smaller companies. Prior to joining Artemis in 2007, Mark analysed UK smaller companies as part of his role as a fund manager at Invesco Perpetual and then Standard Life.

Reasons to consider

The fund may be suitable for investors looking for:

  • the potential for capital growth
  • exposure to the growth potential of smaller companies
  • investment primarily in the UK
  • an experienced fund manager with a good performance record

Introducing the fund

Mark Niznik introduces the Artemis UK Smaller Companies Fund and outlines how he makes investment decisions.

Risk considerations

Before making an investment, investors should consider the level of risk they’re comfortable taking with their money.

  • This fund invests mostly in smaller and more recently established UK companies that the manager believes have strong growth potential.
  • These types of businesses can be more vulnerable to financial or operational failure. As a result, you should consider this a riskier investment than, for example, investing in long-established or larger companies.
  • Investors should also be aware that the usual risks of investing in stocks and shares apply – companies and stockmarkets can go through periods of turbulence and the value of your investment can go down.
  • This fund’s ‘SRRI’ risk rating, a measure of how volatile the fund’s performance has been over time, is currently 4, in a range of 1 (lower risk) to 7 (higher risk).

More detailed information on fund risks is included in the ‘risk warnings’ section below.

Risk warnings

To ensure you understand whether this fund is suitable for you, please read the Key Investor Information Document, which is available, along with the fund’s Prospectus, from artemis.co.uk.

The value of any investment, and any income from it, can rise and fall with movements in stockmarkets, currencies and interest rates. These can move irrationally and can be affected unpredictably by diverse factors, including political and economic events. This could mean that you won’t get back the amount you originally invested.

The fund’s past performance should not be considered a guide to future returns.

The fund may invest in the shares of small and medium-sized companies. Shares in smaller companies carry more risk than larger, more established companies because they are often more volatile and, under some circumstances, harder to sell. In addition, information for reliably determining the value of smaller companies – and the risks that owning them entails – can be harder to come by.

The historic yield reflects distribution payments declared by the fund over the previous year as a percentage of its mid-market unit price. It does not include any preliminary charge. Investors may be subject to tax on the distribution payments that they receive.

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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