AAM.L Regulatory News (AAM)

Artemis VCT plc (the 'Company')

Annual Financial Report for the year ended 30 September 2016

This announcement contains regulated information

Financial Highlights

- Net asset value total return of 28.0% and share price total return of 31.3%.

- Proposed final dividend of 2.00 pence per share and special dividend of 8.00 pence per share.

- Total dividends paid and proposed for the year of 16.00 pence per share.

Returns for the year

* Source: Artemis Fund Managers Limited ('Artemis').

‡ Includes proposed final dividend of 2.00 pence per share and special dividend of 8.00 pence per share in respect of the year ended 30 September 2016 which are subject to shareholder approval at the Annual General Meeting.

Strategic Report

Chairman's Statement

Performance

It is pleasing to be able to report further positive returns for shareholders. As a result, the Company has been placed first out of the nine VCTs in the AIC VCT AIM quoted sector over one, three and five years to 30 September 2016. For the year ended 30 September 2016, the total return for the Company's net asset value was 28.0%. The share price total return for the year was 31.3%.

Results and dividends

The return for the year was a gain of 17.57 pence per share, driven predominantly by successful realisations from the portfolio. The Board is proposing a final dividend of 2.00 pence per share and a special dividend of 8.00 pence per share. This will result in total dividends for the year of 16.00 pence per share. Shareholders will be asked to approve the proposed dividends at the forthcoming Annual General Meeting ('AGM'). If approved, they will be paid on 6 February 2017 to those shareholders on the register on 23 December 2016, with an ex-dividend date of 22 December 2016.

The Company has paid special dividends for a number of years now and these dividends have arisen as a result of the Investment Manager realising profits and generating cash from the portfolio. There have been limited new opportunities in which to re-invest this cash, as the Investment Manager considered that the valuations of potential new investments were too high given the risk of investing in these companies. Additionally, changes to the VCT regulations have reduced the universe of companies in which VCTs can invest and restricted the ability to make further investments in existing holdings. This has resulted in the Company distributing the cash as special dividends. The Board continues to be of the view that new investments should take priority and shareholders should be aware that were more investment opportunities to arise, at acceptable valuations, special dividends may not be paid in future.

Deal flow

Despite a slowdown in VCT-compliant deals following the changes to the rules, a greater number of investment opportunities are now arising as the wider investment market becomes more familiar with the new requirements. For us, valuations continue to be an obstacle to investment. This has resulted in only one new qualifying investment being made during the year - in Yu Group - of which more information can be found in the Investment Manager's review that follows. It is hoped that as we progress into 2017, deal flow and valuations will return to more reasonable levels and new investments can be added to the portfolio.

Share buy backs

The Board has reviewed its policy for purchasing 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 approximately a 10% discount to net asset value.

AGM

The AGM, which alternates between Edinburgh and London, will be held on 1 February 2017 at the offices of Artemis Fund Managers Limited, 42 Melville Street, Edinburgh EH3 7HA at 11.00am.

The fund manager, Andy Gray, will make a short presentation at the meeting and shareholders will have an opportunity to meet with the Directors and the fund manager following the meeting. 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.

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.

Continuation vote

In accordance with the Company's Articles of Association (the 'Articles'), the Directors are required to put forward an ordinary resolution for the continuation of the Company as a VCT every five years. The last continuation vote was held on 31 January 2012 and the next continuation vote will take place at the AGM being held on 1 February 2017. Since January 2012 the Company's assets have increased from £35.6 million to £38.4 million (as at 30 September 2016). Over the same period £24.4 million has been returned in dividends and a further £4.3 million paid out in share buy backs.

Being cognisant of the Company's ongoing viability, a strategic review was undertaken by the Board ahead of the continuation vote, with a particular focus on the next five years. This review concluded that the portfolio includes a number of companies which are yet to reach their full potential and the costs of running the Company continue to be competitive within its peer group. Accordingly, the Board recommends that shareholders vote in favour of the resolution to be proposed at the AGM for the continuation of the Company as a VCT for a further five years. The Board considers this to be in shareholders' best interests.

Outlook

The UK government is focused on how the country will leave the EU. With Article 50 expected to be triggered in March 2017, exiting the EU needs to be completed within two years of this. Companies face the challenge of preparing for the inevitable changes this will bring and many of our investee companies will be affected. That said, the portfolio is largely made up of companies that are well established in their markets, and are profitable. Over the short term, some portfolio volatility is to be expected but over the longer term the underlying fundamentals of these companies are not expected to change materially and they should continue to produce further positive returns for shareholders.

Contact us

The Board is always keen to hear from shareholders. Should you wish to do so, 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

14 December 2016

Investment Manager's Review

Performance

Looking back at our concluding comments in the Company's half-yearly report, we mentioned two factors which, at that time, shaped our view of potential future returns. The first was a confidence in both the strength of the companies in the portfolio and the quality of their management. This is fundamental to our pursuit of long-term returns - and recent company results continue to support this confidence.

The second observation was that valuations had advanced significantly in recent years. As a result we thought that there might be a slowdown which, in turn, could dampen performance - particularly in the near term. Here we were too cautious, or at least too early.

As it turned out, rather than returns moderating, the performance of the Company actually improved in the second half of the year. Therefore, we are able to report a net asset value total return of 28.0% for the year (compared to an increase of 12.4% at the half-year end).

Shareholders will know we prefer to focus on longer-term returns: we are particularly pleased to report total returns over the last three and five years of 77.2% and 126.8%, respectively.

Five largest stock contributors

Five largest stock detractors

Review

While we characterise ourselves as long-term investors, we are conscious that our reporting is essentially short-term in nature: our monthly factsheets and six-monthly financial reports tend to focus on recent activity.

With the continuation vote due in February 2017, we felt it would be useful to step back and assess the evolution of the Company from a longer-term perspective.

As a reminder, we prefer to run a concentrated portfolio of companies in which we have strong levels of conviction about their potential for long term growth. Five years ago, the portfolio consisted of 43 active holdings with the top 20 positions accounting for 69% of the Company's net assets. As at 30 September 2016 this stood at 33 active holdings with 75% accounted for by its 20 largest investments. We would not be surprised to see the portfolio concentrate further over time. Our approach remains long-term in nature. Of the stocks we held five years ago, we remain invested in almost half of them. A further eight investments have been taken over.

We are also conscious of balancing risk as well as reward for our shareholders. Investing in small companies is inherently risky, so we seek to mitigate these risks where we can. We have, in the main, tended to focus on profitable, cash-generative companies with strong growth prospects. Keywords Studios and AB Dynamics - both material contributors to performance this year - fitted this description when the Company invested in them in 2013.

From time to time, we have invested in companies that are loss-making or barely profitable. However, we would make the distinction between companies that have a material revenue line and those that do not. A healthy revenue line shows us that the product or service is valued by customers - they are willing to pay for it after all. It is hence a strong indicator of commercial maturity, which should ultimately turn into profit.

Our investment in Fulcrum Utility Services - our strongest contributor this year - dates back to 2010. Although heavily loss-making at the time of its sale by National Grid, it did have sales in excess of £30 million. The restructuring undertaken by the then CEO, John Spellman, and, in turn, by Martin Donachie, returned the business to a healthy profit.

More recently, in June 2015, we invested in Gear4music. Although the company was modestly loss-making at IPO, it reported annual sales of £24 million, growing year-on-year at 37%. Since then the business has gone from strength to strength, with its latest trading update reporting sales growth of 73%. A strong customer proposition is supported by its excellent Trustpilot rating - a metric we pay keen attention to.

We believe there are strong parallels with another successful investment, Vision Direct, which was also a key contributor to performance this year. Both online businesses had established sales which were growing strongly, both were broadly at break-even and they had similar valuations. We sold our holding in Vision Direct in February 2016 to Essilor International, realising a gain of £2.5 million.

We feel this conservative approach has served us well. That said, on the odd occasion where we have deviated from these criteria, we have largely regretted it.

Looking at contributors to performance over the last five years, and where these companies are currently, we can also draw some lessons from this.

Three of the top five contributors have been companies which are currently facing challenges. Judges Scientific and Pressure Technologies are managing difficult conditions in their respective markets, whilst Anpario is migrating towards a more direct sales approach.

In recent years Cohort has enjoyed good trading, but this has not always been the case. Back in 2010 it suffered, as accounting irregularities were identified in one of its subsidiaries leading to a restatement of profits. It has also encountered more difficult trading in the defence markets.

A company's fortunes can therefore change - for better or for worse. For this reason regular profit-taking has been a feature of our running of the portfolio as we continually manage exposure to individual stock risk. Pressure Technologies is a case in point with its shares currently languishing as it suffers from depressed conditions in its oil and gas market.

Despite this, Pressure Technologies is the third highest contributor to performance over five years, adding almost 15% to the Company's net asset value. Our profit-taking discipline has helped, generating cash of more than £3 million from disposals over the course of 2013 and 2014.

We have in the past used periods of share price weakness to add to holdings, retaining a belief in the long-term potential of the company.

Having increased our holding throughout the course of 2010 and 2011, Cohort is probably the best example of the approach of adding to a holding when prices are weak. We have also done this with Fulcrum Utility Services and Pressure Technologies. Unfortunately, the new VCT rules - which place a restriction on the age of companies - no longer allow this. If they had, we would have added to Anpario and Gama Aviation, which were the poorest contributors to performance over the last 12 months.

Overall, although the Company's returns have been strong over the last five years, we feel a focus on the commercial maturity of our investments and our active management of risk has not exposed shareholders to undue risk in order to deliver them.

Investment activity

The rules governing VCT-qualifying investments changed during the financial year; and this has adversely impacted new investment activity. In particular, companies raising funds for acquisitions can no longer be VCT-qualifying. This is an area we had been particularly active in historically.

As a result, we have made just a single investment in the last 12 months, Yu Group. Yu Group is a new entrant to the UK corporate energy market, having launched operations in April 2014. While loss-making on a historic basis, at the time of the IPO in March the company had sales of £8.4 million for 2016 and a monthly billing rate of nearly £2 million. We therefore felt sufficiently comfortable that the company had a good chance of becoming profitable in due course. A strong maiden trading statement from the company in September, together with considerable momentum in new bookings, suggests this confidence is well-placed.

Our largest disposal in the period was, as mentioned earlier, our sale of Vision Direct following a take-over by Essilor International. We also sold our remaining investment in the unquoted Oxford Nanopore Technologies during the year, realising a total gain of £1.4 million since investing in 2008. The company has made great strides in developing its ground breaking products for nanopore sequencing. We wish the CEO, Gordon Sanghera, and his team every success for the future.

As outlined earlier, profit-taking remains a central part of our approach to portfolio management and this continued during the year. There were material sales of Proactis Holdings (£2.8 million), Fulcrum Utility Services (£1.8 million), Advanced Medical Solutions (£1.4 million) and Cohort (£1.1 million), amongst others.

Outlook

Our outlook is little changed from six months ago, with the uncertainty surrounding the outcome of the UK's EU referendum being replaced by the implications of the result. This will take time to become fully clear, with much to be negotiated. The maturity of our portfolio does, however, mean that many companies now have overseas earnings that will benefit from sterling's recent weakness should it be sustained. Our caution regarding valuations also remains and is, if anything, heightened by some of the price moves we have witnessed.

For all the uncertainty surrounding the new VCT regulations, the performance of the Company over the last year is a timely reminder that, for a fully invested VCT such as ours, the driver of returns remains the strength of the existing portfolio. Here we continue to remain optimistic, as demonstrable progress continues from both new investments and longer-standing holdings.

Andy Gray

Fund manager

14 December 2016

Strategy and Business Review

Corporate strategy

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 corporate 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 2016 the Company had 83.8% 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 adviser 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 2016, 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.

In accordance with the Company's Articles, a continuation vote requires to be held at the AGM due to be held on 1 February 2017. Further details of the Board's recommendation to vote in favour of the continuation of the Company as a VCT for a further five years can be found in the Chairman's Statement.

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 buy back 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 AIC VCT AIM Quoted sector. These returns are provided below for the periods ended 30 September 2016.

Net asset value total return

Share price total return

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% (2015: 2.2%). The Company continues to have one of the lowest ongoing charges in the AIC VCT AIM Quoted sector†.

† Source: Latest published annual financial reports of VCTs in the AIC VCT AIM Quoted sector as at 30 September 2016.

Other matters

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 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 and the Investment Manager's Review.

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. The Board is required to put forward an ordinary resolution for the continuation of the Company as a VCT for a further five years at the forthcoming AGM. At this point the Board has no reason to believe that shareholders will not approve the continuation of the Company. Accordingly, the period assessed is the five years to 30 September 2021, which will be the financial year end prior to the following continuation vote that will require to be held in early 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 2021, subject to shareholders approving the continuation of the Company in February 2017.

Life of the Company

The Company's Articles require the Directors to put forward an ordinary resolution at the 2017 AGM for the continuation of the Company as a VCT for a further five years. The Board recommends that shareholders vote in favour of the continuation of the Company for a further five years. Further details of the reason for the Board's recommendation can be found in the Chairman's Statement.

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 614,520 (2015: 1,484,536) shares at a cost of £381,000 (2015: £966,000). This added 0.07 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 1 February 2017. 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 2015

The Company does not fall within the scope of the Modern Slavery Act 2015 as its turnover is less than £36 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 2016. At 30 September 2016, the Commitment ratio was 100% and the Gross ratio was 82.4%.

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

14 December 2016

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. 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 and Directors' 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

14 December 2016

Financial Statements

Statement of Comprehensive Income

Year ended 30 September

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 return for the year disclosed above represents the Company's total comprehensive income.

Statement of Financial Position

As at 30 September

These financial statements were approved by the Board of Directors and signed on its behalf on 14 December 2016.

Fiona Wollocombe

Chairman

Registered in Scotland Number: SC270952

Statement of Changes in Equity

* The aggregate of these reserves, being £17,422,000, represents the distributable reserves of the Company at 30 September 2016 (30 September 2015: £21,527,000).

Statement of Cash Flows

Year ended 30 September

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') and the Statement of Recommended Practice: Financial Statements for Investment Trust Companies and Venture Capital Trusts (the 'SORP') issued by the AIC in November 2014.

The Company is no longer 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.

2. Dividend

The Directors are recommending the payment of a final dividend of 2.00 pence per share and a further special dividend of 8.00 pence per share. If approved at the AGM the dividends will be paid on 6 February 2017, to shareholders on the register on 23 December 2016.

3. Return per share (pence)

Revenue return per share is based on the net revenue gain attributable to shareholders of £113,000 and on 53,694,808 shares, being the weighted average number of shares in issue during the year (2015: £40,000 and on 54,602,633 shares).

Capital return per share is based on net capital returns attributable to shareholders of £9,321,000 and on 53,694,808 shares, being the weighted average number of shares in issue during the year (2015: £4,560,000 and on 54,602,633 shares).

Total return per share is based on the total return attributable to shareholders of £9,434,000 and on 53,694,808 shares, being the weighted average number of shares in issue during the year (2015: £4,600,000 and on 54,602,633 shares).

4. 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:

The net asset value per share is based on net assets of £38,377,000 and 53,359,817 shares, being the number of shares in issue at 30 September 2016 (2015: net assets of £39,002,000 and 53,974,337 shares in issue).

5. 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.

6. Annual Financial Report

This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 September 2016 and 30 September 2015 but is derived from those accounts. Statutory accounts for the year ended 30 September 2015 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 September 2015 and the year ended 30 September 2016 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 2016 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 2016, 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, 1 February 2017.

 For further information, please contact:

Company Secretary

Tel: 0131 225 7300

Artemis Fund Managers Limited

14 December 2016