Artemis Alpha Regulatory News (ATS)

Artemis Alpha Trust plc (the 'Company')

LEI: 549300MQXY2QXEIL3756

Annual Report for the year ended 30 April 2023

Financial Highlights

** The date when Artemis was appointed as Investment Adviser

* Alternative Performance Measure  

Source: Artemis/Datastream

Chairman's Statement

Performance

During the year ended 30 April 2023, your Company's net asset value per share rose by 1.3% and its share price fell 1.2% (on a total return basis). In comparison the benchmark FTSE All- Share Index rose by 6.0%. The second half of the year showed a stronger relative performance than the first half.

Although the FTSE All-Share Index is your Company's formal benchmark, a significant proportion of the companies in the portfolio are relatively small and form part of the FTSE 250 Index which declined by 3.3% over the year. As we have reminded shareholders in the past, the portfolio bears little relationship to the FTSE All-Share and the stock-selection is not constrained by it. As the last two years have shown, short-term performance is likely to bear very little resemblance to the benchmark; our aim remains to out-perform it over the long term.

During the year global markets were dominated by Russia's invasion of Ukraine and the resulting sharp increase in energy prices, inflation and interest rates. The uncertainty caused by Brexit was exacerbated by the mishandling of the economy by the Truss government, resulting in weakened sentiment towards the UK market and, in particular, the consumer-orientated stocks which feature strongly in our portfolio.

However, the Manager remains confident in the prospects for individual stocks and convinced of the under-valuation of many UK companies. Although the portfolio remains dominated by exposure to UK companies such as retailers, banks and housebuilders, the Manager has also initiated positions in some non-UK companies including out-of-favour digital companies such as Nintendo, Alphabet and Meta.

Revenue earnings and dividends

We are pleased to be able to deliver growth in dividends at a rate in excess of inflation, in line with our policy.

The Board has declared a final dividend of 3.87p (2022: 3.46p) per share, which will be subject to approval by shareholders at the Company's Annual General Meeting. The final dividend, if approved by shareholders, will be paid on 29 September 2023 to those shareholders on the register at 25 August 2023, with an ex-dividend date of 24 August 2023.

Total dividends declared for the year will therefore amount to 6.20p per share (2022: 5.60p), an increase of 10.7% on the previous year and ahead of the increase in the Consumer Prices Index (9.0% as at April 2022), in line with our target.

Investment income from our investee companies fell during the year by 1.5%. The subsidiary company continues to have healthy reserves with which to support the Company's earnings and dividends, if required.

Revenue earnings per share stand at 6.74p for the year to 30 April 2023, an increase of 7.2% on the 6.29p of the prior year.

Share buy backs/discount

The discount to underlying asset value averaged 10.1% over the course of the year, ranging from 4% to 14%, and at the year end stood at 12.8%. In general, discounts of investment trusts, including our own peer group, have widened over the last few months as a result of adverse market conditions.

During the year, the Company bought back a total of 1,019,766 ordinary shares at a total cost of £3.1 million and an average discount of 11.1%, adding approximately 1.19p to the net asset value per share. The policy of buying back shares when in the best interests of our shareholders will continue. We aim to do so in a pragmatic fashion, taking into account both market conditions and the discounts prevailing amongst our peer group; we believe this to be the most effective way of addressing any imbalance in the supply and demand for our shares.

Board Succession

As noted last year, Blathnaid Bergin, having joined the Board in July 2015, retired at the Annual General Meeting in October 2022. Blathnaid had served as Chair of the Audit Committee and Senior Independent Director throughout that time. I am pleased that Victoria Stewart has agreed to take on the role of Senior Independent Director.

The Board spent a significant amount of time with its external advisers in choosing the right candidate to replace Blathnaid Bergin as Chair of the Audit Committee. The Board recognises the importance of achieving a balance of skills and experience whilst paying close attention to the tenure of directors and the level of diversity. Details of these discussions and the process followed can be found within the Annual Report. This process resulted in Tom Smethers joining the Board in March of this year; he brings outstanding and relevant experience and I welcome him to the Board.

Annual General Meeting

Your Company's Annual General Meeting ("AGM") will take place on Thursday, 21 September 2023 at 10.00 a.m. at the London offices of Artemis Fund Managers, Cassini House, 57 St. James's Street, London, SW1A 1LD. The Directors look forward to welcoming shareholders.

The Investment Manager will make a presentation and answer any questions on the portfolio performance and strategy.

I would encourage you to make use of your proxy votes by completing and returning the form of proxy.

Outlook

Despite continued uncertainty and volatility in markets, our policy remains one of picking individual stocks in pursuit of returns over the long term. Our Investment Manager is confident in the prospects for these companies and the opportunities arising from the current market dislocation.

Contact us

Shareholders can keep up to date with Company performance by visiting artemisalphatrust.co.uk where you will find information on the Company, a monthly factsheet and detailed quarterly updates from the Investment Manager.

The Board is always keen to hear from shareholders. Should you wish to, I can be contacted by email on alpha.chairman@artemisfunds.com.

Duncan Budge

Chairman

11 July 2023

Investment Manager's Review

In the year ended April 2023, the Company's NAV increased by 1.3% compared to a 6.0% increase in the FTSE All-Share Index. In the last 6-month period since our interim report, performance improved with NAV rising by 17.0%, compared to a 12.5% increase in its benchmark.

Key factors which influenced equity markets and our portfolio in the period included:

This series of events has damaged consumer, corporate and investor confidence. Confusingly, despite this, employment trends have remained robust and corporate profitability has been better than expected.

Idiosyncratic events in the UK hurt sentiment that was already fragile since Brexit. Markets are now pricing an idiosyncratic inflation problem in the UK, leaving the UK with higher long-term bond yields than Greece or Italy.

We continue to anticipate attractive prospective returns from our portfolio owing to a combination of macroeconomic and bottom-up factors:

The current portfolio is characterised by exposures to capital cycle beneficiaries, structural growth opportunities, and discounted UK assets.

Airlines (easyJet/Ryanair) and retailers (Frasers/Currys) stand to see higher returns from limited capacity / consolidation. Financials (Lloyds/Natwest, Plus500, Hargreaves Lansdown) should be beneficiaries of interest rates remaining higher than they have been in recent years whilst the UK housebuilders should benefit if interest rates ease from current levels. Out-of-favour digital winners (Nintendo, Delivery Hero, and Alphabet) continue to benefit from structural trends that should improve their business economics.

Another reason we are confident in the prospective returns of the portfolio is the result of the diversification in the sources of excess return that we have identified. The portfolio also retains considerable liquidity, with over 80% of the Company able to be sold within one day, which enables us to take advantage of movements in the market.

We judge the greatest visible risks to our outlook to reside in energy markets and geopolitics. Energy markets are fundamentally tight due to underinvestment following the 2014/15 downturn and disruptions to European gas supply provoked by the war. Higher demand or an unforeseen reduction in supply would be damaging to economies with limited domestic supply. Both the UK and US will have elections next year and US-China relations remain strained.

Inflationary pressures likely to ease

UK inflation markets suggest that inflation will be 4% over the next 3 years and 3.6% over the next 10 years. Our view is more sanguine.

Energy prices have fallen markedly in recent months. Luck has played its part as Europe experienced an unusually warm winter. Russian oil production has also proven more resilient than many feared. Following the re-opening of China, the last pandemic-induced distortions to supply chains have eased. These factors suggest downward pressure on goods inflation, when mathematically, inflation should decline from its peak level, as the high rates of inflation seen in the second half of 2023 cease to form part of calculations.

UK labour market tightness has showed signs of easing. In 2022, net migration reached a record net 603,000 against many predictions of a fall following Brexit. The widespread decline in real spending power caused by inflation is providing incentives to seek employment and so the ratio of vacancies to job seekers is falling.

Monetarists were amongst the few correctly to predict higher inflation following the abnormal increase in money supply in response to the pandemic. They are now highlighting marked contractions in money supply growth in both the US and Europe resulting from the increase in interest rates and note that current levels of interest rates would be consistent with the inflation rates seen in the 2010s.

The importance of inflation targeting when making historic comparisons is a factor that is seemingly overlooked. Inflation targeting was introduced in 1992, ahead of the Bank of England becoming independent in 1997. The average annual increase in CPI in the 28 years to 2020 was exactly 2.0%. In the prior 20-year period, the average was 9%.

This illustrates the effectiveness of central banks that have the intent and authority to target inflation over the long- term. Whilst a profound policy mistake was made during the pandemic, central banks remain determined to reassert credibility and have the authority to do what it takes to bring inflation back down to target levels. We are sceptical, consequently, both about expectations of inflation remaining above target and are wary of falling prey to the excessive pessimism currently on display in financial markets as a result of recent difficulties.

A decline in inflation and interest rate expectations should be supportive of risk assets by lowering discount rates and by enabling debt markets to function effectively, even if the cost in the short term is higher interest rates and recession. A re-opening of debt and capital markets would be likely to lead to a pick-up in corporate and private equity activity.

Low valuations in the UK should lead to higher returns

The equity risk premium is a measure of the premium you receive in return for accepting the uncertainty of investing in equities and demonstrates the cheapness of the UK market. At current levels, the earnings yield on the FTSE All-Share is 11%. UK 10-year index linked government bonds yield 0.5%. This implies an equity risk premium of over 10%.

Using the same methodology, the current US and European equity market risk premia are 4% and 7%, respectively. In our judgement, this difference is not justified by the long-term fundamental prospects for corporate profit growth but reflects weak sentiment towards UK markets. Whilst this point might have been made at any point in the last five years, it remains valid.

Our holdings in Natwest and Lloyds illustrate the significant value on offer. Both banks trade on earnings yields in excess of 15% (equating to PE ratios of less than 7x) and at a discount to their book value. This is despite being large and enduring franchises that are also beneficiaries of a normalisation in interest rates. Their combined net interest income in 2023 is forecast to be 40% (>£7bn) more than in 2019.

All of our holdings across the UK housebuilders, with the exception of Berkeley Group, trade below book value. This is attractive for businesses that have consistently achieved returns on capital of over 15%. The UK faces an accumulated supply deficit of over 1 million homes, which has worsened owing to an increasingly difficult environment for planning permissions.

Higher interest rates have reduced demand in the short-term, but this does not impact household formation, which continues every year. Demand for housing is deferred, not eliminated, when it is not fulfilled immediately, and so it is logical to expect industry volumes to recover, as and when mortgage rates stabilise.

The takeover of Dignity highlights the neglected value in UK equities. We have written extensively about the company's irreplicable position within the end-of-life industry as the only vertically integrated provider of funerals (725 branches, #2 share), cremations (46 crematoria, #1 share) and pre-need plans (£1.2bn assets, #1 share).

The Board recommended an offer for the business at an enterprise value of £789m (550p). We have historically noted that the crematoria assets alone generate £48m of EBITDA, implying a value of £820m-£960m based on the comparable multiples of European infrastructure (17-20x). As the bidder offered an opportunity to roll existing shareholdings into a new private vehicle, the Takeover Panel required Morgan Stanley to provide an independent valuation. This was publicly available and indicated a range of 660-990p, 20-80% above the offer price.

We reduced our holding into the cash offer, but we have retained a considerable exposure to the publicly quoted equity roll-over vehicle ("Castelnau") as we see significant value in the business.

Durable equity franchises are attractively valued long-term hedges against inflation

Equity valuation multiples initially contracted sharply in response to higher interest rates, reflecting the fact that higher discount rates reduce equity values. However, higher inflation also acts favourably for equities which display durable pricing power. In our view, this is the primary explanation for the resilience of equity markets that many have found surprising.

The Company has a number of holdings in durable equity franchises such as Nintendo, GSK and EssilorLuxottica each of which enjoys significant pricing power.

Nintendo made considerable progress in the year in its strategy to become a broad entertainment business, allowing it to improve monetisation of its uniquely popular intellectual property. This was evident in the success of the Super Mario Brothers movie, which has become the second most popular animated movie of all time with global box office receipts of over $1.3bn.

GSK has successfully strengthened its balance sheet with the spin-off of its consumer staples business Haleon. The company had a major pipeline success with its RSV (Respiratory Syncytial Virus) vaccine, which has more than 90% efficacy in adults over the age of 50, the cohort at the greatest risk of hospitalisation with the disease.

EssilorLuxottica is the largest global eyewear business, operating in a structurally growing industry and with an R&D budget larger than their four closest competitors combined. This enables the group to provide innovative essential eye care solutions to an ageing global population.

The share prices of Just Eat Takeaway and Delivery Hero have been weak as their growth trends were impacted by consumer confidence and pandemic-related distortions. Both companies have stemmed their losses far more quickly than the market expected, despite declining order volumes. Ultimately, we believe the industry remains in the early stages of long-term adoption and will be able to achieve levels of profitability higher than are anticipated by investors.

The Company's principal focus in the year was to take advantage of volatility to add new holdings in businesses characterised by the long duration of their earnings potential.

In July, the Company initiated a holding in global infrastructure operator Vinci. The company has a portfolio of world-class infrastructure assets (toll roads and airports) with inflation- linked revenues. Vinci has funded these investments from its cash generative contracting business that is benefitting from significant tailwinds from the energy transition.

In August, the Company initiated a holding in Berkeley Group, a company with a unique 16-year land bank and strong record of operational excellence including a counter cyclical approach to buying land. London is a structurally under-supplied market in the London housing to be c.90,000 units per annum, and in the last 3 years deliveries have been less than 30,000 per annum.

The Company received shares in Haleon when the global personal care business was spun out of GSK. The Company doubled its holding in August as we judged concerns over the potential impact of Zantac litigation to be exaggerated. Haleon owns a number of market-leading brands in oral care (Sensodyne), pain relief (Panadol/Advil) and vitamins (Centrum) that have the potential to grow reliably above GDP owing to trends such as ageing populations, self-medication, and premiumisation.

In the second half of the year, the Company repurchased a holding in Meta and initiated a position in Alphabet as we felt that investor pessimism was excessive in the light of the stability of, respectively, their globally dominant franchises in social media and internet search. The digital advertising market has grown rapidly in recent years but remains underpenetrated in many geographies and industry verticals. Meta and Alphabet are amongst the global leaders in the field of artificial intelligence and stand to benefit from the opportunities its development presents.

A new position was started in Hargreaves Lansdown in January as the stock was de-rated sharply in response to slowing industry growth. The company retains an attractive position with a >40% share of the UK direct-to-consumer (D2C) investment market. The entire D2C market has total assets of £300bn, which is only 5% of total UK household wealth of £15tn. We expect the market to grow as costs fall and ageing populations move towards greater personal involvement in their financial planning.

Capital cycles are leading to increased profitability in capital intensive and cyclical sectors

Disruption from the pandemic and volatile demand patterns have created tough conditions in many industries meaning a lack of capital investment is leading to higher returns for those that survive.

In our view, this is most evident in the aviation industry, which was one of the hardest hit sectors through the pandemic as demand evaporated and government support was limited.

Boeing and Airbus combined produced almost 2,000 fewer planes than expected during the pandemic and have full order books to the end of the decade. Demand has rebounded strongly, resulting in a strong pricing environment where it is hard to see how supply can respond.

Our holdings in low-cost airlines easyJet and Ryanair have been strong performers as earnings expectations have been revised upwards owing to their ability to increase fares significantly without loss of volume. Our judgement is that valuations fail to capture the new environment of higher profitability and the operational gearing of their business models to higher prices.

Retail is another sector that has seen dramatic changes owing to the shift to online retail, forced store closures during the pandemic and unpredictable demand. Frasers Group has outshone its peers through prudent cost management and retaining a strong value proposition for customers.

The company has used its strong cash generation to take advantage of commercial distress to acquire several businesses such as Studio Retail, Gieves & Hawkes, Missguided, and Sportsmaster. The company's efficient infrastructure and distribution platforms, combined with its frugal approach to cost, allow it to extract value from businesses which previously struggled. The current environment continues to create new opportunities for the business.

Impact of share buybacks underestimated

Share repurchases are an alternative way of returning cash to shareholders whose value is theoretically equivalent to a reinvestment of dividends. In practice, share buybacks can offer a number of advantages:

To illustrate the last point, consider a company that trades on 10x earnings and grows earnings by 5% per annum over 10 years. Assuming a constant multiple, if 35% of net income is used to repurchase shares, the company's growth in earnings per share doubles from 5% to 10%.

This highlights how lower valuations increases the compounding effect of share repurchases, which in our view is relevant to the UK equity market and our portfolio today and why Charlie Munger once said, "Pay close attention to the cannibals - the businesses that are eating themselves by buying back their stock."

Plus500 is one such example within the portfolio. The company's business model allows it to grow earnings with limited capital required. Since our investment in 2016, it has invested £330m in repurchasing its own shares and this has helped it reduce its share count by 21% and grow its grown earnings by 17% per annum. Plus500 continues to expand into new geographies and business areas, including the US market, which has exciting potential.

Portfolio companies, which account for 45% of NAV, are repurchasing shares. This segment of the portfolio trades on a weighted average multiple of 10x earnings. Whilst the running dividend yield of the portfolio is 2%, including pro-rata share repurchases, the aggregate distribution yield is close to 5%. We believe that such characteristics offer a sound body for future returns to shareholders.

John Dodd and Kartik Kumar

Fund managers

Artemis Fund Managers Limited

11 July 2023

Source: Artemis

ESG & Stewardship at Artemis

Introduction

Artemis believes stewardship activities contribute to improvement in company performance and to consequently higher returns for our clients.

Stewardship is a fundamental element of our approach across all investment strategies. Whilst individual strategies are distinctive, views and ideas are shared across investment teams. The Stewardship team supports fund managers by providing insight, research and analysis, discussion, and challenge on ESG and stewardship matters.

In 2022 Artemis set goals for the Net Zero Asset Managers initiative, covering 80% of AuM. Additionally, we published our first Corporate Social Responsibility report and achieved signatory status from the FRC. We have developed extensive internal tools to inform and guide our Stewardship focuses and continue to strengthen our controls, processes, and actions.

Approach to Stewardship

Our stewardship team is specifically dedicated to supporting our fund managers by providing insight, research and analysis, discussion, and challenge on ESG and stewardship matters including:

 Artemis Alpha Stewardship approach

The Company employs a long-term value investing strategy to pick stocks. The framework is based on valuing companies using fundamental analysis and sizing positions according to the attractiveness of share prices relative to our view of their value. The Company's strategy is underpinned by a core principle that the key driver of long-term value is achieving a high and sustainable return on capital employed.

Investee companies that do not adhere to strong governance, look after their employees, or fail to recognise environmental and societal harm risk inhibiting their long-term potential. The investment process requires a focus on the ESG risks and opportunities present in each business and industry.

Risk mitigation

Our view is that ESG factors are most pertinent in their contribution when creating the risk of a permanent loss of capital, usually through obsolescence, excessive leverage, misjudged investment value, misallocations of capital, and regulation.

This is evident in the portfolio where we are significantly underweight controversial sectors (as defined by ESG data providers), and therefore are less exposed to key ESG risks that may affect the prospects of these businesses.

We actively monitor ESG risks and opportunities primarily through our fundamental and bottom-up driven research process for monitoring existing and evaluating prospective investments. We frequently engage with management teams on strategy, capital allocation, incentive alignment and communication.

Engagement and voting

The Fund Manager has expanded his engagement with current and potential holdings, ensuring appropriate monitoring and due diligence for the portfolio. During the year, the Fund Manager conducted 220 (vs 114 last year) company meetings, 127 with existing and 93 with prospective investments.

During the year we met with the investor forum to improve the engagement and disclosure of easyJet, and to represent our views on the company's capital allocation. Additionally we raised concerns about the Board's oversight and responded to concerns about remuneration and share issuance. As a result of this initiative the company's chair agreed to meet with investors more regularly.

The team used its voting powers to express its dissatisfaction with company/management policy. The number of votes that were not in line with management guidance grew over the year 6x to 33, with the proportion of votes not in line with recommendations rising from 2% to 8%. Votes against were focussed on compensation, directors, and non-routine business.

Portfolio carbon emissions

The portfolio's carbon emissions relative to its benchmark, the FTSE All-Share Index, have remained elevated since the onset of COVID-19 in early 2020. This is because our airline holdings are still recovering from depressed revenues that penalised their carbon intensity statistics based on emissions per revenue. Furthermore, expectations of a strong recovery in revenue have resulted in increases in their share prices, leading to an increased weighting in the portfolio of their temporarily inflated carbon intensity figures. We expect this measure to normalise somewhat as airline revenues fully recover in 2023.

Strategy and Business Review

Culture, Purpose & Values

The Directors drive the culture, purpose and values of Artemis Alpha Trust plc ("the Company") and by doing so seek to ensure that these three elements underpin the delivery of strategy.

Culture

The Company is an externally managed investment trust and as such its culture is created by the Board of Directors and the Investment Manager, Artemis Fund Managers Limited.

Purpose

Our purpose is to provide our shareholders, large or small, with a diversified and cost-effective investment opportunity to achieve long-term growth.

Values

The Company provides access to a portfolio of investments which the Board expects to be managed with integrity, transparency and accountability and with appropriate due diligence to environmental, social and governance matters. The constructive and openly discursive nature of the relationship between the Board and the Investment Manager helps ensure their respective values are aligned and focused on delivering the strategy for our shareholders.

The core values that contribute to the Board culture include:

An overview of the Investment Manager's culture, values and stewardship activities can be found on the website at www.artemisfunds.com.

Corporate strategy & policy

The Company is incorporated in England as a public company limited by shares. Its business as an investment trust is to buy and sell investments with the aim of achieving the investment objective and in accordance with the policy.

Gearing

The Company uses gearing (i.e. borrowing) as part of its investment strategy. The Company's Articles of Association limit borrowing to 50 per cent of the Company's net assets. However, the investment policy limits this to 25 per cent of net assets. Subject to compliance with this restriction, the level of borrowing is a matter for the Board, whilst the utilisation of borrowings is delegated to the Investment Manager. This utilisation may be subject to specific guidelines established by the Board from time to time. The current guidelines permit the Investment Manager to employ borrowings of up to 20 per cent of net assets. The Company had no borrowing facility as at 30 April 2023 or the prior year. The use of gearing by the Investment Manager will vary from time to time, reflecting its views on the potential returns from stock markets. The Company's gearing is reviewed by the Board and Investment Manager on an ongoing basis. At the year end, net gearing was created through the use of contracts for difference and stood at 13.4 per cent (9.4 per cent as at 30 April 2022).

Leverage

Leverage is defined in the Alternative Investment Fund Manager 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. The Company has an agreement with Northern Trust to utilise contracts for difference as a form of leverage. A result of 100 per cent indicates that no leverage has been used. The Company is permitted by its Articles to borrow up to 50 per cent; however the Company's investment policy restricts this to 25 per cent. The Company is permitted to have additional leverage of up to 100 per cent of its net assets, which results in permitted total leverage of 225 per cent under both ratios. Artemis as the Alternative Investment Fund Manager ("AIFM"), monitors leverage limits on a daily basis and reviews them annually. No changes have been made to these limits during the year. At 30 April 2023, the Company's leverage was 134.2 per cent as determined using the gross method and 115.7 per cent under the commitment method.

The Investment Manager requires prior Board approval to:

(i) enter into any stocklending agreements;

(ii) borrow money against the security of the Company's investments; or

(iii) create any charges over any of the Company's investments.

Operating environment

The Company operates as an investment trust company and is an investment company within the meaning of section 833 of the Companies Act 2006 (the "Act").

The Company has been approved as an investment trust in accordance with the requirements of section 1158 of the Corporation Taxes Act 2010 which remains subject to the Company continuing to meet the eligibility conditions and ongoing requirements of the regulations. The Board will manage the Company so as to continue to meet these conditions.

The Company has no employees and delegates most of its operational functions to service providers.

Current & future developments

A summary of the Company's developments during the year ended 30 April 2023, together with its prospects for the future, is set out in the Chairman's Statement and the Investment Manager's Review in the Annual Report. The Board's principal focus is the delivery of positive long-term returns for shareholders and this will be dependent on the success of the investment strategy. The investment strategy, and factors that may have an influence on it, such as economic and stock market conditions, are discussed regularly by the Board and the Investment Manager. The Board regularly considers the ongoing development and strategic direction of the Company, including its promotion and 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 and remain unchanged from the prior year are:

Discrete annual total returns

Source: Artemis/Datastream

* Alternative Performance Measure

Dividends per ordinary share

Ongoing charges as a proportion of shareholders' funds

* Alternative Performance Measure

Discount management

In addition to the above KPIs, the Board monitors the discount to the underlying net asset value at which the shares trade. The discount levels throughout the financial year are shown within the Financial Highlights in the Annual Report. No specific discount target has been set, but the Board sets the share buyback policy and has given the Investment Manager discretion to exercise the Company's authority to buyback its own shares from time to time to address any imbalances between the supply and demand in the Company's shares or at times where it is believed this is the best use of available capital to increase NAV per share. This is reviewed regularly by the Board. The Board will also use its authority to issue new ordinary shares from time to time should there be excess demand for the Company's shares. The Company will also provide tender offers every three years. The first tender offer was due in 2021, for 25 per cent of the ordinary shares then in issue. However, following a shareholder vote, this did not take place. The next proposal for a tender offer will be in 2024.

Principal risks and risk management

As required by the 2018 UK Code of Corporate Governance, the Board has carried out a robust assessment of the principal and emerging risks facing the Company. Following consideration of the investment, regulatory and operational risks, the Board has concluded that there are no emerging risks facing the Company that require to be added to the principal risks.

The Board, in conjunction with the Investment Manager, has developed a risk map which sets out the principal risks faced by the Company and the controls established to mitigate these risks. This is an ongoing process and the risk map, including any emerging risks, is formally reviewed every six months. The Board has given particular attention to those risks that might threaten the long-term viability of the Company. Further information on the Company's internal controls is set out in the corporate governance section in the Annual Report. As an investment company the main risks relate to the nature of the individual investments and the investment activities generally; these include market price risk, foreign currency risk, interest rate risk, credit risk and liquidity risk.

A summary of the key areas of risk, their movement during the year and their mitigation is set out below:

The Pandemic risk noted in the 2022 Annual Report is no longer considered an emerging or principal risk.

Further information on risks and the management of them are set out in the notes to the financial statements

Long-term Viability

Viability statement

In accordance with the Association of Investment Companies (the "AIC") Code of Corporate Governance, the Board has considered the longer-term prospects for the Company beyond the twelve months required by the going concern basis of accounting. The period assessed is for five years to 30 April 2028. The Board has concluded that this period is appropriate, carefully taking into account the inherent risk with equities and the long-term investor outlook.

As part of its assessment of the viability of the Company, the Board has discussed and considered each of the principal risks, including matters relating to geopolitical events and inflationary pressures, and their impact on the Company. Although the damage to the economy through the total impact of inflation and the geopolitical effect of Russia/ Ukraine cannot be known with certainty, the Board has considered these risks and does not believe they affect the long-term viability of the Company and its portfolio. The Investment Manager carried out stress testing scenarios in connection with a longer-lasting damage to the economy, of the withdrawal of liquidity by the financial authorities and of a significant and sustained fall in 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 results demonstrated the impact on the Company's NAV throughout the five year period and on its expenses and liabilities. The Board have concluded, given the realisable nature of the majority of the investments, the level of ongoing expenses and the availability of gearing that the Company will continue to be in a position to cover its liabilities.

The Board also made the below assumptions when considering the viability of the Company:

The Directors do not expect there to be any significant change in the current principal risks and the associated mitigating controls other than the decreased risk in relation to Covid-19. The Directors also do not envisage any change in strategy or objectives that would prevent the Company from continuing to operate over the five-year period. The Company's assets are liquid, its commitments limited, and it intends to continue as an investment trust.

The 2024 tender offer of up to 25% of the share capital has been considered by the Board when assessing the continuing viability of the Company.

Taking into account the results of the above review, 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 April 2028.

Life of the Company

The Company operates a triennial liquidity event for shareholders. The tender offers may be made every three years, with the next event proposed in 2024, subject to shareholder approval. Each tender offer will be for up to 25 per cent of the ordinary shares then in issue (excluding Treasury Shares), save that the Board may, at its sole discretion, decide not to proceed with a tender offer if the ordinary shares are trading at a premium to the estimated tender price.

Share capital

Shareholders authorised the Company to buyback up to 14.99 per cent of the shares in issue at the 2022 AGM.

During the year the Company bought back 1,019,766 ordinary shares. As at 30 April 2023, 4,525,566 ordinary shares bought back during the year are held in treasury.

A resolution to renew the Company's buyback authority will be put to shareholders at the AGM on 21 September 2023.

No ordinary shares were issued during the year.

Duty to Promote the Success of the Company

How the Directors discharge their duties under s172 of the Companies Act

Under section 172 of the Companies Act 2006, the Directors have a duty to act in a way they consider, in good faith, would be likely to promote the success of the Company for the benefit of its shareholders as a whole, and in doing so have regard to:

a) the likely consequences of any decision in the long term;

b) the interests of the Company's employees;

c) the need to foster the Company's business relationships with suppliers, customers and others;

d) the impact of the Company's operations on the community and the environment;

e) the desirability of the Company maintaining a reputation for high standards of business conduct; and

f) the need to act fairly as between members of the Company.

As an externally managed investment trust, the Company has no employees or physical assets, our stakeholders include our shareholders and service providers, such as the Investment Manager.

The below tables describe the impact of engagement with our stakeholders that has taken place during the year:

Engagement with key stakeholders

Board discussions and decisions

The following are the key discussions and decisions made by the Board during the year ended 30 April 2023:

The Board's primary focus is to promote the long-term success of the Company for the benefit of the Company's shareholders. In doing so, the Board has regard to the impact of its actions on other stakeholders as described above.

Directors & Diversity

The Directors of the Company and their biographical details are set out in the Annual Report.

No Director has a contract of service with the Company.

The Board supports the recommendations of the Hampton-Alexander Review on gender diversity and the Parker Review on ethnic representation on Boards.

The Board recognises the principles of diversity in the boardroom and acknowledges the benefits of having greater diversity, including gender, social and ethnic backgrounds, and cognitive and personal strengths. When setting a new appointment brief, the Nomination Committee considers diversity alongside seeking to ensure that the overall balance of skills and knowledge that the Board has remains appropriate, so that it can continue to operate effectively. The Board's Director selection policy will, first and foremost, seek to identify the person best qualified to become a Director of the Company, based on merit and objective criteria.

The Board is currently comprised of four male Directors and one female Director.

The FCA announced a new policy statement on diversity and inclusion on company boards in April 2022. Companies are required to comply with the targets or explain the reasons for non-compliance. Outlined below is an overview of the targets and the Company's compliance as at 30 April 2023 in accordance with Listing Rule 9.8.6R(9):

The following tables set out the data on the diversity of the Directors on the Company's Board in accordance with Listing Rule 9.8.6R(10) as at 30 April 2023. This data has been collected through consultation with the Board. Subsequent to the record date of 30 April 2023, Mrs Stewart became the Senior Independent Director.

1 Duncan Budge is the Chairman of the Board, a senior position as defined by the Listing Rules and Mr Smethers is Chairman of the Audit Committee.

2 Not applicable as the Company does not have an executive management team.

1 Not applicable as the Company does not have an executive management team.

Modern Slavery Act 2015

The Company does not fall within the scope of the Modern Slavery Act 2015 as its turnover is less than £36m. Therefore, no slavery and human trafficking statement is included in the Annual Report.

Sustainability and Environmental, social and governance

(`ESG') matters

The Board recognises that the most material way in which the Company can have an impact on ESG is through responsible ownership of its investments. The Board has appointed Artemis as Investment Manager, who engages actively with investee companies undertaking extensive evaluation and engagement 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 will ultimately impact the profitability of a company or its stock market rating and hence these matters are an integral part of Artemis' thinking as investors. The ESG and stewardship engagement of Artemis is detailed in the Annual Report.

Financial Statements

The financial statements of the Company are included in the Annual Report.

For and on behalf of the Board,

Duncan Budge

Chairman

11 July 2023

Statement of Directors' Responsibilities in respect of the Annual Report

Management Report

Listed companies are required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rules (the "Rules") to include a management report in their annual financial statements. The information required to be in the management report for the purpose of the Rules is included in the Strategic Report in the Annual Report. Therefore no separate management report has been included.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual 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 are required to prepare the financial statements in accordance with UK-adopted international accounting standards.

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 their profit or loss for that period. In preparing each of the financial statements, the Directors are required to:

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 its 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 comply with that law and those regulations.

The financial statements are published on a website, artemisalphatrust.co.uk, maintained by the Company's Investment Manager, Artemis. Responsibility for the maintenance and integrity of the corporate and financial information relating to the Company on this website has been delegated to the Investment Manager by the Directors. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

Each of the Directors listed in the Annual Report confirm that, to the best of their knowledge:

a) the financial statements, prepared in accordance with the applicable set of UK-adopted international accounting standards, give a true and fair view of the assets, liabilities and financial position of the Company as at 30 April 2023, and of the profit or loss of the Company for the year then ended;

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; and

c) the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.

In the case of each Director in office at the date the Directors' Report is approved:

a) so far as the Director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and

b) they have taken all steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

For and on behalf of the Board

Duncan Budge

Chairman

11 July 2023

Financial Statements

Statement of Comprehensive Income

For the year ended 30 April 2023

The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with International Financial Reporting Standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

All income is attributable to the equity shareholders of Artemis Alpha Trust plc. There are no minority interests.

Statement of Financial Position

As at 30 April 2023

These financial statements were approved by the Board of Directors and signed on its behalf on 11 July 2023:

Duncan Budge

Chairman

Statement of Changes in Equity

For the year ended 30 April 2023

The notes in the Annual Report form part of these financial statements.

Statement of Cash Flows

For the year ended 30 April 2023