Artemis UK Smaller Companies Fund
Fund Manager's Comment
Data as at 30 June 2010
The weak stockmarket continued into June. The fund continued the outperformance we started to see in May as the early year euphoria waned. Performance continued to be helped by corporate activity. The fund was in the unusual but happy position of being in receipt of competing bids from larger competitors for two of its holdings. Scott Wilson's board finally agreed a cash offer from a large US competitor, URS, after CH2M (another US competitor) walked away from what had turned into a bidding war between the two. The upshot was a bid premium of 260% – one of the largest ever. The battle for Chloride also reached a similar conclusion, with Emerson trumping ABB's previous offer and winning their prize of what should be a perfect geographic fit for them, albeit at a price 35% higher than their first offer.
The other main contributor to the fund in June was from our large holding of Domino Printing, following better than expected interim results. On the negative side, a profit warning from our vet chain, CVS, saw a big fall in their shares as sales slowed with consumer worries. Mears, our social housing repairs business, also fell after competitor Connaught warned about deferred local government spending post the budget. We think Connaught is blaming the market for its own problems. So the ‘read across’ to Mears is misguided. The largest deals done last month were a sale of our BSS holding following the bid approach from Travis Perkins. We also took profits in a few of our mid-cap holdings which had performed well in recent months. These included Homeserve, Chemring, Cranswick & SSL. We started a new holding in Domino's Pizza in a share placing by directors. This company has a fantastic track record of growth with what must be the most profitable franchise opportunity in the UK. Although the shares are not cheap, the free cash-flow yield is attractive for what we expect will be strong growth. We also bought shares in Brooks Macdonald, a small private client wealth management group which we expect to benefit from the likely future move from government-funded to private pension provision. Overall, while we expect a continuing tough economic outlook, the recent evidence of increasing corporate activity shows that our holdings are seen as representing good value, especially to overseas acquirers.
Fund Manager
John Dodd
Manager of the Artemis UK Smaller Companies Fund Fund since launch
Co-Fund Manager
Mark Niznik
Co-Manager of the Artemis UK Smaller Companies Fund Fund since 22 October 2007
Awards
UK Smaller Companies PDFKey Facts
| IMA Sector | UK Smaller Companies |
|---|---|
| Sedol Number | 0258359 |
| Fund Size (offer basis) | £295.0m |
| Historic yield | 0.30% |
| Unit offer price | 580.62p |
| Unit bid price | 539.06p |
| Valuation (UK business days) | 12:00 |
| Minimum lump sum investment | £1,000 |
|---|---|
| Minimum monthly investment | £50 |
| Launch | 3 April 1998 |
| Launch price | 100p |
| Preliminary charge | 5.00% |
| Annual Management Fee | 1.50% |
| Unit type | Accumulation |
| Accumulation date | 28 February |
| Total Expense Ratio | 1.61% |
Data as at 30 June 2010.
Performance
| Since Launch* | 5 Years | 3 Years | 1 Year | 6 Months | |
|---|---|---|---|---|---|
| UK Smaller Companies Fund (TR)† | 466.0 | -1.5 | -35.7 | 28.3 | 2.3 |
| Hoare Govett ex IT (TR)† | 116.1 | 33.2 | -15.7 | 28.0 | 1.2 |
| Sector Average | 86.6 | 15.9 | -23.0 | 24.3 | 0.7 |
| Position in Sector | 2 | 38 | 47 | 16 | 23 |
| Funds in Sector | 34 | 45 | 52 | 58 | 58 |
| Quartile | 1 | 4 | 4 | 2 | 2 |
Please remember that past performance is not a guide to the future.
* Data from 3 April 1998. Source: Lipper Limited, bid to bid in sterling with net income reinvested to 30 June 2010. All figures show total returns. †Percentage Growth. Sector is IMA UK Smaller Companies.
Percentage Growth
Artemis UK Smaller Companies Fund Fund 12 Months to 31 December 2009
| 2010 | 2009 | 2008 | 2007 | 2006 |
|---|---|---|---|---|
| 28.3 | -42.5 | -12.8 | 25.3 | 22.4 |
Source: Lipper Limited, bid to bid in sterling with net income reinvested. All figures show total returns.
Value of £1,000 invested at Launch to 30 June 2010.
Data from 3 April 1998. Source Lipper Limited, bid to bid in sterling with net income reinvested to 30 June 2010.
Asset Allocation*
*Without cash. Source: Internal
Top Ten Holdings*
| Vostok Energy | 9.2% |
|---|---|
| Abcam | 3.5% |
| Hurricane Exploration | 3.4% |
| Domino Printing Sciences | 3.1% |
| REA Holdings | 3.0% |
| Mears Group | 3.0% |
| Cranswick | 2.9% |
| Babcock International | 2.9% |
| H&T Group | 2.7% |
| Xchanging | 2.7% |
* Without cash.
Source: Internal.
Market Sector Split*
| Industrial Goods & Services | 26.8% |
|---|---|
| Oil & Gas | 17.0% |
| Technology | 14.4% |
| Retail | 7.2% |
| Food & Beverage | 7.2% |
| Healthcare | 6.2% |
| Media | 6.2% |
| Financial Services | 5.5% |
| Real Estate | 3.8% |
| Other | 5.7% |
* Without cash.
Source: Internal.
Risk Warning
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Services Authority (www.fsa.gov.uk), 25 The North Colonnade, Canary Wharf, London E14 5HS and is a member of the IMA. Artemis Fund Managers Ltd is a member of the Artemis Marketing Group. We only market our own unit trusts. The value of an investment, and any income from it, can fall as well as rise as result of market and currency fluctuations and you may not get back the amount originally invested. Investment in the securities of smaller and/or medium sized companies can involve greater risk than is customarily associated with investment in larger, more established companies. The market for securities in smaller companies is often less liquid than that for securities in larger companies, meaning above average price movements both positive and negative can be expected.
All data is sourced internally unless otherwise stated.
The historic yield reflects distributions declared over the past twelve months as a percentage of the mid-market unit price, as at the date shown. It does not include any preliminary charge and investors may be subject to tax on their distributions.
