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Artemis

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
scotia
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Artemis

#15033

Postby scotia » December 14th, 2016, 2:41 pm

A pleasing set of results from Artemis :-
http://www.lse.co.uk/share-regulatory-n ... ial_Report

This VCT had a rocky start, but now seems to be performing well above average. However currently it does not seem likely that Artemis will carry out another fund raise. There will be a continuation vote in 2017, and the Chairman's view of this is:-

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.


There will be a 2p dividend plus an 8p special dividend - i.e. returning cash to shareholders from recent sales. They make a statement on this policy:-

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.

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Re: Artemis

#15257

Postby Karellan » December 15th, 2016, 10:56 am

As you say a rocky start. Its one of earlier ones that I bought in 2004 at 40% tax relief mainly because of the good name of Artemis. One of a pair of 40M issues. After some capital loss the two were merged . I recall some while ago that they said that they were not going to raise any more funds. At some time there was also a resolution to alter the incentive scheme that was rather generous to the managers. After a lot of shareholder action it was scrapped thankfully.

Somewhere between then and now it has produced a good dividend stream and has paid me back more than I paid for it then redeeming the Artemis name. Its an example of shareholders getting their way and is worth remembering that it can be done.

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Re: Artemis

#18227

Postby Karellan » December 27th, 2016, 2:06 pm

I wondered what the general feeling was about the continuation vote as I find myself somewhat undecided ?

Retiringat51
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Re: Artemis

#18274

Postby Retiringat51 » December 27th, 2016, 6:12 pm

I'd vote for continuation and would invest more if there was a new fundraise.

Currently top of the All VCTs class over 1 and 3 years and 2nd over 5 years. Divis have been excellent too.

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Re: Artemis

#18296

Postby Karellan » December 27th, 2016, 8:15 pm

It seems to kick out dividends despite its troubled past. I dont believe that they have any plans ever to raise more so its an oddity , just one VCT fund within Artemis and it makes me wonder what sort of commitment they would have to this backwater in their structure. I did wonder whether this was the reasoning behing their attempt to alter the incentive scheme. The AIM market is a little more mercurial that private equity valuations but they believe they have some good developing firms under their wing. Somehow I cannot come down one side or another.

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Re: Artemis

#18311

Postby scotia » December 27th, 2016, 10:00 pm

Artemis is one of my wife's (first) VCT holdings from 2005. In February the 5 year term on the 50% buy back in 2012 will be complete - so she could get out with an approx. 10% discount to NAV - or vote against a continuance, and get closer to NAV over an extended period. But with no pressure to reduce her VCT holdings, I expect she will do neither - and hope for a profitable continuance. From April 2005 to July 2016 the XIRR has been approx. 8.7% - this includes the 40% initial tax rebate and the further 30% tax rebate on approx. 50% of the shares in the 2012 buy-back. However this figure was significantly affected by a very shaky start - so recent performance has been good.

This VCT can't be a big deal for Artemis, so I suspect they are under no pressure to continue - hence I don't think they are over-egging future possible gains. So If I were a holder, I think I would be voting for a continuance.

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Re: Artemis

#18315

Postby Retiringat51 » December 27th, 2016, 10:14 pm

There was a change of lead manager in 2006. Andy Gray has been in post since then and performance has indeed been good.

I had cursed Artemis for the misjudged attempt to extract enhanced fees at a time when performance under the previous manager (a "Partner" - can't recall the name of the fellow in question) had been quite dire. A veritable turnaround.

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Re: Artemis

#18776

Postby Karellan » December 30th, 2016, 9:53 am

I do recall that early on one of the investment managers said in the company report that performance had been dissapointing (possibly about the time of initial capital losses). This impressed me that they could be so honest and I was happy to remain. When you see that some VCTs want brownie points for tax relief , paying a dividend or managing to print a company report in three colours... It was refreshing but I was very surprised by the attempt at the enhanced incentive scheme.

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Re: Artemis

#22033

Postby rhowitt » January 11th, 2017, 5:47 am

I bought Artemis in the 40% era and more recently have successfully bought second hand in our SIPP and ISAs. 2or 3 years ago having read the annual reports for some years I got the sense that the manager and board were adopting a sensible pragmatic approach to the changing landscape of the AIM market. I felt that AIM share prices began to reflect the worth of some of the companies and in some cases very fully value them. Artemis seemed to react to this by reducing some holdings which seemed to be fully valued, and being careful about new acquisitions. Excess cash was paid out in the form of special dividends. Legislation has further restricted Artemis's ability to invest further but with some decent companies in the portfolio and a good pragmatic approach I am firmly handing on to my holdings.

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Re: Artemis

#275765

Postby scotia » January 7th, 2020, 2:12 pm

The Artemis VCT Annual Financial Report for the year ended 30 September 2019 arrived through the letter box today.
It looks like Artemis is on a run-down. The Manager's report contains this statement:-
It is now well over 12 months since making our last qualifying investment. Looking forward it is becoming increasingly apparent that our investment approach is difficult with the current VCT qualifying rules. So, we are faced with a choice. Should we compromise our investment criteria and "lower the bar"? We believe not. Investing in early stage companies is risky. An investor subscribing to a new VCT fundraising today gets upfront tax relief to compensate them for that risk, and rightly so. Indeed our shareholders bore that same risk when they invested over a decade ago. Today though our portfolio is markedly different. Comprising, in the main, profitable cash generative companies our current portfolio's maturity sits in stark contrast to the speculative nature of the new deal flow we typically see. As a result we think it is right to remain selective and prudent to assume we may not make any new investments going forward.

And the Chairman's statement contains the message:-
As I have highlighted in this and prior Chairman's Statements, the new VCT regulations have resulted in a significant reduction in suitable deal flow for the Company. This situation therefore limits opportunities to continue to develop and refresh the portfolio on an ongoing basis. Our current working assumption is that there are unlikely to be any new investments made by the Company.
In addition, where realisations from the existing portfolio are made in the normal course of business, a significant proportion of these proceeds have been distributed to shareholders rather than re-invested in the portfolio. This has been necessary in order for the Company to continue to comply with the VCT regulations, but it does have the effect of reducing the Company's assets.
Against this background the Board has decided that it should formally explore options for the future of the Company. These are at an early stage and I would expect to provide shareholders with an update on these discussions in due course. In the meantime the Board will continue to ensure that the Company operates in a manner conducive to maximising returns for shareholders.

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Re: Artemis

#275911

Postby BusyBumbleBee » January 8th, 2020, 10:06 am

scotia wrote:It looks like Artemis is on a run-down. The Manager's report contains this statement:-
It is now well over 12 months since making our last qualifying investment. Looking forward it is becoming increasingly apparent that our investment approach is difficult with the current VCT qualifying rules. So, we are faced with a choice. Should we compromise our investment criteria and "lower the bar"? We believe not. Investing in early stage companies is risky. An investor subscribing to a new VCT fundraising today gets upfront tax relief to compensate them for that risk, and rightly so. Indeed our shareholders bore that same risk when they invested over a decade ago. Today though our portfolio is markedly different. Comprising, in the main, profitable cash generative companies our current portfolio's maturity sits in stark contrast to the speculative nature of the new deal flow we typically see. As a result we think it is right to remain selective and prudent to assume we may not make any new investments going forward.

Well spotted - I am in total agreement with the Manager here - the rules for VCTs are now so restrictive that they are no longer an asset class I wish to invest in

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Re: Artemis

#276164

Postby londoninvestor » January 9th, 2020, 12:22 pm

BusyBumbleBee wrote:Well spotted - I am in total agreement with the Manager here - the rules for VCTs are now so restrictive that they are no longer an asset class I wish to invest in


I'm probably not quite this pessimistic, but I wish more VCTs were seriously considering their future existence, where the new rules mean they can no longer do anything like their original investment proposition.

For example the asset-focused VCTs like AAVC and CRWN, and the MBO specialists like the Mobeuses.

It does need the board to be able to have difficult conversations with the manager, and we know that's a problem in the Albion stable.

There are downsides to an exit strategy which makes you a clear forced seller in the market, but Artemis's statement implies they're considering largely sitting on their hands and letting their cash-generating portfolio run at steady state - which is attractive.

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Re: Artemis

#276175

Postby UncleEbenezer » January 9th, 2020, 1:09 pm

londoninvestor wrote:I'm probably not quite this pessimistic, but I wish more VCTs were seriously considering their future existence, where the new rules mean they can no longer do anything like their original investment proposition.

[chop]

but Artemis's statement implies they're considering largely sitting on their hands and letting their cash-generating portfolio run at steady state - which is attractive.


There's precedent for that. c.f. the Renewable Infrastructure VCTs, with strategies ranging from pure sitting back on income-producing assets (Ventus) to slight diversification (Foresight Solar).

What the rule change has done is turn historically-successful managers into unproven rookies in a new field - some more than others. They're responding to that in different ways.

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Re: Artemis

#317154

Postby scotia » June 10th, 2020, 12:29 pm

Artemis has just gone ex-div on another large dividend of 7p - to be paid at the end of the month. So for the year we have had 3p in September 19th, 6p in December 19th, 5p in March 20th and the 7p in June 20th. That makes 21p of dividends , with the (ex div) NAV now sitting at 23.61 - having fallen roughly in line with the dividends around the ex-dividend dates of the dividend payments. So it looks like the end is nigh.

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Re: Artemis

#340437

Postby 127tolmers » September 15th, 2020, 2:59 pm

https://www.investegate.co.uk/artemis-v ... 00044375R/

As noted in the last Annual Report, and discussed at the last annual general meeting of the Company, the new VCT regulations have resulted in a significant reduction in suitable deal flow for the Company. This situation therefore limits opportunities to continue to develop and refresh the portfolio on an ongoing basis, as highlighted in the portfolio activity section above. The Board has been exploring options for the future of the Company and there have been a number of discussions between the Company's advisers, the Board and the Investment Manager on delivering a solution which achieves the best possible outcome for shareholders overall.

A number of options have been discussed, all of which had various pros and cons, which were considered in detail. The culmination of these discussions will see a proposal and recommendation to shareholders that a members' voluntary liquidation of the Company be undertaken (the 'Proposal'). In addition, in view of the Proposal, the Company will be withdrawing its share buy back policy with immediate effect.

The Board strongly believes that this route will enable the Investment Manager to realise the portfolio in an orderly manner, maximising shareholder returns and minimising the significant ongoing costs incurred in running the Company.

It is intended that a circular (the 'Circular') be issued to shareholders in September 2020, outlining the full details of the Proposal. The Circular will also include a notice for a general meeting of the Company, to be convened prior to the Company's year end, enabling resolutions to be proposed and voted on by shareholders to this effect.

If approved, a liquidator will be appointed by shareholders and the Company will de-list from the London Stock Exchange. The liquidator, with assistance from the Investment Manager, will realise the remaining assets of the Company and distribute the proceeds to shareholders through periodic distributions. Once all of the assets have been realised and the liquidator is satisfied that there are no outstanding creditors or other liabilities the Company will be wound up.


https://www.investegate.co.uk/artemis-v ... 29039056Y/

Beware of old CGT deferral being triggered in liquidation.

The Board is aware that some Shareholders acquired their original shares before 6 April 2004 and claimed capital gains tax (“CGT“) deferral relief on their investment. The receipt of distributions made during the course of the liquidation will cause those deferred gains to become chargeable to tax at the prevailing rate of CGT. Such Shareholders should take their own advice as to their own circumstances.

scotia
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Re: Artemis

#340481

Postby scotia » September 15th, 2020, 5:30 pm

127tolmers wrote:It is intended that a circular (the 'Circular') be issued to shareholders in September 2020, outlining the full details of the Proposal. The Circular will also include a notice for a general meeting of the Company, to be convened prior to the Company's year end, enabling resolutions to be proposed and voted on by shareholders to this effect.

Circular now available:- https://data.fca.org.uk/artefacts/NSM/Portal/NI-000010964.pdf

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Re: Artemis

#340530

Postby scotia » September 16th, 2020, 12:53 am

I though it worth looking at the Artemis VCT holdings to get some idea as to how liquid they are. On the Artemis site there is a list of the top 10 investments (all publicly quoted), with their fractional contribution to the total value (approx £10M) of the Artemis VCT - all data as at 31/8/20. https://www.artemisfunds.com/en/gbr/investor/funds/explorer/artemis-vct-plc/ordinary-shares#composition
These top 10 investments make up 48.5% of the Artemis total value.
Starting at the top with ULS Technology, this constitutes 7.1% of Artemis - i.e. £0.71M. Now ULS has a market capitalisation of £35M, so Artemis owns 2% of the ULS market capitalisation. Continuing down through the top ten, the percentage owned of the market capitalisations for the listed companies ranged from 0.1% to 2.4% (my calculations - apologies for any errors). Are there any experts out there who know whether or not such fractions are easily (or otherwise) disposed at around their current quoted prices? I note that it is proposed to retain the investment manger to assist the liquidator in their disposal - for a payment of £60k in the first years and £30k in subsequent years if required.


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