Artemis UK Smaller Companies Fund

Half-Yearly Report (unaudited) for the six months ended 30 June 2021 Keep up to date ...

... with the performance of this and other Artemis funds throughout the year on Artemis’ website

■ Monthly fund commentaries and factsheets ■ Market and fund insights ■ Fund briefings and research articles ■ The Hunters’ Tails, our weekly market newsletter ■ Daily fund prices ■ Fund literature artemisfunds.com General information Objective and investment policy

Company profile Objective To grow capital over a five year period.

Artemis is a leading UK-based fund manager, offering a range Investment What the fund • 80% to 100% in shares of smaller of funds which invest in the UK, Europe, the US and around policy invests in companies. • Up to 20% in bonds, cash and near cash, the world. other transferable securities, other funds (up to 10%) managed by Artemis and third As a dedicated, active investment house, we specialise in party funds, money market instruments, for both retail and institutional and derivatives. investors across Europe. Use of The fund may use derivatives for efficient derivatives portfolio management purposes to: Independent and owner-managed, Artemis opened • reduce risk for business in 1997. Its aim was, and still is, exemplary • manage the fund efficiently. investment performance and client service. All Artemis’ Where the , including companies in staff share these two precepts – and the same flair and fund invests other countries that are headquartered or enthusiasm for fund management. have a significant part of their activities in the United Kingdom. The firm now manages some £27.9 billion* across a range Industries the • Any of funds, two investment trusts and both pooled and fund invests in segregated institutional portfolios. Other • None limitations Our managers invest in their own and their colleagues’ funds. specific to this fund This has been a basic tenet of the Artemis approach since the firm started. It means that interests of our fund managers Investment • The fund is actively managed. strategy • The manager adopts a long-term investment approach. are directly aligned with those of our investors. • The manager seeks to mostly invest in companies with predictable and/or growing cashflow streams which require * Source: Artemis as at 31 July 2021. little additional capital to sustain. • The manager identifies smaller companies with reference to their relative market capitalisation. Fund status Benchmarks • Numis Smaller Companies (-InvTrust) TR Artemis UK Smaller Companies Fund was constituted by a A widely-used indicator of the performance of the UK Trust Deed dated 17 March 1998 and is an authorised unit smaller companies stockmarket, in which the fund invests. It acts as a ‘comparator benchmark’ against which trust scheme under the Financial Services and Markets Act the fund’s performance can be compared. Management of 2000. The fund belongs to the category of UCITS schemes as the fund is not restricted by this benchmark. • IA UK Smaller Companies NR defined in the Collective Investment Schemes Sourcebook A group of other asset managers’ funds that invest in (‘COLL’) of the Financial Conduct Authority (‘FCA’). similar asset types as this fund, collated by the Investment Association. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this Buying and selling benchmark. Units may be bought and sold by contacting the manager by telephone, at the address on page 5 or via the website artemisfunds.com. Valuation of the fund takes place each business day at 12 noon on a forward pricing basis. Investors are reminded that past performance is not a guarantee of performance in the future and that the price of units and the revenue from them can fall as well as rise.

3 Risk and reward profile Other information Prospectus Potentially lower rewards Potentially higher rewards Lower risk Higher risk Copies of the most recent Prospectus are available free of charge from the manager at the address on page 5.

Tax information reporting ̥ The fund is in the category shown due to historic volatility (how much and how quickly the value of shares UK tax legislation requires fund managers to provide in the fund may have risen and fallen in the past due to information to HM Revenue & Customs (‘HMRC’) on certain movements in markets, currencies and interest rates). It investors who purchase units in unit trusts. Accordingly, the may not be a reliable indication of the future risk profile fund may have to provide information annually to HMRC on of the fund. the tax residencies of those unitholders that are tax resident ̥ The risk category has been calculated using historic data outwith the UK, in those countries that have signed up to and may not be a reliable indicator of the fund’s future the OECD’s (‘Organisation for Economic Co-operation and risk profile. Development’) Common Reporting Standard for Automatic ̥ A risk indicator of “1” does not mean that the investment Exchange of Financial Account Information (the ‘Common is “risk free”. Reporting Standard’), or the United States (under the Foreign Account Tax Compliance Act, ‘FATCA’). The risk indicator may not fully take into account the following risks and the following may affect fund All new unitholders that invest in the fund must complete performance: a certification form as part of the application form. Existing unitholders may also be contacted by the Registrar should any ̥ Market volatility risk: The value of the fund and any income from it can fall or rise because of movements extra information be needed to correctly determine their tax in stockmarkets, currencies and interest rates, residence. Failure to provide this information may result in the each of which can move irrationally and be affected account being reported to HMRC. unpredictably by diverse factors, including political and For further information, please see HMRC’s Quick Guide: economic events. Automatic Exchange of Information – information for account ̥ Currency risk: The fund’s assets may be priced in holders: gov.uk/government/publications/exchange-of currencies other than the fund base currency. Changes information- account-holders. in currency exchange rates can therefore affect the fund’s value. Value assessment ̥ Concentration risk: The fund may have investments Artemis Fund Managers Limited (AFML) has conducted a concentrated in a limited number of holdings. This can detailed assessment on whether its funds are providing value to be more risky than holding a wider range of investments. unitholders in response to newly introduced regulations. AFML ̥ Smaller companies risk: Investing in small and medium- must publish publicly on an annual basis, a statement setting sized companies can involve more risk than investing in out a summary of the outcome of the process and whether or larger, more established companies. Shares in smaller not AFML believes the payments out of the scheme property companies may not be as easy to sell, which can cause are justified in the context of the overall value delivered to difficulty in valuing those shares. unitholders. Composite reports on Assessment of Value have Please refer to the fund’s prospectus for full details of these been published via the website artemisfunds.com. and other risks which are applicable to this fund.

4 Manager Report of the manager Artemis Fund Managers Limited * We hereby approve the Half-Yearly Report of the Artemis Cassini House UK Smaller Companies Fund for the six months ended 30 57 St James’s Street June 2021 on behalf of Artemis Fund Managers Limited in SW1A 1LD accordance with the requirements of COLL as issued and amended by the FCA. Dealing information: Artemis Fund Managers Limited PO Box 9688 M J Murray L E Cairney CM99 2AE Telephone: 0800 092 2051 Director Director Artemis Fund Managers Limited Website: artemisfunds.com London 25 August 2021 Investment adviser Artemis Investment Management LLP * Cassini House 57 St James’s Street London SW1A 1LD

Trustee and Depositary J.P. Morgan Europe Limited † 25 Street Canary Wharf London E14 5JP

Registrar SS&C Financial Services International Limited * SS&C House St Nicholas Lane Basildon Essex SS15 5FS

Auditor Ernst & Young LLP Atria One 144 Morrison Street Edinburgh EH3 8EX

* Authorised and regulated by the FCA, 12 Endeavour Square, London E20 1JN. † Authorised by the Prudential Regulation Authority (‘PRA’), 20 Moorgate, London EC2R 6DA and regulated by the PRA and the FCA.

5 Investment review

̥ As economies reopen and demand bounces back, profits value) saw forecasts for earnings per share falling by more are rising. than 10%). We cannot remember a time when the ratio of ̥ The fund returned 24.7%* over the last six months versus positive to negative surprises was higher. 17.4%* from the benchmark index. Holdings where earnings per share ̥ The rush of takeover bids seen over the last 18 months forecasts have risen by 10% or shows little sign of slowing. more… Size of upgrade… Performance – Ahead of the pack… 1. +18% 2. Centaur Media +20% Perhaps the most notable feature of the last six months has been the breadth of the recovery. Confidence among 3. Dunelm +18% businesses and consumers alike has recovered far more 4. Future +15% quickly than it did in the aftermath of previous recessions. 5. Halfords +22% The ample liquidity provided by central , the huge 6. Lookers +75% support from governments and the releasing of pent-up 7. Morgan Advanced +12% demand from consumers as lockdowns ease have all contributed. 8. Morgan Sindall +16% 9. Northbridge +16% The fund returned 24.7% over the first half of the year, significantly ahead of both the 17.4% return from the 10. Norcros +10% benchmark Numis Smaller Companies (-InvTrust) TR index 11. Polar +11% and the 19.8% return from the average fund in its peer group. 12. SCS +21%

Several different themes underpinned these gains: takeover 13. Somero +13% bids (for our holdings in Augean and Vectura); strong 14. Vitec +26% consumer spending (Lookers, Norcros and ScS were Holdings where earnings per share beneficiaries); success in digital marketing (Future); a rise forecasts have fallen by 10% or Size of in capital spending by corporates (Somero) and the easing more… downgrade… of restrictions designed to slow the spread of Covid (useful tailwinds for Medica and RPS). In fact, updates on trading 1. Morses Club -18% from the majority of our companies throughout the first half 2. -25% of the year were positive. Digital media company Future reported very strong first-half results; its earnings almost doubled. It earns money as its Review – Amid takeover bids and rising earnings… customers buy products online based on the niche-interest Two of our holdings received takeover bids in May alone. reviews they read on Future’s websites like Tech Radar, PC Carlyle made a recommended offer for Vectura (at a Gamer and Tom’s Guide. It has been extremely successful at 27% premium to the market price) and buying these legacy and monetising them through a Infrastructure made a tentative approach to acquire Augean number of different channels including digital advertising, (which may – or may not – result in a formal offer). affiliate revenues and, most recently, through its recently acquired price-comparison business. We have trimmed our Not including these two approaches, 13 of our holdings have holding in response to the strong share-price performance. been the subject of completed takeover bids over the past 18 months. We think the pick-up in takeover activity since the The fund’s largest holding, cybersecurity group NCC, bought third quarter of 2019 has been a result of the low cost of debt Iron Mountain’s IP Management business in the United finance (which companies and private equity can utilise to States. This transaction allows NCC to build on its existing buy listed companies) and the high free cashflows that our leadership position in the provision of software escrow in holdings generate. the UK (acting as a neutral third party to hold source code, data, and documentation) to become the clear global market The second factor in our improved performance is that many leader. of our holdings are beating analysts’ profit expectations. Over the second quarter of the year, some 14 of our holdings On the importance of ESG… (or 18% of the fund by value) saw their earnings per share forecasts for the next financial year rising by more than 10%. Our ongoing ESG monitoring and engagement yielded In contrast, just two of our holdings (or just 3% of the fund by changes at a company level and in our investment decisions.

Past performance is not a guide to the future. *Source: Artemis/Lipper Limited, class I accumulation units, in sterling, to 30 June 2021. All figures show total returns with income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor’s currency is different to that of the class. Our benchmark index is Numis UK Smaller Companies (-InvTrust) TR Index and our peer group is the IA’s UK Smaller Companies sector.

6 Having a material ownership of smaller businesses can result Halfords is a cycle and motor retailer. In the short term it is in us having a meaningful impact on their ESG trajectory. benefitting from very strong demand for cycling products, cars needing to be serviced again as commuting resumes Following engagement with the management of Somero and from better rent deals as the retail landscape changes. at which we voiced our concerns over the lack of gender We like its market-leading position, the combined ‘service’ diversity on the board, the company committed to appoint and ‘product’ offering and see scope for it to emerge as a an additional female non-executive director in the next year. compelling multi-channel business. Academic studies have demonstrated that there is a link between greater gender diversity and improved long-term We trimmed our holdings in Future, Morses, RPS and shareholder returns – so we will continue to push for greater Volution, all of which had seen strong rises in their share diversity. prices. We also reduced our holding in SSP as we feel the shares were pricing in a recovery in travel that is taking Morses Club, a doorstep lending group, rebounded strongly longer than expected to happen. despite receiving further earnings downgrades. The shares benefitted from the company’s continued progress in moving its face-to-face consumer lending business online via its Outlook – Cost savings found in the pandemic are own lending portal and from news that its largest competitor set to last… is withdrawing from the market. We took advantage of Rising input costs and supply constraints are common the rise in its share price to reduce our holding. This was themes that are emerging from many of our company partly because we perceive there to be growing social and meetings. There appears to be a high degree of confidence governance risks. The industry is experiencing growing that these can be mitigated through price increases but we numbers of customer complaints. Meanwhile, Provident, a will continue to monitor this closely. key competitor, is the subject of an FCA investigation. We believe this signalled an increased risk to the business and There seems to be a renewed confidence among industry. We will continue to monitor this closely. management teams that the shift to online sales and digital delivery of services which Covid brought about can be We sold out of our remaining holding in Hargreaves Services maintained as the economy reopens. More cars and sofas are (property and industrial services). The shares had performed being bought online. Staff training is being delivered via video strongly and a recent transaction that shifted its coal rather than in expensive classrooms. Many so-called ‘old exposure and a significant amount of its debt ‘off balance economy’ stocks are likely to see a sustained boost to their sheet’ to a joint venture made us uncomfortable. Hargreaves profitability as Covid has forced them to seek efficiencies retains an economic interest of 86% in the joint venture which they might otherwise have been slow to grasp. Who (albeit only 49% of the voting rights so does not technically would have guessed that Lookers, the car dealer, could sell control). UK banks are increasingly unwilling to finance 44,000 cars in the first quarter of the year when all of its activity related to coal so we were concerned that funding showrooms were closed? could become a challenge in the future and put an important dividend stream at risk. We think the cashflows our companies are generating will continue to be attractive to larger competitors and to cash- We continued to engage with a number of companies rich venture capital funds if the public markets do not start to regarding their remuneration policies, including discussions value them more highly. with non-executive directors. As well as believing in the importance of aligning interests between owners and Mark Niznik and William Tamworth management teams, we find that the different perspective Fund managers we gain through engaging with non-executive directors can be informative.

Activity – Guided by valuations… We added to our holdings in Moneysupermarket, , Euromoney and .

Most of these businesses are seeing strong and improving trading that we do not believe is reflected in their current share prices.

Moneysupermarket and Euromoney continue to be hurt by restrictions on travel but we expect trading to recover and we believe the current valuations are attractive on our three- to-five year view.

We started a new position in oil and gas producer Jadestone Energy. We have relatively little oil exposure in the fund and felt the cashflows it generates with the oil price at $60 per barrel (i.e. well below its current level) are compelling.

7 Investment information Ten largest purchases and sales for the six months ended 30 June 2021

Cost Proceeds Purchases £’000 Sales £’000 Moneysupermarket.com Group 5,685 Future 6,789 Halfords Group 4,992 5,440 Serco Group 4,223 National Express Group 4,659 Jadestone Energy 4,209 Hargreaves Services 3,964 Britvic 3,319 RPS Group 3,213 Euromoney Institutional Investor 2,723 Urban & Civic 2,711 QinetiQ Group 2,465 SSP Group 2,661 NCC Group 2,282 NCC Group 2,398 Redrow 2,276 Bakkavor Group 1,976 Revolution Bars Group 2,180 On the Beach Group 1,924

Portfolio statement as at 30 June 2021 Valuation % of net Investment Holding £’000 assets Equities 99.03% (98.78%) Basic Materials 0.00% (0.00%) Thistle Mining ^ 2,376,532 – – – – Consumer Discretionary 23.08% (21.60%) Centaur Media 6,684,091 2,674 0.56 DFS Furniture 2,613,942 7,280 1.52 104,094 1,467 0.31 Ebiquity # 9,968,073 4,486 0.94 Fuller Smith & Turner A shares 600,228 4,982 1.04 Future 239,531 7,449 1.56 Global Market Group^ 1,138,309 – – Halfords Group 1,489,660 6,331 1.32 Headlam Group 1,773,573 7,626 1.59 Hollywood Bowl Group 2,712,623 6,442 1.34 Jet2 # 237,678 2,805 0.59 Lookers 8,139,183 5,787 1.21 National Express Group 2,863,567 7,663 1.60 On the Beach Group 1,257,095 4,079 0.85 Redrow 1,562,490 9,603 2.00 Revolution Bars Group # 18,034,313 3,787 0.79 RM 3,289,798 7,632 1.59 ScS Group 2,598,079 7,950 1.66 Sportech 6,290,552 1,849 0.39 SSP Group 559,702 1,476 0.31 Ted Baker 1,124,055 1,639 0.34 Wilmington 3,653,652 7,527 1.57 110,534 23.08 Consumer Staples 5.31% (4.79%) Bakkavor Group 6,988,732 9,113 1.90 Britvic 1,067,036 9,961 2.08 Carr's Group 3,876,254 5,369 1.12 REA Holdings 2,022,530 995 0.21 25,438 5.31

8 Valuation % of net Investment Holding £’000 assets Energy 1.98% (0.97%) Energy Equity Resources (Norway) ^ 14,000 – – Harbour Energy 184,984 699 0.15 Inspired Energy # 20,133,135 3,946 0.82 Jadestone Energy # 5,944,105 4,280 0.89 Mycelx Technologies # 1,217,612 548 0.12 Timan Oil & Gas^ 1,431,667 – – 9,473 1.98 Financials 11.76% (12.53%) Appreciate Group # 14,211,056 4,334 0.91 Holdings 2,278,848 7,942 1.66 Brooks Macdonald Group # 587,027 13,091 2.73 Curtis Banks Group # 1,223,366 3,229 0.67 H&T Group # 3,071,270 8,262 1.73 Morses Club # 4,227,901 3,763 0.79 Polar Capital Holdings # 441,151 3,644 0.76 Premier Miton Group # 3,195,738 5,433 1.13 Rok Entertainment Group ^ 410,914 – – Rok Global^ 66,097 – – XPS Pensions Group 4,851,283 6,622 1.38 56,320 11.76 Healthcare 7.98% (7.86%) Alliance Pharma # 9,691,020 9,633 2.01 Eco Animal Health Group # 1,667,703 5,670 1.18 Medica Group 6,976,220 12,069 2.52 7,963,725 10,863 2.27 38,235 7.98 Industrials 34.74% (34.77%) Alpha Financial Markets Consulting # 1,475,264 5,163 1.08 Group 2,771,706 8,005 1.67 1,527,110 4,375 0.91 Costain Group 5,398,176 3,077 0.64 Euromoney Institutional Investor 1,163,939 11,872 2.48 Keller Group 1,050,637 8,468 1.77 Mears Group 6,931,285 12,164 2.54 Morgan Advanced Materials 160,875 567 0.12 363,959 7,861 1.64 Norcros 3,044,009 9,680 2.02 Northbridge Industrial Services # 2,327,487 2,607 0.54 QinetiQ Group 2,813,853 9,584 2.00 2,118,895 8,497 1.78 Restore # 1,595,461 6,143 1.28 RPS Group 11,088,374 11,665 2.44 RWS Holdings # 1,426,513 7,939 1.66 Serco Group 7,995,610 10,954 2.29 Severfield 4,485,901 3,508 0.73 Somero Enterprises# 2,137,410 9,618 2.01 1,811,812 8,316 1.74 Vitec Group 509,656 7,161 1.50 Volution Group 2,129,217 9,113 1.90 166,337 34.74

9 Valuation % of net Investment Holding £’000 assets Real Estate 3.04% (3.44%) Harworth Group 5,064,448 7,419 1.55 Henry Boot 868,994 2,286 0.48 U & I Group 5,211,610 4,857 1.01 14,562 3.04 Technology 9.11% (11.20%) 557,701 2,306 0.48 260,175 6,733 1.41 EMIS Group# 367,575 4,257 0.89 Moneysupermarket.com Group 4,559,969 11,719 2.45 NCC Group 4,647,289 13,756 2.87 Redcentric# 3,396,526 4,857 1.01 43,628 9.11 Utilities 2.03% (1.62%) Augean# 2,283,872 6,395 1.34 Biffa 1,011,483 3,307 0.69 9,702 2.03 Equities total 474,229 99.03 Investment assets 474,229 99.03 Net other assets 4,626 0.97 Net assets attributable to unitholders 478,855 100.00 The comparative percentage figures in brackets are as at 31 December 2020. ^ Unlisted, suspended or delisted security. # Security listed on the Market (‘AIM’).

10 Financial statements

Statement of total return for the six months ended 30 June 2021

30 June 2021 30 June 2020 £’000 £’000 £’000 £’000 Income Net capital gains/(losses) 90,823 (165,405) Revenue 5,935 1,549 Expenses (2,578) (2,488) Interest payable and similar charges - (2) Net revenue/(expense) before taxation 3,357 (941) Taxation (162) - Net revenue/(expense) after taxation 3,195 (941) Total return before distributions 94,018 (166,346) Distributions (7) (24) Change in net assets attributable to unitholders from investment activities 94,011 (166,370)

Statement of change in net assets attributable to unitholders for the six months ended 30 June 2021

30 June 2021 30 June 2020 £’000 £’000 £’000 £’000 Opening net assets attributable to unitholders 394,027 550,763 Amounts receivable on issue of units 22,491 38,483 Amounts payable on cancellation of units (31,745) (74,089) (9,254) (35,606) Dilution adjustment 71 325 Change in net assets attributable to unitholders from investment activities 94,011 (166,370) Closing net assets attributable to unitholders 478,855 349,112

Balance sheet as at 30 June 2021

30 June 2021 31 December 2020 £’000 £’000 Assets Fixed assets Investments 474,229 389,217 Current assets Debtors 919 1,093 Cash and cash equivalents 6,346 4,268 Total current assets 7,265 5,361 Total assets 481,494 394,578 Liabilities Creditors Distribution payable - 31 Other creditors 2,639 520 Total creditors 2,639 551 Total liabilities 2,639 551 Net assets attributable to unitholders 478,855 394,027

11 1. Basis of preparation The interim financial statements have been prepared in accordance with the Statement of Recommended Practice for Authorised Funds issued by the Investment Management Association in May 2014.

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2020 as set out therein.

2. Post balance sheet events There were no significant post balance sheet events subsequent to the period end.

12 Fund sizes & net asset values Class I accumulation performance

Net asset Net asset Since 5 3 1 6 Date value of value per Units Performance launch * years years year months fund (£) unit (p) in issue Artemis UK Smaller 31 December 2018 418,978,660 Companies Fund ** 2116.1 85.9 11.6 48.9 24.7

I distribution 1,446.17 71,456 Artemis UK Smaller Companies I accumulation 1,567.95 14,180,229 Fund *** 2135.3 83.4 12.2 49.2 25.0

R accumulation 1,472.10 13,287,531 Numis Smaller Companies 31 December 2019 550,763,402 (-InvTrust) Index 661.3 67.4 20.5 49.8 17.4

I distribution 1,820.93 130,009 Sector average 889.7 116.5 35.8 53.2 19.8

I accumulation 2,029.22 15,607,558 Position in sector 2/16 38/45 44/47 30/49 11/49

R accumulation 1,890.95 12,252,258 Quartile 1 4 4 3 1 31 December 2020 394,026,600 Past performance is not a guide to the future. * Source: Artemis/ Lipper Limited, data from 3 April 1998 to C accumulation * 1,569.36 1,448,104 1 September 2010 reflects class R accumulation units, and from 1 September 2010 to 30 June 2021 reflects class I accumulation units. I distribution 1,504.14 203,548 All figures show total returns with dividends and/or income reinvested, I accumulation 1,692.54 12,703,270 net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a R accumulation 1,565.38 9,788,783 result of currency fluctuations if the investor’s currency is different to that of the class. Sector is IA UK Smaller Companies. 30 June 2021 478,854,630 ** Value at 12 noon valuation point C accumulation 1,954.64 1,742,397 *** Value at close of business Class I accumulation is disclosed as it is the primary class. I distribution 1,877.87 462,328

I accumulation 2,112.73 12,178,318

R accumulation 1,946.75 9,185,587

* Launched 13 March 2020.

Ongoing charges

Class 30 June 2021

C accumulation 1.31%

I distribution 0.86%

I accumulation 0.86%

R accumulation 1.61%

Ongoing charges shows the annual operating expenses of each unit class as a percentage of the average net assets of that class for the preceding 12 months.

13 Artemis Fund Managers Limited Cassini House, 57 St James’s Street, London SW1A 1LD 6th floor, Exchange Plaza, 50 Lothian Road, Edinburgh EH3 9BY

Sales Support 0800 092 2090 Facsimile 020 7399 6498

Client Services 0800 092 2051 Facsimile 0845 076 2290

Website www.artemisfunds.com