Fund Manager's Comment
Data as at 31 October 2008
October saw one of the worst monthly stockmarket declines on record for UK small caps. Investors became increasingly sure that it is a question of ‘how deep’ rather than ‘whether’ we are in a recession — and reacted accordingly. The worst affected of our holdings were Lamprell, Oilexco & JKX Oil, while our investments in Abcam, Salamander Energy and Restaurant Group held up best. The fund’s resource stock overweight declined with further selected sales — the largest being Gem Diamonds. We’re concerned that the company’s future profitability will be squeezed between falling diamond prices, as recession bites, and rising costs. We also reduced our holding in Eaga, the insulation contractor, as we believe that investors are overlooking the risk of the government not extending their large ‘warm front’ contract. We also sold our holding of Pinewood film studios as we feel their property development plan will now take longer to realise.
Looking to the future, although we fully expect further profits warnings in the coming months, we think this has been discounted by the more than halving of the small cap index since last summer. Smaller companies are now trading around a 30-year low rating, are on a discount to large caps and directors have been buying their own shares at unprecedented levels. Falling interest rates have historically been good for small caps. We see this as a good buying opportunity.
Visit the Artemis Film Club to listen to John Dodd talking about the UK Smaller Companies Fund.
Awards
- John Dodd 
UK Smaller Companies PDFKey Facts
| IMA Sector | UK Smaller Companies |
|---|---|
| Sedol Number | 0258359 |
| Fund Size (Offer basis) | £292.9m |
| Historic Yield | 0.00% |
| Unit Offer Price | 427.78p |
| Unit Bid Price | 390.53p |
| Valuation | 12 noon daily (UK business days) |
| Min. lump sum investment | £1,000 |
|---|---|
| Min. monthly investment | £50 |
| Launch | 3 April 1998 |
| Launch price | 100p |
| Initial charge | 5% |
| Annual Management Charge | 1.5% |
| Unit type | Accumulation |
| Accumulation date | 28 February |
Data as at 31 October 2008.
Performance
| Since Launch* | 5 years | 3 years | 1 year | 6 months | |
|---|---|---|---|---|---|
| UK Smaller Companies Fund (TR) † | 310.1 | 1.3 | -32.7 | -53.3 | -46.6 |
| Hoare Govett ex IT-TR † | 34.1 | 10.1 | -21.4 | -47.1 | -37.0 |
| Sector Average † | 27.4 | 6.2 | -23.2 | -46.0 | -35.6 |
| Position in Sector | 2 | 29 | 41 | 53 | 57 |
| Funds in Sector | 37 | 46 | 51 | 59 | 59 |
| Quartile | 1 | 3 | 4 | 4 | 4 |
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 31 October 2008. All figures show
total returns. †Percentage Growth. Sector is IMA UK Smaller Companies.
Percentage Growth
Artemis UK Smaller Companies Fund 12 Months to 30 September
| 2008 | 2007 | 2006 | 2005 | 2004 |
|---|---|---|---|---|
| -34.0 | 20.3 | 7.1 | 31.1 | 24.5 |
Further Discrete Performance periods.
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 31 October 2008
Data from 3 April 1998. Source Lipper Limited, bid to bid in sterling with net income reinvested to 31 October 2008.
Asset Allocation*
*Without cash. Source: Internal
Top Ten Holdings*
| Vostok Energy | 6.9% |
|---|---|
| Abcam | 3.9% |
| Salamander Energy | 3.2% |
| Blueheath | 2.7% |
| Premier Oil | 2.6% |
| Rotork | 2.6% |
| Central Asia Metals | 2.6% |
| IP Group | 2.5% |
| Energy XXI | 2.4% |
| Restaurant Group | 2.4% |
* Without cash.
Source: Internal.
Market Sector Split*
| Oil & Gas Producers | 15.0% |
|---|---|
| Support Services | 10.7% |
| General Financial | 9.4% |
| Mining | 8.2% |
| General Retailers | 7.9% |
| Software & Computer Services | 7.9% |
| Electricity | 6.9% |
| Food Producers | 6.1% |
| Industrial Engineering | 5.8% |
| Other | 22.1% |
* 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.
