Artemis UK Growth Fund

Fund Manager's Comment

Data as at 30 July 2010

The fund gained 7.2% in August and the market added 7.1% (mid-to-mid). To put the 7% one-month performance into perspective, the market actually fell more than 10% during March to June. Year to date, the market is just about break-even. We are pleased to report that the fund has outperformed the market by 5.2%, generating a positive return of 6.4%. The key theme in the fund remains being overweight overseas earners and underweight UK domestic companies.
Our best performing stock was Croda, a maker of chemicals and ingredients for cosmetics. The company reported record results at both its industrial and consumer-care divisions as clients restocked inventories run down during the financial crisis. Another stock that did well for us was Pace, the biggest maker of TV digital set-top boxes for pay TV operators. The company reported a 46% increase in its first-half profit and announced its plan to acquire US-based 2Wire Inc. Given that Pace is already a market leader in cable and satellite television, the 2Wire acquisition could allow the company to expand further into telecommunications in the US, as well as to broaden its revenue stream. The shares trade at about 8x p/e (excluding cash), and its earnings are expected to grow by more than 15% this year.
With effect from 1 September 2010, it is the intention of the investment manager to establish periodically short positions in selected companies as part of the overall management of the fund. Such short positions, in aggregate, will be subject to a maximum of no more than 10% of net assets at any time. The fund is authorised under its current investment policy to undertake transactions of this nature.