TIDMHAN
RNS Number : 1077J
Hansa Trust PLC
30 November 2018
Hansa, investing to create
long-term growth
Half Year Report
Six Months Ended
30 September 2018
Welcome
I'm pleased to present our Half Year Report to the shareholders.
The last six months has continued to see further growth of
shareholder value in a world with increasing uncertainties and
tensions - particularly in the world of politics. I trust you will
find our thoughts on the current market and our prospects (both
short and longer-term) interesting.
The Company held a well-attended AGM in July 2018. As in
previous years, for those of you who could not attend, I have noted
a couple of the points discussed at the AGM in my Report to the
Shareholders beginning on page 2.
Finally, by the time this Report is published, you will no doubt
have noted that the first interim dividend of 8.0p per share for
the year to 31 March 2019 was paid on 30 November 2018.
Yours sincerely
THIS DOCUMENT IS IMPORTANT and if you are a holder of Ordinary
shares it requires your immediate attention. If you are in doubt as
to the action you should take or the contents of this document, you
should seek advice from an independent financial advisor,
authorised if in the UK under the Financial Services and Markets
Act 2000, or other appropriately authorised financial advisor if
outside of the UK. If you have sold or transferred your Ordinary
shares in the Company, you should send this document, immediately
to the purchaser or transferee; or to the stockbroker, bank or
other agent through whom the sale or transfer was effected for
onward transmission as soon as practicable.
COMPANY REGISTRATION AND NUMBER: The Company is registered in
England & Wales under company number 00126107.
Chairman's Report to the Shareholders
Long-Term Shareholder Returns
Shareholders will be familiar with my Reports which address the
long-term returns that have been achieved - reflecting the
investment objective of Hansa Trust, summarised on the front cover:
"investing to create long-term growth". The Board of Directors is
accountable to shareholders for fulfilling that objective, which is
why my Reports focus on long-term returns. Alec Letchfield's Report
which follows this Report addresses the shorter-term returns.
The past five years have seen the MSCI All Country World Index
(in GBP) ("MSCI") return 87.2%, the FTSE All Stocks Gilt Index
return 25.0% and the UK Consumer Price Index (inflation) rise by
7.6%. These are the three Key Performance Indicators ("KPIs") we
use as comparators to assess Hansa Trust's own returns.
By contrast, our Net Asset Value ("NAV") total return has
returned 40.2%. The comparisons are not wholly reasonable, because
the portfolio changes we made were made just over four years ago.
The next annual report (for the year ending the 31 March 2019) will
mark the fifth anniversary of the beginning of those portfolio
changes, so we will be able to assess the five year progress made
since the changes began. It might be worth noting, however, that
the returns of the MSCI are heavily influenced by the performance
of American stock markets, which in turn have been heavily
influenced by America's tech stocks and shares generally and those
of the FAANGs (Facebook, Apple, Amazon, Netflix and Google
(Alphabet)) in particular .
5 Year NAV Performance to 30 Sept 2018
Sep-13 Sep-18
Net Asset Value 1,077.8p 1,414.9p 31.3%
Net Asset Value (Total divs
(Total Return) paid 80p) 40.2%
Net Asset Value per HT Share
Rest of OWHL Total NAV
Portfolio
September
2013 707.6p 370.2p 1,077.8p
September
2018 1,013.5p 401.4p 1,414.9p
Change +305.9p +31.2p +337.1p
+43.2% +8.4% +31.3%
In fact equity markets have recovered slowly but relentlessly
(the tortoise largely, but the hare more recently) since our year
end in March 2009 (when equity markets generally bottomed out after
the great financial crisis of the two previous years). It can be
said that this bull market is long-in-the-tooth but there don't
seem to be any obvious economic reasons for a severe equity market
set back at the moment. However, bear markets can be set off by
other than economic causes (a financial catastrophe somewhere, for
example) and there are plenty of uncertainties around (see my
comments on Prospects at the end of this Report). But long-term
opportunities abound!
Slowly but surely the discounts at which our two classes of
shares sell have been coming down from levels above 30%. There are
still uncertainties surrounding the prospects for Brazil, although
hopefully confidence in the country will recover with its new
president and government. A return in confidence there would, we
believe, help achieve lower NAV discounts for the price of our
shares.
5 Year SHARE PRICE Performance to 30 Sept 2018
Sep-13 Sep-18
Ordinary Share
Price 734.0p 967.50p 34.2%
Ordinary Share (Total divs
Price (total return) paid 80.0p) 46.9%
Discount: Ordinary
Share -26.0% -24.4%
'A' Ordinary Share
Price 779.00p 1,010.00p 29.7%
'A' Ordinary Share (Total divs
Price (total return) paid 80.0p) 42.2%
Discount: 'A'
Ordinary Share -27.7% -28.6%
As you know, our discount policy focuses on creating demand for
our shares through the combination of having an unusual and
interesting portfolio, competitive returns and telling the story,
in order to create that extra demand for the two classes of shares,
which should gradually reduce the two discounts. In particular we
continue to work with Edison in telling the story.
The Annual General Meeting
The Annual General Meeting for the year ending 31 March 2018 was
held on 27 July 2018 at the Washington Mayfair Hotel.
All the formal resolutions put to shareholders were passed.
Following the formal part of the meeting, I made a few comments on
some of the issues shareholders had raised in the past, noting the
discussions of the Board. I then introduced the three speakers who
were to make presentations: Rob Murphy of Edison, the investor
relations firm we engage to help us in telling the Hansa story to
the investment community, William Salomon, who spoke about Brazil
and our investment in Ocean Wilsons Holdings Ltd ("Ocean Wilsons",
"OWHL") and, finally, Alec Letchfield who talked about the
construction, progress and future prospects of the portfolio (given
his assessment of political, economic and financial
conditions).
There were two questions of note from shareholders to report to
you:
Question: Was the double discount of Hansa's share prices (its
own and the underlying discount of the Ocean Wilsons' share price)
a concern in telling the Hansa story to investors (asked of Rob
Murphy)?
Answer: Generally no, other than it made Hansa Trust's shares
that much more attractive.
Question: Given the great success of the share prices of the
FAANG group of companies, why wasn't there a greater investment in
them within the portfolio?
Answer: Given the great volatility in their share prices and the
uncertainty within any "tech" investment, the portfolio tends to
gain exposure to such companies through the funds it invests in and
the expertise that their management brings to them. Alec Letchfield
highlighted the investment in the GAM Star Tech Fund as a
successful holding within the portfolio.
The meeting ended with one-on-one discussions between
shareholders, the Board and management regarding any issues of
concern.
Prospects
Such is the level of uncertainty - political, commercial and
financial - that I am tempted to ask: "who knows?" Politics is the
most important determinant of long-term economic prosperity and yet
democratic countries all over the world are experiencing electoral
challenge, no more so than in the UK, faced with the uncertainties
of Brexit and of an unstable parliament. The maverick that is
President Trump has everyone in guessing mode. All over the
European Union there is challenge to the authority of the European
Commission. It seems that political stability is best found in
non-democratic countries, with China being perhaps the best
example.
In that respect, the recent result of the general election in
Brazil, a country with notoriously unpredictable politics, provides
some (qualified) hope that some of the necessary reforms will pass
and that there will be a generally enterprise-friendly government.
That would be good for us.
Commerce is faced with an unprecedented pace of change brought
about by the IT revolution. Companies all over the world now have
disruptive, even destructive (in the case of cyber-crime),
challenges to deal with - just to survive. IT laggards face
extinction.
The world of finance is faced with the prospect of higher
interest rates being imposed on record levels of debt. The world
has a vulnerable balance sheet.
So, how to deal with it? Three disciplines are particularly
important:
-- backing political governance that recognises private
enterprise is vital to the future economic health and prosperity of
a country;
-- backing the very best management in making equity selections,
in our case of companies and funds; despite the apparently benign
business conditions of the moment, managements need to have their
long-term wits about them in such unpredictable times;
-- ensure robust finances (sovereign and corporate).
In these respects our Investment Manager lays great stress in
selecting investments for the Company. It is why we can be
reasonably confident of our investment portfolio producing good
long-term returns even if, in between, there are some bumpy patches
lying ahead of us.
Additionally, as you may have seen in our recent market
announcement, given the political and economic uncertainty in the
UK and following an initial consultation with shareholders, the
Board is giving consideration to re-domiciling the Company to an
alternative jurisdiction.
No decisions have been made at this time. The Board will
continue to consult with shareholders and will make a further
announcement in due course.
Alex Hammond--Chambers
Chairman
29 November 2018
Half Year Management Report
The Directors present their Report and Condensed Financial
Statements for the six months to 30 September 2018.
THE BOARD'S OBJECTIVES
The Board's primary objective is to achieve growth of
shareholders' value over the medium to long--term.
THE BOARD
Your Board consists of the following persons, each of whom
brings certain individual and complementary skills and experience
to the Board's workings. Individual profiles for each member of the
Board can be found in the Company's Annual Report each year and on
our website.
Alex Hammond--Chambers (Chairman of the Board), Jonathan Davie
(Chairman of the Audit Committee), Raymond Oxford, William Salomon
and Geoffrey Wood.
BUSINESS REVIEW FOR THE SIX MONTHS TO 30 SEPTEMBER 2018
The business review, which includes an indication of important
events which have occurred within the six months to 30 September
2018, is covered in the Chairman's Report to the Shareholders and
the Portfolio Manager's Report.
KEY RISKS FOR THE FINANCIAL YEAR TO 31 MARCH 2019
The key risks and uncertainties relating to the six months ended
30 September 2018 and for the year to 31 March 2019 are covered in
the Chairman's Report to the Shareholders, the Portfolio Manager's
Report and also within the Notes to the Financial Statements.
GOING CONCERN BASIS OF ACCOUNTING FOR THE FINANCIAL YEAR TO 31
MARCH 2019
The Directors consider it appropriate to adopt the going concern
basis of accounting in preparing these Half Year Financial
Statements. The Directors do not know of any material uncertainties
to the Company's ability to continue to adopt this approach over a
period of at least 12 months from the date of approval of these
Financial Statements.
The Directors include a Long-Term Viability Statement in each
Annual Report.
RELATED PARTY TRANSACTIONS
During the period, Hansa Capital Partners LLP charged portfolio
management fees and company secretarial fees to the Company,
amounting to GBP1,265,000 excluding VAT (6 months to 30 September
2017: GBP1,152,000, year to 31 March 2018: GBP2,344,000). Amounts
outstanding at 30 September 2018 were GBP211,000 (30 September
2017: GBP191,000, 31 March 2018: GBP200,000).
THE BOARD'S RESPONSIBILITIES
The Board is charged by the shareholders with responsibility for
looking after the affairs of the Company. It involves the
'stewardship' of the Company's assets and liabilities and 'the
pursuit of growth of shareholder value'. These responsibilities
remain unchanged from those detailed in the last Annual Report.
The Directors confirm to the best of their knowledge that:
-- The condensed set of Financial Statements contained within
the Half Year Financial Report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting'
and on a going concern basis.
-- This Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure
and Transparency Rules.
The above Half Year Management Report, including the
Responsibility Statement, was approved by the Board on 29 November
2018 and was signed on its behalf by:
Alex Hammond--Chambers
Chairman
29 November 2018
PORTFOLIO MANAGER'S REPORT
Are we nearing a turning point?
Market backdrop
They say a picture is worth a thousand words and we particularly
like the one depicted in Chart 1 below. Highlighting the difference
a year can make in stock markets; the lighter bars illustrate just
how strong performance was in 2017 and the darker bars the more
challenging performance experienced so far this year.
Underlying this performance, 2017 really was a case of
everything coming good at the same time. Economic growth improved
in both developing and developed markets. This in turn fed through
to better corporate profitability, with analysts revising up their
forecasts for the first time in many years (something that has been
conspicuously absent in the current stock market cycle).
Geopolitical issues were clearly rumbling on in the background,
with speculation that we would see more populist governments being
elected in a number of European countries. These, however,
ultimately failed to materialise and whilst President Trump seemed
content to talk tough on China, little was seen in the way of
action (at least in 2017). The net result was strong performance
across equity markets, with both developed and developing markets
rising, and across the asset class spectrum with bonds, equities
and commodities performing well.
In contrast, 2018 has seen something of a perfect storm albeit
with a twist. Unlike 2017, this year has been characterised by
weaker than expected economic growth in much of the world, with the
one notable exception being the US. Unusually, and many would argue
imprudently, the US administration decided to cut taxes at a late
stage in the cycle and in the process boosted both economic and
corporate growth at a time when the rest of the world was slowing.
The geopolitical picture has deteriorated with the election of a
populist, anti-EU, coalition government in Italy and the seemingly
unflappable Angela Merkel has struggled to control her power base
in Germany. Brexit, to be blunt, looks like a slow motion train
crash. Trump has also flip-flopped from waging war on North Korea
to holding the first summit between a US and North Korean leader.
At the same time he has antagonised old allies by waging trade wars
with Canada, Europe and Mexico, as well as with China. All of this,
perhaps unsurprisingly, has seen global stock markets fall with the
exception of the US. Perversely, in light of the large weighting of
the US in the MSCI World Index, this has driven up the overall
index despite weakness exhibited elsewhere. We think this
represents a challenging backdrop for many global fund managers who
are typically underweight the US in light of its higher valuation
and more mature stock market cycle.
Market outlook
For the past 18 months or so we have painted a picture of a
maturing business and stock market cycle and have described our
readiness to start shifting assets from riskier investments to
safer assets. Although markets have had their setbacks during this
time, it has generally proved correct to maintain exposure to
equities. The question now is for how long will this remain the
case?
We will start by making the case for why it is right to become
more defensive and then we'll put forward some counter--arguments.
Many commentators have pointed to the increasing maturity of the
current cycle, which is now the longest in recent stock market
history. As we have noted many times in the past, stock markets
don't die of old age but, by definition, the longer the cycle the
more likely that we are near an end point.
The counter-argument to this relates to the depth of the
preceding Global Financial Crisis and the unusual nature of the
subsequent recovery. Looking at past cycles the common feature is
that the magnitude of a downturn is typically mirrored in the
rebound as markets recover. Hence with the Global Financial Crisis
representing one of the largest market setbacks in the past century
an extended recovery would not be unusual. Furthermore, the current
recovery has been notable by its lack of strength with many global
economies barely above their pre-GFC economic peaks. Indeed, unless
we expect the world to become like Japan (which we don't!), it
would be unusual if the recovery didn't carry on for longer.
More worrying is the decline in economic growth. As mentioned
above, we have gone from a picture of growth being in fine fettle,
to one where it has started to slip outside of the US. Our retort
though is that it would be unusual if it didn't slow at some point.
Economic growth is always noisy and naturally waxes and wanes
throughout a cycle. We believed much of the weakness experienced in
the first half of the year was temporary and recent economic data
would appear to vindicate this.
There are, however, a couple of nuances. Firstly, Emerging
Markets ("EM") do appear to be showing more persistent weakness.
Partly this is a function of what is going on in China. China
typically operates to its own cycle, dictated by whether government
policy is expansionary or contractionary. Currently economic growth
in China is slowing, as policy is tightened following a period of
expansion. There have been some tentative signs that the
authorities are looking to ease again but the jury is out as to the
effectiveness of this, given the current trade war between the US
and China. Compounding this, it is unclear at this stage just how
significant the current trade war will be for the broader region
and the strength of the US Dollar has started to put pressure on
many EM companies who have borrowed in US Dollars in recent years.
We are still of the view that this is a wobble rather than the
start of something more sinister, but certainly we are watching
events unfold carefully to see if that view is wrong.
The second point relates to US growth. Undoubtedly US growth has
been the standout area of strength globally. However, as hinted at
above, pump-priming growth is a questionable thing to do at a
mature point in the cycle. It removes one of the policy options
when economies start to slow and is likely to accelerate the pace
with which the Federal Reserve raises interest rates to head off
inflation. At some point we would also expect the benefits of this
policy to annualise out of analyst forecasts, potentially leading
to disappointment.
To summarise on growth, we do not see the normal factors in play
that would lead to a recession in the near-term, despite the mature
age of the recovery. That is not to say that the picture is rosy
across the board. Clearly growth is patchy with the US robust,
Europe rather lacklustre and EM okay but declining. Also whilst we
would expect US growth to fall back from its current extended level
this does not mean it will become contractionary and act as the
catalyst for a bear market (at least for now).
Another area we watch closely is that of interest rates and bond
yield curves. Whilst markets invariably do something different to
one's core forecasts, at this point we see the current cycle
ultimately ending in a fairly conventional fashion. Interest rates
start to rise as economies grow, capacity becomes tight and
inflation starts to take grip. A tipping point is then reached
whereby higher rates impact both corporates and consumers and, in
the process, slow growth, catalyse a recession and cause a bear
market.
This process is already underway in the US and UK with both
countries raising their base rates. The question though is at what
point do interest rates start to bite and impact growth? There is
much debate on this neutral rate of interest, albeit it is
undoubtedly lower than it was in prior cycles. As we write we have
seen some developments on this front. The US Federal Reserve
appears to be shifting from being accommodative in its policy
actions to having a bias towards tighter rates. At the same time
the 10 year US Treasury yield has started to move up. Hence we have
some slightly contradictory messages. On the one hand higher bond
yields are bearish for equities, with equities ultimately being
priced off the risk-free rate. On the other, this rise in 10 year
yields is indicative of an improving growth picture and has led to
a modest steepening in yield curves - typically an inverting curve
is a precursor to a recession and bear market. Again, without
sounding blasé, we do not see US treasury yields at just above 3%
as being sufficient to kill off the equity bull market (and in fact
remain very accommodative at current levels), but clearly if they
keep moving up we would have to re-evaluate our view.
Something that is harder to assess, but equally important, is
exuberance and excess. Peaks in markets go hand-in-hand with
increases in animal spirits and here we see only tentative signs
that these are picking up. Bitcoin demonstrated many of the
characteristics of a bubble earlier in the year, as its price rose
exponentially and retail investors flooded in, but there was little
fundamental support. In practice, however, crypto currencies
probably lack the size to be of any real danger to the wider
financial system. This bubble appears to have now burst with
Bitcoin prices collapsing from their peak above $18,000 in December
2017 to around $6,600 now.
A sector that does have the capacity to cause more systemic
damage is banking. Banks have an uncanny habit of finding the next
black hole, typically allowing their lending standards to decline
as markets peak, dabbling in complex instruments in which they have
little experience and introducing leverage at just the wrong time
in the cycle! Even here though the normal signs that one would look
for do not appear to be in place. Post the GFC, banks have
tightened their lending standards considerably, ring-fenced many of
their retail businesses and leverage is significantly lower than it
was historically.
Whilst we do not see any problems in the banks at this stage,
the financial system is a little like plumbing, with water normally
leaking out somewhere. One suspects that it will be corporate debt
this time around. The ease with which corporates have been able to
issue debt in a zero interest rate world has almost certainly led
to some excesses and shored up those zombie companies that should
have died off long ago. We're sure that, as rates shift higher and
quantitative easing turns to quantitative tightening, some of these
companies will be found to have been swimming with no clothes on.
They normally are.
Portfolio Review and Activity
Your Company's NAV increased by 5.7% for the financial year to
date. Excluding OWHL it is up 10.0% for the first half of the year,
with the value of the holding in OWHL down 3.7% over the same
period. The KPIs for this half are 12.8% for the MSCI ACWI NR
Index, -1.6% for the FTSE UK Gilts All Stocks TR Index and 1.5% for
the UK CPI. The performance this half has held up well given that
global markets have continued to be volatile. The Trust's NAV per
share increased over the half, from 1,346p at the end of March 2018
to 1,415p at the end of September 2018. This compares to a level of
1,345p at the end of September 2017.
Core and Thematic Funds
In the first half of the year the Core Regional bucket had a
8.6% return, while the Thematic bucket had a return of 15.9%. This
half, emerging and frontier markets continued to underperform
developed markets, with holdings in those areas being the main
detractors.
In the Core Regional bucket, the largest contributor (in GBP
terms) to the performance was again the holding in Findlay Park
American Fund which closed the half up 16.7%. The performance of
this fund was largely driven by its holdings in the technology
sector, namely Microsoft, as well as American Express and Berkshire
Hathaway continuing to perform well. Another US focused fund,
Select Equity, was the second largest contributor, ending the half
up 19.7%. This small-mid cap fund's largest holding, life science
equipment supplier Perkin Elmer, performed particularly well off
the back of strong quarterly results announced in August. Other
good performers include the technology company Gartner and the
insurer Cincinnati Financial, both large holdings for the fund.
The holding in Adelphi European Select Equity Fund performed
well this half, returning 9.5%. This European fund performed
particularly well against its benchmark of the MSCI Europe TR Index
in August, led largely by positive stock selection in the consumer
discretionary and health care sectors. Adidas and Almirall were
names that performed well in these sectors, as did Worldpay in the
technology sector.
As previously mentioned, the emerging and frontiers holdings,
such as Prince Street Institutional (down 7.2%), SR Global Fund
Frontier Markets (down 10.8%) and BlackRock Frontiers Investment
Trust (down 11.8%), continued to be the main detractors. This was
largely due to contagion fears of the weakness in Turkey and
Argentina spreading to other emerging markets and concerns over the
impact of the US--China trade war.
GAM Star Technology Fund was the largest contributor in the
Thematic bucket, returning 17.7% over the half, as the technology
sector continued to perform well. Its largest holdings in
Microsoft, Alphabet and Visa all reporting strong results, with
Visa performing particularly well this year with strong revenue,
payment volume and processed transactions growth. Another strong
performer in this bucket was the Worldwide Healthcare Trust which
was up 20.9% for the half. This was due, in part, to several of its
pharmaceutical company holdings beating their sales performance
targets in the US in the second quarter of the year.
Diversifying Funds
The Diversifying segment ended this half with a positive return
of 2.1%. The holdings in this segment of the portfolio are designed
to show lower correlation to the equity market, so it is expected
that they will lag behind the equity market when it is strong, such
as in this half.
The strongest performer in this segment of the portfolio was DV4
Ltd, a property development vehicle managed by Delancey, the value
of which was up 2.6% in the half. DV4 made several disposals during
the half, including the sale of a site in west London known as The
Kensington, all of which have produced healthy returns. Hudson Bay
International Fund was also a positive contributor, up 12.2% in the
half, as was the JLP Credit Opportunity Fund, up 9.3%. These are
both US Dollar denominated funds so a large part of their
performance will be down to the continued strength of the US
Dollar. We have been gradually reducing the position in JLP Credit
over the last couple of years, as we feel high yield debt has been
getting increasingly expensive and the position was fully exited at
the half's end. Schroder GAIA BlueTrend and GAM Systematic Core
Macro funds both had disappointing halves, their NAVs declining
5.3% and 5.2% respectively. The continued market volatility has
meant these trend-following CTAs have struggled, with both
reporting significant losses on FX and commodity positions in July,
before recovering slightly later in the half.
Global equities
It is a generally accepted truth that the stock market adores
certainty and abhors uncertainty. This is why businesses with a
loyal customer base or long-term contracts tend to trade at
premiums to the market. There are, however, points in a business's
life cycle when the future prospects appear less clear and this can
result in premiums associated with quality, which had been
relatively entrenched, being eroded or lost altogether. As
investors with a preference for buying companies with margins of
safety, this presents us with opportunities.
The market has become increasingly certain that "new world"
technology businesses will dominate the future, and, on this basis,
has ascribed them large valuation premiums. This approach has led
to a market of "haves" and "have nots", which can be crudely seen
in the differential of performance between value and growth stocks
over the past 12 months; the MSCI World Growth Index is up 20.5%
whilst the MSCI World Value Index has returned just 8.0%.
Unsurprisingly, we are finding more compelling investment
opportunities in the latter group, where in some cases, the market
is pricing in a continuation of recent negative trends in
perpetuity. As a result of this, we have been more active than
normal over the half. We have added to our positions in Bayer,
Exor, Berkshire Hathaway, Interactive Brokers, Technicolor and
TripAdvisor, and we have initiated new positions in KT Corp and
C&C. Informa, CBRE and Liberty Global have been sold.
Take C&C, an Irish beverage company best known for making
Bulmers, Magners and Tennent's. It has suffered from material
uncertainty over its future prospects, following three years of
declining sales and a challenging operating environment, which has
seen them face falling alcohol consumption, an increase in the
availability of competing products (from home and abroad),
unfavourable weather conditions and consolidation of the UK pub
sector. It also made a misguided US acquisition. All this was
largely priced into the stock at the end of the first quarter; over
five years, its price had declined by almost 40%, leaving it 75%
behind the sector average and 110% behind the World Index.
In our view, it has been abandoned by growth investors just as
it approaches a potential inflection point in volumes and improving
earnings, thanks to a rather shrewd, opportunistic acquisition. The
purchase of the alcohol distribution business from the bankrupt
retailer, Conviviality has the potential to be transformational;
diversifying the earnings stream into a steadier, albeit lower
margin business. C&C paid only GBP1 for the business, taking on
GBP102m of debt, which equates to less than 4x EV/EBITDA; arguably
a bargain. Whilst the acquisition could increase the uncertainty
further over the next 12 months, it should be very accretive to the
bottom line and it offers potential revenue synergies over the
longer-term.
There are also potential catalysts in its core brands (Bulmers,
Magners and Tennent's) which could lead to some long--awaited
organic growth. Tennent's returned to growth last year and the
introduction of minimum unit pricing should lead to higher unit
margins this year. In England, Magners growth accelerated in the
second half of last year after the distribution agreement with AB
InBev ramped up and we expect this momentum to continue. The
weather can also have an impact, and after two below par summers,
we would expect this summer to have been positive for the Bulmers
cider brand in particular.
The stock is trading on a PE of just 11x. We believe within two
years it could be earning 35c a share in net income and 33c in free
cash flow. This implies a forward PE of 9.4x and a free cash flow
yield of 10% at the current price of EUR3.30. If it returned to its
historic 30% discount to the sector it would trade at EUR5.40.
This has the potential to be "heads we win, tails we don't lose
much" situation; if the stock does not re-rate or return to growth,
we should be paid the 4.5% dividend yield for waiting for the
activist investors which currently hold a quarter of the shares to
encourage management to realise the value of the business.
Looking at the equity portfolio over the half, the largest
contributors to performance were Iridium Communications, Berkshire
Hathaway and CVS Health, whilst Coca-Cola Bottlers Japan,
Interactive Brokers and Bayer were the biggest detractors.
Ocean Wilsons Holdings
OWHL's holding in Wilson Sons continues to face a challenging
economic environment in Brazil, but the firm has put itself in a
position to reap the rewards of its $1bn investment plan over the
last ten years. The Brazilian political environment remains
uncertain, with the second round of the Chairman's presidential
election due to take place at the end of October, although markets
have taken positively the strong showing of Jair Bolsonaro in the
first round. On 16 July 2018 the board of Wilson Sons announced it
had initiated a process of assessing the future of the company's
container terminals and logistics assets. This process is part of
the evaluation of strategic alternatives that the management is
carrying out, which may include divestment of such assets, as well
as attracting strategic partners. The board has emphasised that no
formal decision has yet been taken with respect to any of the
alternatives, and there is no certainty that a transaction will
occur.
The second quarter results for Wilson Sons, which were released
in August, showed the negative impact of the nationwide truck
drivers' strike protesting against high fuel prices, as well as the
effect of the weakening currency which adversely impacted container
terminals revenues. Earnings fell by 18.1% to $36.6m in the second
quarter compared to the same period the year before. Operating
volumes in the terminals' business fell as a result of the truck
drivers' strike, although Rio Grande inland navigation flows
increased significantly, denoting the efficiency and safety of the
route.
Results in the towage division suffered from the very
competitive environment, affecting volumes and pricing and revenues
were down 20% from the prior year. However, the division was
awarded a $48.3m financing priority by the Merchant Marine Fund to
be used for the repair and maintenance of 35 tugboats over the next
two years, a first step to contracting with a financial agent. The
company has been able to partially mitigate weakened offshore
vessel demand through alternative vessel solutions. For example, in
July the offshore joint venture commenced two contracts for
shallow--water diving support services and one for oil spill
recovery services.
The Ocean Wilsons Investment subsidiary was valued at $272.5m at
the end of June 2018, which represented a decrease of $2.2m (0.8%)
from the valuation at the end of December 2017 ($274.7m), although
dividends of $4.75m were also paid out from the portfolio during
this time. The portfolio continues to be biased towards equities,
both public and private, reflecting its long-term nature, but also
includes some assets which display lower correlation to equity
markets.
The Ocean Wilsons Holdings' share price was more volatile than
usual over the half, most likely on account of the announcement in
July from the Board of Wilson Sons, but at the end of the half the
share price was up 2.5% over the three month period. Over the past
12 months the share price has declined 5.0%, but on a total return
basis its return has been -0.6%, taking account of the 51.7p
dividend paid to the Trust in June. The share price represents a
discount to the look-through NAV of 30.4%, based on the market
value of the Wilson Sons shares, together with the latest valuation
of the investment portfolio.
Summary
Clearly the current picture for global stock markets is a mixed
one. We are of the view, however, that this is a normal situation
for a maturing stock market cycle and whilst the best days are
almost certainly behind us, that does not mean that more modest
returns cannot be achieved, albeit with more volatility. This view
is supported by current valuations. These are undoubtedly above
their historic averages but are not at previous peaks. Pinpointing
peaks in valuations is nigh on impossible, but what we can say is
that if a bear market were to start at current valuation levels it
is likely to be a modest one. More likely valuations move higher as
in previous cycles before we move into a bear market.
There is also the question of what else do you do with your
money. As highlighted previously, whilst equity valuations are
getting fuller, bond valuations are even more expensive by historic
standards, even in the US following the recent uplift in yields. So
yes, we acknowledge that the next move is almost certainly more
defensive, we just don't think we're there quite yet.
Alec Letchfield
October 2018
Portfolio Statement
as at 30 September 2018
Investments Fair value Percentage of
GBP000 Net Assets
Core Regional Funds
Findlay Park American Fund 18,409 5.4
Vulcan Value Equity Fund 14,083 4.1
Select Equity Offshore, Ltd 13,123 3.9
Goodhart Partners: Hanjo Fund 11,959 3.5
Indus Japan Long Only Fund 9,690 2.8
Adelphi European Select Equity Fund 9,582 2.8
Schroder ISF Asian Total Return 7,247 2.1
BlackRock European Hedge Fund 5,641 1.7
iShares EURO STOXX Mid UCITS ETF 5,377 1.6
Prince Street Institutional Offshore Ltd 4,646 1.4
Pershing Square Holdings Ltd 3,860 1.1
Blackrock Frontiers Investment Trust PLC 3,741 1.1
Vanguard FTSE Developed Europe ex UK Equity
Index Fund 3,663 1.1
LF Odey Absolute Return Fund 3,589 1.1
NT Asian Discovery Fund 2,933 0.9
SR Global Fund Inc. Frontier Markets 2,528 0.7
Egerton Long - Short Fund Limited 537 0.2
Total Core Regional Funds 120,608 35.5
Strategic
Wilson Sons (through our holding in Ocean Wilsons
Holdings)* 58,571 17.3
Ocean Wilson (Investments) Limited (through
our holding in Ocean Wilsons Holdings)* 37,763 11.1
Total Strategic 96,334 28.4
Global Equities
Berkshire Hathaway Inc 3,973 1.2
Interactive Brokers Group Inc 3,648 1.1
Hansteen Holdings PLC 3,453 1.0
EXOR NV 3,344 1.0
Alphabet Inc 3,240 0.9
White Mountains Insurance Group Ltd 3,229 0.9
KT Corp ADR 3,189 0.9
CK Hutchison 3,182 0.9
Hilton Food Group PLC 3,133 0.9
Samsung Electronics Co Ltd 2,613 0.8
Iridium Communications Inc 2,582 0.8
Orion Engineered Carbons SA 2,581 0.8
Orange 2,569 0.8
TripAdvisor Inc 2,506 0.7
Bayer AG 2,348 0.7
9 other investments 13,129 3.9
Total Global Equities 58,719 17.3
Diversifying
DV4 Ltd ** 10,620 3.1
Global Event Partners Ltd 7,931 2.3
Hudson Bay International Fund Ltd 2,987 0.9
MKP Opportunity Offshore, Ltd 2,767 0.8
BNY Mellon Absolute Return Bond Fund 2,237 0.7
Keynes Dynamic Beta Strategy Fund 1,997 0.6
Pareturn Gladwyne Absolute Credit UCITS 1,641 0.5
CZ Absolute Alpha UCITS Fund 1,310 0.4
GAM Systematic Core Macro Fund 1,282 0.4
Schroder GAIA BlueTrend 1,066 0.3
Total Diversifying 33,838 10.0
Thematic
GAM Star Fund PLC - Technology 15,704 4.6
SPDR MSCI World Financials UCITS ETF 3,330 1.0
Worldwide Healthcare Trust PLC 1,846 0.5
Total Thematic 20,880 6.1
Total Investments 330,379 97.3
Net Current Assets 9,188 2.7
Net Assets 339,567 100.0
*Hansa Trust owns 9,352,770 shares in Ocean Wilsons Holdings
Limited ("OWHL"). In order to reflect Hansa Trust's exposure to
different market silos better, our interests in the two
subsidiaries of OWHL, Wilson Sons and Ocean Wilsons (Investments)
Ltd ("OWIL"), are shown separately above. The fair value of Hansa
Trust's holding in OWHL has been apportioned across the two
subsidiaries in the ratio of the latest reported NAV of OWIL, that
being the NAV of OWIL shown per the 30 June 2018 OWHL accounts, to
the market value of OWHL's holding in Wilson Sons, that being the
bid share price of Wilson Sons multiplied by the number of shares
held by OWHL at 30 September 2018.
**DV4 Ltd is an unlisted Private Equity holding. As such, its
value is estimated as described in Note 1(b) to the Financial
Statement and is listed as a Level 3 Asset in Note 9. All other
valuations are either derived from information supplied by listed
sources, or from pricing information supplied by third party fund
managers.
Financial Statements
Condensed Income Statement
For the six months ended 30 September 2018
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 2018 30 September 2017 31 March 2018
Revenue Capital Total Revenue Capital Revenue Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gains on investments
held at fair value
through profit
or loss - 14,433 14,433 - 13,333 13,333 - 16,825 16,825
Exchange gains
on currency balances - 27 27 - 81 81 - 92 92
Investment income 5,879 - 5,879 5,605 - 5,605 6,062 - 6,062
5,879 14,460 20,339 5,605 13,414 19,019 6,062 16,917 22,979
Investment management
fees (1,202) - (1,202) (1,102) - (1,102) (2,238) - (2,238)
Other expenses (702) - (702) (606) - (606) (1,253) - (1,253)
(1,904) - (1,904) (1,708) - (1,708) (3,491) - (3,491)
Profit before finance
costs and taxation 3,975 14,460 18,435 3,897 13,414 17,311 2,571 16,917 19,488
Finance costs - - - - - - - - -
Profit before taxation 3,975 14,460 18,435 3,897 13,414 17,311 2,571 16,917 19,488
Taxation (49) - (49) (20) - (20) (38) - (38)
Profit for the
period 3,926 14,460 18,386 3,877 13,414 17,291 2,533 16,917 19,450
Return per Ordinary
and 'A' non--voting
Ordinary share 16.4p 60.3p 76.7p 16.1p 55.9p 72.0p 10.6p 70.5p 81.1p
The Company does not have any income or expense that is not
included in the Profit/(Loss) for the period. Accordingly the
"Profit/(Loss) for the period" is also the "Total Comprehensive
Income for the period", as defined in IAS 1 (revised) and no
separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the Income
Statement, prepared in accordance with IAS 34. The supplementary
revenue and capital return columns are both prepared under guidance
published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
Condensed Balance Sheet
as at 30 September 2018
(Unaudited) (Unaudited) (Audited)
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Non--current assets
Investment in subsidiary at fair value through
profit or loss 629 629 629
Investments held at fair value through profit
or loss 330,379 320,736 322,322
331,008 321,365 322,951
Current assets
Trade and other receivables 2,424 2,138 55
Cash and cash equivalents 7,130 771 1,102
9,554 2,909 1,157
Current liabilities
Trade and other payables (995) (1,423) (1,007)
Net current assets 8,559 1,486 150
Net assets 339,567 322,851 323,101
Capital and reserves
Called up share capital 1,200 1,200 1,200
Capital redemption reserve 300 300 300
Retained earnings 338,067 321,351 321,601
Total equity shareholders' funds 339,567 322,851 323,101
Net asset value per Ordinary and 'A' non--voting
Ordinary share 1,414.9p 1,345.2p 1,346.3p
Condensed Statement of Changes in Equity
For the six months ended 30 September 2018
(Unaudited)
Share Capital Retained Total
capital redemption earnings GBP000
GBP000 reserve GBP000
GBP000
Net assets at 1 April 2018 1,200 300 321,601 323,101
Gains for the period - - 18,386 18,386
Dividends - - (1,920) (1,920)
Net assets at 30 September 2018 1,200 300 338,067 339,567
Condensed Statement of Changes in Equity
For the six months ended 30 September 2017
(Unaudited)
Share Capital Retained Total
capital redemption earnings GBP000
GBP000 reserve GBP000
GBP000
Net assets at 1 April 2017 1,200 300 305,980 307,480
Gains for the period - - 17,291 17,291
Dividends - - (1,920) (1,920)
Net assets at 30 September 2017 1,200 300 321,351 322,851
Condensed Statement of Changes in Equity
For the year ended 31 March 2018
(Audited)
Share Capital Retained Total
capital redemption earnings GBP000
GBP000 reserve GBP000
GBP000
Net assets at 1 April 2017 1,200 300 305,980 307,480
Gains for the year - - 19,450 19,450
Dividends - - (3,829) (3,829)
Net assets at 31 March 2018 1,200 300 321,601 323,101
Condensed Cash Flow Statement
For the six months ended 30 September 2018
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Cash flows from operating activities
Gain before finance costs and taxation * 18,435 17,311 19,488
Adjustments for:
Realised gains on investments (1,407) (7,089) (12,670)
Unrealised gains on investments (13,026) (6,244) (4,155)
Effect of foreign exchange rate changes (27) (81) (92)
(Increase)/decrease in trade and other receivables (2,369) 1,385 4,051
(Decrease)/increase in trade and other payables (12) 1 22
Taxes paid (49) (20) (38)
Purchase of non--current investments (17,201) (47,715) (59,284)
Sale of non--current investments 23,577 41,003 53,458
Net cash inflow/(outflow) from operating activities 7,921 (1,449) 780
Cash flows from financing activities
Interest paid on bank loans - - -
Dividends paid (1,920) (1,920) (3,829)
Net cash outflow from financing activities (1,920) (1,920) (3,829)
Increase/(decrease) in cash and cash equivalents 6,001 (3,369) (3,049)
Cash and cash equivalents at 1 April 1,102 4,059 4,059
Effect of foreign exchange rate changes 27 81 92
Cash and cash equivalents at end of period/year 7,130 771 1,102
*includes dividends received of GBP5,806,000 (6 months ended 30
September 2017: GBP5,495,000, Year ended 31 March 2018:
GBP6,080,000) and interest received of GBP1,000 (6 months ended 30
September 2017: GBP3,000, Year ended 31 March 2018: GBP5,000).
Notes to the Condensed Financial Statements
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 2018 30 September 2017 31 March 2018
Revenue Capital Total Revenue Capital Revenue Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gains on investments
held at fair value
through profit
or loss - 14,433 14,433 - 13,333 13,333 - 16,825 16,825
Exchange gains
on currency balances - 27 27 - 81 81 - 92 92
Investment income 5,879 - 5,879 5,605 - 5,605 6,062 - 6,062
5,879 14,460 20,339 5,605 13,414 19,019 6,062 16,917 22,979
Investment management
fees (1,202) - (1,202) (1,102) - (1,102) (2,238) - (2,238)
Other expenses (702) - (702) (606) - (606) (1,253) - (1,253)
(1,904) - (1,904) (1,708) - (1,708) (3,491) - (3,491)
Profit before finance
costs and taxation 3,975 14,460 18,435 3,897 13,414 17,311 2,571 16,917 19,488
Finance costs - - - - - - - - -
Profit before taxation 3,975 14,460 18,435 3,897 13,414 17,311 2,571 16,917 19,488
Taxation (49) - (49) (20) - (20) (38) - (38)
Profit for the
period 3,926 14,460 18,386 3,877 13,414 17,291 2,533 16,917 19,450
Return per Ordinary
and 'A' non--voting
Ordinary share 16.4p 60.3p 76.7p 16.1p 55.9p 72.0p 10.6p 70.5p 81.1p
The Company does not have any income or expense that is not
included in the Profit/(Loss) for the period. Accordingly the
"Profit/(Loss) for the period" is also the "Total Comprehensive
Income for the period", as defined in IAS 1 (revised) and no
separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the Income
Statement, prepared in accordance with IAS 34. The supplementary
revenue and capital return columns are both prepared under guidance
published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
(Unaudited) (Unaudited) (Audited)
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Non--current assets
Investment in subsidiary at fair value through
profit or loss 629 629 629
Investments held at fair value through profit
or loss 330,379 320,736 322,322
331,008 321,365 322,951
Current assets
Trade and other receivables 2,424 2,138 55
Cash and cash equivalents 7,130 771 1,102
9,554 2,909 1,157
Current liabilities
Trade and other payables (995) (1,423) (1,007)
Net current assets 8,559 1,486 150
Net assets 339,567 322,851 323,101
Capital and reserves
Called up share capital 1,200 1,200 1,200
Capital redemption reserve 300 300 300
Retained earnings 338,067 321,351 321,601
Total equity shareholders' funds 339,567 322,851 323,101
Net asset value per Ordinary and 'A' non--voting
Ordinary share 1,414.9p 1,345.2p 1,346.3p
Share Capital Retained Total
capital redemption earnings GBP000
GBP000 reserve GBP000
GBP000
Net assets at 1 April 2018 1,200 300 321,601 323,101
Gains for the period - - 18,386 18,386
Dividends - - (1,920) (1,920)
Net assets at 30 September 2018 1,200 300 338,067 339,567
Condensed Statement of Changes in Equity
For the six months ended 30 September 2017
(Unaudited)
Share Capital Retained Total
capital redemption earnings GBP000
GBP000 reserve GBP000
GBP000
Net assets at 1 April 2017 1,200 300 305,980 307,480
Gains for the period - - 17,291 17,291
Dividends - - (1,920) (1,920)
Net assets at 30 September 2017 1,200 300 321,351 322,851
Condensed Statement of Changes in Equity
For the year ended 31 March 2018
(Audited)
Share Capital Retained Total
capital redemption earnings GBP000
GBP000 reserve GBP000
GBP000
Net assets at 1 April 2017 1,200 300 305,980 307,480
Gains for the year - - 19,450 19,450
Dividends - - (3,829) (3,829)
Net assets at 31 March 2018 1,200 300 321,601 323,101
Condensed Statement of Changes in Equity
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Cash flows from operating activities
Gain before finance costs and taxation * 18,435 17,311 19,488
Adjustments for:
Realised gains on investments (1,407) (7,089) (12,670)
Unrealised gains on investments (13,026) (6,244) (4,155)
Effect of foreign exchange rate changes (27) (81) (92)
(Increase)/decrease in trade and other receivables (2,369) 1,385 4,051
(Decrease)/increase in trade and other payables (12) 1 22
Taxes paid (49) (20) (38)
Purchase of non--current investments (17,201) (47,715) (59,284)
Sale of non--current investments 23,577 41,003 53,458
Net cash inflow/(outflow) from operating activities 7,921 (1,449) 780
Cash flows from financing activities
Interest paid on bank loans - - -
Dividends paid (1,920) (1,920) (3,829)
Net cash outflow from financing activities (1,920) (1,920) (3,829)
Increase/(decrease) in cash and cash equivalents 6,001 (3,369) (3,049)
Cash and cash equivalents at 1 April 1,102 4,059 4,059
Effect of foreign exchange rate changes 27 81 92
Cash and cash equivalents at end of period/year 7,130 771 1,102
*includes dividends received of GBP5,806,000 (6 months ended 30
September 2017: GBP5,495,000, Year ended 31 March 2018:
GBP6,080,000) and interest received of GBP1,000 (6 months ended 30
September 2017: GBP3,000, Year ended 31 March 2018: GBP5,000).
Notes to the Condensed Financial Statements
1 ACCOUNTING POLICIES
(a) Basis of preparation
The Financial Statements of the Company have been prepared under
the historical cost convention, except for the measurement at fair
value of investments, and in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union.
The Half Year Financial Statements have been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" and are consistent with the basis of the
accounting policies set out in the Company's Annual Report and
Accounts at 31 March 2018.
These Financial Statements are presented in Sterling, the
currency of the primary economic environment in which the Company
operates.
(b) Significant judgements and estimates
The key significant estimate to report, concerns the Company's
valuation of its holding in DV4 Ltd. DV4 is valued using the most
recent estimated NAV as advised to the Company by DV4, adjusted for
any further drawdowns, distributions or redemptions between the
valuation date and 30 September 2018. The most recent valuation
statement was received on 24 September 2018 stating the value of
the Company's holding as at 30 June 2018. The most recent
distribution was received on 16 August 2018. It is believed the
value of DV4 as at 30 September 2018 will not be materially
different, as adjusted for the distribution, but this valuation is
based on historic valuations by DV4, does not have a readily
available third party comparator and, as such, is an estimate.
There are no significant judgements.
2 INCOME
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Income from quoted investments
UK dividends 366 460 653
Overseas and other dividends 5,379 4,842 5,105
Property income distributions 132 300 300
5,877 5,602 6,058
Other income
Interest receivable on AAA rated money market
funds 2 3 4
Total income 5,879 5,605 6,062
3 DIVIDS PAID
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
Second interim dividend for 2018 (paid May 2018):
8.0p (2017: 8.0p) 1,920 1,920 1,920
First interim dividend for 2018 (paid November
2017): 8.0p (2017: 8.0p) - - 1,920
Unclaimed dividends refunded - - (11)
1,920 1,920 3,829
Note: The first interim dividend for 2019, payable in November
2018 will be 8.0p per share (2018, paid November 2017: 8.0p).
4 RETURN PER SHARES
The returns stated below are based on 24,000,000 shares, being
the weighted average number of shares in issue during the
period.
Revenue Capital Total
GBP000 Pence GBP000 Pence GBP000 Pence
per share per share per share
Six months ended 30 September
2018 (Unaudited) 3,926 16.4 14,460 60.3 18,386 76.7
Six months ended 30 September
2017 (Unaudited) 3,877 16.1 13,414 55.9 17,291 72.0
Year ended 31 March 2018 (Audited) 2,533 10.6 16,917 70.5 19,450 81.1
5 FINANCIAL INFORMATION
The financial information contained in this Half Year Report is
not that of the Company's statutory accounts as defined in section
434-436 of the Companies Act 2006. The financial information for
the six months ended 30 September 2018 and 30 September 2017, has
not been audited or reviewed by the Auditor and has been prepared
in accordance with accounting policies consistent with those set
out in the Annual Report and Accounts for the year ended 31 March
2018.
The statutory accounts for the financial year ended 31 March
2018 have been delivered to the Registrar of Companies and received
an Audit Report which was unqualified, did not include a reference
to any matters to which the Auditor drew attention by way of
emphasis without qualifying the report and did not contain
statements under section 498 (2), (3) and (4) of the Companies Act
2006.
The Half Year financial information was approved by a committee
of the Board of Directors on 22 November 2018.
6 NET ASSET VALUE PER SHARE
The NAV per share is based on the net assets attributable to
equity shareholders of GBP339,567,000 (30 September 2017:
GBP322,851,000; 31 March 2018: GBP323,101,000) and on 24,000,000
shares, being the number of shares in issue at the period ends.
7 COMMITMENTS AND CONTINGENCIES
The Company has no outstanding commitments as at 30 September
2018. (30 September 2017: GBPnil; 31 March 2018: GBPnil).
8 PRINCIPAL RISKS AND UNCERTAINTIES
The principal financial and related risks faced by the Company
fall into the following broad categories - External and Internal.
External risks to shareholders and to their returns are those that
can severely influence the investment environment within which the
Company operates: including government policies, taxation, economic
recession, declining corporate profitability, rising inflation and
interest rates and excessive stock market speculation. Internal and
operational risks to shareholders and to their returns are:
portfolio (stock and sector selection and concentration), balance
sheet (gearing), and/or administrative mismanagement. In respect of
the risks associated with administration, the loss of Approved
Investment Trust status under s.1158 CTA 2010 would have the
greatest impact.
A review of the half year and the outlook for the Company can be
found in the Chairman's Report to the Shareholders and in the
Portfolio Manager's Review.
Information on each of these areas is given in the Strategic
Report within the Annual Report and Accounts for the year ended 31
March 2018. In the view of the Board these principal risks and
uncertainties are applicable to the remaining six months of the
financial year as they were to the six months under review.
9 FAIR VALUE HIERARCHY
Fair Value Hierarchy
IFRS 13 'Fair Value Measurement' requires an entity to classify
fair value measurements, using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements. The
fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (ie
as prices) or indirectly (ie derived from prices); and
Level 3: inputs for the asset or liability not based on
observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value in
the statement of financial position are grouped into the fair value
hierarchy, are detailed below:
30 September 2018 (Unaudited) Level Level Level Total
1 2 3 GBP000
GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 164,500 - - 164,500
Unquoted equities - - 10,620 10,620
Fund investments 8,707 146,552 - 155,259
Investment in subsidiary - - 629 629
Net fair value 173,207 146,552 11,249 331,008
30 September 2017 (Unaudited) Level Level Level Total
1 2 3 GBP000
GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 163,760 - - 163,760
Unquoted equities - - 11,854 11,854
Fund investments 8,326 136,796 - 145,122
Investment in subsidiary - - 629 629
Net fair value 172,086 136,796 12,483 321,365
31 March 2018 (Audited) Level Level Level Total
1 2 3 GBP000
GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 162,060 - - 162,060
Unquoted equities - - 11,783 11,783
Fund investments 8,335 140,144 - 148,479
Investment in subsidiary - - 629 629
Net fair value 170,395 140,144 12,412 322,951
There have been no transfers during the period between
levels.
The Company's policy is to recognise transfers into and out of
the different fair value hierarchy levels at the date of the event
or change in circumstances that caused the transfer to occur.
9 FAIR VALUE HIERARCHY (CONTINUED)
A reconciliation of fair value measurements in Level 3 is set
out in the following table:
(Unaudited) (Unaudited) (Audited)
September September March
2018 2017 2018
Equity Equity Equity
investments investments investments
GBP000 GBP000 GBP000
Opening Balance 12,412 12,489 12,489
Transferred from Level 1: - - -
Purchases (Capital Drawdown) - - -
Sales (Capital Distribution) (1,496) - -
Total gains or losses included in gains on investments
in the Income Statement:
- on assets sold 22 - -
- on assets held at year end 311 (6) (77)
Closing Balance 11,249 12,483 12,412
As at 30 September 2018, the investment in DV4 Ltd has been
classified as Level 3. The investment in DV4 has been valued using
the most recent estimated NAV as advised to the Company by DV4,
adjusted for any further drawdowns, distributions or redemptions
between the valuation date and 30 September 2018. The most recent
valuation statement was received on 24 September 2018, with an
estimated NAV based on the unaudited capital statement of DV4 as at
30 June 2018 as amended for a distribution received from DV4 Ltd on
16 August 2018. If the value of the unquoted Level 3 equity
investments were to increase or decrease by 10%, while all other
variables had remained constant, the return and net assets
attributable to shareholders for the period ended 30 September 2018
would have increased or decreased by GBP1,061,966 respectively.
Investor Information
The Company currently manages its affairs so as to be a
qualifying investment trust for ISA purposes, for both the Ordinary
and 'A' non-voting Ordinary shares. It is the present intention
that the Company will conduct its affairs so as to continue to
qualify for ISA products. In addition, the Company currently
conducts its affairs so shares issued by Hansa Trust PLC can be
recommended by independent financial advisers to ordinary retail
investors, in accordance with the Financial Conduct Authority's
("FCA") rules in relation to non--mainstream investment products
and intends to continue to do so for the foreseeable future. The
shares are excluded from the FCA's restrictions which apply to
non--mainstream investment products, because they are shares in an
investment trust. Finally, Hansa Trust is registered as a Reporting
Financial Institution with the US IRS for FATCA purposes.
Investor Disclosure
AIFMD
The Company's AIFM, Maitland Institutional Services Limited,
hosts a Hansa Trust Investor Disclosure document on its website.
The document is a regulatory requirement and summarises key
features of the Company for investors. It can be viewed at:
https://www.maitlandgroup.com/wp-content/uploads/2017/08/Hansa-Investor-Disclosure-Document-2018-updated.pdf
Packaged Retail and Insurance-based Investment Products
("PRIIPs")
The Company's AIFM, Maitland Institutional Services Limited, is
responsible for applying the product governance rules defined under
the MiFID II legislation on behalf of Hansa Trust PLC. Therefore,
the AIFM is deemed to be the 'Manufacturer' of Hansa Trust's two
share classes. Under MiFID II, the Manufacturer must make available
Key Information Documents ("KIDs") for investors to review if they
so wish ahead of any purchase of the Company's shares. Maitland
have done this as required. The PRIIPs KIDs can be found on their
website:
https://www.maitlandgroup.com/investment-data/hansa-trust-plc/ and
links to these documents can also be found on the Company's website
for good measure:
https://www.hansatrust.com/shareholder-information/regulatory-information.aspx
Capital Structure
The Company has 8,000,000 Ordinary shares of 5p each and
16,000,000 'A' non--voting Ordinary shares of 5p each in issue. The
Ordinary shareholders are entitled to one vote per Ordinary share
held. The 'A' non--voting Ordinary shares do not entitle the
holders to vote or receive notice of meetings, but in all other
respects they have the same rights as the Company's Ordinary
shares.
Contact Details
Hansa Trust PLC
50 Curzon Street, London W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hansatrustenquiry@hansacap.com
Website: www.hansatrust.com
The Company's website includes the following:
- Monthly Fact Sheets
- Stock Exchange Announcements
- Details of the Board Statements
- Annual and Half Year Reports
- Share Price Data Reports
Please contact the Portfolio Manager, as below, if you have any
queries concerning the Company's investments or performance.
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hansatrustenquiry@hansacap.com
Website: www.hansagrp.com
Please contact the Registrars, as below, if you have a query
about a certificated holding in the Company's shares.
Link Asset Service
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300
(Calls cost 12p per minute plus your phone company's access
charge. If you are outside the United Kingdom, please call +44 371
664 0300. Calls outside the United Kingdom will be charged at the
applicable international rate. We are open between 9.00 am - 5.30
pm, Monday to Friday excluding public holidays in England and
Wales.)
Email: enquiries@linkgroup.co.uk
www.linkassetservices.com
Share Price Listings
The price of your shares can be found on our website and in the
Financial Times under the heading 'Investment Companies'.
In addition, share price information can be found under the
following:
ISIN Code
Ordinary shares GB0007879728
'A' non-voting Ordinary shares GB0007879835
SEDOL
Ordinary shares 787972
'A' non-voting Ordinary shares 787983
Reuters
Ordinary shares HAN.L
'A' non-voting Ordinary shares HANA.L
Bloomberg
Ordinary shares HAN LN
'A' non-voting Ordinary shares HANA LN
TIDM
Ordinary shares HAN
'A' non--voting Ordinary shares HANA
Legal Entity Identifier: 213800AIF87JWGLA1L74
Useful Internet Addresses
Association of Investment Companies www.theaic.co.uk
London Stock Exchange www.londonstockexchange.com
TrustNet www.trustnet.com
Interactive Investor www.iii.co.uk
Morningstar www.morningstar.com
Edison www.edisongroup.com
Financial Calendar
Company year end 31 March
Annual Report sent to shareholders June
Annual General Meeting July
Announcement of Half Year results November
Half Year Report sent to shareholders December
Interim dividend payments November & May
Company Information
Registered in England & Wales number: 00126107
BOARD OF DIRECTORS
Alex Hammond--Chambers (Chairman)
Jonathan Davie
Raymond Oxford
William Salomon
Geoffrey Wood
SECRETARY AND REGISTERED OFFICE
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
PORTFOLIO MANAGER
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
AUDITOR
Grant Thornton UK LLP
30 Finsbury Square
London EC2P 2YU
SOLICITORS
Dentons
1 Fleet Place
London EC4M 7RA
REGISTRAR
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
DEPOSITARY
BNP Paribas Securities Services
10 Harewood Avenue
London NW1 6AA
STOCKBROKER
Winterflood Investment Trusts
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
ADMINISTRATOR
Maitland Administration Services Limited
Springfield Lodge
Colchester Road
Chelmsford
Essex CM2 5PW
ALTERNATIVE INVESTMENT FUND MANAGER
Maitland Institutional Services Limited
Springfield Lodge
Colchester Road
Chelmsford
Essex CM2 5PW
Glossary of Terms
AIC
The Association of Investment Companies ("AIC") is the UK trade
association for closed-ended investment companies.
Alternative Investment Fund Managers Directive ("AIFMD")
The AIFMD is a regulatory framework for alternative investment
fund managers ("AIFMs"), including managers of hedge funds, private
equity firms and investment trusts. Its scope is broad and, with a
few exceptions, covers the management, administration and marketing
of alternative investment funds ("AIFs"). Its focus is on
regulating the AIFM rather than the AIF.
Annual Dividend / Dividend
The amount paid by the Company to shareholders in dividends
(cash or otherwise) relating to a specific financial year of the
Company. UK Investment Trusts are required to distribute a minimum
amount each year based upon a minimum allowed level of retention of
revenue income. The Company's dividend policy is to announce its
expected level of dividend payment at the start of each financial
year. Barring unforeseen circumstances, the Company then expects to
make two interim dividend payments each year - the first at the end
of November during that financial year and the second at the end of
May following the end of the financial year.
Bid Price
The price at which you can sell shares determined by supply and
demand.
Capital Structure
The stocks and shares that make up a trust's capital i.e. the
amount of ordinary and preference shares, debentures and unsecured
loan stock etc. which are in issue.
Closed-ended
A company with a fixed number of shares in issue.
Depositary/Custodian
A financial institution acting as a holder of securities for
safekeeping.
Discount
When the share price is lower than the Net Asset Value, it is
referred to as trading at a discount. The discount is expressed as
a percentage of the Net Asset Value.
Expense Ratio
An expense ratio is determined through an annual calculation,
where the operating expenses are divided by the average NAV. Note
there is also a description of an additional PRIIPs KIDs Ongoing
Changes Ratio explained on page 13 of the most recent Annual
Report.
Five Year Rolling NAV Return (per annum)
The rate at which, compounded for five years, will equal the
five year NAV total return to end March, assuming dividends are
always reinvested at pay date.
Five Year NAV and Share Price Total Return
Rebased from 0% at the start of the five year period, this is
the rate at which the Company's NAV and share prices would have
returned at any period from that starting point, assuming dividends
are always reinvested at pay date.
Gearing
Gearing refers to the level of borrowing related to equity
capital.
Hedging
Strategy used to reduce risk of loss from movements in interest
rates, equity markets, share prices or currency rates.
Investment Trust
An Investment Trust is a company that is a form of collective
investment vehicle. The company is a closed-end fund and is
constituted as a public limited company that is listed on a Stock
Exchange. In the UK, Investment Trusts that meet the approval
criteria from HMRC benefit from certain beneficial tax allowances -
most notably not paying tax on Capital Gains. Their taxation status
is governed by s.1158 of the Corporate Tax Act 2010.
Issued Share Capital
Issued share capital is the total number of shares subscribed to
by the shareholders.
Key Performance Indicators ("KPIs")
A set of quantifiable measures that a company uses to gauge its
performance over time. These metrics are used to determine a
company's progress in achieving its strategic and operational goals
and also to compare a company's finances and performance against
other businesses within its industry.
Market Capitalisation
The market value of a company's shares in issue. This figure is
found by taking the stock price and multiplying it by the total
number of shares outstanding.
Mid Price
The average of the Bid and Offer Prices of a particular traded
share.
Net Asset Value / NAV
The value of the total assets minus liabilities of the
company.
Net Asset Value Total Return
See Total Return.
Offer Price
The price at which you can buy shares determined by supply and
demand.
Ordinary Shares
Shares representing equity ownership in a company allowing
investors to receive dividends. Ordinary shareholders have the
pro-rata right to a company's residual profits. In other words,
they are entitled to receive dividends if any are available after
payments to financial lenders and dividends on any preferred shares
are paid. They are also entitled to their share of the residual
economic value of the company should the business unwind.
Hansa Trust has two classes of Ordinary share. The Ordinary (8m
shares) and the 'A' non-voting Ordinary shares (16m shares). Both
have the same financial interest in the underlying assets of the
Company, and receive the same dividend, but differ only in that
only the former shares have voting rights, whereas the latter do
not. They trade separately on the London Stock Exchange, nominally
giving rise to different share prices at any given time.
Premium
When the share price is higher than the Net Asset Value it is
referred to as trading at a premium. The premium is expressed as a
percentage of the Net Asset Value.
Packaged Retail and Insurance-based Investment Product
("PRIIP")
Packaged retail investment and insurance-based products
("PRIIPs") make up a broad category of financial assets that are
regularly provided to consumers in the European Union. The term
PRIIPs, created by the European Commission to regulate the
underlying market, is defined as any product that is manufactured
by the financial services industry, to provide investment
opportunities to retail investors, where the amount repayable is
subject to fluctuation because of exposure to reference values or
the performance of underlying assets not directly purchased by the
retail investor.
Public Limited Company ("PLC")
A Public Limited Company in the UK is a company limited by
shares with an authorised share capital of over GBP50,000.
Shareholders' Funds/Equity Shareholders' Funds
This value equates to the Net Asset Value of the Company. See
Net Asset Value.
Spread
The difference between the Bid and Ask price.
TIDM
Tradable Instrument Display Mnemonics ("TIDM"). A short, unique
code used to identify UK-listed shares. The TIDM code is unique to
each class of share and to each company. It allows the user to
ensure that they are referring to the right share. Previously known
as EPIC.
Total Return
When measuring performance, the actual rate of return of an
investment or a pool of investments over a given evaluation period.
Total return includes interest, capital gains, dividends and
distributions realised over a given period of time.
Total Return - Shareholder
The Total Return to a shareholder is a measure of the
performance of the company's share price over time. It combines
share price appreciation/depreciation and dividends paid to show
the total return to the shareholder expressed as an annualised
percentage.
VIX Index
The VIX, or the CBOE Volatility Index, is a widely used measure
of the implied volatility of the stock market, based on S&P 500
index options. It is calculated and published by the Chicago Board
Options Exchange.
Hansa Trust PLC
50 Curzon Street
London
W1J 7UW
T : +44 (0) 207 647 5750
F : +44 (0) 207 647 5770
E : hansatrustenquiry@hansacap.com
Visit us at
www.hansatrust.com/
Condensed Statement of Changes in Equity
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR URVSRWNAAOAA
(END) Dow Jones Newswires
November 30, 2018 10:23 ET (15:23 GMT)
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