TIDMHAN TIDMHANA
RNS Number : 4304I
Hansa Trust PLC
09 December 2015
Hansa, investing to create
long--term growth
Half Year Report
Six Months Ended
30 September 2015
Welcome
I'm pleased to present our Half Year Report to the
shareholders.
You will note the pace of change of the portfolio has slowed
somewhat from recent periods, now the new investments are largely
in place. Alec Letchfield outlines his thoughts on the market and
key investments in his Portfolio Manager's Report.
The Company held a well-attended AGM in July following which
Jonathan Davie assumed the role of Chairman of the Audit Committee.
As in previous years, I have noted a couple of the points discussed
at the AGM for those of you who could not attend.
Finally, by the time you receive this Report, you will no doubt
have noted that the first interim dividend of 8.0p per share for
the year to 31 March 2016 was paid on 27 November 2015.
I trust you will find our thoughts on the current market and our
prospects (both short and longer-term) interesting.
Yours sincerely
Alex Hammond-Chambers
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 and any
accompanying Form of Proxy, 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 126107.
Chairman's Report to the Shareholders
Alex Hammond--Chambers
Chairman
The details of our first half year returns are covered by Alec
Letchfield's Portfolio Manager's Report, allowing me to report on
the long-term (five year) returns, which are the Company's stated
goals. So the basic statistics covering the last five years
are:
5 Year Performance to 30 SepT 2015
Sept Sept
2010 2015
Net Asset Value 1,017.80p 1,083.50p +6.5%
--------- --------- ------
Net Asset Value (Total Divs
(total return) Paid: 64.5p) +12.8%
-------------------- ------
Benchmark +18.8%
--------- --------- ------
These returns lag behind our benchmark but they are made up of
two distinct returns within the portfolio - from our holding in
Ocean Wilsons Holdings Ltd ("OWH") and from the rest of the Hansa
Trust portfolio:
Net Asset Value ("NAV") per HT Share
Rest of Portfolio OWH Total NAV
Sept-10 579.4p 438.4p 1,017.8p
----------------- ------- ---------
Sept-15 787.3p 296.2p 1,083.5p
----------------- ------- ---------
Movement +207.9p -142.2p +65.7p
----------------- ------- ---------
+35.9% -32.4% +6.5%
----------------- ------- ---------
The table above shows that the 'Rest of Portfolio' (pre and post
the strategy changes) has fared really rather well.
Shareholders will be very aware of the much publicised political
and economic circumstances in Brazil, which have had a marked
effect on OWH's share price (-32.4% over the five years). The share
price of its Brazilian subsidiary, Wilson Sons, actually rose 10%
over the period in Brazilian Real, but the collapse of the value of
the Brazilian currency turned that increase into a decline of 51%
when expressed in Sterling. That the share price of Wilson Sons
should have risen in value against the huge headwind of the
declining stock market is testament to the progress the company has
made over the last five years, in developing its marine services
business and the high regard in which the company and its
management is held.
Share Prices
Sept 2010 Sept 2015
Ocean Wilsons
(GBP) 1,125.0p 760.0p -32.4%
--------- --------- ------
Wilson Sons (BRL) BRL 26.5 BRL 29.2 +10.1%
--------- --------- ------
Wilson Sons (GBP) 993.0p 487.2p -50.9%
--------- --------- ------
Brazil's BOVESPA
(BRL) 69,429.8 45,059.3 -35.1%
--------- --------- ------
Brazil's BOVESPA
(GBP) 26,007.9 7,517.5 -71.1%
--------- --------- ------
Brazilian Real/GBP BRL 2.670 BRL 5.994 -55.5%
--------- --------- ------
The decline in the value of our holding in Ocean Wilsons has
tended to mask the progress made in the rest of the portfolio.
Shareholders will be aware of the development of our investment
strategy which we undertook in the early part of 2014, which has
now been running for about a year and a half. Alec's report goes
into some detail on it, commenting on the four different investment
silos we have adopted as part of that strategy.
Long-term Share Price Returns
Of course the returns which matter most are those shareholders
experience through their shareholdings - in turn through the share
prices. The table below provides the data concerning the two
classes of shares and their share prices over the period.
5 Year Performance to 30th SepT 2015
Sept Sept
2010 2015
Ordinary Share Price 837.50p 813.80p -2.8%
------- ------- -----
Ordinary Share Price (Total Divs
(total return) Paid: 64.5p) +4.9%
---------------- -----
Discount: Ordinary
Share -17.7% -24.9%
------- ------- -----
"A" Ordinary Share
Price 820.00p 782.50p -4.6%
------- ------- -----
"A" Ordinary Share (Total Divs
Price (total return) Paid: 64.5p) +3.3%
---------------- -----
Discount: "A" Ordinary
Share -19.4% -27.8%
------- ------- -----
These share price return figures are heavily influenced by the
fact that the discount has widened because, we believe, of the
Brazilian factor with which our shares are associated. I comment on
the situation in Brazil below, but I reiterate the point made in
the last Annual Report that "it will take time for Brazil to turn
itself around and re--engage the attention of international
investors, it (a lower discount) will not be realised overnight".
We do believe that, with improvements in the Brazilian story, which
will in time come, the discounts on our shares will narrow.
Interestingly our five year record coincides with this period of
Brazilian difficulties to which I refer overleaf.
Brazil
The difficulties that the politics and economics of Brazil are
encountering are quite well broadcast, if only because of their
severity. The present difficulties, it can be argued, started
towards the end of 2011 and the beginning of 2012 when the price of
commodities around the world started to fall and the value of the
US Dollar started to rise. Brazil's BOVESPA peaked at circa
BRL73,000 towards the end of 2010 (BRL45,000 at the end of
September 2015); the Real was circa BRL1.70 per US Dollar (BRL3.96
at the end of September 2015) and many of the important commodities
peaked in the first half of 2011 - iron ore, for instance, Brazil's
biggest commodity export, peaked in February 2011 at circa $190 per
ton (circa $55 per ton at the end of September 2015). Gradually,
over the period, the external economics of Brazil deteriorated
(notwithstanding the significant decline in the value of the Real,
the benefits of which take time to take effect). Brazil now needs a
strong government to get the country's finances back in order and
on the path to a sustainable recovery.
Meanwhile Wilson Sons has continued to prosper and is well set
to enjoy the benefits of the large investment programme it
undertook during recent years.
DIVIDEND
Shareholders will now be familiar with our new dividend policy
which is to declare at the beginning of the Company's fiscal year
and subsequently pay two interim dividends - in the case of this
fiscal year each of 8p per share, making a total of 16p for the
year as a whole. On 20 October 2015, we formerly declared the first
interim dividend of 8p, payable on 27 November 2015.
The Annual General Meeting (16 July 2015)
Shareholders will be familiar with the practice that we have
adopted of highlighting one or two of the important questions
raised at each year's Annual General Meeting - with our responses
to them. There were two I would like to highlight in this
statement:
(MORE TO FOLLOW) Dow Jones Newswires
December 09, 2015 02:00 ET (07:00 GMT)
-- Following Alec Letchfield's presentation on the portfolio and
its prospects, he was asked about the criteria he used in selecting
funds for investment and whether the liquidity of the subsequent
holding was a material consideration. Over and above the objective
of making investments in funds that our shareholders could not
easily make for themselves (and in some cases not at all), he
responded that he looked for an alignment of interest between the
manager of the fund in question and the fund itself (usually being
an investment by the manager in the fund), good stock picking
processes and disciplines and an appropriate structure of the fund
in relation to its investment objective. He stated he did not have
any overriding rules about the liquidity of investments in funds,
but rather treated each investment on a case by case basis. One of
the advantages of managing a closed ended fund - such as that of an
investment trust - is that the liquidity of the portfolio's
holdings is not an important priority.
-- The second question addressed to the Board, concerned the
validity of continuing to hold the large investment in Wilson Sons,
through Ocean Wilsons, given the difficulties occurring in Brazil.
It was noted that Wilson Sons was a well-managed company with
excellent prospects (the primary criteria for making any equity
investment) which was the reason the investment in that business
had made us a lot of money in the past. It was also pointed out
that the Board wished to keep a strategic investment in Ocean
Wilsons so Hansa Trust would be consulted should there ever be the
prospect of the sale of the company. Further, it was also noted
there had been times in the past when there were difficulties in
Brazil and when it would have been tempting to sell the Ocean
Wilsons holding but that, by not selling in difficult times, Hansa
Trust had benefitted from huge gains in the share price in better
times. The Board felt Wilson Sons was well positioned to take
advantage of the government's requirement for local (Brazilian)
involvement in marine services.
Longer-Term Prospects
It seems the world economy (in which we have - selectively
chosen - some exposure) is in the doldrums. Nobody seems to know -
with any great degree of assurance - quite which way it is drifting
- into a period of stag-deflation (to coin a rather ugly phrase!),
recession, or even rather higher inflation. With the first two
comes a continuation of quantitative easing, ultra-low interest
rates and, quite possibly, continuing buoyant securities markets -
as investors chase the income that interest rates no longer afford.
Stock markets are driven by money and confidence and, as long as
the money is there and there is confidence that the patient (the
post 2008/9 global economy) is making an albeit slow recovery
towards better times, markets will continue to perform well - as
they have done since the nadir of the early months of 2009.
The pluses are that (rather perversely) the slow global economic
growth would appear to prolong ultra-low interest rates, corporate
balance sheets are strong, profits are buoyant (albeit with one or
two problem areas - mining and oil for instance) and margins are
high. As long as this continues, the prospects for dividends and
dividend growth (a very important prop for equity markets) remain
good and the demand for equities likewise.
But there are clouds on the horizon - global debt continues to
grow and grow, some emerging market economies and their
international indebtedness are causes for concern, politics is
throwing up some strange bedfellows (particularly because of the
division caused by - perceived or otherwise - growing financial
inequality), mass immigration problems, growing concern about
cybercrime and the uncertainty of the politics of Russia and the
economics of China. Then there are the black swans which appear out
of left field, which are bemusing and worrying (Volkswagen's diesel
engine emissions scandal being the latest such event). Anyone of
them can have an effect on confidence - one of the two drivers to
markets levels I mentioned above.
And thirdly there is - what appears to be unlikely at the moment
but which can appear quite suddenly and as unexpectedly - the
possibility of rather more than mild inflation. It can literally
erupt. It would mean much higher interest rates quite quickly and
almost certainly lead to a material reverse in the value of
financial markets. Fortunately, at this time, it seems to be a
lesser possibility.
Investing in such uncertain circumstances is not easy. But in
the end though, successful long-term equity investment is all about
backing good companies/funds run by able and honest people. Our
success in our investment in Wilson Sons is just such an example of
backing good management over a long time. The rest of the portfolio
stands up to the same scrutiny which makes your Board optimistic of
long-term success, without being certain of short--term
fluctuations.
Alex Hammond--Chambers
Chairman
27 November 2015
Half Year Management Report
The Directors present their Report and Condensed Financial
Statements for the six months to 30 September 2015.
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 and on our
website.
Alex Hammond-Chambers (Chairman of the Board), Jonathan Davie
(Chairman of Audit Committee), Raymond Oxford, William Salomon and
Geoffrey Wood.
BUSINESS REVIEW FOR THE SIX MONTHS TO 30 SEPTEMBER 2015
The business review, which includes an indication of important
events which have occurred within the six months to 30 September
2015, are covered in the Chairman's Report to the Shareholders and
the Portfolio Manager's Report.
KEY RISKS FOR THE FINANCIAL YEAR TO 31 MARCH 2016
The key risks and uncertainties relating to the six months ended
30 September 2015 and for the year to 31 March 2016 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 2016
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.
RELATED PARTY TRANSACTIONS
During the period, Hansa Capital Partners LLP charged portfolio
management fees and company secretarial fees to the Company,
amounting to GBP1,031,000, excluding VAT (year to 31 March 2015:
GBP1,968,000). Amounts outstanding at 30 September 2015 were
GBP164,000 (31 March 2015: GBP173,500).
THE BOARD'S RESPONSIBILITIES
The Board is charged by the shareholders with the 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 Interim Management Report including the Responsibility
Statement was approved by the Board on 27 November 2015 and was
signed on its behalf by:
Alex Hammond-Chambers
Chairman
27 November 2015
Portfolio Manager's Report -
Seeing the wood for the trees
One of the most challenging and vital aspects of fund management
is separating the truly important events from the background noise.
As a fund manager, so often one becomes caught up in the day-to-day
machinations of the market, scrutinising company profit
announcements, waiting with bated breath for the next piece of
macro data and so on. In reality this is almost always
counter-productive, leading to excessive dealing, incurring high
transaction charges and hindering one's ability to spot the really
important factors. We try not to do this at Hansa. Rather, it is
most often best to ignore the short-term noise, turn off the
Bloomberg terminal if necessary and resist the urge to trade the
markets.
What is necessary, however, is to identify major inflection
points, where it is right to re--assess one's positioning and
adjust portfolios accordingly. Typically, this would be the
recognition of a coming bear market, or a supercycle beginning or
indeed ending. Correctly identifying these is challenging but
worthwhile, since the resulting asset allocation calls are the main
drivers of investment performance and are far more influential than
the outcomes of individual stocks or funds.
With this approach in mind, we consider the events of the
summer. Stock markets have been through a torrid time. In equity
markets, the MSCI World fell 5.0% during the quarter and 10.0% over
the six month period. Within this, the US, Europe and UK fell by
3.3%, 5.2% and 6.6% respectively, over three months and by 8.6%,
10.2% and 9.2% over six months. Other asset classes have not
escaped the weakness over the quarter, with oil down 21.2%, copper
by 7.2% and local currency emerging market debt by 7.1%.
Naturally we ask ourselves whether this is just a summer lull,
exacerbated by a lack of liquidity and sovereign wealth fund
selling, or if the market is signalling that something more
important is afoot and a change in strategy is required?
(MORE TO FOLLOW) Dow Jones Newswires
December 09, 2015 02:00 ET (07:00 GMT)
On the face of it there appears to be good reason for concern
with two of the most important market drivers, China and US
interest rates, experiencing important changes.
China, which has been one of the main drivers of global growth
over the past decade, is wobbling. In truth, the Chinese economy
has been experiencing a lower growth rate for some while now,
coming down from over 10% to 7%, according to official numbers.
There is a sense, however, that having expanded too quickly and
invested too heavily, growth could go into freefall. The Chinese
government has recognised this and is attempting to manage a
transition from an export driven economy to a service and consumer
led one. However, such shifts rarely happen seamlessly and its
efforts may be both too little and too late. Recent decisions to
weaken the exchange rate and artificially prop-up the stock market
only serve to fuel the belief that the situation is out of
control.
The other concern is that of a change in direction in US
interest rates. A feature of markets in recent years has been the
persistent use of liquidity in the face of economic and stock
market weakness. Undoubtedly this policy has boosted global stock
markets, as money works its way through the system in pursuit of
higher returns and income, albeit its impact on growth and lending
seems to be diminishing. Naturally, with the US nearing a turning
point in its rate cycle, and with US rates forming the basis for
the global risk free rate, there is a fear that stock markets will
decline in the face of such a change.
Exacerbating this situation is the current market backdrop. Much
like a chemical reaction, where conditions need to be optimal to
see a really explosive effect, stock markets are at their most
vulnerable at particular points in the cycle. Typically at the
start of the cycle when valuations are low and fear is high,
markets can tolerate numerous shocks and disappointments. However,
as the cycle matures and valuations rise, the ability for markets
to shake off disappointments diminishes. In the current situation,
with the maturing cycle showing high, albeit not excessive,
valuations and with markets not having experienced a meaningful
pull-back for some while now, share prices are particularly
susceptible to negative news flow.
Whether these conditions herald the next bear market is likely
to depend on the economic outlook, since true bear markets
typically go hand-in-hand with recessions. Currently, a recession
in the developed world, which continues to dominate global stock
markets, does not appear likely. Growth is undoubtedly lacklustre
but nonetheless positive. The US and UK lead the way with their
cycles being more advanced and growth more robust, but even Europe
is seeing positive signs of a recovery in growth from depressed
levels.
The outlook for emerging markets is less clear. With Chinese
growth falling and many commodity-exporting emerging nations under
pressure in the face of weakening commodity prices, prospects for
their economies and stock markets remain challenging. To a large
degree this is captured in current valuations, which are now
significantly below most developed markets. Unfortunately these
situations have a habit of persisting for longer than one expects,
and typically prior excesses lead to prices over-shooting on the
downside.
The concern has been that this slow-down in emerging markets
causes a recession in developed markets. Back in 1998, when many
emerging markets experienced a sharp decline in their growth,
developed markets escaped relatively unscathed. With emerging
markets now much larger, however, and with global trade now far
more interconnected, the danger of weakness in emerging markets
rippling through to developed markets is greater. Our sense at this
point is that whilst any emerging market weakness will weigh on
developed market growth, it will not push them into recession.
Partly this reflects the fact that most developed markets are
commodity importers and are the beneficiaries of weak commodity
prices. Also, since many emerging markets are net exporters, they
are not key sources of demand for developed markets and hence their
impact is more muted.
Taking into account all these factors, we conclude that the
markets have probably experienced a summer lull, albeit a
particularly severe one. We acknowledge that the uncertainty in the
global economy, combined with the slowdown in China and the
anticipated rate rising cycle in the US, are likely to contribute
to ongoing bouts of volatility. However, we are not making
significant changes to our strategy, although we are looking to add
less correlated investments in order to help protect against market
draw--downs.
Portfolio Review and Activity
During this challenging period for markets, your Company's NAV
has returned -4.1% on a total return basis over the six month
period to the end of September, with the NAV falling from 1,138.6p
per share to 1,091.4p per share (again, on a total return basis
including the dividend of 8.0p per share paid in the period).
Excluding the Brazil-focused Ocean Wilsons Holdings the Company's
NAV has returned -3.6%. This compares to a return of 1.7% for the
benchmark, which is absolute in nature, and -11.0% for the MSCI All
Country World Index. Underlying contributors to this performance
are discussed in the silo review below.
Activity levels have been modest over the period, reflecting the
fact that most of the changes post the strategic review have now
been made. In the second quarter we sold JO Hambro Japan and
purchased the Lyxor Nikkei 400 ETF, a passive fund that tracks the
new Japanese index focusing on those companies with good
shareholder returns and corporate governance. We also purchased
Indus Japan Long Only, an active Japanese fund with a focus on
larger capitalisation stocks and added to our position in Goodhart
Hanjo Japan following a positive update with the manager.
We also purchased the Global Event Partners Fund managed by
BlackRock, reflecting our desire to start adding less correlated
investments, which will provide us with some protection from
falling markets as the stock market cycle matures.
Core/Regional funds
As would be expected, the Core/Regional silo saw a wide range of
returns over the past six months. Pleasingly our two hedge funds
produced robust returns with BlackRock European Hedge rising by
12.9% and CF Odey UK Absolute Return by 6.1%. The manager of the
BlackRock European Hedge fund, Alister Hibbert, has managed risk
well, reducing his overall exposure to markets and has also made
money by being short a number of names in the commodity sector. We
feel we have the great advantage of having access to some of the
world's best fund managers, which provides us insight into their
thoughts on markets. Our discussions with Alister Hibbert reinforce
our macro view, as he argues China is unlikely to derail the
domestic recovery in Europe, whilst acknowledging that we remain in
a low growth world.
Your Company's exposures to Asian and emerging markets have
unsurprisingly been under pressure, with Schroder ISF Asian Total
Return, Prince Street Institutional and NTAsian Discovery down by
12.5%, 14.8% and 23.4% respectively over the past half year. The
combined exposure to the latter two is relatively modest at just 2%
of portfolio assets, whilst the weighting in Schroder Asian, which
actively manages its risk levels, is higher at 2.3%.
Eclectic and Diversifying funds
The Eclectic and Diversifying silo also saw a spread of returns
over the past six months. DV4, our property investment, returned an
excellent 9.3% whereas our technology fund, GAM Star Technology and
JLP Credit Opportunity fell by 14.6% and 15.3%, respectively. JLP
is a fund which invests in stressed credit that typically comes
under pressure at the very end of a cycle, as recession nears and
defaults start to rise. This is not what we envisage in the
near--term and we suspect the recent underperformance partly
reflects the low liquidity in the sector owing to regulatory
restrictions on banks. As coupons are paid and bonds are redeemed
we would expect significant value to be realised.
UK Equities
Our largest holding, NCC Group (Mkt Cap GBP630m), was purchased
at IPO in 2004 and is fundamentally a services business, with the
world's largest team of highly skilled testers or "ethical hackers"
who find vulnerabilities in companies' cyber defences, offering an
almost unique way to play the cybersecurity theme in the UK. The
firm's Domain Services proposition is an internally funded start-up
which is still evolving towards a higher proportion of consultancy
type revenues, as it aims to create a safe corner of the internet.
The original Escrow division remains the cornerstone of the group
and is highly cash generative, storing software source code for
critical applications, to ensure business continuity should a
software vendor fail. The dividend has been increased at a compound
rate of 25% pa since the company floated in 2004.
While on the subject of cybersecurity, Experian (Mkt Cap
GBP10.6bn), now the only FTSE 100 holding left in the portfolio,
recently announced that its North American business experienced an
unauthorised acquisition of information from a server that
contained data, on behalf of one of its clients (T-Mobile, USA,
Inc), on approximately 15 million consumers in the US. While
regrettable, similar instances are unfortunately commonplace in
such businesses and importantly the breach did not involve payment
card numbers or banking information.
(MORE TO FOLLOW) Dow Jones Newswires
December 09, 2015 02:00 ET (07:00 GMT)
Hansteen Holdings (Mkt Cap GBP885m) invests primarily in
industrial properties in the UK and Europe, focusing on properties
with the potential for high yields and opportunities for value
improvement. The portfolio is diversified in terms of country and
tenant type and is weighted 50% in Germany, 28% in the UK and 22%
in Northern Europe. It is managed on a very hands-on basis via a
platform of 16 regional offices. Since inception, Hansteen has
delivered strong NAV returns alongside an attractive and growing
dividend. Owing to the increasingly strong occupier and investment
demand within the market, this is expected to continue.
UBM (Mkt Cap GBP2.3bn), a leading global marketing services and
communications company, whose primary focus is events, has
confirmed it is in discussions with a number of parties about a
potential sale of its PR Newswire business, which would turn UBM
into a fully-focused events business which could drive a re-rating
of its shares.
Ocean Wilsons Holdings
The second quarter results for Wilson Sons, which were released
in August, showed a strong rise in EBITDA of 37.8% from the
previous year. This was despite the continuing weak macroeconomic
picture in Brazil. During the year, the Wilson Sons' share price,
in Brazilian Real terms, has increased 4.2% from BRL28.3 to
BRL29.5, at a time when the BOVESPA has weakened by 11.9%. The
resilience of the company's logistics and maritime operations is
encouraging and demonstrates the benefits of the company's
diversity.
Revenues in Container Terminals continue to be pressured, down
18.1% from the previous year, but there are signs that agricultural
exports through the terminals are picking up, helped by the weak
Real. Meanwhile, Towage revenues improved 3.9%, owing to increases
in harbour manoeuvres and special operations during the quarter.
Growth in harbour manoeuvres was mainly driven by new port
operations in the state of Pará, while the expanding special
operations helped contribute to an increased EBITDA margin of 44.6%
in the segment.
The portfolio of Ocean Wilsons Investments, the subsidiary of
OWH, was valued at $248.5m at the end of June 2015, which was down
slightly from $251.7m at the end of December 2014. The decline was
primarily due to $7.0m of dividends paid in the period, principally
to fund the 2014 final dividend payment to shareholders of OWH. The
time-weighted, gross--of-fees, performance over this six month
period was 2.2%.
In the third quarter, the share price of OWH fell by 14.8% (in
Pound Sterling terms), meaning it is down 11.0% over the first six
months of our company's financial year, and down 7.0% with
dividends reinvested. The share price represents a discount to the
look-through NAV of 26.1%, based on the market value of the Wilson
Sons' shares together with the latest valuation of the investment
portfolio.
Company share performance and discount
During the six months to September 2015, the Ordinary and 'A'
non-voting Ordinary share prices fell by 46.2p and 45.0p
respectively - both approximately 5.4% of their values at 31 March
2015. Whilst this is partly a reflection of the wider market
malaise during this time (the MSCI All Countries World Index fell
11.9% during this period), it is mainly the impact of the falling
value of OWH on the portfolio which, as noted above, has suffered
due to the weakening Brazilian Real and fallen by 10.2% in Sterling
terms or c.33p per Hansa share.
During this period, the discount of both share classes has
remained fairly constant (Ordinary: 24.9%; 'A' non-voting Ordinary:
27.8%). We believe that a key reason for the ongoing discount is
the continuing market uncertainly over the Brazilian economy.
Summary
The current market setback represents one of the most
significant tests since we began the long road to recovery post the
Great Financial Crisis, matched only by the Euro crisis of 2011. As
discussed above, we do not believe this heralds the next recession
and bear market in the developed economies, but it is a situation
we will monitor closely. However, we do expect to see ongoing
volatility as the slowdown in China and other emerging markets
plays out.
We remain encouraged by the progress of your portfolio, which
whilst not delivering positive returns over the past few months,
has significantly outperformed global equity markets. The vast
majority of the strategic changes have now been made such that we
have a blend of both direct UK equities and complementary
world-class funds. Undoubtedly our investment in Wilson Sons, via
the holding in Ocean Wilsons Holdings, is weighing on sentiment but
we remain of the view this is an excellent company that will emerge
from the crisis in Brazil as a stronger and even more successful
entity. Furthermore, at just 15% of the Hansa Trust assets, and
with the Trust standing on a 26% discount to NAV, you could argue
you are getting this great company for free!
Alec Letchfield
Hansa Capital Partners LLP
October 2015
Portfolio Statement
as at 30 September 2015
Investments Fair value Percentage of
GBP000 Net Assets
UK Equity
---------- -------------
NCC Group PLC 14,385 5.5
---------- -------------
Hansteen Holdings PLC 8,608 3.3
---------- -------------
Galliford Try PLC 8,297 3.2
---------- -------------
UBM PLC 7,859 3.0
---------- -------------
Experian PLC 5,444 2.1
---------- -------------
Great Portland Estates PLC 5,127 2.0
---------- -------------
Cape PLC 4,112 1.6
---------- -------------
Brooks Macdonald Group PLC 3,418 1.3
---------- -------------
Goals Soccer Centres PLC 3,359 1.3
---------- -------------
Hargreaves Services PLC 2,368 0.9
---------- -------------
Hilton Food Group PLC 1,661 0.6
---------- -------------
Cairn Energy PLC 743 0.3
---------- -------------
Petroceltic International PLC 453 0.2
---------- -------------
Immupharma PLC 400 0.2
---------- -------------
Altitude Group PLC 330 0.1
---------- -------------
Seven other investments 448 0.2
---------- -------------
Total UK Equity 67,012 25.8
---------- -------------
Strategic
---------- -------------
Wilson Sons (through our holding in Ocean Wilsons
Holdings) * 39,222 15.1
---------- -------------
Total Strategic 39,222 15.1
---------- -------------
Core Regional Funds
---------- -------------
Findlay Park American Fund 11,700 4.5
---------- -------------
Adelphi European Select Equity Fund Class F 8,656 3.3
---------- -------------
Select Equity Offshore Ltd Class D 7,636 2.9
---------- -------------
Goodhart Partners Longitude Fund: Hanjo Fund 7,429 2.9
---------- -------------
Vulcan Value Equity Fund 7,308 2.8
---------- -------------
Indus Japan Long Only Fund 6,281 2.4
---------- -------------
CF Odey UK Absolute Return Fund Class I 5,976 2.3
---------- -------------
Schroder ISF Asian Total Return Fund Class
D 5,863 2.3
---------- -------------
BlackRock European Hedge Fund Class I 4,900 1.9
---------- -------------
Pershing Square Holdings 4,687 1.8
---------- -------------
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Vanguard FTSE Developed Europe ex UK Equity
Index 3,659 1.4
---------- -------------
Lyxor UCITS ETF JPX - Nikkei 400 3,581 1.4
---------- -------------
Prince Street Institutional Offshore Ltd 3,314 1.3
---------- -------------
NTAsian Discovery Fund Classes A & B 2,013 0.8
---------- -------------
Total Core Regional Funds 83,003 32.0
---------- -------------
Eclectic & Diversifying Assets
---------- -------------
Ocean Wilsons Investments (through our holding
in Ocean Wilsons Holdings) * 31,859 12.3
---------- -------------
DV4 Ltd 11,837 4.5
---------- -------------
GAM Star Technology Fund 8,888 3.4
---------- -------------
Global Event Partners Ltd Class F 7,937 3.0
---------- -------------
JLP Credit Opportunity Cayman Fund 4,026 1.5
---------- -------------
Total Eclectic & Diversifying Assets 64,547 24.7
---------- -------------
Total Investments 286,829 97.6
---------- -------------
Net current assets/(liabilities) 6,251 2.4
---------- -------------
Net Assets 260,035 100.0
---------- -------------
*Hansa Trust owns 9,352,770 shares in Ocean Wilsons Holdings
Limited ("OWH"). In order to reflect better Hansa Trust's exposure
to different market silos, the two subsidiaries of OWH, Wilson Sons
and Ocean Wilsons (Investments) Ltd ("OWIL") are shown separately
above. The fair value of Hansa Trust's holding in OWH 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 2015 OWH accounts, to the market value of OWH's holding in
Wilson Sons, that being the bid share price of Wilson Sons
multiplied by the number of shares held by OWH at 30 September
2015.
Financial Statements
Condensed Group Income Statement
For the six months ended 30 September 2015
(Unaudited) (Unaudited) (Unaudited)
Six months ended Six months ended Year ended
30 September 2015 30 September 2014 31 March 2015
Revenue Capital Total Revenue Capital Revenue Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------- -------- -------- ------- ------- ------- ------- -------- --------
Losses on investments
held at fair value - (14,963) (14,963) - (1,020) (1,020) - (12,707) (12,707)
------- -------- -------- ------- ------- ------- ------- -------- --------
Exchange losses on
currency balances - (13) (13) - (32) (32) - (12) (12)
------- -------- -------- ------- ------- ------- ------- -------- --------
Investment income 5,143 - 5,143 5,405 - 5,405 6,302 - 6,302
------- -------- -------- ------- ------- ------- ------- -------- --------
5,143 (14,976) (9,833) 5,405 (1,052) 4,353 6,302 (12,719) (6,417)
------- -------- -------- ------- ------- ------- ------- -------- --------
Investment management
fees (981) - (981) (935) - (935) (1,868) - (1,868)
------- -------- -------- ------- ------- ------- ------- -------- --------
Other expenses (523) - (523) (527) - (527) (1,274) - (1,274)
------- -------- -------- ------- ------- ------- ------- -------- --------
(1,504) - (1,504) (1,462) - (1,462) (3,142) - (3,142)
------- -------- -------- ------- ------- ------- ------- -------- --------
Profit/(Losses) before
finance costs and
taxation 3,639 (14,976) (11,337) 3,943 (1,052) 2,891 3,160 (12,719) (9,559)
------- -------- -------- ------- ------- ------- ------- -------- --------
Finance costs - - - (5) - (5) (7) - (7)
------- -------- -------- ------- ------- ------- ------- -------- --------
Profit before taxation 3,639 (14,976) (11,337) 3,938 (1,052) 2,886 3,153 (12,719) (9,566)
------- -------- -------- ------- ------- ------- ------- -------- --------
Taxation - - - - - - - - -
------- -------- -------- ------- ------- ------- ------- -------- --------
Profit for the period 3,639 (14,976) (11,337) 3,938 (1,052) 2,886 3,153 (12,719) (9,566)
------- -------- -------- ------- ------- ------- ------- -------- --------
Return per Ordinary
and 'A' non-voting
Ordinary share 15.2p (62.4)p (47.2)p 16.4p (4.4)p 12.0p 13.1p (53.0)p (39.9)p
------- -------- -------- ------- ------- ------- ------- -------- --------
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 Group's Income
Statement, prepared in accordance with IFRS. 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 Statement of Changes in Equity
For the six months ended 30 September 2015
(Unaudited)
Capital
Share redemption Retained
capital reserve earnings Total
GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2015 1,200 300 271,792 273,292
-------- ----------- --------- --------
Losses for the period - - (11,337) (11,337)
-------- ----------- --------- --------
Dividends - - (1,920) (1,920)
-------- ----------- --------- --------
Net assets at 30 September 2015 1,200 300 258,535 260,035
-------- ----------- --------- --------
Condensed Statement of Changes in Equity
For the six months ended 30 September 2014
(Unaudited)
Capital
Share redemption Retained
capital reserve earnings Total
GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2014 1,200 300 285,913 287,413
-------- ----------- --------- -------
Gains for the period - - 2,886 2,886
-------- ----------- --------- -------
Dividends - - (2,640) (2,640)
-------- ----------- --------- -------
Net assets at 30 September 2014 1,200 300 286,159 287,659
-------- ----------- --------- -------
Condensed Statement of Changes in Equity
For the year ended 31 March 2015
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(Audited)
Capital
Share redemption Retained
capital reserve earnings Total
GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2014 1,200 300 285,913 287,413
-------- ----------- --------- -------
Losses for the period - - (9,566) (9,566)
-------- ----------- --------- -------
Dividends - - (4,555) (4,555)
-------- ----------- --------- -------
Net assets at 31 March 2015 1,200 300 271,792 273,292
-------- ----------- --------- -------
Condensed Group Balance Sheet
as at 30 September 2015
(Unaudited) (Unaudited) (Audited)
30 September 30 September 31 March
2015 2014 2015
GBP000 GBP000 GBP000
Non-current assets
-------------- -------------- ----------
Investments held at fair value through profit
or loss 253,784 280,969 255,264
-------------- -------------- ----------
253,784 280,969 255,264
-------------- -------------- ----------
Current assets
-------------- -------------- ----------
Trade and other receivables 377 9,302 9,358
-------------- -------------- ----------
Cash and cash equivalents 6,174 750 9,039
-------------- -------------- ----------
6,551 10,052 18,397
-------------- -------------- ----------
Current liabilities
-------------- -------------- ----------
Trade and other payables (300) (3,362) (369)
-------------- -------------- ----------
Net current assets 6,251 6,690 18,028
-------------- -------------- ----------
Net assets 260,035 287,659 273,292
-------------- -------------- ----------
Capital and reserves
-------------- -------------- ----------
Called up share capital 1,200 1,200 1,200
-------------- -------------- ----------
Capital redemption reserve 300 300 300
-------------- -------------- ----------
Retained earnings 258,535 286,159 271,792
-------------- -------------- ----------
Total equity shareholders' funds 260,035 287,659 273,292
-------------- -------------- ----------
Net asset value per Ordinary and 'A' non-voting
Ordinary share 1,083.4p 1,198.5p 1,138.6p
-------------- -------------- ----------
Condensed Cash Flow Statement
For the six months ended 30 September 2015
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2015 2014 2015
GBP000 GBP000 GBP000
Cash flows from operating activities
------------- ------------- ---------
(Loss)/Gain before finance costs and taxation (11,337) 2,891 (9,559)
------------- ------------- ---------
Adjustments for:
------------- ------------- ---------
Realised gains on investments (2,427) (5,480) (10,803)
------------- ------------- ---------
Unrealised losses on investments 17,390 6,500 23,510
------------- ------------- ---------
Effect of foreign exchange rate changes 13 32 12
------------- ------------- ---------
(Increase)/decrease in trade and other receivables (191) (2,393) 3,487
------------- ------------- ---------
(Decrease)/increase in trade and
------------- ------------- ---------
other payables (69) (19) 88
------------- ------------- ---------
Taxes paid - - -
------------- ------------- ---------
Purchase of non - current investments (27,725) (67,566) (82,976)
------------- ------------- ---------
Sale of non - current investments 23,414 53,112 76,604
------------- ------------- ---------
Net cash (outflow)/inflow from operating activities (932) (12,923) 363
------------- ------------- ---------
Cash flows from financing activities
------------- ------------- ---------
Interest paid on bank loans - (5) (7)
------------- ------------- ---------
Dividends paid (1,920) (2,640) (4,555)
------------- ------------- ---------
Drawdown of loans - 3,100 -
------------- ------------- ---------
Net cash outflow/(inflow) from financing activities (1,920) 455 (4,562)
------------- ------------- ---------
Decrease in cash and cash equivalents (2,852) (12,468) (4,199)
------------- ------------- ---------
Cash and cash equivalents at beginning of period 9,039 13,250 13,250
------------- ------------- ---------
Effect of foreign exchange rate changes (13) (32) (12)
------------- ------------- ---------
Cash and cash equivalents at end of period 6,174 750 9,039
------------- ------------- ---------
Notes to the Condensed Financial Statements
1. ACCOUNTING POLICIES
The Financial Statements of the Group have been prepared under
the historical cost convention, except for the measurement at fair
value of investment, 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 Group and Company's Annual
Report and Accounts at 31 March 2015.
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These Financial Statements are presented in Sterling, the
currency of the primary economic environment in which the Group
operates.
2 INCOME
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2015 2014 2015
GBP000 GBP000 GBP000
Income from quoted investments
------------- ------------- ---------
UK dividends 1,083 1,553 2,428
------------- ------------- ---------
Overseas and other dividends 3,924 3,811 3,737
------------- ------------- ---------
Property income distributions 133 41 137
------------- ------------- ---------
5,140 5,405 6,302
------------- ------------- ---------
Other income
------------- ------------- ---------
Interest receivable on AAA rated money market
funds 3 - -
------------- ------------- ---------
Total income 5,143 5,405 6,302
------------- ------------- ---------
3 DIVIDENDS PAID
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2015 2014 2015
GBP000 GBP000 GBP000
Final dividend for 2015: 0.0p (2014: 11.0p) - 2,640 2,640
------------- ------------- ---------
Second interim dividend for 2015 (paid May 2015):
8.0p (2014: 0.0p) 1,920 - -
------------- ------------- ---------
First interim dividend for 2015 (paid November
2014): 8.0p - - 1,920
------------- ------------- ---------
Unclaimed dividends refunded - - (5)
------------- ------------- ---------
4,555
------------- ------------- ---------
Note: The first interim dividend for 2016, payable in November
2015 will be 8.0p per share (2015, paid November 2014: 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
Pence Pence Pence
Period GBP000 per share GBP000 per share GBP000 per share
---------- -------- ---------- -------- ----------
Six months ended 30 September
2015 (Unaudited) 3,639 15.2 (14,976) (62.4) (11,337) (47.2)
----- ---------- -------- ---------- -------- ----------
Six months ended 30 September
2014 (Unaudited) 3,938 16.4 (1,052) (4.4) 2,886 12.0
----- ---------- -------- ---------- -------- ----------
Year ended 31 March 2015 (Audited) 3,153 13.1 (12,719) (53.0) (9,566) (39.9)
----- ---------- -------- ---------- -------- ----------
5 FINANCIAL INFORMATION
The financial information contained in this Half Year Report is
not 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 2015, and 30 September 2014 are not for a
full financial year, have not been audited or reviewed by the
Auditors and have been prepared in accordance with accounting
policies consistent with those set out in the Annual Report and
Accounts for the year ended 31 March 2015.
The statutory accounts for the financial year ended 31 March
2015 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 Auditors 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 the Board of
Directors on 27 November 2015.
6 NET ASSET VALUE PER SHARE
The Net Asset Value per share is based on the net assets
attributable to equity shareholders of GBP260,035,000 (30 September
2014: GBP287,659,000; 31 March 2015: GBP273,292,000) and on
24,000,000 shares, being the number of shares in issue at the
period ends.
7 COMMITMENTS AND CONTINGENCIES
The Company has a commitment to DV4 Ltd, an unquoted property
investment company. As of 7 March 2015, the investment period for
DV4 ended. Under the commitment agreement, this allows DV4 to call
the remaining outstanding amount of the original commitment but
only for existing projects for a period of two years, or for the
payment of expenses and liabilities of DV4. As at 30 September
2015, the Company's undrawn commitment was GBP702,372 and the
interest free loan referred to in past reports had been fully
repaid (30 September 2014: undrawn commitment GBP1,296,227; loan
GBP1,162,880). The holding in DV4 is held at a current valuation of
GBP11,837,000 (2014: GBP9,120,000).
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 their returns are those that can
severely influence the investment environment within which the
Company operates: including government policies, economic
recession, declining corporate profitability, rising inflation and
interest rates and excessive stock market speculation. Internal and
operational risks to shareholders and 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 2015. 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 assets 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 2015 Level Level Level Total
1 2 3 GBP000
GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
------- ------- ------- -------
Quoted equities 142,780 - - 142,780
------- ------- ------- -------
Unquoted equities - - 11,837 11,837
------- ------- ------- -------
Fund investments - 99,167 - 99,167
------- ------- ------- -------
Net fair value 142,780 99,167 11,837 253,784
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