Hansa Trust PLC - Half-year Report

HANSAinvesting to create long-term growth

Half Year Report Six Months Ended 30 September 2018


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

Chairman's Report to the Shareholders


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 .






Net Asset Value




Net Asset Value (Total Return)

(Total divs paid 80p)




September 2013




September 2018











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.






Ordinary Share Price




Ordinary Share Price (total return)

(Total divs paid 80.0p)


Discount: Ordinary Share




'A' Ordinary Share Price




'A' Ordinary Share Price (total return)

(Total divs paid 80.0p)


Discount: 'A' Ordinary Share




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 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.


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

29 November 2018