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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hansa Investment Company Limited | LSE:HAN | London | Ordinary Share | BMG428941162 | ORD 1P (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.00 | -0.94% | 210.00 | 196.00 | 224.00 | 208.00 | 208.00 | 208.00 | 14,581 | 16:35:22 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | -7.71M | -12.06M | -0.1005 | -20.70 | 249.6M |
From Apr 2019 to Apr 2024
TIDMHAN
RNS Number : 9407I
Hansa Trust PLC
22 June 2017
Hansa, investing to create
long-term growth
Annual Report
For the year ended 2017
31 March 2017
Welcome
Welcome to the Hansa Trust PLC Annual Report for the year to 31 March 2017.
Your Company has had a rather better year, as the prospects for Brazil and its economy improved to the benefit of our investment in Ocean Wilsons. Elsewhere in the portfolio there was encouraging progress. Details of both can be found within the sections of the Strategic Report.
I would also like to take this opportunity, on behalf of the Board, to invite you to the Company's Annual General Meeting at 11.00am on 28 July 2017 at The Washington Mayfair Hotel in London. We value the feedback we receive from all shareholders and look forward to meeting you at the AGM.
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 under the Financial Services and Markets Act 2000 if in the UK, 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 00126107.
Long-Term Highlights 2017
Rolling Five Year NAV Returns (per annum)
It is the goal of the Company to make money for shareholders on a long-term basis (five years). The Board monitors the five year NAV returns as the primary achievement of Trust's goal.
Share price record
Approximate Attribution Ordinary Shares of Shareholders' 1 Yr Returns Due to NAV change +148p +20% Due to discount change -12p -2% Dividends +16p +2% Shareholders' Return +153p +21% Approximate Attribution Ordinary Shares of Shareholders' 5 Yrs' Returns Due to NAV change +133p +15% Due to discount change -171p -19% Dividends +79p +9% Shareholders' Return +41p +4%
The tables show the contribution of the rising NAV offset by a rising discount, due we believe to the association with Brazil of the holding in Ocean Wilsons and its Brazilian subsidiary, Wilson Sons.
The Board is cautiously optimistic that the politics of Brazil are improving, thereby enhancing the prospects for Wilson Sons over the longer-term.
Dividend Payments (total payments over five years*)
The Dividend Policy can be found in the Organisation and Objectives section of this annual report and on the Company's website. It can be summarised as the declaration at the beginning of the year of two equal dividends, one paid in November and the other in May.
* Based on dividends attributable to their respective financial years.
Long-term (5yr) record
Hot Features
Premium
31 31 Capital Total
March March Return Return
2012 2017
NAV 1,117.5p 1,281.2p +14.6% +23.3%
NAV (Ocean
Wilsons Holdings
Ltd) 659.6p 887.6p +34.6%
Ocean Wilsons
Holdings
per Hansa
Share 457.9p 393.6p -14.0%
KPIs
Ten Year Fixed
Interest Gilt +11.4%
Inflation
(CPI) 95.4 102.5 +7.4%
MSCI ACWI
TR GBP 88.8 169.3 +90.6%
Share Ord
Prices Shs 905.0p 866.5p -4.3% +5.7%
"A" Ord
shs 891.5p 848.0p -4.9% +5.2%
Ord
Discounts Shs -19.0% -32.4%
"A" Ord
Shs -20.2% -33.8%
Over the past five years the value of the holding in Ocean Wilsons has held back the returns earned by the rest of the portfolio. Its capital performance has done rather better than the five year fixed interest gilt and inflation and a little better than the MSCI ACWI. The two Hansa Trust share prices have, we believe, suffered from Ocean Wilsons Holdings' association with Brazil, resulting in a widening of the discount.
Chairman's Report to the Shareholders
The Strategic Report has been prepared in accordance with requirements of The Companies Act 2006 and incorporates the Chairman's Report to the Shareholders, the majority of the former Directors' Report and elements from the Directors' Remuneration Report.
Stock Markets and Politics in 2016/17
What an unexpected year it has turned out to be. A year ago markets had just suffered a dose of the hiccoughs, caused largely by fears over China's economy. But the eight year old bull market proved to be too strong to be derailed by such fears - or as it turned out - by the two subsequent political shocks, the British voting to leave the European Union and the Americans voting to have Donald Trump as their new president. To add to that - and of particular significance to us - was the impeachment of Brazil's erstwhile president, Dilma Rousseff. Global markets, led by those in America, just rolled on and on upwards and upwards.
For the better part of 35 years we have lived in an era of benign politics - at least within the developed world. During and following the Thatcher/Reagan years of the 1980s, the economic policies emanating from centralist governments recognised the importance of both free trade and of creating wealth, to generating economic growth and general prosperity. Business was worth the risk. And as a consequence, we have seen an unprecedented (in modern times at least) creation of new wealth - courtesy of global free trade, extraordinary technological developments and very generous monetary policies. Huge fortunes have been created.
We may think that, following the events of the last year or so, we live in unusual times, but the truth is we have been doing so for a long time. The populism that appears to be developing - and is seen by some as something of a threat to the world's economic order - is not an out of the blue event; it is rather a development provoked by how the few have benefited from the prosperity and by how much they have benefited from it. There is now the inevitable political backlash - led, it would appear, by political mavericks; but then by who else? Politics are now firmly back on investors' agenda. It is something we spend time talking about at Board Meetings, concerned as we are with political risk within our portfolio.
Net Asset Value: Long-term Performance
Five year return: NAV: +14.6% to 1,281.2p per share; 23.3% including dividends.
The tables in the Long-Term Highlights section illustrate - with some commentary - the salient points behind the Company's long-term (five year) performance. As we have remarked at some length over the past few years, the returns from the portfolio have been affected by the large holding in Ocean Wilson Holdings Ltd ("Ocean Wilsons", "Ocean Wilson Holdings" or "OWHL") - the value of which fell by 14% over the last five years - largely because of the decline in the value of its Brazilian subsidiary Wilson Sons Ltd ("Wilson Sons"), whose share price actually rose by circa 18% in Brazilian Reals, but fell by 12.5% in Sterling terms.
As a consequence of this, and relative to our peer group (see website for peers) and to the MSCI All Country World Index ("MSCI ACWI"), we have lagged some of our Key Performance Indicators ("KPIs"). We believe that the action that we have undertaken over the past five years has already generated positive results and has set us up for some much more competitive returns in years to come.
During the last five years:
-- We have refreshed the Board of Directors with two new appointments, one of whom is now the Chair of the Audit Committee.
-- We have broadened the base of the equity exposure from "UK small cap" to internationally based companies, both as direct equity and through investment in funds managed by best in class managers.
-- We have set a dividend policy which seeks to provide clarity in respect to the dividends in the year ahead.
-- Wilson Sons' business has continued to make progress; it is a well-managed company with excellent long-term prospects, which we would expect to benefit from. The Brazilian economy seems to be making tentative steps in the right direction.
In doing all of this we have created a portfolio which, while not necessarily unique, is quite different from what exists elsewhere and provides shareholders with an exposure to investments not easily available to the individual investor. It is, however, a rather illiquid portfolio and one not suited to managing a share buy-back scheme. So, in order to reduce the discount, we need to create greater demand for our shares - by earning good and competitive returns and then by telling the story. In this respect, we are working with Edison, an investor relations firm, to go out and tell the Hansa Trust story to those investors we believe might be interested in it.
The Future
Guessing, yet alone analysing the future, would appear to be a mug's game - at least judging by the success of opinion polls! But we can observe trends and come to some sort of conclusion as to which are lasting and which are not. What is hugely more difficult is attributing time scales to those trends.
Perhaps the most obvious trend, that surely has some sort of limited life, is that of the ever growing level of global debt - global government debt alone being circa $70 trillion or close to the size of the global economy. It cannot go on growing forever. Quite extraordinarily low - one might say punishingly low - interest rates have afforded these ever increasing levels of debt but one day that too must change. The debt problem "can" continues to be kicked down the road and it just gets bigger with every kick. It is, or should be, a matter of some concern to politicians and investors alike. Against declining demographics in the developed world, dealing with it seems to me a tough ask.
The other issue of some concern is how to ensure that the ambitions of rising political populism and its goal of spreading the benefits of globalisation and technological productivity don't damage those engines of growth. I am sure it can be done but it's not clear the new rivalry in politics will manage to achieve the best of both. Globalisation, technology and quantitative easing in the developed economies have benefited the few but not the many, leading to the rise of populism and nationalism. They will influence the order of things in the future, including carrying the risk of rising international conflict.
Plenty to worry about if you want to. However, there are also some really positive developments. The most obvious is the quite extraordinary achievement being made in various technologies - not only in electronics but also in healthcare, in metallurgy, in environmental management and so on. The world is changing at a quite extraordinary pace as the table below illustrates. Technology and the underlying software that it enables is literally changing the way we do business and the way we live our lives. From nowhere it seems, the world's largest companies are brand new names as the old ones either fade into lesser significance or, as in some cases, become obsolete and die. Technology is both creative and destructive and the modern day portfolio manager has to put the business models of his/her investee companies under a microscope to see if they benefit or suffer from the onward march of technology.
The Most Valuable Companies in the World
March March
2007 2017
(US$s (US$s
bn) bn)
Exxon Mobil 430 Apple 754
General Alphabet
Electric 364 (Google) 574
Microsoft 273 Microsoft 509
Citigroup 253 Amazon 423
Berkshire
AT & T 246 Hathaway 411
Largest Largest
5 1,566 5 2,671
Source: Wikipedia
Secondly, there are parts of the world where populism is in retreat, it having been tried, tested and found wanting. Perhaps the most unlikely of places for such political turnaround is Latin America, where democracies (a relatively new political structure in the longer-term scheme of things) are now returning governments with the combination of populist awareness and business friendly policies. Argentina, Brazil, Columbia, Mexico and Peru all have such governments. It is likely that Chile will have one by the end of the year and even the basket case, Venezuela, may embark on better things in a year or two's time. And there are other parts of the world where the politics is improving. Therein lies opportunity.
In respect of Brazil, I should restate the long-term confidence the Board has in its investment in Wilson Sons (through Ocean Wilsons). It has fared well in good and in difficult times and, if the improved outlook for Brazil continues, we would expect an even brighter prospect for the future of the company.
There is no doubt that the current, post Financial Crisis, bull markets are long in the tooth - although the necessary slower economic growth following the Crisis prevented too quick a build up of economic or financial excesses. Many stocks and shares are probably too expensive, but that depends on their companies' prospects. In a changing world some have even better prospects than investors can imagine, others rather worse.
It is a truly exciting world and offers huge opportunities for astute (careful and courageous) investors.
Some Housekeeping
1 Benchmarks/Key Performance Indicators
We established the benchmark we have been using in April 2003 to reflect Hansa Trust's goal of achieving growth of shareholder value - or put another way - of making money through growing the net asset value and paying dividends. The benchmark - the total return of the three-year average of a five year UK government bond plus two per cent - was chosen to reflect a risk free (or as near risk free as possible) return that would also achieve the goal of growth of shareholder value plus the two per cent.
The circumstances of the last eight years - from the bottom of the bear market (March 2009) that followed the onset of the Financial Crisis - have been characterised by significant equity bull markets and very low interest rates - leading to high returns from equities and low returns from short-term bonds. Making money by investing in equities has not been difficult - either in absolute terms or relative to that "safe" alternative that is our benchmark. Hence the questions we have received about the benchmark.
Benchmarks should be no more than comparators but, unfortunately, they become templates for management - in all walks of life including portfolio management. They should reflect the goal or goals concerned - not constrain or guide the portfolio that is used to achieve the goals (that is putting the cart before the horse). With circa 30% of the portfolio invested in Ocean Wilsons, another 40% invested in international funds and finally 30% invested in international equities, there is no portfolio-fitting index for Hansa Trust's portfolio anyway.
As a Board of Directors, we monitor the returns made in absolute and relative terms against the KPIs that we have established for that purpose and are set out in the Organisation and Objectives section of this report. The comparisons are made over 1,3, 5 and 10 years. Here and hence forward we will comment on our returns when reporting to shareholders by reference to our KPIs and not have a single benchmark that would be appropriate some times and not at other times.
Our first and most important goal is to make money for shareholders and we compare that against a safe return from an appropriate government bond - for this we have elected to follow the 10 year UK Government gilt; our second goal is to achieve returns that are higher than inflation and we use the UK's CPI as the KPI for comparison; and finally we compare our returns with those of our peer group and of an appropriate index - for which we have elected to follow the MSCI All Country World Index because it is an appropriate KPI for UK investors wishing to invest internationally.
Two other aspects that influence the returns that shareholders receive are the share price discounts to the underlying net asset value and the costs of running the Company. There are also appropriate KPIs for them.
2 I have also mentioned we are working with Edison to go out and promote the Hansa Trust story to those investors who might be interested in such an investment. With the onset of MIFID 2 (EU legislation, which, amongst other things, will affect the level of research on companies provided for investors), there will be less investment research available about all but the very biggest companies; Edison provides research on Hansa Trust.
Hansa Trust will not be of interest to all investors - particularly those interested in more conventional, index focused portfolios and those requiring a large, liquid share base but it will interest some. With a relatively high discount and improving prospects, it is just possible that the Company's shares could prove to be a quite rewarding investment. We believe so; we'll see.
3 I have mentioned we have recently broadened the base of our "UK small-cap" equity portfolio on to an international base, because it seems sensible to take advantage of opportunities in other parts of the world - notably in the US but also elsewhere.
4 The policy on Directors' Remuneration will be presented to shareholders at the AGM on 28 July 2017 for their consideration and approval. At the meeting, it will be proposed that the current overall cap of GBP175,000 should be maintained on annual Directors' fees.
Alex Hammond--Chambers
Chairman
22 June 2017
The Board of Directors
The Directors who served during the year to 31 March 2017 are:
Alex Hammond--Chambers
(Chairman)
Alex joined the Board in 2002. He serves on a number of boards of a variety of companies, including other investment trusts and open-ended investment companies (including Findlay Park Funds).
His career has spanned two phases. The first phase working for Ivory and Sime (investment managers) for 27 years, from which he gained portfolio management skills and experience running investment trusts. The second phase, working for 25 years to date, has been involved in corporate governance, serving on the boards of many companies in a number of different industries and countries - investment trust company boards particularly. He has served as chairman of the Association of Investment Companies and as a governor of the NASD (NASDAQ).
Meetings Total
attended Yearly
Meetings
---------------- --------- ---------
Strategic 1 1
---------------- --------- ---------
Board 5 5
---------------- --------- ---------
Audit Committee 2 2
---------------- --------- ---------
Jonathan Davie
(Audit Committee Chairman)
Jonathan joined the Board in January 2013. He is a non-executive director of Persimmon and Gabelli Value Plus+ Investment Trust and also chairman of First Avenue Partners, an alternatives advisory boutique.
Jonathan qualified as a Chartered Accountant and then joined George M. Hill and Co. and became an authorised dealer on the London Stock Exchange. The firm was acquired by Wedd Durlacher Mordaunt and Co. where Jonathan became a partner in 1975. He was the senior dealing partner of the firm on its acquisition by Barclays Bank to form BZW in 1986.
Jonathan developed BZW's Fixed Income business prior to becoming chief executive of the Global Equities Business in 1991. In 1996 he became deputy chairman of BZW and then vice chairman of Credit Suisse First Boston in 1998 on their acquisition of most of BZW's businesses. He focused on the development of Credit Suisse's Middle Eastern business. He retired from Credit Suisse in February 2007.
Meetings Total
attended Yearly
Meetings
---------------- --------- ---------
Strategic 1 1
---------------- --------- ---------
Board 5 5
---------------- --------- ---------
Audit Committee 2 2
---------------- --------- ---------
Raymond oxford
Raymond joined the Board in January 2013. He served 18 years with the British Foreign & Commonwealth Office. He spent three years in Moscow (1983-1985), seven years in the Cabinet Office covering Soviet and East European political, military and economic developments (1985-1992) and was a founding member of the British Embassy in Kiev (1992-1997). In 1997 he left British government service to pursue private business interests in the United Kingdom, Eastern Europe and the Middle East, chiefly in energy, agriculture and environmental remediation. In October 2014, Raymond was elected to the House of Lords, the upper chamber of the British Parliament.
Meetings Total
attended Yearly
Meetings
---------------- --------- ---------
Strategic 1 1
---------------- --------- ---------
Board 5 5
---------------- --------- ---------
Audit Committee 0 2
---------------- --------- ---------
William Salomon
William has been a Director of Hansa Trust PLC since 1999 and, through his family's wider investments as well as direct share ownership, has a significant, long standing, investment in the Company.
William's experience in investment banking and management is important to the Board in developing and monitoring investments in special investment themes and in the Company's strategic investment through Ocean Wilsons Holdings Limited in Wilson Sons.
William is the senior partner of Hansa Capital Partners LLP ("Hansa Capital Partners", the Portfolio Manager and Company Secretary), deputy chairman of Ocean Wilsons Holdings Limited and its listed subsidiary Wilson Sons Limited. He is also a shareholder representative on the investment advisory committee for DV4 Ltd ("DV4"). William was formerly the vice chairman of Close Asset Management Limited and chairman of the merchant bank Rea Brothers PLC.
Meetings Total
attended Yearly
Meetings
---------------- --------- ---------
Strategic 1 1
---------------- --------- ---------
Board 5 5
---------------- --------- ---------
Audit Committee 2 2
---------------- --------- ---------
Geoffrey Wood
Geoffrey was appointed to the Board in 1997. Geoffrey is Professor Emeritus of Economics at Cass Business School, in the City of London, Professor Emeritus of Monetary Economics at the University of Buckingham and a visiting Professorial Fellow at the Centre for Commercial Law at Queen Mary and Westfield College of London University. He has been visiting Professor at the University of South Carolina and at the National Bureau for Economic Research at Harvard. In addition he has been an advisor to a number of Central Banks and City of London financial firms and has been a specialist adviser to the Treasury Select Committee. Geoffrey has a deep knowledge of economics and, specifically, monetary and fiscal policy issues.
Meetings Total
attended Yearly
Meetings
---------------- --------- ---------
Strategic 1 1
---------------- --------- ---------
Board 5 5
---------------- --------- ---------
Audit Committee 2 2
---------------- --------- ---------
The Board
The Board
Each Director brings certain individual and complementary skills and experience to the Board's workings, as summarised in the previous Directors' pages and dedicates his time to the Company to ensure its success. All Directors resign at each AGM and offer themselves for consideration for re-election. The Board recommends the re-appointment of each of the Directors, based on his continuing contribution to the Company and its shareholders.
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 are discharged in many ways and are explained below.
INVESTMENT POLICY, STRATEGY AND KEY PERFORMANCE INDICATORS
The investment policy adopted by the Board, which constitutes the Company's business model, is to invest in a portfolio of quoted and unquoted special situations, many of which may not normally be available to the general public, with the objective of achieving growth of shareholder value. By the very nature of special situation investments, the opportunity to invest in them will arise at any time but often not for long periods. Sometimes a number of opportunities may arise at the same time. Any single investment may, on occasion, constitute a significant proportion of the portfolio and/or that of the company concerned.
The investment strategy of the Company has evolved over time, but it has always been managed with a strong focus on seeking out undervalued investments. The Company has a strategic stake in Ocean Wilsons Holdings. The Company has broadened its (non-fund) equity exposure to include global equities. Equity exposure is also achieved through investment in funds managed by third party managers with whom we have relationships through Hansa Capital Partners' activities. Many of the investments are not readily available to the general public. The final part of the Company's portfolio reflects its size and flexible structure, as we are always on the lookout for unconventional investments, which often cannot be accommodated by more traditional, larger fund managers, typically less flexible in their approach. These more eclectic investments range from those sectors benefiting from structurally higher growth, such as biotechnology, to assets which we believe stand on unwarranted discounts to their true intrinsic value, including other investment trusts.
This investment approach may well produce returns which are not replicated by movements in any market index.
Previously, returns were compared with an absolute benchmark derived from the three year average rolling rate of return of a five year UK Government bond plus 2%, with interest being reinvested semi-annually. However, the Board considers that the use of a single benchmark won't always offer shareholders relevance and the clarity needed with regard to the performance of their Company.
As a board of directors, we monitor the returns made in absolute (firstly) and relative (secondly) terms against the KPIs that we have established for that purpose and are set out in the Organisation and Objectives section of this report. The comparisons are made over 1,3, 5 and 10 years. We will now make comment on our returns when reporting to shareholders by reference to our KPIs and not have a single benchmark that would be appropriate some times and not at other times.
The Portfolio Manager is charged by the Board to implement the investment policy under its supervision and guidance. It is important for the Portfolio Manager to be able to vary any investment at any time, in order either to protect shareholders' funds and/or to optimise shareholders' future returns.
POLICY ON BOARD DIVERSITY
Appointments to the Board are made on merit and against objective criteria in accordance with the AIC Corporate Governance Code. The Board considers it is of paramount importance to shareholders that, after consideration of the skills and experience needed by the Board, candidates are chosen on the basis of merit only and that there should be no discrimination in the choice of Directors for any reason.
Long--Term Performance
TEN YEAR COMPANY PERFORMANCE STATISTICS
Ten Year Record
Net Asset
Value Share Price
Ordinary (Bid) Discount/(Premium)
Year ended Shareholders' and 'A' Annual Ordinary 'A' Ordinary 'A'
31 March Funds Ordinary Dividends Ordinary Ordinary
2017 GBP307.5m 1,281.2p 16.0p 866.5p 848.0p 32.4% 33.8%
2016 GBP255.6m 1,064.9p 16.0p 729.8p 725.5p 31.5% 31.9%
2015 GBP273.3m 1,138.6p 16.0p 860.0p 827.5p 24.5% 27.3%
2014 GBP287.4m 1,197.5p 16.0p 879.3p 877.5p 26.6% 26.7%
2013 GBP259.9m 1,082.9p 15.0p 834.0p 815.0p 23.0% 24.7%
2012 GBP268.2m 1,117.5p 14.0p 905.0p 891.5p 19.0% 20.2%
2011 GBP264.1m 1,100.5p 3.5p 971.0p 952.5p 11.8% 13.5%
2010 GBP215.0m 895.9p 25.0p 755.0p 735.0p 15.7% 18.0%
2009 GBP152.4m 635.0p 18.0p 510.0p 500.0p 19.7% 21.3%
2008 GBP221.9m 924.5p 13.0p 820.0p 815.0p 11.3% 11.8%
2007 GBP249.5m 1,039.4p 12.5p 1,123.0p 1,022.5p (8.0)% 1.6%
To 31 March 1 3 years 5 years 10
2017 year years
Share Price
Total Return
Ordinary shares
(%) 21.1 4.6 5.7 -6.5
'A' non--voting
Ordinary shares
(%) 19.3 2.7 5.2 0.9
To 31 March 1 3 years 5 years 10
2017 year years
Net Asset Value Total Return
Performance
Net Asset
Value (%) 22.0 11.7 23.3 43.8
Organisation and Objectives
This section explains how the Board has organised the Company and seeks to deliver its objectives.
BOARD COMMITTEES
The Directors consider that, in order to fulfil their responsibilities as the Directors of the Company, they should all be members of every sub-committee, except where there is a deemed conflict of interest.
Audit Committee
The Audit Committee, which meets at least twice a year, consists of all five Directors and Edwin Teideman, a former director, whose skills and experience of the Company strengthen the Committee. Jonathan Davie is the Chairman of the Audit Committee.
Nomination Committee
The Board as a whole fulfils the function of the Nomination Committee. Appointments are made on merit and against objective criteria in accordance with the AIC Code. The Board considers it is of paramount importance to shareholders that, after consideration of the skills and experience needed by the Board, candidates are chosen on the basis of merit only and that there should be no discrimination in the choice of directors for any reason. The Company's Articles of Association require newly appointed Directors to submit themselves for election by shareholders at the next AGM after appointment and that they will be subject to re-election at intervals of no more than three years. However, the Board has determined that all Directors will retire and offer themselves for re-election each year at the AGM.
Management Engagement Committee
The Board, with the exception of William Salomon, fulfils the function of this Committee. The level of management fees, level of service provided and the performance of the Portfolio Manager are reviewed on a regular basis to ensure these remain competitive and in the best interests of shareholders. The Board also receives feedback from the Company's Alternative Investment Fund Manager ("AIFM"), Maitland Institutional Services Limited. The Board, after the recommendation of the Management Engagement Committee, considers the engagement of the AIFM and the Portfolio Manager to be in the best interests of the shareholders.
Remuneration Committee
The Board fulfils the function of a Remuneration Committee and considers the specific appointment of such a committee is not appropriate for an investment trust company. The level of Directors' fees is monitored annually and formally reviewed every three years, in the light of their duties and also relative to other comparable companies. The upper limit on Directors' remuneration is to be presented to shareholders at the AGM for their consideration and approval.
In the absence of a separate Remuneration Committee, the Chairman is responsible for ensuring appropriate contact is kept with the principal shareholders during the year.
PROMOTING THE COMPANY
Although the Board has always considered ways and means to promote the ownership of the shares in the Company, the establishment of the Retail Distribution Review a number of years ago has had the effect of making the various different investment products compete rather more directly with each other. It assists the Board in targeting the type of shareholder that Hansa Trust shares would most likely appeal to. It has placed an added requirement that we should promote the "Hansa Trust story" in the market place so there is reasonably widespread understanding of it; by doing so, we aim to promote the demand for the Company's shares with a positive effect on the discount.
Indeed the promotion of the Company is also part of the discount policy, the purpose of which is to encourage the demand for the Company's shares and thereby reduce any discount at which the shares sell in relation to the NAV.
The Company has the following promotional initiatives and activities:
-- Recognising the growing number of DIY investors, we continue to develop the Annual Report, the monthly factsheet and the website to make them, we hope, more interesting and easier to use.
-- The remit of Winterflood Securities as the Company's corporate stockbroker was broadened to assist in proactively promoting the Company and enhancing its market coverage.
-- We have expanded our working relationship with Edison Research to help produce written research on the Company, its investments and its progress and gain wider access to IFA and investor platforms. Such research is distributed to many thousands of investors.
-- In addition to Edison and Winterflood Securities initiatives, our Portfolio Manager, Hansa Capital Partners, is increasing the numbers of presentations to investment trust investors.
-- We are working with Capita Asset Services, the Company's Registrars, to improve our understanding of our shareholder base and promote the dividend re-investment programme.
SERVICE PROVIDERS
Service Provider Policy
The Board consists entirely of non-executive Directors; it delegates the day to day implementation of its policies to third party service providers. The Board has contractually delegated to external organisations the management of the investment portfolio, the custodial services which include safeguarding of the assets and the day to day accounting and company secretarial requirements. Each of these contracts is only entered into after proper consideration of the quality and cost of services, which are regularly reviewed and monitored either by the Board or its Committees.
The Board, in seeking to engage organisations which can provide the relevant levels of experience and expertise at an acceptable cost, carries out the following processes:
-- Monitors third party suppliers, performance and costs:
The Board, at its regular meetings, reviews reports prepared by both the Portfolio Manager and the Administrator, which enables it to monitor the performance and costs of the third party suppliers to the Company. Following the implementation of the Alternative Investment Fund Managers' Directive ("AIFMD"), the Board has established a monitoring programme for the AIFM and Depositary. The Company Secretary meets each supplier regularly to monitor its processes and systems and, in addition, the AIFM and Depositary attend at least one Board Meeting per annum.
-- Monitors investment risks and returns:
The Board reviews reports prepared by the Portfolio Manager at its regular meetings, which enables it to monitor the investment risks and returns.
-- Determines investment strategy, guidelines and restrictions:
The Board determines the investment strategy in conjunction with the Portfolio Manager. The strategy is monitored regularly and refinements are made to it as required, with formal review at the Board's annual strategy meeting.
The Board issues formal investment guidelines and restrictions; compliance with these is reported by the Portfolio Manager's compliance officer on a regular basis and is also monitored independently by the AIFM.
-- Determines gearing levels and capital preservation through the use of hedging instruments:
The Board, taking account of advice from the Portfolio Manager, determines the maximum level of borrowings the Company will undertake at the time of borrowing. The Company has entered into a short-term loan facility with BNP Paribas; currently the extent of the facility is GBP30m. The Board has approved the utilisation of hedging instruments at appropriate times, in order to provide the portfolio with a limited degree of protection from extreme market declines.
THE PROVIDERS
Portfolio Manager
Hansa Capital Partners LLP charges an investment management fee at an annual rate of 1% of the net assets of the Company (after any borrowings) but, after deducting the value of the investment in Ocean Wilson Holdings on which no fee is payable. Hanseatic Asset Management LBG, a company connected to Hansa Capital Partners LLP, separately charges an investment management fee to the investment subsidiary of OWHL.
The terms of the portfolio management agreement permit either party to terminate the agreement by giving to the other not less than 12 months' notice, or such shorter period as is mutually acceptable. There is no agreement between the Company and the Portfolio Manager concerning compensation in respect to the termination of the agreement. In its annual assessment of the Portfolio Manager, the Board concluded that, because of the calibre of the management team and its commitment to the Company and the long-term returns to shareholders it has produced, it is in the best interest of shareholders that the Portfolio Manager remains in place under the present terms. Details of the fees paid to the Portfolio Manager can be found in Note 3.
Auditor
The Auditor, Grant Thornton UK LLP, has expressed its willingness to continue to act as Auditor to the Company and a resolution to re-appoint Grant Thornton UK LLP as Auditor to the Company will be proposed at the forthcoming AGM.
New audit guidance limits the non-audit related work that can be carried out by the Company's Auditor - in particular tax compliance work. Any new supplier is approved by the Board. If non-audit work were to be carried out by the Company's Auditor, the appointment would be approved by the Board, in advance, to ensure that the Auditor's objectivity and independence is safeguarded. (Details in Note 4.)
Company Secretary
The Company engages Hansa Capital Partners LLP as its Company Secretary at an annual rate of GBP100,000, excluding VAT (2016: GBP100,000).
Alternative Investment Fund Managers' Directive
The Company appointed Maitland Institutional Services Limited, with effect from 10 June 2014, to act as its AIFM with responsibilities for the Portfolio Management and Risk Management. The AIFM has sub-contracted to Hansa Capital Partners LLP the provision of Portfolio Management services. During the year to 31 March 2017, the AIFM has charged GBP116,247 (2016: 110,525) for its services.
Administrator
The Company engages Maitland Administration Services Limited as its Administrator, at an annual rate of GBP125,179, excluding VAT (2016: GBP123,173).
Depositary
BNP Paribas Securities Services is the Company's Depositary, an appointment that was ratified by the AIFM. During the year to 31 March 2017, BNP Paribas Securities Services charged GBP93,145 for the combined Depositary and Custodial service excluding VAT (2016: GBP86,031).
KEY PERFORMANCE INDICATORS
The Board at its quarterly meeting reviews the returns and the performance of the Company, including an analysis using the KPIs listed below.
Previously, returns were compared with an absolute benchmark - the three year return of a five year gilt plus 2% - it providing a comparison with a safe alternative return in pursuit of our goal of growth of shareholder value. However, the Board considers that the use of a single benchmark won't always offer shareholders the relevance and the clarity needed with regard to the performance of their Company.
We continue to compare our returns with those of a safe fixed interest gilt, however using the 10 year UK Gilt Return. Our returns are also compared to the rate of inflation (real returns are important to shareholders) and with those of our peer group and appropriate indices.
Additionally, two further KPIs: costs of managing the Company are monitored against the NAV (that ratio is also known as the 'ongoing charges percentage per annum ratio') and the discount/premium that the shares sell at in relation to the NAV were likewise monitored.
As a Board of Directors, we monitor the returns made in absolute (firstly) and relative (secondly) terms against the KPIs that we have established for that purpose noted above. The comparisons are made over 1,3, 5 and 10 years. We will now make comment on our returns when reporting to shareholders by reference to our KPIs and not to a single benchmark that would be appropriate some times and not at other times.
i) Shareholders - Total Returns
As noted above, a comparison is no longer made between the 'Total Return' of each class of shares to that of a single benchmark. Rather, the performance of the shares should be compared to the KPIs noted opposite.
To 31 March 1 3 years 5 years 10 2017 year years Share Price Total Return Ordinary shares (%) 21.1 4.6 5.7 -6.5 'A' non--voting Ordinary shares (%) 19.3 2.7 5.2 0.9
ii) Company - Total Returns
These comparisons are used to determine the effectiveness of the Investment Strategy and of the Portfolio Management. The KPIs below should also be noted.
To 31 March 1 3 years 5 years 10 2017 year years NAV (%) 22.0 11.7 23.3 43.8 Relative comparison Peer group average (%) 21.0 27.7 62.8 87.3
* See website for peer group
iii) Discount/(Premium)
A comparison is made between the discount/(premium) of the Company's two classes of shares, those of the Company's peer group and of the AIC average.
To 31 March 1 3 years 5 years 10
2017 year average average years
average average
Ordinary shares
(%) 31.5 26.9 26.5 19.9
'A' non-voting
Ordinary shares
(%) 33.2 28.9 28.1 21.6
Peer group
(%) 9.5 8.2 8.4 7.1
AIC (%) 7.0
Note: AIC only produces AIC average for 1 year.
iv) Expense ratios
A comparison is made between the level of expenses (administrative and management) of the Company and the net asset returns (both annualised) in order to assess the value for money shareholders receive.
To 31 March 1 3 years 5 years 10
2017 year p.a. p.a. years
p.a.
Ongoing charges
per annum
(%) 1.0 1.1 1.0 1.0
NAV total
return (%) 22.0 3.8 4.3 3.7
v) Key Performance Indicators
The following are the KPIs that the Board use to assess the returns of elements of the portfolio and of the Company as a whole.
To 31 March 1 3 years 5 years 10 2017 year years 10yr UK Gilt Return (%) 2.3 16.1 11.4 38.2 UK CPI Inflation (%) 2.3 2.8 7.4 25.9 MSCI ACWI (total return) (%) 32.0 54.3 90.6 132.4
LIMITS
Investment Guidelines
The Investment Policy enables the Portfolio Manager to invest worldwide, in either UK or foreign, quoted or unquoted companies. The Board does not believe it is practical to impose limits on the geographical allocation of assets because, with the globalisation of businesses, it is an almost impossible task to monitor. While fully aware of the impact of geopolitical influences on the outcome of investment returns, the Board, in conjunction with the Portfolio Manager, regularly reviews each investment on its individual merits. There is no geographical constraint on where and how much may be invested in any one country or currency.
The Board does not set a limit on the number of investments which can be held in the portfolio; however it usually has holdings in at least 30 investments. The current investment strategy was announced on 22 April 2014. The following items require Board approval:
(a) Investing in illiquid assets in excess of 10% of the portfolio's value. (b) An investment to be made in a derivative instrument.
(c) At the time of investment, the market value of an investment sector exceeds the following bands within the portfolio:
i. Country-based Exposure 0-40% ii. Global Equities 0-40%
iii. Eclectic & Diversifying Assets 0-40%
Note: the Investment Guidelines have been modified since being published in the 2016 Annual Report. The sector "UK Equity Special Situations" has been widened to "Global Equity" and the upper limit of "Eclectic & Diversifying Assets" has been increased from 30% to 40%.
(d) An investment greater than 5% of the market value of the portfolio (at the time of the investment) can be made in any company/fund.
(e) An investment, which constitutes more than 5% of the share capital of the investee company, can be made.
(f) An investment is made that involves a potential conflict of interest for a Director of the Company, the Portfolio Manager or any connected party to either.
These investment guidelines remain in force as at the time of signing of this Report.
Borrowing Limits
The Board believes shareholders' returns may be enhanced if the Company borrows money at appropriate times for the purpose of investment. While the Articles of Association allow the Company to borrow up to 3.5 times shareholders' funds, the amount that can be borrowed at any time is normally subject to a constraint imposed in the lender's borrowing covenants. The Board will normally set an informal borrowing limit of approximately one half of the lender's covenanted constraint at the time the borrowings are made, allowing plenty of capacity for the value of the portfolio to fall, without having to sell investments to conform with those covenants. However, in extreme circumstances, such as when it is believed to be the bottom of a bear market, the Board may well borrow up to the full amount the lender's covenant allows.
PRINCIPAL RISKS
The Board reviews the principal risks from the point of view of the long-term shareholders, the main risk being that over the long-term (which we determine to be five years) they do not make a return from their investment in the Company. The Board confirms that it has carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future returns, solvency and liquidity. The Board considers the risks the Company, and therefore shareholders, face can be divided into external and internal risks.
External risks
External risks to shareholders and their returns are those that can severely influence the investment environment within which the Company operates. These risks include anti-business government policies, economic recession, declining corporate profitability, taxation and rising inflation. The impact of such an environment could lead to sharp rises in interest rates and in stock market decline. Deflation is also a source of concern in some countries, but until deflation increases sharply it is not a significant impediment to growth. But, it may lead to negative interest rates which would surely damage the banking system and the levels of savings available for investments. At their regular Board Meetings and at the annual strategy meeting, the Directors and the Management consider long-term risks that concern them, including:
Economic, currency and equity declines.
Risks, particularly political risks, associated with Brazil.
The growth of global debt.
Unquantifiable risks resulting from worldwide political 'hot--spots'.
It should be stressed these are the external risks which most concern the Directors and the Management, not forecasts of future events. The mitigation of these risks is achieved by sensible stock and sector diversification and adherence to the Board's investment restrictions and guidelines.
Internal Risks
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. The portfolio is continuously monitored by the AIFM and the Portfolio Manager to ensure the Company is compliant with s.1158/1159 and monitoring reports are presented to the Board.
The mitigation of these risks is achieved by the Board performing regular reviews of all service providers and monthly reviews of s.1158/1159 compliance.
The Board considers the risks to the Company's two share prices, apart from those mentioned above, include the risk of higher discounts. The Board monitors the discount/premium and may take action when appropriate. However, given the Company's stated objective of increasing shareholder value over the long-term, the Board does not consider short--term NAV or share price volatility to be a risk to long--term shareholders.
Details of how the principal risks arising from financial instruments (as determined by the Financial Reporting Council) are managed, have been summarised in Note 20.
Details of the Company's policy on stewardship in relation to invested companies can be found on the Company's website at www.hansatrust.com.
DIVID POLICY AND DIVID PAYMENTS
Dividend Policy
The Board's dividend policy is to pay two similar interim dividends each year. The Board will declare the rate of the two dividends at the beginning of the financial year in question. Barring unforeseen circumstances, the first interim dividend will then be paid in November during the financial year with the second being paid in the May following the end of the financial year. Again, barring unforeseen circumstances, the Company expects the dividends to grow over time reflecting the longer-term returns of the portfolio. If circumstances are such that the level of cash income generated by the portfolio is insufficient to meet the dividend commitment, the shortfall may be made up from the Company's reserves. Under certain one-off circumstances an extra and final dividend may be proposed at the Company's Annual General Meeting.
Dividend Payments
The dividends paid and proposed are as follows:
2017 2016
GBP000 GBP000
Ordinary and 'A'
non-voting Ordinary
shares
First interim paid
8.0p (November 2016)
(2016: 8.0p) per
share 1,920 1,920
Second interim paid
8.0p (May 2017)
(2016: 8.0p) per
share 1,920 1,920
Total dividends 3,840 3,840
Due to the payment of two interim dividends relating to the year ended 31 March 2017, the Board is not proposing a final dividend per Ordinary and 'A' non-voting Ordinary share classes.
Discount Policy
The discount policy of Hansa Trust is to encourage the demand for the shares, by ensuring it has an investment policy that is attractive to investors and which is likely to produce above average returns over the long-term and then to promote the Company and its prospects so as to encourage the demand for its shares.
The Board of Directors does not believe it can manage the discount in the short-term and has therefore eschewed having an active share buy back policy. Furthermore, the Board does not believe buying in its own shares is in the best long-term interest of shareholders because:
it reduces the number of shares outstanding and therefore the liquidity of the shares in the market place; less liquidity may cause a rise in the discount;
it means a liquid portfolio needs to be maintained, compromising the ability to have a portfolio of special situations; the maintenance of the long-term investment policy and its portfolio, takes precedence over the short-term discount policy;
the holding in Ocean Wilson Holdings would represent an even greater percentage of the portfolio and buying back shares would raise the relative exposure to Brazil, which the Board does not wish to do; and
buying back shares to manage the discount is only necessary if there is not enough market place demand for them; buying back shares treats the symptoms of the problem of lack of demand, not the cause.
The one good reason for buying back shares is that, if done so on a large enough scale and at a large enough discount, it can have a material and positive effect on the NAV per share. So, if there is an unusual opportunity to buy back shares such that it would make a reasonably material impact on the NAV, then we will do so.
Insurance
The Company through its Articles has indemnified its Directors and Officers to the fullest extent permissible by law. During the year the Company also purchased and maintained liability insurance for its Directors and Officers.
Status and Activities
During the year under review the Company has operated as an investment company in compliance with s.833 of the Companies Act 2006 and s.1158/1159 of the Corporation Tax Act 2010 as amended. The Company has obtained approval from HM Revenue & Customs ("HMRC") of its status as an investment trust under s.1158 of the Corporation Tax Act 2010 for all accounting periods commencing on or after 1 April 2012; the Directors are of the opinion that the Company has conducted its affairs in compliance with the ongoing requirements of s.1158 since approval was granted and intends to continue to do so.
Going Concern
The Company's business activities, together with the factors likely to affect its future development, performance and position, including its financial position, are set out in the Chairman's Report to the Shareholders, the Portfolio Manager's Report and other elements of the Strategic Report. After due consideration of the Balance Sheet, activities of the Company, estimated liabilities for the next 12 months and having made appropriate enquiries, the Directors have concluded the Company has adequate resources to continue in operational existence for the foreseeable future as the assets of the Company consist of securities, the majority of which are traded on recognised stock exchanges, or open ended funds run by established managers. For this reason, they continue to adopt the going concern basis in preparing the Financial Statements.
Longer-Term Viability Statement
The Financial Reporting Council requires that the Directors make a statement concerning the longer-term viability of the Company, in addition to the Statement of Going Concern. As stated many times in the wider Strategic Report, the Directors consider 12 months to be a relatively short timeframe and look to the longer-term for both the performance and risks associated with the Company. The Directors consider a period of five years as being a more representative period. This period is sufficiently long to cancel out short-term market volatility and allow longer-term performance to become apparent. Barring unforeseen circumstances and taking account of the Company's current position and principal risks, the Directors consider the Company fully satisfies the formal requirement that there be "a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over this assessed period". The Board continually monitors the Investment Strategy and Investment Guidelines issued to the Portfolio Manager and AIFM and directs those entities to target long-term capital preservation. Further, whilst the Board has sanctioned the use of gearing, the facility available to the Portfolio Manager is relatively small compared to the NAV of the Company. Finally, a number of the more significant costs in each financial year are contracted to be calculated, on the basis of the underlying NAV of the Company. As such, in a period of negative portfolio performance, the cost base should also fall.
Greenhouse Gas Emissions
Hansa Trust PLC has no greenhouse gas emissions to report from the operations of its Company, nor does it have responsibility for any other emissions producing sources under Part 7 of Schedule 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended.
Social, Community, Human Rights, Employee Responsibilities and Environmental Policy
The Company does not have any employees. As an investment trust, the Company has no direct social, community, human rights, or environmental impact. Its principal responsibility to shareholders is to ensure the investment portfolio is properly invested and managed.
Portfolio Manager's Report
Market backdrop
Stock markets have provided a healthy backdrop for your Company, with the rapid ascent they experienced in the latter part of last year continuing into 2017. Buoyed by a cocktail of an improving economic outlook across the globe, an anticipated stimulation package from the Trump administration and tentative signs of better company profitability, market prices moved higher. Overall then, equity markets produced strong returns over the last 12 months, and these are further boosted when measured in Sterling because of the currency's weakness post-Brexit.
Global equities in Sterling terms rose by some 32.0% during the last 12 months, with the US, UK, Europe and Japan returning 34.5%, 23.3%, 27.0% and 31.3%, respectively. More surprisingly, emerging markets have also started to perform well. Initially, following Donald Trump's surprise US election victory, emerging markets fell sharply. Investors reacted cautiously to a more US-centric policy with threats of greater protectionism, higher interest rates and a rising Dollar; all usually negative for emerging markets. Of late, though, markets have chosen to ignore these concerns and instead have focused on the positive impact of stronger global growth, with emerging markets typically representing a geared play into this, while also benefiting from more attractive valuations and ongoing strength in many commodities, which provides a boost for commodity-exporting nations. The region as a whole returned 9.7% in the last quarter of the financial year, taking its 12 month return to 34.5%, with notably strong performance in Asian emerging markets, which returned 35.5% over the year and Latin America, which rose by 41.5%.
In contrast to the strength experienced in equity markets, bonds have been more muted recently, but their annual returns have been generally strong. Anticipated stronger economic growth combined with the greater use of fiscal policy are serving to accelerate the expected path of interest rate rises in the US. Even in Europe, investors are starting to anticipate the eventual end of the current loose monetary regime. Overall, for the year, global government bonds generated an 11.0% return, investment-grade credit rose 16.3% and high yield produced a strong 30.0%.
Within commodities, there was mixed performance over the course of the year, but Sterling's weakness meant most commodities produced good returns when measured in that currency. Industrial metals continued to be robust, up 44.8%, helped by the improved global growth environment.
Brent crude rose by 56.2% over the year, although it paused for breath in the final quarter, declining by 6.4%. Partly this reflected investors reassessing OPEC's commitment to oil production cuts and, importantly, the ability of shale oil producers to influence future oil supply by rapidly turning production on and off.
Pinning the tail on the donkey
With many stock markets hitting all-time highs, as the current bull market reaches its eighth anniversary and your Company achieving strong results over the last 12 months, it is worth pausing for a health-check.
At Hansa Capital Partners we view stock markets through the lens of the business cycle, with markets typically following a fairly pre-defined sequence of events. All cycles are different, with their own quirks and nuances, but almost without exception they comprise the familiar stages of despair, hope, growth and optimism.
The challenge, of course, is to determine where we stand within the cycle and which idiosyncrasies this particular cycle will exhibit. Like pinning the tail on the donkey you have a sense of where one stands but it is impossible to be completely certain. What we can do, however, is gauge where a number of key metrics are to help us improve the odds of identifying the correct point. Important metrics to consider regarding the business cycle include: the macro backdrop, corporate profitability, valuations, policies and other factors such as geopolitics.
Working through this list the macro picture has undoubtedly improved. The path of growth in this cycle has been muted compared to previous recoveries and different regions have experienced different growth rates, with the US and the UK leading the way and Europe being a clear laggard. Recent surveys suggest growth is improving, albeit it is still below that which would have been expected historically. What is less clear is how successful President Trump will be in implementing his spending and tax plans and how this will feed through to global growth. His intentions are clearly to boost growth, at least in the US, but such efforts often have long lead times and the early signs of his Presidency are not encouraging regarding his ability to successfully negotiate the US political system. Autocratically managing a private US real estate firm is one thing, but it is by no means clear that this approach will work at the government level, where a degree of finesse is required!
Linked with the macro backdrop is corporate profitability. Like economic growth, company earnings have been muted this cycle and estimates have been persistently downgraded. Again, a multitude of factors lies behind this but central, in our opinion, was the global financial crisis and the subsequent central bank policy of zero interest rates. These served to dampen corporate confidence and subsequent investment, with many companies preferring to engage in corporate engineering through share buy--backs. Furthermore, many companies that should have died, and so freed up capital for more productive uses, were kept alive in this process. The net effect of this has been low productivity and a stock market recovery that has been driven by rising valuations rather than improving profitability.
Higher valuations are perhaps our biggest concern. At the beginnings of cycles, when valuations are low, markets have the capacity to rise even in the face of negative news flow. One would then normally expect there to be a point when corporate profitability starts to improve, such that markets continue to rise but are no longer being re-rated, at least initially. As mentioned above, this cycle has been unusual in that corporate profitability has been muted and as a result stock market valuations have risen more quickly than is typical. Again central bank policy has played an important role in this. By forcing down interest rates, government bond yields fell to multi-decade (even century!) lows. This had the dual effect of forcing investors to move up the risk spectrum, into asset classes such as equities in order to achieve their income and return requirements, and also making assets such as property and equities look attractive from a relative valuation perspective. The net impact of this is that almost all assets now sit above their historical valuation averages. Whilst valuations are not in fact particularly good predictors of short--term future market returns, they are very important over the longer-term. Historically, when equity markets have stood at current levels (with the US Shiller P/E at 29.5x), they have typically been followed by negative real equity returns over the next five years.
CHART 4: Higher valuations typically mean lower long-term returns
Shiller P/E Subsequent S&P 500 returns (real)
From to 3-month 6-month 12-month 2-year 3-year 5-year
5.1 9.7 4% 9% 15% 20% 31% 50%
9.7 11.2 1% 2% 9% 21% 21% 30%
11.2 12.7 1% 2% 6% 16% 22% 36%
12.7 15 2% 5% 7% 10% 14% 21%
15 17.1 1% 0% -1% -1% -1% 11%
17.1 19.1 -1% -1% -1% -3% 1% 10%
19.1 21 2% 3% 5% 11% 23% 47%
21 23.3 0% 0% 1% 4% 9% 11%
23.3 26.5 2% 2% 4% 7% 7% 3%
26.5 45.5 0% 0% -2% -5% -9% -15%
Average since
1928 1% 2% 4% 8% 12% 22%
Source: Goldman Sachs Global Investment Research
Hence if we update our scorecard we find:
CHART 6: Key metrics within the business cycle
Poor OK Good Very Good Comments
Macro Backdrop X Getting better
Corporate X Improving
Profitability
Valuations X Deteriorating
Policy X Fiscal positive,
monetary
deteriorating
Other (Geopolitics) ? Swing factor?
Pulling all of this together and reflecting back on the stock market cycle, we can draw a number of important conclusions. Clearly the global financial crisis and subsequent policy actions have made this an unusually elongated cycle. This is important, although we also note that stock markets rarely die of old age. Combining this with high valuations and with policies starting to shift to a tightening phase, we are inclined to believe we are in the latter stage of the cycle. Our sense is that we have moved from the growth to the optimism stage (arguably this started in 2016).
Typically the optimism phase lasts a couple of years in the US and about half that in Europe. This phase of the cycle can be quite powerful and is often dominated by momentum investing (i.e. people do not worry much about valuations). It is also a rather dangerous phase with rising volatility, and the absence of a valuation buffer makes the market vulnerable to disappointing news flow.
As for idiosyncrasies, clearly the geopolitical backdrop has considerable scope for extending or contracting this cycle. Europe has huge potential for disappointments, either from the Brexit negotiations or from one of the several elections in 2017. President Trump is also a wildcard. If he is successful in his growth-push this would likely extend the current cycle (although in our view it would also increase the downside in the next downturn). Conversely any failure of his plans for growth will not be taken well by the markets and neither would any signs that his more maverick views on protectionism and foreign policy are coming to fruition.
In conclusion, we are inclined to continue riding the current cycle with market optimism, often quite a powerful stage of the business cycle. We do, though, acknowledge that the risks are rising, with markets having had no meaningful pull-back for quite some time. As a consequence we are ever ready to increase our allocations to more defensive assets if we see further signs of excess, or if the risk/reward balance becomes increasingly unattractive.
Portfolio review and activity
The Company has returned 22.0% over the financial year. This compares to 32.0% for the MSCI ACWI for the equivalent 12 month period and 2.3% for both the 10yr UK Gilt Return and UK CPI Inflation. This strong performance was driven by good performance from both Ocean Wilson Holdings and the investment portfolio, with notably strong performance from Wilson Sons, which are discussed below. The Company's NAV per share rose over the quarter from 1,250p at the end of December to 1,281p at the end of March. This compares to a level of 1,065p at the beginning of the financial year in March 2016.
Core regional funds
Reasonable performance has been generated in the regional silo over the last year, although the range of returns has been wide. This diverging performance has been a major feature of markets over the past 12 months, with many active managers struggling to generate outperformance. Partly, this reflects the major rotations discussed in previous reports, in particular with emerging markets, cyclical companies and commodities all bouncing back strongly following multiple years of disappointing performance.
The strongest performers included Vulcan Value, the US equity manager based in Birmingham, Alabama. The portfolio manager, CT Fitzpatrick, follows a value approach and, whilst this style has struggled in recent years, it performed strongly during the past 12 months and quarter (the fund's NAV was up 31.8% and 4.8% over the respective periods). Findlay Park American, another of our US equity managers, also performed well, its NAV returning 3.3% over the quarter and 19.0% over the year. Its investment manager continues to express a relatively cautious view on equity valuations by maintaining a high cash position in excess of 15%.
Strong performance was also generated by Schroder Asian Total Return. The Fund's NAV rose 35.0% over the year, with performance driven by stock selection, as the manager focused on strong franchises and resilient cash flow generation.
The main area of disappointment has been the performance over the past 12 months by some of the managers who have been among the largest contributors to performance in recent years. Most notably, Odey Absolute Return Fund and Adelphi European Select Equity Fund were material detractors. The Odey fund saw a number of stock specific challenges, as well as being poorly positioned during the sector rotation, whilst Adelphi's investments reported strong or stable underlying earnings, but were de-rated by the markets. We watch these funds carefully, but recognise it is not normally sensible to sell good investment managers following a period of poor performance.
Eclectic and Diversifying
During the last 12 months we have been introducing a number of more defensive investments into the portfolio. This reflects our belief that, whilst equities remain the favoured asset class, there are risks in being fully invested in equities as the business cycle becomes mature and valuations rise. It is very early days but we have been pleased with the performance of a number of the names, especially in the global macro hedge fund space. Macro funds have been under pressure in recent years, with limited investment opportunities in a flat interest rate environment. 2016, however, has provided a more fruitful backdrop with interest rates starting to diverge and macro events becoming more plentiful.
One underperformer during the quarter and over the past 12 months was the investment in Argentière. This fund's NAV declined 1.8% during the quarter and has fallen modestly over the past 12 months. The manager seeks to capitalise on spikes in realised equity market volatility, by building option positions with convex return profiles. Unfortunately, the fund failed to capitalise on the increased volatility surrounding the Brexit referendum and the US Presidential election.
UK Equities
Cape reached an agreement to settle with Insurer PL Litigation, with the maximum amount payable being settled from the Group's existing cash resources, thus removing a significant risk to the business and the distraction of a likely protracted appeals process, thereby enabling the management to focus on the development of the core business. Cape announced a strong set of final figures and the decision to halve and re-base the dividend is constructive, as it clearly signals the desire to continue executing the growth strategy now that the main asbestos litigation threats have been settled. Higher growth prospects for lower risk have duly been rewarded with a higher share price.
Hargreaves Services announced it has received planning approval in principle for 1,500 new homes on part of a 392 acre site situated less than 15 miles from Edinburgh city centre. This is the first phase of a wider master plan for more than 3,200 homes to be developed over the next 12-15 years, an important milestone in achieving the target of delivering GBP35--GBP50m of new value from the overall property portfolio over the next five years. Hansteen Holdings successfully crystallised the value of its German and Dutch property portfolios, selling them for EUR1.28bn (7% yield), a 6% premium to the December FY16 valuation and 30% above FY15, as the European assets hit cyclically high occupancy and rents, combined with a favourable exchange rate. The net effect will be to remove GBP1bn of property and GBP400m of debt, resulting in GBP600m of cash, with the intention to return a substantial proportion of net cash to shareholders. The company also plans to sell GBP35m of Belgium and French properties. The remaining UK-weighted business is well placed to deliver attractive returns, comprising GBP677m of property yielding 7.3% (with a vacancy rate of 7.7%), which is in a sweet spot for rising occupational demand and late-cycle yield compression.
NCC Group has a dominant position in the UK cyber-assurance market, counting most of the FTSE 100, Fortune 500 companies and the British Government among its customers. The company warned that earnings before interest, tax, depreciation and amortisation would be 20% lower than the bottom of its previously forecast range of GBP45.5-GBP47.5m after a disappointing third-quarter performance. Rob Cotton stepped down as chief executive, and Jonathan Brooks, chief financial officer of ARM Holdings from 1995 until 2002 has been appointed as a non-executive director. Hilton Food announced a strong set of final figures and a 17.1% dividend increase, whilst continuing to generate significant cash during 2016, enabling the group's net cash position to grow from GBP12.7m at the end of 2015 to GBP32.3m at the end of 2016. As well as having the cash available to fund new projects in Australia and Portugal, the company is in a good position to take advantage of other opportunities as they arise.
Ocean Wilson Holdings
Recent years have been challenging for the company, as its exposure to Brazil, through Wilson Sons, has faced the twin headwinds of the country's worst recession on record and a seemingly never-ending political crisis. The impeachment of Dilma Rousseff last summer was a key milestone viewed positively by most investors, but continuing corruption investigations threaten to paralyse the successor government of Michel Temer. However, there are signs of improvement in the economy; the currency has been strengthening and the equity market recovering. Meanwhile, the business is beginning to reap the rewards of its investment programme.
The end of March saw the release of the Wilson Sons' fourth quarter results. Despite the backdrop of the recession and the uncertainty caused by Trump's election in the US, the company has benefited from efforts to diversify its portfolio and improve efficiency and productivity, thus the full-year profits of $80.7m were significantly ahead of the $29.3m achieved in 2015. The company is continuing to focus on improving cash flow, operational efficiencies and maximising the use of the installed capacity across all its businesses. In the first quarter of 2017, the company's two container terminals, Rio Grande and Salvador, took receipt of $40m and $4.9m worth, respectively, of new crane equipment, which will contribute significantly to improved productivity at the terminals. The three new ship--to--shore cranes at Rio Grande will be the largest such cranes currently in operation in Brazil.
The Brazilian currency remains much weaker versus the US Dollar than it has been for most of the past five years, but its strength over the course of 2016 meant that the average exchange rate in the quarter was 14.3% higher than in the prior year. This contributed to general increases in costs, but was positive for the minority of revenues denominated in Dollars. This benefited Container Terminals revenue, which was up 12.0%, but the division's EBITDA declined by 9.5%. Although there was volume growth in imports, partly driven by solar panel imports, export volumes at Rio Grande declined, mainly owing to the cancellation of some ships. The Towage division continues to benefit from the expanded fleet, as well as from lower costs as fewer tugs are rented and its EBITDA grew by 9.4%. The Offshore Vessels joint venture experienced strong growth in revenues and EBITDA, which was boosted by the commencement of operations of two long-term contracts for the two largest vessels in the fleet.
The Ocean Wilsons Investments Ltd ("Ocean Wilsons Investments", "OWIL") subsidiary was valued at $238.9m at the end of December 2016, an increase of 0.8% from 31 October 2016. The end of year valuation is 2.3% below the 31 December 2015 value of $244.4m, although during this period $4.25m was withdrawn from the portfolio to contribute to the dividend paid by the parent company. The portfolio continues to be biased towards equities, both public and private, reflecting its long--term nature.
The share price performance of Ocean Wilsons Holdings has been strong since June last year. Although its return in the first quarter of 2017 was roughly flat, it has produced a return of 35.3% in Sterling over the last 12 months. On a total return basis, its return has been 42.7%, which takes into account the dividend of 43.7p per share paid in June last year. The share price represents a discount to the look-through NAV of 29.7%, based on the market value of the Wilson Sons shares, together with the latest valuation of the investment portfolio.
Alec Letchfield
April 2017
Portfolio Statement
as at 31 March 2017
Investments Fair value Percentage
GBP000 of
Net Assets
UK Equity
UBM PLC 8,823 2.9
Hansteen Holdings PLC 8,529 2.8
Experian PLC 6,345 2.0
Galliford Try PLC 4,880 1.6
NCC Group PLC 4,629 1.5
Cape PLC 4,292 1.4
Brooks Macdonald Group PLC 3,957 1.3
Hilton Food Group PLC 2,356 0.7
Hargreaves Services PLC 2,347 0.8
Goals Soccer Centres PLC 2,285 0.7
Altitude Group PLC 1,822 0.6
Immupharma PLC 517 0.2
Six other investments 241 0.1
Total UK Equity 51,023 16.6
Strategic
Wilson Sons (through our holding
in Ocean Wilsons Holdings)
* 62,062 20.2
Total Strategic 62,062 20.2
Core Regional Funds
Findlay Park American Fund 15,104 4.9
Vulcan Value Equity Fund 12,217 4.0
Select Equity Offshore Ltd
Class D 10,773 3.5
Adelphi European Select Equity
Fund Class F 8,515 2.8
Goodhart Partners Longitude
Fund: Hanjo Fund 8,486 2.7
Indus Japan Long-Only Fund 7,994 2.6
Schroder ISF Asian Total Return
Fund Class D 6,523 2.1
Prince Street Institutional
Offshore Ltd 4,528 1.5
BlackRock European Hedge Fund
Class I 4,434 1.4
Pershing Square Holdings 4,020 1.3
CF Odey UK Absolute Return
Fund Class I 3,594 1.2
Vanguard FTSE Developed Europe
ex UK Equity Index 3,298 1.1
NTAsian Discovery Fund Classs
A & B 2,891 0.9
iShares Core MSCI Emerging
Markets IMI UCITS ETF 2,080 0.7
BlackRock Frontiers Investment
Trust 1,560 0.5
SR Global Fund Inc. Frontier
Markets Class M ^ 1,502 0.5
Total Core Regional Funds 97,519 31.7
Eclectic & Diversifying Assets
Ocean Wilsons Investments
Limited
(through our holding in Ocean
Wilsons Holdings)* 32,401 10.5
DV4 Ltd ** 11,849 3.9
GAM Star Technology Fund 11,480 3.7
Global Event Partners Ltd
Class F 9,090 3.0
JLP Credit Opportunity Cayman
Fund 4,627 1.5
Field Street Offshore Fund
Ltd Class A1 3,962 1.3
SPDR MSCI World Financials
UCITS ETF 3,087 1.0
MKP Opportunity Offshore LTD
Class A 2,831 0.9
Hudson Bay International Fund
Ltd Class A 2,701 0.9
BNY Mellon Absolute Return
Bond Fund - THA 2,312 0.8
Argentière Fund Class
C - NR 1,921 0.6
Keynes Dynamic Beta Strategy
Class A 1,843 0.6
Cantab CCP Core Macro - Pavlov
GBP Class 1,315 0.4
Schroder GAIA BlueTrend Class
C 1,150 0.4
Total Eclectic & Diversifying
Assets 90,569 29.5
Total Investments 301,173 97.9
Net Current Assets 6,307 2.1
Net Assets 307,480 100.0
Note:
*Hansa Trust owns 9,352,770 shares in Ocean Wilsons Holdings Limited ("OWHL"). In order to better reflect Hansa Trust's exposure to different market silos, 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 in the 31 December 2016 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 31 March 2017.
**DV4 Ltd is an unlisted Private Equity holding. As such, its value is estimated as described in Note 19 to the Financial Statement and is listed as a Level 3 Asset in Note 21. All other valuations are either derived from information supplied by listed sources, or from pricing information supplied by third party fund managers.
^ On 31 March 2017, the Trust had committed to purchasing 10,577 shares in SR Global Fund Inc. Frontier Markets. As a result, the cash in place to purchase SR Global Fund Inc. Frontier Markets is shown as a Current Asset as at 31 March 2017 in Note 12 to the Financial Statements. All other assets are shown as Investments in Note 10.
Shareholder Profile and Engagement
Capital Structure
The Company has 8,000,000 Ordinary shares of 5p (1/3 of the total capital) and 16,000,000 'A' non-voting Ordinary shares of 5p (2/3 of the total capital) 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.
Shareholder Profile
The Company's shares owned at 31 March 2017 are as follows:
Ordinary 'A' non--voting
shares Ordinary
shares
Institutional
& Wealth
Managers 3,439,521 43.0% 15,307,874 95.7%
Directors 2,127,619 26.6% 139,150 0.9%
Private
Individuals 2,380,384 29.8% 438,491 2.7%
Other 52,476 0.7% 114,485 0.7%
8,000,000 16,000,000
Substantial Shareholders
As at 31 March 2017 the Directors were aware of the interests below in the Ordinary shares of the Company, which exceeded 3% of the voting issued share capital of that class.
The following information is disclosed in accordance with the Companies Act 2006 and DTR 7.2.6 of the FCA Disclosure Guidance and Transparency Rules.
The Company's capital structure and voting rights are summarised above and in Note 15.
-- The giving of powers to issue or buy back the Company's shares requires an appropriate resolution to be passed by shareholders. Proposals for the renewal of the Board's powers to buy back shares are set out in the Notice of the Annual General Meeting at the end of this report.
-- There are no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; no agreements which the Company is party to that affect its control following a takeover bid; and no agreements between the Company and its Directors concerning compensation for loss of office. Notwithstanding the foregoing, the Company may require any holder of shares to transfer some or all of its shares (or otherwise refuse to register any transfer of shares) to avoid the Company being regarded as a "close company" as defined in s.414 of the Income and Corporation Taxes Act 1988, to another person whose holding of such shares, in the sole and conclusive determination of the Board, would not cause the Company to be a close company.
No. % of
of voting voting
shares shares
Nomolas Ltd 2,069,425 25.9%
Victualia Limited
Partnership 2,069,425 25.9%
William Salomon is interested in 2,069,425 of the shares held by Victualia Limited Partnership, representing 25.9% of the voting share capital. In addition, William Salomon has further interests in the Company's shares; the total interest is detailed in the Directors' Interests section below.
As at 22 June 2017, the date of signing of the Annual Accounts, there have been no disclosures to the Company of changes of interests under DTR 5.
BOARD AND MANAGEMENT SHAREHOLDINGS
Directors and Directors' Interests
The present members of the Board are shown above.
The Board's policy is that all Directors retire annually. All Directors being eligible, at the forthcoming Annual General Meeting, will retire and seek re-election in accordance with the Board's policy. The contracts of employment between the Company and each of the Directors do not allow for any compensation payment in the event of loss of office.
The interests of Directors and their connected parties in the Company at 31 March 2017 are shown below:
Ordinary shares 'A' non--voting Nature
of 5p each Ordinary of interest
shares
of 5p each
2017 2016 2017 2016
Alex Hammond-Chambers 4,900 4,900 10,600 10,600 Beneficial
Jonathan Davie 4,000 4,000 26,000 26,000 Beneficial
Raymond Oxford 1,850 1,850 1,850 1,850 Beneficial
William Salomon 2,115,869 2,115,869 98,700 98,700 Beneficial
Geoffrey Wood 1,000 1,000 2,000 2,000 Beneficial
As at 22 June 2017, the date of signing of the Annual Accounts, there were no changes to report to the Directors' holdings.
William Salomon is the senior partner of Hansa Capital Partners LLP. Fees payable to Hansa Capital Partners LLP amounted to GBP2,009,794 (2016: GBP1,934,627). The fees outstanding at the year-end amounted to GBP181,091 (2016: GBP157,999). During the year, no rights to subscribe for the shares of the Company were granted to, or exercised by Directors, their spouses or infant children.
PORTFOLIO MANAGER'S INTERESTS
As at 22 June 2017, the date of signing of this Annual Report, the management and staff of the Portfolio Manager's group, excluding the holding of William Salomon, shown above, were interested in c2.1m shares in the Company - a mixture of Ordinary and 'A' non-voting Ordinary shares.
ANNUAL GENERAL MEETING
A special resolution relating to the following items will be proposed at the forthcoming AGM:
Authority to repurchase 'A' non-voting
Ordinary shares
A resolution will be proposed at the forthcoming AGM, seeking shareholder approval for the renewal of the authority for the Company to repurchase its own 'A' non-voting Ordinary shares. The Board believes the ability of the Company to repurchase its own 'A' non-voting Ordinary shares in the market could potentially benefit all equity shareholders of the Company in the long-term. The repurchase of 'A' non-voting Ordinary shares at a discount to the underlying NAV would enhance the NAV per share of the remaining equity shares.
The Company's Articles are drafted in such a way that the Company may from time to time purchase and cancel its own shares. However, company law requires that shareholders' approval to repurchase shares be sought. At the AGM the Company will therefore seek the authority to purchase up to 2,398,400 'A' non-voting Ordinary shares (representing 14.99% of the Company's issued 'A' non-voting Ordinary share capital, the maximum permitted under the FCA Listing Rules), at a price not less than 5p per share (the nominal value of each share) and not more than 5% above the average of the middle-market quotations for the five business days preceding the day of purchase or, where a series of transactions have taken place the higher of the last independent trade and current highest independent bid on the trading venue where the purchase(s) will be carried out. The authority being sought, the full text of which can be found in Special Resolution 10 in the Notice of Meeting, will last until the date of the next AGM.
The Company is seeking authority to use its realised capital reserve to allow repurchase of shares in the market. The decision as to whether the Company repurchases any shares will be at the absolute discretion of the Board. Any shares purchased will be cancelled.
Notice Period for General Meetings
The EU Shareholder Rights Directive increased the notice period for general meetings of companies to 21 days unless certain conditions are met, in which case it may be 14 days' notice. A shareholders' resolution is required to permit that the Company's general meetings (other than AGMs) may be held on 14 days' notice. Accordingly, Special Resolution 11 will propose that the period of notice for general meetings of the Company (other than AGMs) shall not be less than 14 days' notice.
An ordinary resolution relating to the following item will be proposed at the forthcoming AGM:
(a) Approve the Directors' Remuneration Policy
Resolution 8 will be proposed at the forthcoming AGM, seeking the triennial shareholder approval of the Directors' Remuneration Policy, as detailed under "Policy on Directors' Remuneration".
The Directors consider that the above highlighted resolutions, and all the resolutions to be proposed at the forthcoming AGM as set out in the Notice of Meeting, are in the best interests of shareholders as a whole and unanimously recommend all shareholders to vote in favour, by ticking the appropriate boxes on the enclosed Form of Proxy. This form should be returned to the Company's Registrar as soon as possible, but in any event so as to arrive no later than 48 hours before the time of the AGM.
If the Board considers a significant proportion of votes have been cast against a resolution at the AGM, the Company will explain, when announcing the results of voting, what action it intends to take to understand the reasons behind the results of the vote.
APPROVAL OF THE DIRECTORS
The Directors consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
For and on behalf of the Board
Alex Hammond--Chambers
Chairman
22 June 2017
Report of the Directors
The Companies Act 2006 requires the Directors to report on a number of items within the Annual Report. With the introduction of the Strategic Report, the Directors have chosen to report on some of those items within the body of the Strategic Report, while others remain within the Report of the Directors.
ITEMS INCLUDED WITHIN THE STRATEGIC REPORT
The following items are listed within the Strategic Report:
-- Statement of the existence of qualifying indemnity provisions for Directors.
-- Names of Directors, at any time in the year - see above for the Directors' details and attendance at Company meetings.
-- Greenhouse Gas Emissions. -- Policy on Diversity - see within "The Board".
ITEMS REPORTED WITHIN THE DIRECTORS' REPORT
Disclosure to the Auditor of Relevant Audit Information
The Directors confirm that, so far as they are aware, having made such enquiries and having taken such steps as they consider they reasonably ought, they have provided the Auditor with all the information necessary for it to be able to prepare its report. In doing so each Director has made himself aware of any information relevant to the audit and established that the Company's Auditor is aware of that information. The Directors are not aware of any information relevant to the audit of which the Company's Auditor is unaware.
Capital Structure
The Company's Capital Structure is described in the "Investor Information Section".
Corporate Governance Report
The Corporate Governance Report, including the Financial Risk Management Review of the Company, is included in this document starting below.
Future Developments and Post Balance Sheet Events
The Company does not have any imminent future developments or post balance sheet events to report.
APPROVAL OF THE DIRECTORS
The Directors consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy. Further details demonstrating the Company's performance, business model and strategy have been included within the Strategic Report.
For and on behalf of the Board
Alex Hammond--Chambers
Chairman
22 June 2017
Corporate Governance Report
UK Corporate Governance Code
Internal Controls
The UK Corporate Governance Code ("UK Code") (issued September 2014 and applying to accounting periods beginning on or after 1 October 2014, but superseded by the April 2016 Code for accounting periods beginning on or after 17 June 2016), which can be found on the website of the Financial Reporting Council (www.frc.org.uk), requires the Directors to review the effectiveness of the Company's risk management and system of internal controls on an annual basis. The Directors, through the procedures outlined below, keep the system of risk management and internal controls under review. The Board has identified risk management controls in the key areas of business objectives, accounting, compliance, operations and secretarial as areas to be included in the extended review.
The Board recognises its ultimate responsibility for the Company's system of risk management and internal controls and for monitoring their effectiveness. In order to perform this responsibility the Board receives regular reports on all aspects of risk management and internal control from the Company's service providers (including financial, operational and compliance controls, risk management and relationships with other service providers); the Board will authorise necessary action in response to any significant failings or weaknesses identified by these reports. However, it must be noted this system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.
Financial Reporting
The Board has a responsibility to present a fair, balanced and understandable assessment of annual, half-year and other price sensitive public reports and reports to regulators, as well as to provide information required to be presented by statutory requirements. To ensure this responsibility is fulfilled, all such reports are reviewed and approved by the Board prior to their issue.
The Board confirms there have been no important events since 31 March 2017, of which the Board is aware, which would have a material impact on the Company.
Compliance with the Provisions of the UK Corporate Governance Code
The Board has considered the principles and recommendations of the AIC Code of Corporate Governance ("AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the relevant principles of the UK Code, as well as setting out additional principles and recommendations on issues of specific relevance to investment companies such as Hansa Trust PLC.
The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide more appropriate information to shareholders.
The Company has complied with the recommendations of the AIC Code, thereby the UK Code.
The Board confirms, with the exception of the existence of a senior independent Director and the need to involve the Chairman early in the process for structuring a new share launch (as it is not relevant for this Company), that it has in all respects followed the AIC Code in meeting its obligations under the Listing Rules and the UK Code. The AIC Code can be found on its website at www.theaic.co.uk.
Association of Investment Companies Code
The AIC Code has 21 principles, the vast majority of which the Board has been following for many years. However, modern corporate governance requires that boards not only govern their companies sensibly and responsibly, but that they are seen to do so. Hence there is a requirement to follow a check list of principles, which in our case is drawn from the AIC Code. They include:
The Board
-- The Chairman should be independent
Alex Hammond-Chambers has been assessed by the Board to be independent.
-- A majority of the Board should be independent of the Manager
All the Directors are subject to an annual independence review and with the exception of William Salomon, who is a partner of the Portfolio Manager, all are adjudged to be independent and to have performed their duties in an independent manner.
-- Directors should be submitted for re-election at regular intervals. Nomination for re-election should not be assumed, but be based on disclosed procedures and continued satisfactory performance
All Directors resign at each AGM and where appropriate offer themselves for re-election.
-- The Board should have a policy on tenure which is disclosed in the Annual Report
The Board has determined that neither age nor length of service necessarily compromise independence, rather that experience and knowledge gained in service normally strengthen independent performance. All Directors have service contracts, details of which are contained in the Directors' Remuneration Report.
-- There should be full disclosure of information about the Board
A brief biography of each member of the Board can be found on above. The Company's Chairman chaired the Board and Remuneration Committee during the year. Jonathan Davie was Chairman of the Audit Committee for the full year.
-- The Board should aim to have a balance of skills, experience, length of service and knowledge of the company
The Board regularly reviews its requirements to direct the affairs of the Company. When and where appropriate, individuals are identified who would strengthen the Board and are put forward as candidates for Board membership.
-- The Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual Directors
The Board undertakes a formal written evaluation every three years. In the other years the Board carries out an evaluation of the independence of each Director, by means of a written response from each Director on his fellow Directors, the progress of the actions resulting from the previous reviews and any new ideas for improving the returns to shareholders, by enhancing the effectiveness of the Board. The Chairman is evaluated by another Director on behalf of the Board.
-- Directors' remuneration should reflect their duties and responsibilities and the value of their time spent
The level of Directors' fees is monitored annually and formally reviewed every three years, in light of their duties, responsibilities and their time committed to the interests of the Company; note is taken of fees paid by other comparable companies. A note of the Company meetings attended by each Director is included with their biographies above.
-- The Independent Directors should take a lead in the appointment of new directors and the process should be disclosed in the Annual Report
The identification and appointment of a new Board member is a matter for the whole Board. The Chairman, as the de facto senior independent Director, is charged with taking the lead in all the processes with respect to the appointment of a new director.
-- Directors should be offered relevant training and induction
When a new Director is appointed, he/she attends an induction seminar held by the Company Secretary and the Chairman. Directors are also provided on a regular basis with industry, regulatory and investment updates. Directors regularly participate in industry seminars and training courses where appropriate. In addition, the Company maintains a membership of its trade body, the AIC, to ensure it has reliable access to technical resources and best practice.
Board meetings and the relationship with the Manager
-- Boards and managers should operate in a supportive, co--operative and open environment
The Board is primarily responsible for the running of the Company and maintains specific duties and responsibilities. Where the Board has delegated certain duties to the AIFM and Portfolio Manager, the Board, the AIFM and the Portfolio Manager operate in an environment of mutual trust and respect, both at formal Board Meetings and during the year when ad-hoc communications are instigated by any party.
-- The primary focus at regular Board Meetings should be the review of the investment performance and associated matters such as gearing, asset allocation, marketing/investor relations, peer group information and industry issues
At the regular Board Meetings, discussions are held and reports and papers reviewed, all of which cover the above mentioned aspects.
-- Boards should give sufficient attention to overall strategy
The Board holds an annual strategy meeting with the Portfolio Manager, to specifically discuss the Company's future investment and corporate strategies. However, macro trends, the drivers for the wider economy and their potential for impact on the portfolio are discussed at every Board Meeting.
-- The Board should regularly review both the performance of and contractual arrangements with the Portfolio Manager
The Board formally reviews the performance of the Portfolio Manager each quarter, at which Board Meeting the Portfolio Manager presents a written report. At the annual review of the Portfolio Manager all aspects of its service to the Board are reviewed, particularly the long-term returns to shareholders and the terms and conditions of its contract. This review is conducted by the independent Directors only.
-- The Board should agree policies with the Manager covering key operational issues
Within the agreement, service levels are defined between the AIFM, Portfolio Manager and the Company. In addition the Board determines certain investment restrictions and guidelines for the Portfolio Manager, on which the Portfolio Manager reports monthly and the AIFM also monitors.
-- Boards should monitor the level of share price discount or premium (if any) and, if desirable, take action to reduce it
The Board monitors the levels of discount or premium and comments on it at its regular meetings. The Board also seeks authority to purchase up to 14.99% of the Company's 'A' non-voting Ordinary shares at the Company's AGM. The Board, through the Chairman, ensures that shareholders are fully aware of the Company's policy with regard to share buybacks and, additionally, states its discount policy in the Annual Report.
-- The Board should monitor and evaluate other service providers
The Board, through its Audit Committee, receives independent reports from the auditors of the main service providers; these reports are called either AAF 01/06 or ISAE3402 reports.
Shareholder Communication
-- The Board should regularly monitor the shareholder profile of the Company and put in place a system for canvassing shareholder views and for communicating the Board's views to shareholders
The Board reviews the shareholder profile at its regular meetings. The Company, through its Portfolio Manager and Company Secretary, has regular contact with its shareholders. The Board supports the principle that the AGM should be used to communicate with all shareholders and promotes its website to them. The Company Secretary and where appropriate the Chairman, regularly receive and handle communications from shareholders. These communications are received by letter, email or telephone. Any matter requiring the Board's attention is referred to it for action.
-- The Board should normally take responsibility for, and have a direct involvement in, the content of communications regarding major corporate issues even if the Manager is asked to act as spokesman
The Board is responsible for all major corporate issues and as such would have a direct involvement in both the issue and the content of its communications.
-- The Board should ensure shareholders are provided with sufficient information for them to understand the risk:reward balance to which they are exposed by holding the shares
The Board, through the issuance of the Annual and Half--Year Reports, and monthly factsheets, aims to ensure both shareholders and prospective shareholders are made fully aware of the investment aims and KPIs of the Company, the types of investments the Company is likely to enter into, the disposition of those investments in the portfolio, the gearing of the Company and the period over which its performance should be judged.
UK STEWARDSHIP CODE
The aim of the Stewardship Code is to enhance the quality of engagement between institutional investors and companies, to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities.
The seven principles of the Code are that institutional investors should:
-- Publicly disclose their policy on how they will discharge their stewardship responsibilities.
-- Have a robust policy on managing conflicts of interest in relation to stewardship which should be publicly disclosed.
-- Monitor their investee companies. -- Establish clear guidelines on when and how they will escalate their stewardship activities. -- Be willing to act collectively with other investors where appropriate. -- Have a clear policy on voting and disclosure of voting activity. -- Report periodically on their stewardship and voting activities.
Discharging stewardship responsibilities
The Company, in conjunction with the AIFM, has delegated to its Portfolio Manager, Hansa Capital Partners LLP, the day to day operation of the Company's policy, which is to operate a due diligence process when considering any investment.
The process includes a number of key factors in the establishment of whether an investment is suitable for its portfolio and will include:
-- Competent management. -- Likelihood of offering an acceptable return for the risk undertaken. -- Financial and structural soundness. -- Regular reporting. -- Sound business plans. -- Compliance with current governance and regulatory requirements.
The Portfolio Manager will engage the Board on controversial matters arising from the operations of the policy.
COMPLIANCE WITH THE COMPANIES ACT AND FINANCIAL CONDUCT AUTHORITY UKLA LISTING RULES
In discharging its responsibilities of stewardship the Board is governed by the Companies Act and the Financial Conduct Authority UKLA Listing Rules.
The Company's Articles of Association include a general power for the Directors to authorise any matter which would or might constitute or give rise to a breach of the duty of a director under s.175 of the Companies Act 2006. Procedures have been established for the disclosure of any such conflicts and also, where relevant, for the consideration and authorisation of these conflicts by the Board.
Under UK Company Law the Directors are responsible for ensuring that:
-- Adequate accounting records are kept, that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006.
-- The assets of the Company are safeguarded; and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
-- The Report of the Directors and other information included in the Annual Report is prepared in accordance with Company Law in the UK. The Directors are also responsible for ensuring the Annual Report includes information required by the Listing Rules of the FCA.
-- The Company has effective internal control systems, designed to ensure that adequate accounting records are maintained; and that financial information on which the business decisions are made, which is issued for publication, is reliable. Such a system of internal control can provide only reasonable, but not absolute, assurance against material misstatement or loss.
-- The Company Financial Statements for each financial year are prepared in accordance with IFRS, as adopted by the EU. Under Company Law directors must not approve the financial statements unless they are satisfied they give a true and fair view of the state of affairs and profit or loss of the Company for that period.
In preparing these Financial Statements, the Directors are required to:
-- select suitable accounting policies and apply them consistently; -- make judgements and estimates that are reasonable and prudent; -- state whether they have been prepared in accordance with IFRS as adopted by the EU; and
-- prepare the financial statements on the going concern basis, unless it is inappropriate to presume the Company will continue in business.
Under the FCA UKLA Listing Rules and the UK Code, the Board is responsible for:
-- Disclosing how it has applied the principles and complied with the provisions of the AIC Code and, thereby, the UK Code, or where not, to explain the reasons for divergence.
-- Reviewing the effectiveness of the Company's systems of risk management and internal controls.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website: www.hansatrust.com. Visitors to the website need to be aware that legislation in the UK governing the preparation and dissemination of the Financial Statements may differ from legislation in their own jurisdictions.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
-- The financial statements, prepared in accordance with applicable international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company.
-- The Strategic Report, including the Chairman's Report to the Shareholders and the Report of the Directors include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties it faces.
The Directors consider the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable. Further detail demonstrating the Company's performance, business model and strategy has been included within the Strategic Report.
For and on behalf of the Board
Alex Hammond--Chambers
Chairman
22 June 2017
Audit Committee Report
The Financial Reporting Council's guidance emphasises the need for audit committee arrangements to be proportionate to the task and proportionate to the size, complexity and risk profile of the company and as such our Board does not consider the establishment of an internal audit function appropriate for the size and complexity of the organisation.
The Audit Committee, which meets at least twice a year, consists of all five Directors and Edwin Teideman, a former director, whose skills and experience of the Company strengthen the Committee. During the Company's year to 31 March 2017, and to date, the Committee was chaired by Jonathan Davie.
The Committee is authorised by the Board to investigate any activity within its terms of reference, to seek any information it requires from any officer or service provider to the Company, to obtain outside legal or other independent professional advice and to secure the attendance of third parties with relevant experience and expertise if it considers this necessary.
The Chairman of the Audit Committee formally reports to the Board following each Audit Committee meeting and on other occasions as requested by the Board.
The Terms of Reference are determined by the Board and approved by the Committee and include, but are not restricted to, the following:
-- To consider and make a recommendation to the Board as to the appointment of the external Auditor, tendering of the audit services, the audit fee and any questions relating to the resignation or dismissal of the Auditor.
-- To determine with the external Auditor the nature and scope of the audit.
-- To review and monitor the independence of the external Auditor and the provision of additional services to the Company.
-- To review the Half-Year and Annual Financial Reports before submission to the Board, focusing particularly on:
-- any changes in accounting policies and practices;
-- major judgemental areas;
-- significant adjustments resulting from the audit;
-- the going concern assumption;
-- compliance with Accounting Standards and Governance Codes;
-- compliance with FCA Listing Rules and legal requirements; and
-- valuation of unquoted investments.
-- To discuss issues and reservations arising from the annual audit and any matters the Auditor may wish to discuss.
-- To review the Auditor's audit findings and responses to it.
-- To review and monitor the effectiveness of the Company's Internal Control and Risk Systems prior to endorsement by the Board.
-- To review the processes and procedures that monitor compliance with s.1158 CTA 2010. -- To review service providers' AAF 01/06 or ISAE 3402 reports.
In discharging its duties and, in particular, matters relating to the approval of the Annual Report, Half-Year Report and the review of the Company's Internal Controls, the Committee considers reports and presentations made by the Company's Auditor, Administrators, Company Secretary and Legal Advisers.
In its review of the Annual Report the Committee pays particular attention to the ownership of assets, the valuations of the portfolio, recognition of income and outstanding liabilities, if applicable, which it considers to be of significant importance in establishing its opinion on it, all of which are covered by the Auditor in its report and fully discussed with the Auditor.
With regard to the ownership of assets, the Company's Depositary and Administrator have confirmed the ownership of all assets to the Audit Committee's satisfaction. With regard to the valuations, the Audit Committee notes that 66% of the portfolio by value is held in assets that are listed, hence forming the basis of the valuation. Further, of the remaining 34% unquoted, the majority relate to unquoted fund investments where valuations are supplied by third party managers. The Committee is satisfied with the valuation process. With regard to revenue recognition, the Audit Committee reviewed the external Auditor's approach to the audit prior to the commencement of the audit. The results of the audit in this area were discussed with the external Auditor and there were no significant issues arising in relation to the recognition of revenue.
The Audit Committee, having considered its responsibilities and its reporting to the Board, confirms it is not aware of any matter which it should bring to the attention of either the Board or the Auditor and considers the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
The Audit Committee considers the external Auditor's independence, objectivity and the cost effectiveness of the audit process through a process of feedback from the Company advisors, including the Company Secretary and Portfolio Manager. The Committee also meet with the Auditor directly to discuss the Annual Report, the work the Auditor has carried out as part of its review and any matters raised.
The level of non-audit services provided to the Company by the Auditor is monitored, as is the Auditor's objectivity in providing such services, to ensure that the independence of the audit team from the Company is not compromised. Non-audit services provided by Grant Thornton UK LLP were, historically, in relation to taxation services. A change of best practice in the accounting industry following the new rules on Auditor Independence has meant that Grant Thornton UK LLP is no longer able to provide tax compliance services to the Company and continue to act as Auditor. Therefore, the Company is in the process of appointing a replacement tax adviser to provide tax compliance services for the year ended 31 March 2017. Further information on fees paid to Grant Thornton UK LLP is contained in "Other Expenses" within Note 4 of the Financial Statements.
Grant Thornton UK LLP has been the Company's Auditor for seven years. Prior to that, and before its merger with Grant Thornton, RSM Robson Rhodes LLP was the Company's auditor. The Committee previously indicated that the statutory audit and associated non-audit services would be tendered for the year ended 31 March 2016. However, the Company now intends to delay the tender until 2019, as permitted under the UK Government's implementation of the new EU Directive at which point a change of audit firm will be required.
Following careful consideration of the independence, experience and value for money of the current Auditor, the Audit Committee has recommended that the Board propose the re-appointment of Grant Thornton UK LLP as Auditor to the Company.
For and on behalf of the Audit Committee
Jonathan Davie
Audit Committee Chairman
22 June 2017
Directors' Remuneration Report
Despite the inclusion of the Strategic Report, the Companies Act continues to require the Company to produce a separate report on the Directors' Remuneration and that the Board approves the Report and signs it to confirm its accuracy. There are elements of the Directors' Remuneration Report that are audited, by law, by the Company's Auditor. The Auditor's opinion is included in its report below.
The Board has prepared this Report in relation to all directors who have served during the year and in accordance with the requirements of s.420-422 of the Companies Act 2006. Ordinary resolutions for the approval of this Report, as well as acceptance of the Remuneration Policy will be put to shareholders at the forthcoming AGM.
ANNUAL STATEMENT
The Company has five non-executive Directors. The Board as a whole fulfils the function of a Remuneration Committee. The Chairman has prepared this statement on behalf of the Board.
There have been no changes to remuneration during the year to 31 March 2017, either on an individual basis or for the Board as a whole. The most recent update to Directors' remuneration was made in the year to 31 March 2013. All Directors have served for the full year, although all retired at the AGM on 29 July 2016 as is the Company policy and were subsequently re-elected.
POLICY ON DIRECTORS' REMUNERATION
The Board's policy is that the remuneration of non-executive Directors should include a basic pay level and should reflect the experience of the Board as a whole, be appropriate for the work carried out and the responsibilities, financial and reputational risks undertaken, including additional remuneration for any roles in addition to the responsibilities of the non-executive director role, for example, chairman. The remuneration does not include a performance related element and Directors do not receive bonuses, share options, pensions or long-term incentive schemes. The total remuneration of the Board will be kept within the limits set out in the Company's Articles of Association, as amended from time to time.
The fees for the non-executive Directors are within the limits (maximum total fee of GBP175,000) set. This policy was approved at the AGM held on 21 July 2014 with 99.86% of the votes cast being In Favour of the policy and the remaining 0.14% being Against. The policy was approved for a period of three years from 1 July 2014 to 30 June 2017. The Directors consider that the maximum total fee should remain as GBP175,000. The Policy on Directors' Remuneration will be presented to shareholders at the forthcoming AGM for their consideration and approval for a further three years.
DIRECTORS' SERVICE CONTRACTS
It is the Board's policy that every Director has a service contract. None of the service contracts is for a fixed term. The terms of appointment provide that a Director shall retire and be subject to re-election at the first AGM after appointment. The Board has decided each Director will retire annually at the AGM and seek re-election as appropriate. The terms also provide that either party may give three months' notice, in certain circumstances a Director may be removed without notice and compensation will not be due on leaving office. There are no agreements between the Company and its Directors concerning compensation for loss of office.
REMUNERATION COMMITTEE
The Board fulfils the function of a Remuneration Committee and considers that the specific appointment of such a committee is not appropriate for an investment trust company such as Hansa Trust. The level of Directors' fees is monitored annually and formally reviewed every three years in the light of their duties and also relative to other comparable companies. The Company Secretary provides relevant information when the Directors consider the level of Directors' fees. The Directors' Remuneration Policy will be presented to shareholders at the AGM on 28 July 2017 for their consideration and approval. At the meeting, it will be proposed that the current overall cap of GBP175,000 should be maintained on annual Directors' fees.
FUTURE POLICY TABLE
The Company only has non-executive Directors, who only receive fees. The implementation of the above policy could give rise to the following increase in fees:
Current Potential
total future
fee total
GBP000 fee
GBP000
Non--executive
Director fees 141 175
The Board has appointed the Company Secretary to provide relevant information when the Directors consider the level of Directors' fees.
If, in the future, recruitment of another non-executive director is deemed necessary by the Board, the remuneration would be managed within the overall limit of GBP175,000. If this were not possible, it would be necessary to return a revised remuneration policy to shareholders for their consideration. As above, the Company Secretary provides relevant information when the Directors consider the level of Directors' fees. The criteria for agreeing the fees of any incoming non-executive director would be the same criteria used to assess the remuneration of existing Directors.
POLICY FOR NOTICE PERIODS
The current Directors' service contracts stipulate three months' written notice to be given by either the Director or the Company to terminate the services of a Director. The Board consider this is sufficient notice to ensure an orderly hand over between the parties.
SHAREHOLDERS' VIEWS ON REMUNERATION POLICY
The formal views of unconnected shareholders have not been sought in the preparation of this policy.
EMPLOYEES
The Company does not have any employees and, therefore, no Chief Executive Officer. Accordingly, the disclosures required under paragraphs 18(2), 19, 38 and 39 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 are not required.
ANNUAL REPORT ON REMUNERATION
Directors' Emoluments (Audited)
The Company does not have any employees, only non-executive Directors who receive only a basic fee, plus expenses. Therefore, the use of the detailed remuneration table, as prescribed in the legislation, is not appropriate here. A condensed table showing the information relevant to the Directors' remuneration is shown in its place.
The Directors who served in the year received the following emoluments in the form of fees:
2017 2017 2016 2016
Fee Total Fee Total
GBP000 GBP000 GBP000 GBP000
Alex Hammond--Chambers
(Chairman)* 38 38 38 38
Jonathan Davie 30 30 28 28
Raymond Oxford 25 25 25 25
William Salomon 23 23 23 23
Geoffrey Wood 25 25 25 25
141 141 139 139
* The amounts due in respect of Alex Hammond--Chambers' fees are paid to his service company.
The Company pays National Insurance contributions on the Directors' emoluments where applicable. This amounted to GBP6,736 (2016: GBP7,537). The Company also pays the expenses of the Directors to attend the Board Meetings.
DIRECTORS' INTERESTS (AUDITED)
Directors must seek permission from the Chairman before trading in shares, taking note of any Closed Periods. Other than that, there are no specific rules on Directors' shareholdings.
The interests of Directors and their connected parties in the Company at 31 March 2017 are shown below.
Ordinary 'A' non--voting Nature
shares Ordinary of
of shares interest
5p each of 5p
each
2017 2016 2017 2016
Alex Hammond--
Chambers 4,900 4,900 10,600 10,600 Beneficial
Jonathan
Davie 4,000 4,000 26,000 26,000 Beneficial
Raymond
Oxford 1,850 1,850 1,850 1,850 Beneficial
William
Salomon 2,115,869 2,115,869 98,700 98,700 Beneficial
Geoffrey
Wood 1,000 1,000 2,000 2,000 Beneficial
As at 22 June 2017, the date of signing of these Annual Accounts, there were no changes to report to the Directors' holdings.
William Salomon is the senior partner of Hansa Capital Partners LLP. Fees payable to Hansa Capital Partners LLP amounted to GBP2,009,794 (2016: GBP1,934,627). The fees outstanding at the year-end amounted to GBP181,091 (2016: GBP157,999). During the year, no rights to subscribe to the shares of the Company were granted to, or exercised by Directors, their spouses or infant children.
YOUR COMPANY'S PERFORMANCE
The graph below shows the ten year cumulative total return to shareholders:
TEN YEAR NET ASSET VALUE TOTAL RETURN RECORD
Note: The table of ten year performance for the Company is also shown within the Strategic Report.
DIRECTORS' ATTANCE
The Directors meet as a Board on a quarterly basis and at other times as necessary and the table below sets out the number of meetings and the attendance at them by each Director.
Strategic Board Audit
Committee
Number of meetings
held 1 5 2
Number of meetings
attended:
Alex Hammond--Chambers 1 5 2
Jonathan Davie 1 5 2
Raymond Oxford 1 5 0
William Salomon 1 5 2
Geoffrey Wood 1 5 2
STATEMENT OF VOTING AT THE AGM
The Directors' Remuneration Report for the year ended 31 March 2016 was presented at the AGM held on 29 July 2016. At that meeting, the Directors' Remuneration Report was approved by 100% of the votes cast.
The Directors' Remuneration Report for the year ended 31 March 2017 will be presented to the AGM on 28 July 2017.
On behalf of the Board, and in accordance with Part 2 of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), I confirm that the above Report on Director's Remuneration summarises, as applicable, for the year ended 31 March 2017:
(a) the major decisions on Directors' remuneration; (b) any substantial changes relating to Directors' remuneration made during the year; and (c) the context in which those changes occurred and decisions have been taken.
For and on behalf of the Board
Alex Hammond--Chambers
Chairman
Hansa Trust PLC
22 June 2017
Independent Auditors' Report to the
Members of Hansa Trust PLC
Independent auditor's report to the members of Hansa Trust plc
Our opinion on the financial statements is unmodified In our opinion the financial statements: give a true and fair view of the state of the Company's affairs as at 31 March 2017 and of its profit for the year then ended; have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act 2006. --------------------------------------------------------------
Who we are reporting to
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
What we have audited
Hansa Trust plc's financial statements for the year ended 31 March 2017 comprise the Income Statement, the Balance Sheet, the Statement of Changes in Equity, the Cash Flow Statement and the related notes.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.
Overview of our audit approach
Overall materiality: GBP3,075,000, which is
approximately 1% of the Company's net assets;
and
Key audit risks were identified as existence
and valuation of quoted and unquoted investments.
---------------------------------------------------
Our assessment of risk
In arriving at our opinions set out in this report, we highlight the following risks that, in our judgement, had the greatest effect on our audit:
Audit risk How we responded to the risk
----------------------------- -------------------------------------------------------------
Existence and valuation For quoted investments, our audit
of investments work included, but was not restricted
The Company's business to:
is to achieve a * assessing whether the Company's accounting policy for
growth of shareholder quoted investments is in accordance with the
value, from a concentrated, requirements of IFRSs as adopted by the EU and the
long-term, non--index Association of Investment Companies' Statement of
correlated portfolio Recommended Practice ('AIC SORP') and testing whether
of unusual investments. the Company has accounted for such investments in
Accordingly, the accordance with the policy;
investment portfolio
is a significant,
material item in * comparing the investments holdings to the
the financial statements. confirmation from the Company's custodian;
The existence and
valuation of quoted
and unquoted investments * reviewing the liquidity of the investment portfolio
are therefore risks by obtaining trading volumes from an independent
that require particular source, enabling us to gain further comfort over the
and special audit fair value classification; and
attention.
* comparing the valuation to an independent source of
market prices.
----------------------------- -------------------------------------------------------------
For unquoted investments, our audit
work included, but was not restricted
to:
* assessing whether the Company's accounting policy for
unquoted investments is in accordance with IFRSs as
adopted by the EU and the AIC SORP and testing
whether the Company has accounted for unquoted
investments in accordance with the policy;
* assessing whether the valuations were performed in
accordance with the International Private Equity and
Venture Capital Valuation guidelines;
* obtaining an understanding of the investment
valuation process for the private equity funds
through review of the fund's latest available audited
financial statements and review of the fund's latest
quarterly reports;
* on a sample basis, testing additions and disposals
during the year; and
* obtaining a direct confirmation of the investments
held by the Company at the year-end from the
respective fund administrators.
The Company's accounting policy
on non-current investments is shown
in Note 1(d) and related disclosures
are included in Note 10. The Audit
Committee identified the ownership
of assets and the valuations of
the portfolio as significant issues
in its report, where the Committee
also described the action that
it has taken to address these issues.
----------------------------- -------------------------------------------------------------
Our application of materiality and an overview of the scope of our audit
Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our work and in evaluating the results of that work.
We determined materiality for the audit of the financial statements as a whole to be GBP3,075,000, which is approximately 1% of the Company's net assets. This benchmark is considered the most appropriate because net assets, which is primarily composed of the Company's investment portfolio, is considered to be the key driver of the Company's total return performance.
Materiality for the current year is higher than the level that we determined for the year ended 31 March 2016 to reflect the increase in net asset value this year.
We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial statement materiality. We also determine a lower level of specific materiality for certain areas such as directors' remuneration and related party transactions.
We determined the threshold at which we will communicate misstatements to the audit committee to be GBP153,000. In addition we will communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds.
Overview of the scope of our audit
A description of the generic scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.
We conducted our audit in accordance with International Standards on Auditing (ISAs) (UK and Ireland). Our responsibilities under those standards are further described in the 'Responsibilities for the financial statements and the audit' section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the company in accordance with the Auditing Practices Board's Ethical Standards for Auditors, and we have fulfilled our other ethical responsibilities in accordance with those Ethical Standards.
Our audit approach was based on a thorough understanding of the Company's business and is risk based. The day-to--day management of the Company's investment portfolio, the custody of its investments and the maintenance of the Company's accounting records is outsourced to third-party service providers. Accordingly, our audit work included:
-- Obtaining an understanding of, and evaluating, internal controls at the Company and relevant third-party service providers. This included a review of reports on the description, design and operating effectiveness of internal controls at relevant third-party service providers; and
-- Undertaking substantive testing on significant transactions, account balances and disclosures, the extent of which was based on various factors such as our overall assessment of the control environment, the design effectiveness of controls over individual systems and the management of specific risks.
Other reporting required by regulations
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
-- the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and
-- the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report to you if, in our opinion:
-- adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
-- the financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or -- we have not received all the information and explanations we require for our audit.
Under the Listing Rules, we are required to review:
-- the Directors' statements in relation to going concern and longer-term viability, set out on in the Organisation and Objectives section; and
-- the part of the Corporate Governance Statement relating to the company's compliance with the provisions of the UK Corporate Governance Code specified for our review.
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:
-- materially inconsistent with the information in the audited financial statements; or
-- apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or
-- otherwise misleading.
In particular, we are required to report to you if:
-- we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable; or
-- the annual report does not appropriately disclose those matters that were communicated to the audit committee which we consider should have been disclosed.
We have nothing to report in respect of the above.
We also confirm that we do not have anything material to add or to draw attention to in relation to:
-- the directors' confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the company including those that would threaten its business model, future performance, solvency or liquidity;
-- the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated;
-- the directors' statement in the financial statements about whether they have considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; and
-- the directors' explanation in the annual report as to how they have assessed the prospects of the company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Responsibilities for the financial statements and the audit
What the directors are responsible for:
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
What we are responsible for:
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
Andrew Heffron
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
22 June 2017
Income Statement
For the year ended 31 March 2017
Revenue Capital Total Revenue Capital Total
2017 2017 2017 2016 2016 2016
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gains/(losses)
on investments
held at fair value
through profit
or loss 10 - 52,575 52,575 - (16,981) (16,981)
Exchange gains/(losses)
on currency balances - 111 111 - (13) (13)
Investment income 2 6,194 - 6,194 6,129 - 6,129
6,194 52,686 58,880 6,129 (16,994) (10,865)
Investment management
fees 3 (2,010) - (2,010) (1,935) - (1,935)
Other expenses 4 (1,123) - (1,123) (1,077) - (1,077)
(3,133) - (3,133) (3,012) - (3,012)
Profit/(loss)
before finance
costs and taxation 3,061 52,686 55,747 3,117 (16,994) (13,877)
Finance costs 5 (2) - (2) - - -
Profit/(loss)
before taxation 3,059 52,686 55,745 3,117 (16,994) (13,877)
Taxation 6 - - - - - -
Profit/(loss)
for the year 3,059 52,686 55,745 3,117 (16,994) (13,877)
Return per Ordinary
and
'A' non-voting
Ordinary share 8 12.8p 219.5p 232.3p 13.0p (70.8)p (57.8)p
The Company does not have any income or expense not included in the above statement. Accordingly the "Profit/(loss) for the year" is also the "Total comprehensive income for the year", as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the Company's Income Statement, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The supplementary revenue and capital return columns are both prepared under guidance published by the AIC.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of this statement.
Balance Sheet
As at 31 March 2017
2017 2016
Notes GBP000 GBP000
Non-current assets
Investment in subsidiary at fair
value through profit or loss 9 629 629
Investments held at fair value
through profit or loss 299,671 250,625
10 300,300 251,254
Current assets
Trade and other receivables 12 4,106 253
Cash and cash equivalents 13 4,059 5,028
8,165 5,281
Current liabilities
Trade and other payables 14 (985) (960)
Net current assets 7,180 4,321
Net assets 307,480 255,575
Capital and reserves
Called up share capital 15 1,200 1,200
Capital redemption reserve 16 300 300
Retained earnings 17 305,980 254,075
Total equity shareholders' funds 307,480 255,575
Net asset value per Ordinary and
'A' non-voting Ordinary share 18 1,281.2p 1,064.9p
The Financial Statements of Hansa Trust PLC, registered number 00126107, were approved by the Board of Directors on 22 June 2017 and were signed on its behalf by:
Alex Hammond-Chambers
Chairman
The accompanying notes are an integral part of this statement.
Statement of Changes in Equity
For the year ended 31 March 2017
Capital Capital
Share redemption Retained Share redemption Retained
capital reserve earnings Total capital reserve earnings Total
2017 2017 2017 2017 2016 2016 2016 2016
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Net assets
at 1 April 1,200 300 254,075 255,575 1,200 300 271,792 273,292
Losses for
the year - - 55,745 55,745 - - (13,877) (13,877)
Dividends 7 - - (3,840) (3,840) - - (3,840) (3,840)
Net assets
at 31 March 1,200 300 305,980 307,480 1,200 300 254,075 255,575
Cash Flow Statement
For the year ended 31 March 2017
2017 2016
Notes GBP000 GBP000
Cash flows from operating activities
Gain/(loss) before finance costs
and taxation* 55,747 (13,877)
Adjustments for:
Realised gains on investments 10 (4,234) (4,302)
Unrealised (gains)/losses on investments 10 (48,341) 21,283
Effect of foreign exchange rate
changes (111) 13
Increase in trade and other receivables 12 (1,456) (67)
Increase/(decrease) in trade and
other payables 14 25 (37)
Purchase of non-current investments (49,307) (29,371)
Sale of non-current investments 50,439 26,200
Net cash inflow/(outflow) from
operating activities 2,762 (158)
Cash flows from financing activities
Interest paid on bank loans (2) -
Dividends paid 7 (3,840) (3,840)
Net cash outflow from financing
activities (3,842) (3,840)
Decrease in cash and cash equivalents (1,080) (3,998)
Cash and cash equivalents at 1
April 5,028 9,039
Effect of foreign exchange rate
changes 111 (13)
Cash and cash equivalents at end
of year 13 4,059 5,028
*Includes dividends received of GBP6,216,000 (2016: GBP5,912,000) and interest received of GBP5,000 (2016: GBP1,000).
The accompanying notes are an integral part of this statement.
Notes to the Financial Statements
1 ACCOUNTING POLICIES
(a) Basis of preparation
The Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS"). These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ("IASC") that remain in effect, to the extent that IFRS have been adopted by the European Union.
These Financial Statements are presented in Sterling because that is the currency of the primary economic environment in which the Company operates.
The Financial Statements have been prepared on an historical cost and going concern basis, except for the valuation of investments and in accordance with the AIC Statement of Recommended Practice ("SORP") for investment trusts, issued by the AIC in November 2014, as updated in January 2017, to the extent that the SORP does not conflict with IFRS. The principal accounting policies adopted are set out below.
(b) Basis of non-consolidation
IFRS10 stipulates that subsidiaries of Investment Entities are not consolidated but, rather, stated at fair value unless the conditions for certain exemptions from this treatment are met. Hansa Trust meets all three characteristics of an Investment Entity as described by IFRS10. More details regarding its subsidiary Consolidated Investment Funds Limited ("CIFL"), are included in Note 9 of the Financial Statements.
(c) Presentation of Income Statement
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature, has been presented alongside the Income Statement. The Company's Articles of Association allow net capital returns to be distributed by way of dividend, in addition to revenue returns. Additionally, the net revenue is the measure the Directors believe to be appropriate in assessing the Company's compliance with certain requirements set out in s.1158/1159 CTA 2010, adjusted for details of Reporting and Non-Reporting Funds where appropriate.
(d) Non-current investments
As the Company's business is investing in financial assets, with a view to profiting from their total return in the form of income received and increases in fair value, investments are designated at fair value through profit or loss on initial recognition in accordance with IAS 39. The Company manages and evaluates the performance of these investments on a fair value basis, in accordance with its investment strategy and information about the investments is provided on this basis to the Board of Directors.
Investments are recognised and de-recognised on the trade date. For listed investments fair value is deemed to be bid market prices, or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange's electronic trading service, covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 constituents, along with some other securities.
Fund investments are stated at fair value through profit or loss as determined by using the most recent available valuation. In some cases, this will be by reference to the most recent valuation statement supplied by the fund's manager. In other cases, values may be available through the fund being listed on an exchange or via pricing sources such as Bloomberg.
Unquoted investments are stated at fair value through profit or loss as determined by using various valuation techniques, in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These include using recent arms-length market transactions between knowledgeable and willing parties where available. The investment in the Company's subsidiary undertaking is stated at fair value.
Gains and losses, arising from changes in fair value, are included in net profit or loss for the period as a capital item in the Income Statement and are ultimately recognised in the Capital Reserves.
(e) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, short-term deposits and cash funds with an original maturity of three months or less and are subject to an insignificant risk of changes in capital value.
(f) Investment Income and return of capital
Dividends receivable on equity shares are recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends are recognised when the Company's right to receive payment is established. UK dividends are stated net of related tax credits where applicable, while overseas dividends and Real Estate Investment Trusts' ("REIT") income are stated gross.
When an investee company returns capital to the Company, the amount received is treated as a reduction in the book cost of that investment and is classified as sale proceeds.
(g) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except as follows:
(i) expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Income Statement; and
(ii) expenses are charged to the capital reserves, via the capital column of the Income Statement, where a connection with the maintenance or enhancement of the value of the investments can be demonstrated.
(h) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Income Statement, because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.
Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent it is probable that taxable profits will be available, against which deductible temporary differences can be utilised.
Approved Investment Trusts under s.1158 CTA 2010 are not liable for taxation on capital gains.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity or other comprehensive income.
(i) Foreign Currencies
Transactions denominated in foreign currencies are recorded in the local currency, at the actual exchange rates as at the date of the transaction. Assets and liabilities denominated in foreign currencies at the year end are reported at the rate of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates, subsequent to the date of the transaction, is included as an exchange gain or loss in the capital or revenue column of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature respectively.
(j) Reserves
Capital Reserves - Other
The following are credited or charged to this reserve via the capital column of the Income Statement:
-- gains and losses on the disposal of investments; -- exchange differences of a capital nature; and
-- expenses charged to the capital column of the Income Statement in accordance with the above accounting policies.
Capital Reserves - Investment Holding Gains/(Losses)
The following are credited or charged to this reserve via the capital column of the Income Statement:
-- increases and decreases in the valuation of investments held at the year end.
Revenue Reserves
The following are credited or charged to this reserve via the revenue column of the Income Statement:
-- net revenue recognised in the revenue column of the Income Statement. (k) Significant Judgements and Estimates
The key significant estimate to report, concerns the Company's valuation of its holding in DV4 Ltd. This is explained in more detail under Note 19 "Commitments and Contingencies". There are no significant judgements.
(l) Adoption of new and revised standards
Accounting standards issued but not yet effective
Standards issued but not yet effective up to the date of issuance of the Company's Financial Statements are listed below. This listing of standards and interpretations issued are those the Company reasonably expects will have an impact on disclosure, financial position and/or financial performance, when applied at a future date. The Company intends to adopt those standards (where applicable) when they become effective.
-- IFRS 9 Financial Instruments - classification and measurement of financial assets and financial liabilities as defined in IAS 39 (IASB effective date 1 January 2018).
-- Amendments to IAS 7 - Disclosure initiative Statement of Cash Flows (effective date 1 January 2017).
-- Amendments to IAS 12 - Recognition of deferred tax assets for unrealised losses (effective date 1 January 2017).
2 INCOME
Revenue Revenue
2017 2016
GBP000 GBP000
Income from quoted investments
UK dividends 1,701 1,754
Overseas and other dividends 4,254 4,102
Property income distributions 232 261
6,187 6,117
Other income
Interest receivable on AAA rated money
market funds 7 12
Total income 6,194 6,129
3 PORTFOLIO MANAGEMENT FEE
Revenue Revenue
2017 2016
GBP000 GBP000
Portfolio management fee 2,010 1,935
Total management fee 2,010 1,935
Note: Details of the portfolio management agreement are disclosed in the Strategic Report - Service Providers.
4 OTHER EXPENSES
Revenue Revenue
2017 2016
GBP000 GBP000
Administration fees* 125 123
AIFM fees* 116 110
Directors' remuneration* 141 139
Auditor's remuneration for:
- audit of the Company's Annual Report 33 36
Fees payable to the Auditor for other
services:
- Audit Related Assurance Services:
review of the Half-Year Report 4 4
- all taxation advisory services - 5
Irrecoverable VAT on audit fees 7 9
Printing fees 38 34
Marketing 57 52
Registrar's fees 53 56
Banking charges* 146 147
Secretarial services 120 120
Other 283 242
1,123 1,077
*Denotes services that do not incur VAT. VAT on other costs, where incurred, forms part of the irrecoverable VAT cost.
5 FINANCE COSTS
Revenue Revenue
2017 2016
GBP000 GBP000
Interest payable 2 0
2 0
6 TAXATION
Revenue Revenue
2017 2016
GBP000 GBP000
(a) Taxation on Ordinary Activities
UK Corporation Tax at 20% (2016: 20%) - -
(b) Factors affecting tax charge for
the year
Approved investment trusts are exempt
from tax on capital gains made by the
Trust. The tax charge for the year
is lower than the standard rate of
Corporation Tax in the UK of 20% (2016:
20%). The differences are explained
below:
2017 2016
GBP000 GBP000
Total profit/(loss) before taxation 55,745 (13,877)
Profit/(loss) multiplied by standard
rate of corporation tax 11,149 (2,775)
Effects of:
- Non-taxable capital (10,537) 3,398
- Non-taxable investment income (1,190) (1,171)
- Excess administration expenses unused 578 548
Current tax charge - -
(c) Provision for deferred taxation
There is no requirement to make a provision for deferred taxation in the current or prior accounting year.
(d) Factors that may affect future tax charges
As at 31 March 2017 the Company had unutilised management expenses and loan relationship deficits of GBP24,220,000 (2016: GBP22,570,000). The expenses will only be utilised to the extent that there is sufficient future taxable income, or if the tax treatment of the capital gains made by the Company, or the Company's investment profile, changes.
7 DIVIDS PAID
2017 2016
GBP000 GBP000
Amounts recognised as distributed to
shareholders in the year are as follows:
Second interim dividend for 2016 (paid
May 2016): 8.0p (2015: 8.0p) 1,920 1,920
First interim dividend for 2017 (paid
November 2016): 8.0p (2016: 8.0p) 1,920 1,920
3,840 3,840
Set out below are the total dividends paid and proposed in respect of the current financial year, which is the basis on which the requirements of s.1158 CTA 2010 are considered. The Company's revenue available for distribution by way of dividend for the year is GBP3,059,000 (2016: GBP3,117,000).
Revenue Revenue
2017 2016
GBP000 GBP000
First interim dividend for 2017 (paid
November 2016): 8.0p (2016: 8.0p) 1,920 1,920
Second interim dividend for 2017 (payable
May 2017): 8.0p (2016: 8.0p) 1,920 1,920
3,840 3,840
The Board has announced two interim dividends, each of 8.0p per Ordinary and 'A' non-voting Ordinary share, relating to the year ended 31 March 2018. No final dividend is proposed for the year ended 31 March 2017.
8 RETURN ON ORDINARY SHARES (EQUITY)
Revenue Capital Total Revenue Capital Total
2017 2017 2017 2016 2016 2016
Returns per share 12.8p 219.5p 232.3p 13.0p (70.8)p (57.8)p
Returns
Revenue return per share is based on the revenue attributable to equity shareholders of GBP3,059,000 (2016: GBP3,117,000).
Capital return per share is based on the capital profit attributable to equity shareholders of GBP52,686,000 (2016: Loss of GBP16,994,000).
Total return per share is based on the combination of revenue and capital returns attributable to equity shareholders, amounting to a net profit of GBP55,745,000 (2016: net loss of GBP13,877,000).
Both revenue and capital return are based on 8,000,000 Ordinary shares (2016: 8,000,000) and 16,000,000 'A' non-voting Ordinary shares (2016: 16,000,000), in issue throughout the year.
9 INVESTMENT IN SUBSIDIARY
The Company owns 100% of the ordinary share capital and voting rights of Consolidated Investment Funds Limited, an investment dealing company, registered and operating in England. The fair value at 31 March 2017 was GBP629,000 (2016: GBP629,000). During the year to 31 March 2017, Consolidated Investment Funds Limited was dormant and held no investments.
10 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
Listed AIM & Unquoted 2017 2016
OFEX Total Total
GBP000 GBP000 GBP000 GBP000 GBP000
Cost at 1 April 2016 88,881 21,425 65,944 176,250 159,605
Investment holding gains/(losses)
at 1 April 2016 81,817 (13,514) 6,701 75,004 96,287
Valuation at 1 April
2016 170,698 7,911 72,645 251,254 255,892
Movements in the year:
Purchases at cost 32,282 - 17,025 49,307 29,371
Sales - proceeds (45,632) (536) (6,668) (52,836) (17,028)
Gains/(losses) on sales 8,203 (4,961) 992 4,234 4,302
Transferred from Listed
to Unquoted (3,129) - 3,129 0 0
Movement in investment
holding gains/(losses) 31,344 8,743 8,254 48,341 (21,283)
Valuation as at 31 March
2017 193,766 11,157 95,377 300,300 251,254
Cost 80,605 15,928 80,422 176,955 176,250
Investment holding gains/(losses) 113,161 (4,771) 14,955 123,345 75,004
193,766 11,157 95,377 300,300 251,254
2017 2016
GBP000 GBP000
Gains on sales 4,234 4,302
Movement in investment holding gains/(losses) 48,341 (21,283)
Gains/(losses) on investments held at
fair value through profit or loss 52,575 (16,981)
Transaction costs
During the year expenses were incurred in acquiring and disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:
2017 2016
GBP000 GBP000
Purchases 13 8
Sales 35 14
48 22
11 SIGNIFICANT HOLDINGS
The Company's holdings of 10% or more of any class of shares in investment companies and 20% or more of any class of shares in non-investment companies are detailed below:
Exc. Minority Interest
Proft
after
Country Latest Total tax
of Class % of available capital for
incorporation of class audited and the
or registration capital held accounts reserves year
Ocean Wilsons Holdings
Limited Bermuda Ordinary 26.5 31.12.16 $535,343,000 $45,060,000
Consolidated Investment
Funds Limited UK Ordinary 100.0 31.03.15 GBP628,887 -
Ocean Wilsons Holdings Limited is included as part of the investment portfolio in accordance with IAS 28 - Investment in Associates.
The Company has material holdings in the following companies which represent more than 3% of any particular class of equity share capital:
Company Class % of class
of held
Capital
Work Group Plc Ordinary 5.6
Altitude Group Plc Ordinary 5.5
Helesi Plc Ordinary 3.8
All Leisure Group Plc Ordinary 3.6
Goals Soccer Centres Plc * Ordinary 3.0
*Note: At the time of signing of the Annual Report, Hansa Trust no longer held more than 3% in this Company.
12 TRADE AND OTHER RECEIVABLES
2017 2016
GBP000 GBP000
Amounts due from brokers 2,397 -
Prepayments and accrued income 207 253
Cash committed to purchase SR Global
Fund Inc. Frontier Markets Class M 1,502
4,106 253
13 CASH AND CASH EQUIVALENTS
2017 2016
GBP000 GBP000
Cash at bank 295 116
Cash funds 3,764 4,912
4,059 5,028
14 TRADE AND OTHER PAYABLES
2017 2016
GBP000 GBP000
Due to subsidiary undertaking 629 629
Other creditors and accruals 356 331
985 960
15 CALLED UP SHARE CAPITAL
2017 2016
GBP000 GBP000
8,000,000 Ordinary shares of 5p 400 400
16,000,000 'A' non-voting Ordinary
shares of 5p 800 800
1,200 1,200
The 'A' non-voting Ordinary shares do not entitle the holders to receive notices or to vote, either in person or by proxy, at any general meeting of the Company, but in all other respects rank pari passu with the Ordinary shares of the Company.
16 CAPITAL REDEMPTION RESERVEL
2017 2016
GBP000 GBP000
Balance at 31 March 300 300
17 RETAINED EARNINGS
Reserves Reserves
Revenue* Capital Capital Total Revenue* Capital Capital Total
- Other* - Investment retained - Other* - Investment retained
holding earnings holding earnings
profits** profits**
2017 2017 2017 2017 2016 2016 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening balance
at 1 April 3,642 175,430 75,003 254,075 4,365 171,141 96,286 271,792
Profit/(loss)
for the year 3,059 4,345 48,341 55,745 3,117 4,289 (21,283) (13,877)
Dividend paid (3,840) - - (3,840) (3,840) - - (3,840)
Closing balance
at 31 March 2,861 179,775 123,344 305,980 3,642 175,430 75,003 254,075
*These reserves are able to be distributed by way of dividends.
**Where holding gains relate to liquid investments that can be realised at their fair value, such gains are also distributable.
18 NET ASSET VALUE
2017 2016
NAV per Ordinary and 'A' non-voting
Ordinary share 1,281.2p 1,064.9p
The NAV per Ordinary and 'A' non-voting Ordinary share is based on the net assets attributable to equity shareholders of GBP307,480,000 (2016: GBP255,575,000) and on 8,000,000 Ordinary shares (2016: 8,000,000) and 16,000,000 'A' non-voting Ordinary shares (2016: 16,000,000) in issue at 31 March 2017.
19 COMMITMENTS AND CONTINGENCIES
The Company has a commitment to DV4, an unquoted property investment company. On 3 February 2017 the remaining GBP702,302 of the commitment was drawn upon. As at 31 March 2017, the Company's commitment was fully drawn and the interest free loan referred to in past reports had been fully repaid (2016: undrawn commitment GBP702,372). The holding in DV4 is held at a current valuation of GBP11,849,000 (2016: GBP11,985,000). 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 31 March 2017. The most recent valuation statement was received on 3 February 2017. It is believed the value of DV4 as at 31 March 2017 will not be materially different 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.
20 FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
The Company's financial instruments comprise securities, cash balances, debtors and creditors. All financial assets and liabilities are either carried in the Balance Sheet at their fair value, or the Balance Sheet amount is a reasonable approximation of fair value.
Risk Objectives and Policies
The objective of the Company is to achieve growth of shareholder value commensurate with the risks taken, bearing in mind that the protection of long-term shareholder value is paramount. The policy of the Board is to provide a framework within which the Portfolio Manager can operate and deliver the objectives of the Company. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company's net assets and/or a reduction of the profits available for dividends.
These risks include those identified by the accounting standard IFRS 7, being market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Directors' approach to the management of these are set out below. The Board, in conjunction with the Portfolio Manager and Company Secretary, oversees the Company's risk management.
The objectives, policies and processes for managing the risks and the methods used to measure them are set out below; these have not changed from the previous accounting period.
Risks Associated with Financial Instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect the valuation of the investment portfolio. 1) the direct exposure where an investment is denominated and paid for in a currency other than Sterling; and 2) the indirect exposure where an investment has substantial non-Sterling underlying investment and/or cash flows. The Company does not normally hedge against foreign currency movements affecting the value of the investment portfolio, but takes account of this risk when making investment decisions. Some of the fund investments into which the Company invests will, in part or in whole, hedge some of their underlying currency risk but this will be known at the time of investment and will form part of the investment decision. In those cases, the hedging will not remove the exposure to the underlying country or market sector. The Portfolio Manager monitors the effect of foreign currency fluctuations through the pricing of the investments by the various markets.
Direct No direct Total Direct No direct Total
foreign foreign foreign foreign
currency currency currency currency
risk risk risk risk
2017 2017 2017 2016 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Investments 55,018 244,653 299,671 27,566 223,059 250,625
Investment in subsidiary - 629 629 - 629 629
Other receivables
including prepayments - 4,106 4,106 - 253 253
Cash at bank - 4,059 4,059 - 5,028 5,028
Current liabilities - (985) (985) - (960) (960)
55,018 252,462 307,480 27,566 228,009 255,575
Note: Direct foreign currency risk includes direct exposure to USD and Euro currencies.
Interest rate risk
Interest rate movements may affect the level of income receivable on cash deposits and the interest payable on the Company's variable rate borrowings.
The Company has banking facilities amounting to GBP30m (2016: GBP30m) which are available for the Portfolio Manager to use in purchasing investments; the costs of which are based on the prevailing LIBOR rate, plus an agreed margin. The Company does not normally hedge against interest rate movements affecting the value of the investment portfolio, but takes account of this risk when an investment is made utilising the facility. The level of banking facilities used is monitored by both the Board and the Portfolio Manager on a regular basis. The impact on the returns and net assets of the Company for every 1% change in interest rates, based on the amount drawn down at the year end under the facility, would be GBPnil (2016: GBPnil). The level of banking facilities utilised at 31 March 2017 was GBPnil (2016: GBPnil).
Interest rate changes usually impact equity prices. The level and direction of change in equity prices is subject to prevailing local and world economic conditions as well as market sentiment, all of which are very difficult to predict with any certainty. The Company has floating rate financial assets, consisting of bank balances and cash funds that have received average rates of interest during the year of 0.0% on bank balances.
Cash No Total Cash No Total
flow interest flow interest
interest rate interest rate
rate risk 2017 rate risk 2016
risk 2017 GBP000 risk 2016 GBP000
2017 GBP000 2016 GBP000
GBP000 GBP000
Investments - 299,671 299,671 - 250,625 250,625
Investment in subsidiary - 629 629 - 629 629
Other receivables
including prepayments - 4,106 4,106 - 253 253
Cash at bank 4,059 - 4,059 5,028 - 5,028
Current liabilities - (985) (985) - (960) (960)
4,059 303,421 307,480 5,028 250,547 255,575
Other price risk
By the nature of its activities, the Company's investments are exposed to market price fluctuations. NAV is calculated and reported daily to the London Stock Exchange. The Portfolio Manager and the Board monitor the portfolio valuation on a regular basis and consideration is given to hedging the portfolio against large market movements.
The Company's investment in Ocean Wilsons is large both in absolute terms, GBP94.5m as valued at 31 March 2017 (2016: GBP69.0m) and as a proportion of the NAV, 30.7% (2016: 27.1%). Shareholders should be aware that if anything of a severe and untoward nature were to happen to this company, it could result in a significant impact on the NAV and share price. However, it should also be noted that the exposure of Hansa Trust to the currency, country and market based risk exposure of Ocean Wilsons is, to an extent, mitigated by the diverse nature of the two investments within Ocean Wilsons. Wilson Sons, corresponding to 65.7% of Ocean Wilsons' NAV, has a direct exposure to the Brazilian economy, whereas Ocean Wilsons Investments is not exposed to Brazil and corresponds to the other 34.3%. It is an investment the Board pays close attention to and it should be pointed out that the risks associated with it are very different from those of the other companies represented in the portfolio. The Board itself regularly undertakes a thorough review of its business and prospects and has determined that its future holds a lot of promise. As a consequence the Board believes the risk involved in the investment is worthwhile.
The performance of the portfolio as a whole is not designed to correlate with that of any market index. Should the portfolio of the Company rise or fall in value by 10% from the year end valuation, the effect on the Company's profit and equity would be an equal rise or fall of GBP30.1m (2016: GBP25.0m).
Credit Risk
The Company only transacts with regulated institutions on normal market terms, which are trade date plus one to three days in the case of equities. Fund investment settlement periods will vary from fund to fund and are defined by the individual managers. The levels of amounts outstanding from brokers and fund managers are regularly reviewed by the Portfolio Manager. The duration of credit risk associated with the investment transactions is the period between the date the transaction took place, the trade date, the date the stock and cash were transferred and the settlement date. The level of risk during the period is the difference between the value of the original transaction and its replacement with a new transaction. The amounts due to/(from) brokers at 31 March 2017 are shown in Note 12 and Note 14.
The Company's maximum exposure to credit risk on cash is GBP0.3m (2016: GBP0.1m) and on cash funds is GBP3.8m (2016: GBP4.9m). Surplus cash is on deposit with the Depositary/Custodian.
Liquidity Risk
The liquidity risk to the Company is that it is unable to meet its obligations as they fall due, as a result of a lack of available cash and an inability to dispose of investments in a timely manner. A substantial proportion of the Company's portfolio is held in liquid quoted investments; however, there is a large holding in Ocean Wilsons of 30.7% (2016: 27.1%); there are holdings in AIM and unquoted equity investments of 7.6% (2016: 7.8%) and there are investments into open-ended investment funds with varying liquidity terms of 43.8% (2016: 40.7%).
The Portfolio Manager takes into consideration the liquidity of each investment when purchasing and selling, in order to maximise the returns to shareholders, by placing suitable transaction levels into the market. Special consideration is given to investments representing more than 5% of the investee company. A detailed list of the investments, split by silo, held at 31 March 2017 is shown on in the Strategic Report. This can be used broadly to ascertain the levels of liquidity within the portfolio, although liquidity will vary with each investment - particularly the funds.
The Company has no financial liabilities at 31 March 2017 arising from its bank loan facility (2016: GBPnil). This loan is part of a total revolving credit facility with BNP of GBP30m (2016: GBP30m) that would bear interest based on the prevailing LIBOR rate, plus an agreed margin. The facility is a committed facility repayable on or before 30 March 2018 and subject to a covenant requirement of a minimum adjusted NAV of GBP80m. The Company has undrawn loans from this facility of GBP30m (2016: GBP30m). The Company holds this facility for use at short notice for its investment activities. If fully drawn the loan would form 10.0% (2016: 12.0%) of the current value of the investment portfolio.
Capital Management
The Company considers its capital to be its issued share capital and reserves and whilst the Company has access to loan facilities it is not considered or used as core capital, but primarily to meet the cash timing requirements of opportunistic investment strategies and thereby enhance shareholder returns. The Board regularly monitors its share discount policy and the level of discounts and whilst it has the option to repurchase shares, it considers the best means of attaining a good rating for the shares is to concentrate on good shareholder returns.
However, the Board believes the ability of the Company to repurchase its own 'A' non-voting Ordinary shares in the market may potentially enable it to benefit all equity shareholders of the Company. The repurchase of 'A' non-voting Ordinary shares, at a discount to the underlying NAV, would enhance the NAV per share of the remaining equity shares and might also enable the Company to address more effectively any imbalance between supply and demand for the Company's 'A' non-voting Ordinary shares.
21 FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
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 (i.e. as prices) or indirectly (i.e. 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, grouped into the fair value hierarchy and valued in accordance with the accounting policies in Note 1, are detailed below:
Level Level Level
1 2 3 Total
31 March 2017 GBP000 GBP000 GBP000 GBP000
Financial assets at fair
value through profit or
loss
Quoted equities 147,035 - - 147,035
Unquoted equities - - 11,860 11,860
Fund investments 5,167 135,609 - 140,776
Investment in subsidiary - - 629 629
Net fair value 152,202 135,609 12,489 300,300
Level Level Level
1 2 3 Total
31 March 2016 GBP000 GBP000 GBP000 GBP000
Financial assets at fair
value through profit or
loss
Quoted equities 131,433 - - 131,433
Unquoted equities - - 11,985 11,985
Fund investments - 107,207 - 107,207
Investment in subsidiary - - 629 629
Net fair value 131,433 107,207 12,614 251,254
There have been no transfers during the year between levels 1 and 2.
The Company's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused the transfer occurred.
A reconciliation of fair value measurements in Level 3 is set out in the following table:
2017 2016
Equity Equity
investments investments
GBP000 GBP000
Opening Balance 12,614 11,959
Transferred from Level 1 3,129 -
Purchases 702 -
Sales (700) (550)
Total gains or losses included in gains
on investments in the Income Statement:
- on assets sold 700 550
- on assets held at year end (3,956) 655
Closing Balance 12,489 12,614
As at 31 March 2017, the investment in DV4 has been classified as Level 3. The investment 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 31 March 2017. The most recent valuation statement was received on 3 February 2017. It is believed the value of DV4 as at 31 March 2017 will not be materially different. If the value of the investment was to increase or decrease by 10%, while all other variables remained constant, the return and net assets attributable to shareholders for the year ended 31 March 2017 would have increased or decreased by GBP1,184,900.
22 RELATED PARTIES
Details of the relationship between the Company and Hansa Capital Partners LLP, including amounts paid during the year and owing at 31 March 2017, are disclosed in the Strategic Report - Shareholder Profile and Engagement and in Note 3. Details of the relationship between the Company and the Directors, including amounts paid during the year to 31 March 2017, are disclosed in the Strategic Report - The Board and also in the Directors' Remuneration Report.
The Company has one subsidiary, Consolidated Investment Funds Limited, which is dormant. Alex Hammond-Chambers and William Salomon are directors of CIFL as well as Hansa Trust. There is an interest-free intercompany loan from CIFL to its parent of GBP629,000. The Board considers that the par value and fair value of the loan to be GBP629,000 as it is repayable on demand and does not have a fixed term. CIFL does not maintain a bank account and so, in previous years, the Company has paid any costs incurred by CIFL adjusting the intercompany loan accordingly. During the current year, CIFL has not incurred any costs and so no changes to the intercompany loan have occurred.
23 CONTROLLING PARTIES
At 31 March 2017 Victualia Limited Partnership and Nomolas Ltd each held 25.9% of the issued Ordinary shares. Additional information is disclosed in the Strategic Report - Substantial Shareholders.
Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of Hansa Trust PLC will be held at The Washington Mayfair Hotel, 5 Curzon Street, London W1J 5HE on 28 July 2017 at 11.00am, for the following purposes:
Ordinary Business
1 To receive and consider the audited Financial Statements and the Reports of the Directors and Auditor for the year ended 31 March 2017.
2 To re-elect Alex Hammond-Chambers (a biography and Board endorsement can be found in "The Board" section above) as a Director of the Company.
3 To re-elect Jonathan Davie (a biography and Board endorsement can be found in "The Board" section above) as a Director of the Company.
4 To re-elect Raymond Oxford (a biography and Board endorsement can be found in "The Board" section above) as a Director of the Company.
5 To re-elect William Salomon (a biography and Board endorsement can be found in "The Board" section above) as a Director of the Company.
6 To re-elect Geoffrey Wood (a biography and Board endorsement can be found in "The Board" section above) as a Director of the Company.
7 To approve the Directors' Remuneration Report.
8 To approve the Directors' Remuneration Policy and authorise the Board to determine the remuneration of the Directors.
9 To re--appoint Grant Thornton LLP as Auditor of the Company and to authorise the Directors to determine the remuneration of the Auditor.
Special Business
To consider, and if thought fit, pass the following resolutions which will be proposed as special resolutions:
Authority to repurchase up to 14.99% of the 'A' non-voting Ordinary shares of 5p each in the issued shares capital of the Company (the "Shares").
10 THAT the Company be and hereby is unconditionally authorised, in accordance with s.701 of the Companies Act 2006, to make market purchases up to an aggregate of 2,398,400 shares at a price (exclusive of expenses) which is:
a) not less than 5p per share; and
b) not more than the higher of: i) 5% above the average of the middle-market quotations (as derived from and calculated by reference to the Daily Official List of the London Stock Exchange) for 'A' non-voting Ordinary shares of 5p each in the five business days immediately preceding the day on which the share is purchased; and ii) the higher of the last independent trade and the then current highest independent bid.
AND
THAT the authority conferred by this resolution shall expire on the date of the next AGM (except in relation to the purchase of shares, the contract for which was concluded before such date and which might be executed wholly or partly after such date) unless the authority is renewed or revoked at any other general meeting prior to such time.
11 THAT the period of notice required for general meetings of the Company (other than AGMs) shall be not less than 14 days.
By order of the Board
Hansa Capital Partners LLP
Company Secretary
22 June 2017
Notes
1 Ordinary shareholders, proxies and authorised representatives of corporations which are ordinary shareholders, are entitled to attend the meeting. To be entitled to attend and vote at the meeting (and for the purpose of the determination by the Company of the number of votes they may cast), members must be entered on the Company's register of members by close of business on 26 July 2017 ('the specified time') pursuant to Regulation 41 of the Uncertified Securities Regulations 2001. Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.
2 If the meeting is adjourned to a time not more than 48 hours after the specified time applicable to the original meeting, that time will also apply for the purpose of determining the entitlement of members to attend and vote (and for the purpose of determining the number of votes they may cast) at the adjourned meeting. If, however, the meeting is adjourned for a longer period then, to be so entitled, members must be entered on the Company's register of members at the time which is 48 hours before the time fixed for the adjourned meeting or, if the Company gives notice of the adjourned meeting, at the time specified in that notice.
3 A member entitled to attend and vote and present in person or by proxy, shall have one vote on a show of hands. On a vote by poll every member entitled to vote shall have one vote for every Ordinary share of which he/she is the holder.
4 A member entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attend and, upon a poll, to vote instead of him/her provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member. A proxy need not also be a member. To appoint more than one proxy, the proxy form should be photocopied and completed for each proxy holder. The proxy holder's name should be written on the proxy form together with the number of shares in relation to which the proxy is authorised to act. All proxy forms should be enclosed in the same envelope.
5 In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the register of members in respect of the joint holding (the first-named being the most senior).
6 To be valid any proxy form or other instrument appointing a proxy must be received by post (during normal business hours only), or by hand at Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, or a proxy can be lodged electronically at www.capitashareportal.com, in each case no later than 11.30am on 26 July 2017.
7 The return of a completed Proxy Form, other such instrument or any CREST Proxy Instruction (as described overleaf) will not prevent a shareholder from attending the Annual General Meeting and voting in person if he/she wishes to do so.
8 Any corporation which is a member can appoint one or more corporate representatives, who may exercise on its behalf all of its powers as a member provided they do not do so in relation to the same shares.
9 As at 22 June 2017 (being the last practicable date prior to the publication of this Notice) the Company's issued share capital consists of 8,000,000 Ordinary shares of 5p each, carrying one vote each. Therefore, the total voting rights in the Company as at 22 June 2017 are 8,000,000.
10 CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
11 In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent ID RA10 by 11.30am on 26 July 2017. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST, in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
12 CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
13 The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
14 Any member entitled to attend, vote or their duly appointed representative attending the meeting, has the right to ask questions. In accordance with s.319A of the Companies Act 2006, the Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer may be given if: (a) to do so would interfere unduly with the meeting or involve the disclosure of confidential information; (b) the answer has already been given on a website in the form of an answer to a question; or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
15 A copy of this notice, and other information required by s.311A of the Companies Act 2006, can be found at www.hansatrust.com.
16 The following documents will be available for inspection at the registered office of the Company during usual business hours on any business day (except public holidays) until the date of the AGM and at the place of the AGM for a period of 15 minutes prior to and during the meeting:
a) a copy of the current Articles of Association; and
b) a copy of all Directors' Service Contracts.
17 A person to whom this notice is sent who is a person nominated under s.146 of the Companies Act 2006 to enjoy information rights (a 'Nominated Person') may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights. The statements of the rights of members in relation to the appointment of proxies in AGM Notice Notes 1 and 2 above do not apply to a Nominated Person. The rights described in those Notes can only be exercised by registered members of the Company entitled to attend and vote at the meeting.
A person authorised by a corporation is entitled to exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual member of the Company (provided, in the case of multiple corporate representatives of the same corporate shareholder, they are appointed in respect of different shares owned by the corporate shareholder or, if they are appointed in respect of those same shares, they vote those shares in the same way). To be able to attend and vote at the meeting, corporate representatives will be required to produce, prior to their entry to the meeting, evidence satisfactory to the Company of their appointment.
On a vote on a resolution on a show of hands, each authorised person has the same voting rights to which the corporation would be entitled. On a vote on a resolution on a poll, if more than one authorised person purports to exercise a power in respect of the same shares:
a) if they purport to exercise the power in the same way as each other, the power is treated as exercised in that way; and
b) if they do not purport to exercise the power in the same way as each other, the power is treated as not exercised.
18 Members should note it is possible, pursuant to requests made by members of the Company under s.527 of the Companies Act 2006 (the "Act"), the Company may be required to publish on a website a statement setting out any matter relating to:
a) the audit of the Company's Accounts (including the Auditor's report and the conduct of the audit) that are to be laid before the AGM; or
b) any circumstances connected with an auditor of the Company ceasing to hold office since the previous meeting at which Annual Accounts and Reports were laid in accordance with s.437 of the Act. The Company may not require the members requesting any such website publication to pay its expenses in complying with s.527 or 528 of the Act. Where the Company is required to place a statement on a website under s.527 of the Act, it must forward the statement to the Company's Auditor no later than the time when it makes the statement available on the website. The business which may be dealt with at the AGM includes any statement the Company has been required under s.527 of the Act to publish on a website.
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 that the shares issued by Hansa Trust PLC can be recommended by independent financial advisers to ordinary retail investors, in accordance with the FCA's 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 and complies with its reporting requirements under FATCA, C-DOT and CRS regimes.
Investor Disclosure
The Company's AIFM, Maitland Institutional Services Limited, hosts a Hansa Trust Investor Disclosure document on their 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/2016/10/Hansa-Investor-Disclosure-Document-2017.pdf
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
Fax: +44 (0) 207 647 5770
Email: hansatrustenquiry@hansacap.com
Website: www.hansatrust.com
The Company's website includes the following:
- Monthly factsheets
- Stock Exchange announcements
- Details of the board statements
- Annual and Half-Year Reports
- Share price data reports
- Peer group listing
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.
Capita Asset Services
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 9.00am - 5.30pm, Monday to Friday excluding public holidays in England and Wales.
Email: shareholderenquiries@capita.co.uk
www.capitaregistrars.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
SEAQ
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 www.iii.co.uk Morningstar www.morningstar.com Edison www.edisongroup.com
Financial Calendar
Company year end 31 March Annual Report sent to shareholders 27 June Annual General Meeting 28 July 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
Jonathan Davie
Raymond Oxford
William Salomon
Geoffrey Wood
COMPANY 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
Maclay Murray & Spens LLP
One London Wall
London EC2Y 5AB
REGISTRAR
Capita 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
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
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUBUQUPMGAP
(END) Dow Jones Newswires
June 22, 2017 11:20 ET (15:20 GMT)
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