Hansa Trust — Positioned for interesting times

Hansa Investment Company (LSE: HAN,HANA)

Last close As at 20/06/2024

GBP2.09

0.00 (0.00%)

Market capitalisation

GBP244m

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Hansa Trust — Positioned for interesting times

Hansa Trust (HAN/HANA) seeks to be differentiated from peers by giving investors access to a portfolio of global equities, specialist funds and a strategic (c 20%) holding with exposure to Brazil, which began as a small position but has grown as a result of superior long-term performance. There is a long-term bias to equities but the focus on preserving and growing capital means that, at certain points in the cycle, the manager may invest more in defensive assets to dampen volatility. Strategy changes since the start of FY15 appear to be bearing fruit and recent NAV and share price performance have been strong, yet Hansa Trust remains at a wide discount to NAV relative to peers. This provides scope for the discount to narrow substantially should the positive performance trend be maintained.

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Investment Companies

Hansa Trust

Positioned for interesting times

Investment trusts

25 July 2017

Price Ord

942.8p

Price A-share

907.5p

Market cap

£220.6m

AUM

£317.9m

NAV*

1,324.3p

A-share discount to NAV

31.5%

NAV**

1,341.9p

A-share discount to NAV

32.4%

*Excluding income. **Including income. NAV data at 20 July 2017.

Yield

1.8%

Ord. voting shares in issue

8.0m

A-shares in issue

16.0m

Code Ord/A shares

HAN/HANA

Primary exchange

LSE

AIC sector

Global

Share price/discount performance

Three-year cumulative perf. graph

52-week high/low*

907.5p

737.5p

1,341.9p

1,166.5p

*A-shares. **Including income.

Gearing

Gross*

0.0%

Net cash*

2.8%

*As at 30 June 2017.

Analysts

Sarah Godfrey

+44 (0)20 3681 2519

Gavin Wood

+44 (0)20 3681 2503

Hansa Trust (HAN/HANA) seeks to be differentiated from peers by giving investors access to a portfolio of global equities, specialist funds and a strategic (c 20%) holding with exposure to Brazil, which began as a small position but has grown as a result of superior long-term performance. There is a long-term bias to equities but the focus on preserving and growing capital means that, at certain points in the cycle, the manager may invest more in defensive assets to dampen volatility. Strategy changes since the start of FY15 appear to be bearing fruit and recent NAV and share price performance have been strong, yet Hansa Trust remains at a wide discount to NAV relative to peers. This provides scope for the discount to narrow substantially should the positive performance trend be maintained.

12 months ending

Share price
(%)

NAV
(%)

MSCI AC World (%)

FTSE All-Share (%)

Bovespa (%)

FTSE Gilts All Stocks TR (%)

30/06/13

9.0

2.7

21.2

17.9

(17.5)

(2.4)

30/06/14

23.5

24.6

9.6

13.1

(0.4)

2.3

30/06/15

(8.8)

(4.4)

10.1

2.6

(23.0)

8.9

30/06/16

(13.5)

(6.8)

13.9

2.2

10.7

13.5

30/06/17

29.5

24.2

22.9

18.1

21.5

(0.9)

Note: Twelve-month rolling discrete £-adjusted total return performance.

Investment strategy: Dynamic multi-asset approach

After overhauling its investment approach in early 2014, Hansa Trust’s portfolio is now a blend of global equities, regional equity funds, specialist thematic and diversifying funds and a long-standing strategic investment in Ocean Wilsons Holdings (OWHL), which holds a majority stake in Brazilian maritime services company Wilson Sons. Manager Alec Letchfield says the aim is to construct a diversified portfolio of investments that individual investors would be unable or unlikely to access directly. The focus is on long-term preservation and growth of capital and the strategy is managed dynamically through the business cycle.

Market outlook: Time to look beyond the mainstream?

In spite of widespread fears over the outcome of the US election and the effect of Brexit on both the UK and the rest of Europe, equity markets have continued to grind higher, with valuations across world markets now above five-year averages. Interest rates remain ultra-low, putting pressure on cash and bond returns and suggesting that investors who wish to preserve and grow their capital may prefer to seek uncorrelated returns away from the mainstream.

Valuation: Attractive double discount

At 20 July, Hansa Trust’s A (non-voting) shares traded at a 32.4% discount to cum-income NAV while the ordinary shares were at a 29.7% discount. This is wider than peer discounts, possibly owing to ongoing concerns over Brazil, a perception of illiquidity as a result of the strategic investment in OWHL, or a lack of awareness of the revamped strategy. OWHL also trades below NAV (see Exhibit 4) creating a double discount; on a look-through basis the combined discount is 40.6%, meaning that each £1 invested in the trust buys exposure to underlying assets worth £1.68.

Hansa Trust is a research client of Edison Investment Research Limited

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

Hansa Trust seeks to achieve growth of shareholder value by investing in a portfolio of quoted and unquoted investments, which may not normally be available to the general public. The trust combines a strategic stake in OWHL with a portfolio of global equities and funds managed mainly by third-party managers, giving access to primarily non-UK equities and more thematic and diversifying investments. Until the end of FY17, Hansa Trust had an absolute benchmark based on the rolling three-year average return of a five-year UK government bond +2% with interest reinvested semi-annually. It no longer has a benchmark, but measures its performance against a number of key performance indicators (KPIs), including the FTSE Gilts All Stocks Total Return index, the rate of CPI inflation, the returns of a selected peer group (see Exhibit 10), appropriate equity indices, the level of ongoing charges and the discount to NAV.

26 June 2017: Annual results for the year ended 31 March. NAV TR +22.0% and A share TR +19.3% versus absolute benchmark TR of +3.4%. Five-year NAV TR +3.0% and A share TR -17.1% versus benchmark TR of +18.1%. Dividends of 16p paid for FY16 and guided for FY17.

16 May 2017: Announcement of intention to pay two interim dividends of 8.0p each in respect of FY18.

12 April 2017: Second interim dividend of 8.0p declared for FY17.

Forthcoming

Capital structure

Fund details

AGM

July 2017

Ongoing charges

1.0%

Group

Hansa Capital Partners LLP

Interim results

November 2017

Net cash

2.8% (30 June 2017)

Managers

Alec Letchfield

Year end

31 March

Annual mgmt fee

1% of NAV ex OWHL

Address

50 Curzon Street,

London, W1J 7UW

Dividend paid

November, May

Performance fee

No

Launch date

1912

Trust life

Indefinite

Phone

+44 (0) 20 7647 5750

Continuation vote

No

Loan facilities

£30m facility

Website

www.hansatrust.com

Dividend policy and history (financial years)

Hansa Trust portfolio by silo (as at 30 June 2017)

Two dividends of similar size paid each year, with aim of long-term income growth.

Note: Wilson Sons (part of OWHL investment) shown on a look-through basis.

Shareholder base (ordinary and A non-voting at 30 March 2017)

Currency exposure (as at 30 June 2017)

Top 10 holdings (as at 30 June 2017)

Country/domicile

Portfolio weight %

Company

Sector

Industry

30 June 2017

30 June 2016*

Ocean Wilsons Holdings

Bermuda

Industrials

Transportation & logistics

30.6

27.1

Findlay Park American Fund

US

US equity fund

4.8

4.9

Vulcan Value Equity Fund

US

Value equity fund

3.8

3.2

GAM Star Technology Fund

Global

Technology sector fund

3.8

3.1

DV4

UK

Financials

Unquoted property fund

3.7

4.6

Select Equity Offshore

US

Global equity fund

3.5

3.5

Goodhart Partners Hanjo Fund

Japan

Japan equity fund

3.0

N/A

Hansteen Holdings

UK

Real estate

Real estate

2.8

N/A

Adelphi European Select Equity

Europe

Growth equity fund

2.8

3.1

Indus Japan Long Only Fund

Japan

Japan equity fund

2.6

N/A

Top 10 (% of portfolio)

61.3

61.1

Source: Hansa Trust, Edison Investment Research, Morningstar, Bloomberg. Note: *N/A where not in the top 10 at 30 June 2016.

Market outlook: Less fundamental support for markets

Amid a climate of global uncertainty, stock markets have continued to grind higher, with sterling weakness since the UK’s EU referendum boosting domestic investors’ returns from overseas, as well as the more internationally focused UK companies (Exhibit 2, left-hand chart). With company earnings growth remaining relatively subdued, equity valuations in most cases look less attractive relative to history (right-hand chart), although dividend yields remain a useful source of return. Away from the developed markets, Brazilian equities recovered markedly following the enforced removal of President Dilma Rousseff, although the corruption charges brought against her successor, Michel Temer, have caused a further period of instability in the stock market and currency. While the latest IMF projections anticipate that the country will exit recession in 2017, its forecast growth rate is still the lowest of all the major economies. With political risks still in play on both sides of the Atlantic and arguably less fundamental support for continued equity market advances, investors may prefer a strategy that looks beyond mainstream equity markets to preserve and grow their capital.

Exhibit 2: Market performance and valuation

Brazil, World and UK indices (£ total returns) over five years

Valuation metrics as at 27 June 2017

 

Forward
P/E

P/E as % of 5-year avg

Price/

book

Yield

(%)

World

15.6

112

2.1

2.4

UK

14.4

106

1.7

3.6

US

18.1

114

3.2

2.0

Europe ex-UK

14.6

116

1.8

2.9

Japan

14.8

107

1.4

1.9

Brazil

11.8

101

N/A

3.4

Source: Thomson Datastream, Edison Investment Research. Note: Valuation chart uses Datastream indices.

Fund profile: Diversified, long-term multi-asset portfolio

Hansa Trust began life in 1912 as Scottish & Mercantile Investment Trust. In the 1950s the Salomon family, who have a long involvement in banking and finance, took a significant stake; they remain majority holders of the 8m voting shares through family entities as well as owning a smaller proportion of the 16m non-voting A shares, giving them a 17.2% overall stake (see Exhibit 1).

Exhibit 3: Hansa asset ownership structure

Exhibit 4: Hansa Trust look-through NAV exposure

Source: Edison Investment Research

Source: Edison Investment Research. Note: % figures based on look-through values. OWIL based on end-April 2017 value.

Exhibit 3: Hansa asset ownership structure

Source: Edison Investment Research

Exhibit 4: Hansa Trust look-through NAV exposure

Source: Edison Investment Research. Note: % figures based on look-through values. OWIL based on end-April 2017 value.

The company is managed by Hansa Capital Partners, the Salomon family office. It has a long-standing strategic investment in OWHL, which in turn holds a 58.25% majority stake in Brazilian maritime services company Wilson Sons (Exhibit 3). OWHL also owns a portfolio of investment funds, Ocean Wilsons Investments Ltd (OWIL) which is managed by Alec Letchfield, Hansa Trust’s manager since 2013. The OWHL investment (including OWIL and Wilson Sons) makes up c 30% of Hansa Trust’s portfolio; the manager points out that this reflects the long-term success of Wilson Sons, which was initially a much smaller position. The balance is a diversified mix of equities, core regional funds and thematic and diversifying funds (OWIL is classified as part of this allocation). The aim is to build a portfolio of investments that individual investors would be unable or unlikely to access directly, with a focus on long-term preservation and growth of capital.

Until the end of FY17, Hansa Trust had an absolute benchmark based on rolling three-year average returns on a five-year UK government bond +2% with interest reinvested semi-annually. It no longer has a benchmark, but measures its performance against a number of key performance indicators (KPIs), including the FTSE Gilts All Stocks index, the rate of CPI inflation, the returns of a selected peer group (see Exhibit 10), appropriate equity indices, the level of ongoing charges and the discount to NAV.

The fund manager: Alec Letchfield

The manager’s view: Maturing cycle supports defensive tilt

Manager Alec Letchfield argues that enhancements made to the Hansa Trust investment approach in recent years mean the fund now has a coherent balance of investments and an improving performance record. While the capital preservation and growth objective means there is a natural bias to equities, the manager aims to manage the portfolio dynamically through the business cycle and assesses equity valuations accordingly. He currently sees a balance of positive and negative factors. A historical analysis of cyclically adjusted P/E valuations suggests that simply buying the S&P 500 today would result in negative returns over a five-year period, added to which the current economic cycle is looking protracted, interest rates are beginning to rise and there is heightened political risk on both sides of the Atlantic. Yet economic indicators show no sign of a recession, perhaps because the 2008/9 crisis was so severe and the recovery from it has been relatively muted; monetary policy remains accommodative even in the US, and there could also be a boost from higher fiscal spending; and company earnings are beating estimates for the first time in several years. This balance of factors informs Letchfield’s view that equity markets have not yet reached the top of their current cycle, and although valuations are no longer cheap, they are not yet excessively extended in most cases.

At certain times in the cycle Letchfield notes that he will tend to invest more in defensive assets in order to dampen volatility, and in the past year he has increased the trust’s exposure to more defensive hedge fund strategies (see Current positioning), although he stresses that this allocation can be managed quite nimbly should conditions change. The manager favours these assets rather than the more traditional ‘safe haven’ of government bonds, as a decade of extraordinary monetary policy has left fixed income valuations stretched and vulnerable to a sell-off. Letchfield has also added exposure to frontier markets funds, which provide exposure to the positive demographic factors of emerging markets in general but have historically been less correlated with mainstream equities. The recovery in Brazil following the impeachment and subsequent removal of President Dilma Rousseff has been positive for strategic holding Wilson Sons, which has benefited from a stronger currency and should see a further improvement in its business if the pick-up in economic activity proves strong enough to outweigh the renewed political instability following the corruption charges against Dilma’s successor, Michel Temer.


Asset allocation

Investment process: Diversified and dynamic approach

Hansa Trust overhauled its investment process in early 2014 in a move to create a more diversified portfolio with the flexibility to move dynamically from higher-risk to more defensive asset classes in response to changing cycles. Previously a predominantly UK equity portfolio with a strategic holding in OWHL and hence Wilson Sons, two new strands or ‘silos’ were added to the strategy in the form of a core regional funds portfolio, and an allocation to thematic and diversifying assets. A further change to the approach has occurred since the start of 2017, with the retirement of UK equity manager John Alexander and a move to a more global equity allocation under new team member Rob Royle, who has joined Hansa Capital Partners from Smith & Williamson.

Portfolio manager Alec Letchfield joined Hansa in September 2013, bringing expertise in multi-asset class investing. His aim with the new silos is to gain exposure to funds that individual investors would be unable or unlikely to access themselves. As a family office, Hansa has established networks with a broad range of fund management groups, and Letchfield builds on these relationships when constructing the portfolio. The OWIL funds portfolio, which is managed by Letchfield and has a bias to emerging markets and private equity, is classified in the ‘thematic and diversifying’ silo.

In terms of the overall portfolio, the focus on preserving and growing capital leads to a natural bias towards equities over the longer term, although all asset classes are considered and the proportion in non-equity investments may rise when stock market volatility is expected. Asset class and regional exposures are the product of top-down allocation, including an assessment of the business cycle and market valuations, with individual investments selected on the basis of detailed fundamental analysis. Royle’s global equity selections focus on capturing intrinsic upside while avoiding downside; he seeks to invest in cash-generative businesses with improving prospects, which are able to reinvest for long-term growth. Letchfield says the global equities allocation may also be used to gain more exposure to individual holdings in the various underlying funds’ portfolios as a result of insights gained from discussions with fund managers, where these positions would otherwise be a very small part of Hansa Trust’s overall portfolio. The manager’s aim is to blend all the exposures so that holdings are uncorrelated with one another and new investments complement existing holdings.

Current portfolio positioning

As shown in Exhibit 5 below, the split between the four silos in Hansa Trust’s portfolio has changed somewhat since 12 months ago. Three principal factors underlie this: an increase in the value of the strategic holding in Wilson Sons (+2.8pp), caused partly by a strengthening in the Brazilian real; a higher allocation to thematic and diversifying assets; and the change in the UK equity portfolio to a more global focus following the retirement of John Alexander and the recruitment of Rob Royle.

During the second half of 2016, Letchfield added exposure (c 10pp) to hedge funds, including some defensively orientated strategies (Hudson Bay International, Field Street Offshore and MKP Opportunity Offshore) that use derivatives to structure trades in order to achieve upside potential with downside protection. The manager has also bought positions in trend-following funds Schroder GAIA BlueTrend and Cantab CCP Core Macro. The latter two funds tend to do well in downturns; they did less well in the whipsaw market conditions of 2016 but Letchfield says he has confidence in them on a medium-term view. In the thematic part of the Hansa Trust portfolio, the manager notes he has a bias to areas offering long-term growth, such as technology, and he has also added exposure to a fund tracking a global financials index, as he views this as better placed to capture cyclical upside from the sector than many actively managed funds, which have been heavily underweight banks as a result of post-crisis regulatory pressures.

The manager notes that having built the hedge fund allocation, it can be raised or lowered with relative ease. A market pullback leading to more favourable equity valuations could see the defensive exposure dialled back, while the reverse could occur if equities continue to become more expensive.

Hansa Trust’s portfolio has a broad geographic spread. The core regional funds allocation has a developed market focus, although Letchfield has added exposure to frontier markets funds managed by Sloane Robinson and BlackRock on the basis that valuations are attractive, the return profile is favourable and performance tends to be less correlated with other equity markets. The OWIL funds portfolio is tilted to non-Latin American emerging markets to balance the Brazil exposure of Wilson Sons.

Exhibit 5: Portfolio analysis by sector, geography and investment silo (30 June 2017 unless stated)

Weighting (%)

Weighting (%)

30 June 2017

30 June 2016

Sector

Portfolio

MSCI ACWI

Geography

Portfolio

MSCI ACWI

Silo

%

Silo

%

Info technology

18.7

16.9

North America

32.2

55.8

Core regional funds

33.2

Strategic - Wilson Sons

17.0

Consumer disc.

14.1

12.1

UK

18.5

5.8

Thematic & diversifying

28.9

UK Equity

20.5

Financials

14.1

18.6

Other Emerging Asia

10.1

8.2

Strategic (Wilson Sons)

19.8

Thematic & diversifying

28.0

Industrials

10.4

10.9

Developed Europe ex UK

8.6

15.2

Global equities

15.3

Core Regional Funds

31.5

Real estate

8.7

3.1

Japan

8.2

7.7

Cash

2.8

Cash

3.1

Healthcare

6.9

11.4

Developed Asia ex Japan

2.3

4.0

Consumer staples

3.8

9.4

Africa

2.2

0.7

Materials

3.3

5.2

Latin America

1.9

1.4

Telecommunications

3.1

3.2

Emerging Europe

1.5

0.7

Energy

2.3

6.1

Middle East

0.6

0.4

Utilities

0.6

3.1

Diversifying hedge funds

10.7

0.0

Diversifying hedge fds

10.7

Cash/liquidity funds

3.4

0.0

Cash/liquidity funds

3.4

100.0

100.0

100.0

100.0

100.0

100.0

Source: Hansa Trust. Note: Thematic & diversifying includes OWIL. MSCI ACWI is the MSCI All Countries World Index.

Performance: Positive contribution from all areas

Exhibit 6: Hansa Trust silo performance 12 months to 30 June 2017

Source: Hansa Trust

Hansa Trust has experienced a period of strong performance since the UK’s EU referendum in June 2016, buoyed partly by the weakness of sterling and a recovery in the Brazilian real following the decision to suspend (and subsequently remove) the country’s president Dilma Rousseff from office. The allocation to thematic and diversifying assets has also made a notable contribution. As shown in Exhibit 6, over 12 months to the end of June 2017, the strategic investment in Wilson Sons increased in value by more than 40%, dwarfing the positive returns from all the other portfolio areas and reversing some of the previous underperformance. The overall NAV total return for the portfolio over this period was 24.9%.

As shown in Exhibit 7, the trust’s share price total return has been in line with or ahead of its NAV performance over one, three, six and 12 months to 30 June 2017 (left-hand chart). Over longer periods the NAV total return is ahead of the share price total return.

Exhibit 7: Investment trust performance to 30 June 2017

Price and NAV total return performance, one-year rebased

Price and NAV total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three, five and 10-year performance figures annualised.

Exhibit 8 looks at Hansa Trust’s performance relative to a range of KPIs: the FTSE All-Share (included for its broad relevance to UK investors), the main Brazilian index (given the exposure to Brazil through Wilson Sons) and the MSCI World, given the global investment remit, as well as the FTSE Gilts All Stocks index and cumulative CPI inflation. The trust’s recent performance has been strong, although the longer-term record versus the equity indices is mixed.

Exhibit 8: Share price and NAV total return performance, relative to KPIs (%, all in £)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI AC World

0.7

6.5

3.5

5.4

(33.7)

(32.8)

(54.7)

NAV relative to MSCI AC World

0.3

2.1

(0.9)

1.1

(28.1)

(30.8)

(40.2)

Price relative to FTSE All-Share

3.1

5.6

4.4

9.7

(17.5)

(16.8)

(36.8)

NAV relative to FTSE All-Share

2.7

1.2

(0.1)

5.1

(10.6)

(14.3)

(16.6)

Price relative to Bovespa

3.1

20.0

12.8

6.6

(1.4)

61.6

2.5

NAV relative to Bovespa

2.6

15.0

8.0

2.2

6.9

66.4

35.3

Price relative to FTSE Gilts All Stocks TR

2.6

8.5

9.8

30.7

(16.6)

12.4

(43.2)

NAV relative to FTSE Gilts All Stocks TR

2.2

4.0

5.0

25.3

(9.6)

15.8

(25.0)

Price relative to UK CPI

0.6

7.1

10.1

29.5

(0.8)

31.0

(3.3)

NAV relative to UK CPI

0.1

2.6

5.4

24.2

7.5

34.9

27.7

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-June 2017. Geometric calculation.

Discount: Wider after period of strong NAV returns

As shown in Exhibit 9, Hansa Trust’s discount to cum-income NAV has broadly moved in a 20-30% range for most of the past five years, but has widened a little in the past 12 months to stand at 32.4% on 20 July 2017, following a period of strong NAV performance. Because OWHL also trades at a discount to the value of its underlying assets, the trust’s look-through discount is wider at c 40%. While the board has the authority to buy back shares, it has stated that it would not do so simply with the aim of narrowing the discount, as this would risk reducing liquidity in the shares, curtailing the manager’s investment flexibility by requiring the portfolio to be more liquid, shrinking the size of the portfolio and inflating the percentage exposure to OWHL. The board views building awareness of Hansa Trust’s differentiated investment approach and capital preservation focus as a better way to address the discount. Before the financial crisis, the discount was much narrower. The manager notes that while Wilson Sons had, until recently, detracted from performance over much of this period, as a long-term strategic holding it has significantly added to performance over time. A continued reappraisal of the business against the backdrop of an improving economy in Brazil could see the asset once more viewed in a positive light by potential investors.

Exhibit 9: Share price premium/discount to NAV (excluding income) over 10 years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

Hansa Trust has two classes of share; a majority of the voting ordinary shares (8m in issue) are held by entities beneficially owned by the Salomon family, while there are also 16m non-voting A shares. The trust is authorised to buy back up to 14.99% of the A shares but in practice has not made any repurchases. A £30m borrowing facility is in place with BNP but is currently unused; if fully drawn this would equate to gearing of 9.4% based on 20 July 2017 net assets. The manager states that gearing is unlikely to be deployed in the near term unless there is a substantial market sell-off.

Hansa Capital Partners is paid a management fee of 1.0% of net assets (excluding any borrowings), after deducting the value of the stake in OWHL. There is no performance fee, and ongoing charges for FY17 were 1.0% (FY16: 1.2%).

Dividend policy and record

Hansa Trust pays two interim dividends a year, in November and May. It adopted its current distribution policy in 2014 (effective from the start of FY15) at the same time as its new investment approach. Previously, dividends largely reflected income received, and could vary substantially from year to year depending on the timing of income receipts. In order to provide income visibility to shareholders, dividends are declared at the start of the year and the two payments are roughly equal. The trust may also pay a final dividend if income received during the year is higher than anticipated, for example from special dividends. For FY18, Hansa Trust has announced dividends of 16p, in line with the total for FY17. This represents a yield of 1.8% on the non-voting A shares, based on the share price at 21 July 2017. Dividends may be funded from capital or income and at 31 March 2017 the trust had revenue reserves equivalent to 11.9p per share.


Peer group comparison

Hansa Trust is a member of the AIC’s Global sector, although its unusual portfolio mix means it has few direct comparators in the sector. Exhibit 10 below brings together the group of funds (four from the Global sector, three from the UK All Companies sector and four from the Flexible Investment sector) that Hansa Trust has chosen as one of its KPIs. Within this group, Hansa Trust’s NAV total return performance is below average over one, three, five and 10 years, although one-year underperformance is marginal. The dividend yield on the ‘A’ shares is slightly above average, while the ongoing charges are in line. In common with the majority of peers, Hansa Trust is currently ungeared, while its discount to NAV is the widest in the peer group.

At the beginning of 2016, the Association of Investment Companies created a new Flexible Investment sector designed for investment companies that offer a multi-asset and/or absolute return approach. While the trusts in this sector are diverse and, again, none is directly comparable with Hansa Trust, for comparative purposes the average NAV total return for this group over the past 12 months was 14.0%.

Exhibit 10: Selected peer group as at 21 July 2017*

% unless stated

Market cap (£m)

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Ongoing charge

Perf.
fee

Discount (ex-par)

Net
gearing

Dividend yield (%)

Hansa Trust 'A'

217.8

15.8

12.2

48.5

41.1

1.1

No

(32.0)

100

1.8

Hansa Trust Ord

226.3

16.5

12.8

49.4

42.0

1.1

No

(29.4)

100

1.7

Artemis Alpha Trust

116.1

24.6

10.2

23.2

70.6

0.9

Yes

(20.5)

107

1.5

British Empire

811.1

31.5

44.3

86.6

83.8

0.9

No

(10.5)

100

1.7

Caledonia Investments

1,577.8

19.0

47.0

105.0

85.6

1.1

No

(15.7)

100

1.9

Capital Gearing

184.7

10.2

25.3

34.3

100.6

1.0

No

2.2

100

0.5

Fidelity Special Values

642.1

25.1

42.9

135.5

141.2

1.1

No

(2.6)

103

1.5

Henderson Opportunities

72.6

24.6

27.0

115.6

64.3

0.9

Yes

(18.1)

111

2.2

Henderson Alternative Strategies Trust

106.6

21.2

21.5

9.5

(15.3)

1.0

Yes

(17.5)

100

1.4

RIT Capital Partners

3,004.5

12.2

39.6

69.9

84.2

1.1

Yes

5.8

104

0.0

Ruffer Investment Company

386.3

6.3

17.1

28.9

131.8

1.2

No

2.3

100

0.8

Witan

1,842.6

24.3

57.5

122.4

143.9

0.8

Yes

(2.6)

111

1.8

Weighted average

18.7

41.9

88.1

99.1

1.0

(4.4)

104

1.7

HANA rank in peer group

8

9

11

8

11

4

12

6

4

Source: Morningstar, Edison Investment Research. Note: Performance data to 20 July 2017. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

Hansa Trust has five directors, four of whom are independent. Chairman Alex Hammond-Chambers has been on the board since 2002. Geoffrey Wood became a director in 1997. Jonathan Davie and Raymond (Lord) Oxford were appointed in January 2013. William Salomon, who is deemed non-independent, has served on the board since 1999. He is also the senior partner of Hansa Capital Partners and deputy chairman of OWHL and Wilson Sons. He is a significant shareholder in Hansa Trust both directly and through family entities. The directors have backgrounds in asset management, academia, capital markets and the diplomatic service. The board and the portfolio manager regularly visit Brazil to ensure oversight of the large holding in OWHL/Wilson Sons.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hansa Trust and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

cf

cf

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hansa Trust and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

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