Member Info for Damienmoore

Evening Guitarsolo,
I believe we both may be suffering from the same ambivalence. Whilst I am disgusted with the managers over the FOREX debacle, the decision to cease hedging does put a different complexion on things. Further, like you say, they do have a history of investing in some fairly decent companies. My position remains the same in that I have lost too much for it to
be worth selling my holding, so I'll see what unfolds over the next 24 months.

This is not to say I will ever trust the managers again, though!

Cheers
DM.

Many congratulations, DenFos. I believe this is a very good opportunity for you, and I'll be honest in saying I am a little jealous. All the best with your investment.

The managers have decided to cease forex hedging, thus bowing to the likely shareholder pressure resulting from the huge forex losses they incurred. Alongside dividend reinstatement, the outlook is (by perception) better than it was. The managers still refuse to apologise for their error, citing "NAV stability" and the chair, Richard Battey, is stepping down and disappearing without any accountability. He retires, in my opinion, on a very sour note, but no doubt he'll still receive the gold pen (and some).

Good stuff. I will keep topping-up, too. I love it when markets are irrational. In the long term it (usually) pays off. I note that the manager believes reversionary rental income has the potential to increase by circa 30%, so the prospective yield is meaningfully higher than the curent yield of 6%.

Actuary63, I see your point, but within your premise you are making the assumption that the manager cares about total return, and will place a floor on the total return performance/decline before cutting the dividend. As we know, to date the manager has been reluctant to do this, because they are under pressure to maintain a record of progressive dividends.
The manager is living in hope that capital values will improve, so he can continue to dividend wash, without objections.

ade2a, Your points are well formulated, but what I am uncomfortable with is the suggestion that private investors like us have full responsibility to forensically analyse an investment trust to get to the truth. No - the managers should reveal the truth, as is their moral and fiduciary duty. And take a look on this forum - the vast majority of these investors just aren't getting it. They are proof of ther consequences of the managers not being direct and truthful about this aspect of their income generation.

ade2a, the most diligent investor in the World would not be able to find out the trades executed by the trust, unless they disclose it. Yes, at certain points in the year the trust gives an update on the STATIC position of the trust holdings, but that doesn't tell the truth of what they have been doing in between times. It doesn't tell us the value of trades executed for the purposes of accruing dividends, and the money spent on transaction costs.

Indeed, you may be right, it may be a silly endeavour attempting to get the transparency investors deserve. However, there's no harm in pointing out that we smell the rat. Investors should challenge fund managers. They are not as smart as they think, and it's our money on the line.

Actuary63, Couldn't have put it better myself. The trusts that pay from capital make it their mandate to do so, and generally invest in growth orientated businesses. When observing the annual report for these trusts it is possible to clearly see the capital position, and the reduction in capital from the dividends paid. Investors know what they are dealing with - no problems here. HFEL, on the other hand, claims to be an income fund, but hides the fact it pays from capital. It does this through the trickery of buying shares cum dividend to funnel the trust's capital to the revenue account. It is an act of deception.

Indeed, your point about whether the deception is sustainable is extremely pertinent. The answer is, it is worryingly sustainable in that there is no limit the extent to which the managers can sell companies ex-dividend and use the money to buy other companes cum-dividend. This has, and may continue, to weigh on the trust's absolute return over time, as the strategy clearly has not been working in recent years. The costs associated to turning over shares to create the dividend income must be high, and plays a part in the poor performance.

This is why Mike Kerley needs to be transparent and tell investors the extent to which he uses dividend sripping to generate revenue, so we all have a choice in whether this is something we can tolerate. Indeed, we know that he hasn't mentioned it/volunteered the information, but perhaps he needs to take on board the adage that a truth unspoken is a lie.

zac0_4, thank you for your comments. Ade2a does believe that a significant proportion of dividends are a return of capital, because it is true. The underlying companies The Manager holds do not possess the natural yield to cover the dividend. Instead the manager purports to be "dividend aware" in portfolio buying and selling. This means recycling capital and buying companies before their dividend ex dates. This captures the dividends, which are posted to the revenue/income account of the fund. However, as we know, when a company goes ex dividend, the share price marks down by the dividend amount, to reflect the amount of cash/capital the business is paying out. No such thing as a free lunch and all that!

So, the effect of this is that for every dividend paid to the company there is a corresponding mark down in capital. It's a disgrace that the manager converts capital in to income in this fashion, yet does not provide the full information on the extent to which the strategy is used within any given investment period. This informtion is not offered to us explicitly, when it should be.

There are many trusts that pay our dividends from capital, such as European assets trust. This is fair enough, they make no secrets about it and you can see in the accounts exactly what is happening.

However, with HFEL the managers are being opaque, because the accounts show that the dividend income posted to the revenue account from the underlying companies covers the dividends paid to us. BUT, as we know, this revenue is from capital conversion from dividend stripping described.

It is sneaky stuff, and the Chairman should be ashamed for failing to encourage transparency.

Thanks for your comments, JGFFourie. Happy with 57.5p, and happy for those who are getting them for less. It's a good opportunity to buy quality real estate with low levels of gearing.

The appointment of Paul Leaf-Wright as CEO is a significant development. He has a proven history of being able to attract new capital for UK real estate investments, particularly from South African investors. He also has connections in the banking sector. This is a solid appointment and marks an inflection point for the company. We may see the company become larger, with greater liquidity in its shares.

Bought in at 57.5p and as far as I am concerned this is bargain of the century. I always invest in REITS via an ISA. The providers I use request dividends to be paid gross, with no withholding tax deducted. Any ISA provider who fails to request dividends be paid gross should not be in business.

If you hold shares outside of an ISA expect your dividends to be paid net of 20% withholding tax. Moral of the story - use an ISA for your REIT investments where possible.

Info below on PID's and taxation:

https://monevator.com/how-property-income-distributions-pids-are-taxed/

Cheers.

My opinion is that PI's will be wiped out. It's just been one disaster after another after the business went from being a CLO investment company, in to direct Fintech investments. These investments destroyed huge amounts of capital because they were minority stakes in mostly unsuccessful businessess. The current management have tried their best to rebuild the company through the Sancus brand, but it's proven difficult with such a drastically reduced capital base.

I will come back in 2 years to see if the company still exists. I believe I will return to an empty page.

Evening Guitar Solo,
Your decision is well-reasoned. For me, I will stick with it for now because I have lost too much, and I have a vain hope the managers will change their spots! It will also serve as a reminder of the opacity that comes with private equity investing. I note that, through the latest Edison report, they have decided to make it clear that 90% of the US investments are hedged to the Euro. Laughable that they should indulge us in this transparency after the event. I think this is called "shutting the stable door after the horse has bolted".
Such a shame and disappointmnt. To think I had many years of trusting and respecting the managers.
DM

Ade, My concern is both with the dividend stripping and the lack of clear information volunteered by the manager on the contribution this stategy makes to the total income. I am sorry, but I do no agree with you about there being enough information. As an investor I shouldn't have to resort to digging around like a private detective, and being left estimating/guessing anything. The information should be declared fully in the annual report/s. If the manager would care to tell us how much income is generated by cum-dividend investing, I would be able to make decide if I want to stay invested.

I invested in this trust because they said they generated income from the investments + options. I have never once seen in any of their annual reports that they utilise a dividend stripping/capital return strategy. This is unfair, because had they provided this information, I would have thought twice.

Now, several years later, and having becoming a more inquisitive investor (not trusting the annual reports I should have been able to rely on), I have discovered that the manager has been returning capital to me via dividend stripping they have never highlighted.

How the hell has this manager been allowed to return capital without making reference to it in their literature???? Is it fair to say I was duped??

I am very annoyed about it. My annoyance is not just for myself, but for all private investors who put their faith in the manager in the pursuit of building wealth, and a better future.

I am on the side of all investors - even those who don't understand or agree with my point.

I have said my piece several times now, so I will stop banging the drum at least until the new year. Happy Christmas everyone (including Longtimeinvestor) when it comes.

Good Morning Guitar Solo, I have indeed noticed that Mr LongTimeInvestor has the time to create circuitous conversations by quoting out of context, denying facts that have already been evidenced, and supporting fallacious/false premises. But that's not to say I should allow him to deter me from making my point to fellow investors . As with the PEY debacle, I am indignant in cases where a fund manager fails to provide the full picture of their activities - particularly activities with risk attached. I may contact investor relations, but sadly past experience diactates that it would yield little. I'll give it some thought.

Longtin
(1)"''and there should be complete disclosure by Mike Kerley '' really - why?"" - because disclosure is fair to investors who are committing their own money. You are probably the only investor I have come across who is anti-disclosure. Strange, but there's a first time for everything.
(2) "I am not aware of investment trusts publishing every single purchase and sale transaction - you do however get a frequent update of the holdings held within the trust." - I'm not arguing for the trust to publish all their trades; this is a different matter. What I am arguing for is for the trust to give information on how much income generation is from the dividend stripping strategy they have been employing, so I have an idea of how much of the income yield is naturally occurring from the underlying investments.
(3) "The trust has an investment objective. Any investor can decide for themselves based on the trusts objectives, whether to make an investment or not." - No, nonsense. No sensible investor invests on objectives alone without knowing what methods and tools are being used to achieve the objectives. As we know, some methods and strategies are better than others. If you are a "long time investor" you should know this. If not, may lady luck forever be on your side.
(4) " If an investor has concerns then don't invest." - Of course, except when I made the investment I did now know about the dividend stripping, because the managers have not been transparent about it. How can an investor be concerned about an activity they don't know about.

If you are so pro investor responsibility, why are you against a level of transparency that would allow investors to make an informed decision that they can truly be responsible for?

Many thanks for sharing this, Guitarsolo.
"Reviewing their options". Well, congratulations to them. After destroying a large chunk of the company's value on forex positions, they have come to understand that betting on currency markets can result in losses. Doh!!

And what are these huge losses for?? To hedge a portfolio of investments that is already inherently hedged via geographical diversification - pardon? And furthermore, to hedge to Euros when the shares are listed on the London Stock Exchange, where British investors need dividends in GBP - pardon?

Congratulations on selling a holding here - you've just idiot-proofed this money, though you should not be investing for your in-laws. That may not end well.

Significant share price uplift driven by on-market share purchases by the management. The shares will be held in treasury should the share price move to a premium. A good decision made for the benefit of shareholders.

Longtit, Thank you for your comment, and I am pleased you agree. HFEL have indeed left shareholders clueless on the extent they dividend strip, because they don't tell us. You are absolutely right that we should not be clueless in this regard, and there should be complete disclosure by Mike Kerley and his team.