Report Of The Chairman

Investment background

It is an understatement to say that, from an investor’s perspective, the quarter just passed has been one of very mixed challenges, threats, and outcomes; it has reflected the extraordinary economic and political upheaval markets have faced. However, more encouragingly we have also perhaps witnessed the first stages of the eventual shift in the status of Covid-19 from “pandemic” to “endemic”. But Covid is, of course, still not over.

Our industry has now endured nearly two years of Covid disruption, with pubs being closed, re-opened with restrictions, closed again, re-opened again with different restrictions, and so on. Although people have started to mix more with others and venture out of their homes to visit hospitality and entertainment venues, many still do so with caution, and we are far from returning to the pre-Covid “normal”. We are beginning to learn to live with fewer restrictions. This should result in a more stable environment and, therefore, encourage economic growth: nonetheless, emerging from Covid restrictions and their effect on the economy will be a marathon and not a sprint.

At the industry level, trade has not yet recovered across the board, and many companies continue to have to make adjustments to their business models as customer behaviour changes. For many, even getting sales to pre-pandemic levels will not return them to profit at pre-pandemic levels. This is because they are experiencing very significant cost increases, particularly for energy and labour. This combination of supply chain challenges and labour shortages has contributed to a steep rise in inflationary pressures which, in turn, led to the authorities increasing interest rates at the same time as the government scaled back the support it offered to the industry during the worst stages of the pandemic.

The explosion in energy costs, exacerbated by Russia’s invasion of Ukraine, will be well-known to all of you; the increase in labour costs is widespread across the industry, with many finding it difficult to recruit good staff, particularly in kitchens. Building sales to levels that cover these cost increases would be a challenge at the best of times, and the next 12 months are not likely to be the best of times. This is not just because of the well-publicised hit to the disposable income of customers, due to general inflation, energy costs, mortgage costs, and tax rises. This cost-of-living squeeze will result in families re-assessing their priorities and how they spend their disposable income, which will inevitably depress discretionary spending such as pub visits.

It is also clear that not all of those who were prevented during lockdown from going to the pub are coming back to the pub: this is particularly true of the older population who have traditionally been in the mainstream of cask beer consumption. With less demand for wet led pubs, there is a polarisation in trade developing which might persist. We are beginning to see casualties already though, so far, primarily amongst the smaller brewers. Such failures are due to many factors and whilst some might be solely down to the effect of the pandemic, many are the result of management weaknesses which the lockdowns laid bare.

As far as pub groups are concerned, demand for properties has surprisingly outstripped supply, but recently there have been early signs this is starting to change. The loss of government support and cost pressures are causing more proprietors to consider that it is time to sell. This might accelerate further when the moratorium preventing landlords from evicting tenants for non-payment of rent ends at the end of March.

We cannot disguise the rocky road that the Club has travelled since the early days of the pandemic. The decline in unit value reflects the negative background described above. The table below illustrates the share price movements of a handful of the portfolio companies we invest in: –


Unquoted investments and portfolio risk

When the Committee has consulted with members over investing in smaller companies, especially brewers, it has always been strongly supported, notwithstanding the difficulty in identifying sound opportunities and evaluating the risks involved. We have continued to do this but have struggled to find businesses that do not price themselves too highly and/or offer financial returns rather than just product in kind!

We are also conscious of the pressures that Covid continues to bring to this sub-sector. Although investment in an individual smaller company carries a higher risk than investing in a larger one, spreading the risks across a portfolio of smaller companies is only slightly greater than investing in a portfolio of bigger ones. Although the Club does have holdings in major brewers, the overwhelming number of our investments are in what are regarded as smaller UK listed companies. Our principal risks are, therefore, market price risk and liquidity risk. The latter is particularly crucial when evaluating our few holdings in unquoted companies. The Committee has spent much time considering this (especially in light of the failure of West Berkshire) and have decided, therefore, that whilst we will continue to seek out potential investments, we will do so knowing that any investment will be nominal. It is very difficult to evaluate these businesses, especially when the crowdfunding ethos does not seem to include looking for a profitable return. Valuing such businesses is not a perfect science.

Membership news

The gloom also pervades this section of my report because, although we continue to recruit new members, those leaving, I’m sorry to say, outnumber them. We recorded 75 departures and 21 deaths during the year, against 31 joiners. Of those who gave a reason for leaving the Club, the largest group by far stated that they were leaving the Campaign. Please remember that you can “rest” your contributions at any time and leave a residual balance of as little as £20 in the Club.

Administration

I would like to thank all those who have worked steadfastly throughout the year to ensure the smooth running of the Club, including, and in no particular order: Allens, our administrators at Stockport; Hadfields, our reporting accountants; James Sharp and S+T, our brokers; our branch ambassadors; my fellow Committee members and, last but by no means least, you the members for your encouragement and support during this most difficult of times.

Outlook

As I write this piece, I’m only too well aware of the heightened risks and uncertainty investors face, and it is easy to become uncomfortable in these situations. War has returned to Europe. The human cost is already apparent. War also usually heralds higher inflation, and it would be dangerous to conclude that the price rises we are now facing stem purely from the pandemic. Given the unprecedented levels of debt around the world, it is tempting for governments to allow inflation to run at higher levels than we have known because it constrains debt growth. This is, of course, not a policy that can be publicly avowed, but savers need to be aware that it is happening.

More particularly, for your Club being focussed on real ale, our financial returns are very dependent upon the profitability and sustainability of the domestic hospitality sector, and these are under threat. Many have been resilient through the great challenges of the past two years but there are many bumps on the road ahead. While politics and economics will be important influences on the Club’s near term returns, the more important contribution over time stems from the fortunes of its investee companies. Pubs and brewers need to adapt to the new post-Covid trends (such as the increased working from home and greater acceptability of canned beers) if they are to survive and continue to attract the consumer in an age of changes in drinking habits. There will be more casualties along the way. It is encouraging to see positive support for the future of cask ale from some leading producers and the gradual uplift in pub trade since the easing of restrictions.

In the short term, it is important to deal with, understand, and adjust for market movements caused by “macro” factors (the FTSE 250 fell 20% from its all-time high in one week in March) and remain positive. The Bank of England has warned that things won’t get better until 2023 at the earliest. The Club and other investors face volatility, uncertainty, complexity, and ambiguity. As geo-political tensions mount and markets continue to churn, the next couple of quarters are likely to remain fractious. We will be watching matters closely and reacting as flexibly as we can.

Thank you for your continued support.

John Hattersley – Chairman – CAMRA Members’ Investment Club
31st March 2022

Report Of The Chairman

I have seen one investment manager describe the last twelve months as producing a “memorable backdrop”: that seems to me to belittle what has been a most extraordinary and turbulent year and one which for many has been a truly painful and miserable one. However, seen from just a financial perspective it is possibly a reasonable view. The unfolding of the global pandemic during early 2020 and the consequent precipitous falls in share prices gave way to a remarkable rally as investors responded to the vaccine roll out. Optimism and hope overtook despair and despondency.

The approach that your Committee took to navigating through this “backdrop” has been described in earlier newsletters, so I don’t intend to repeat it here in detail. But, it is appropriate to reiterate that we are always conscious that we are investing other people’s money, and in a specialised sector to boot: therefore, we operate a below-average risk strategy. We do not see ourselves as competing in a talent contest against other forms of investment!

Risk management and market timing

We recognise that some risks are easier to mitigate than others. One of the many lessons to be learnt from the past year is that exogenous threats, like a pandemic, can rarely be predicted or planned for by investors, though an understanding of potential risks helps to manage them. The earnings potential from our portfolio was always going to suffer in such an extraordinary year as rolling lockdowns created trading turbulence across all of our investments. Many of our investees either reduced or cancelled their dividends. Some companies with weaker balance sheets were exposed, as were those which were, arguably, distributing unsustainable dividends. The latter may have been rewarding shareholders too richly at the expense of growth, jeopardising the sustainability of cash flows required to fund their pay-outs. We must be prepared for, and indeed to expect, that the Club will face a more “challenged dividend income environment”, as the jargon puts it, going forward.

When managing stocks and shares it, is tempting to think you can time the market. Of course, you should buy when shares are going to go up, and when they are going to go down you should sell them. It is a seductive idea. It seems simple, but without some concept of value how do you know if prices are cheap or dear? This is especially true when the paucity of returns on offer in other asset markets makes them unappealing. It would be lovely to have ups without downs, but investment rewards generally come with risks. Hence, the Committee bought relatively small amounts of shares at a time but dealt more than twice as often. Liquidity is always important and cash was kept in hand just in case something exciting came along! This enabled the Club to increase its exposure to some preference shares when rare lines appeared. Members can keep up to date with developments between newsletters by visiting the Club’s website.

Behavioural changes

As we look forward once again to emerging from the pandemic – at the risk of stating the obvious – it is highly unlikely that we will return fully to the way things were. Lockdown has exacerbated existing trends towards changing environments, the shrinkage of licensed floor space, altered drinking habits and new ways of social mixing. The pressures on city and town centre large-volume pubs are clear.

Whilst many people may relish the chance to be with their neighbours and colleagues when the drinking restrictions are lifted, that does not automatically mean that the beer and pub industry will return to the trading levels of 2019. Those who are relying on the clear human need to socialise should bear in mind that there has been a long decline in communal activities. Men, in particular, are choosing to spend more time with their families. There is also the reality behind the phrase that ‘’there is loneliness in a crowded room’’. These are all causes for concern for the future of cask beer since, for practical purposes, it is near impossible to enjoy it in quite the same way at home. From a Club investor viewpoint it will be prudent to bear this in mind when markets get buoyed by the re-opening trade. Whilst we aim to identify UK businesses that appear best geared both to weather the crisis and expand thereafter, that is easier said than done.

Membership news and unit values

If you find the above all too depressing and too devoid of facts, I’m pleased to report some encouraging membership news. After a couple of years of relative stability, it is encouraging to report a healthy membership increase of 29 during the year (being 56 leavers and 85 new members) – a warm welcome to you all. The average age of our new members is 56, still on the high side but hopefully not quite as high as that of existing members! Encouraging too is the fact that contributions from our new members tend to be higher than the contributions of those leaving us. It is also pleasing to report as well 8 females among those joining.

It cannot be denied that it has been a turbulent year for the Club in terms of its two-principal metrics, its fund value and its unit value. Pre-Covid, the fund and unit values at 31st December 2019 stood at a £26,105,771 and £6.30 respectively, before falling to lows during the year of £15,607,964 and £3.59 at 31st October 2020. Thankfully, by 31st March 2021 a semblance of normality appears to be returning, with respective values now standing at £23,253,726 and £5.19.

In a similar positive vein, members’ contributions during the year came in at a record £1,913,147, with withdrawals during the year the lowest since records began (and therefore, probably, ever?) at £565,943.

Administration and the annual meeting

As you know, the Committee has met monthly via Zoom throughout this year – the routine business of the Club is taken care of this way but it lacks some of the interaction, debate and conviviality of the face-to-face meetings. Similarly, the Committee was saddened to have to pull last year’s annual meeting/members’ lunch which is always a welcome opportunity to meet, greet and converse with the membership. Accordingly, at its last Zoom meeting, and suitably encouraged by recent announcements over the so-called ‘roadmap’ to lockdown removal, the Committee determined to try for a real AGM at The Victoria, Beeston this year. The venue has therefore been booked for 11-30 hrs on Saturday 17 July 2021 (note, approximately one month later than usual), so would those interested in attending please put that date in their diaries and await further details. We even have a guest speaker lined up!

Of course, no-one can predict how lockdown release will play out in practice, and with this in mind we have also booked Saturday, 28 August at The Victoria as a reserve date. We are also making enquiries as to how we might run a virtual AGM with at least some member ‘attendance’ if neither of the two dates referenced above prove achievable. Needless to say, we will be posting updates on the website during May concerning final arrangements.

As usual, an impending AGM means that four members of your present Committee retire by rotation and this year that applies to Colin Bodimeade, Iain Loe, Sean Murphy and John Westlake, all of whom have expressed a willingness to continue in office. That should not, however, deter any other member/s from putting their name/s forward in the usual way – please refer to the Company Secretary’s formal notice on this matter below.

I would like to thank those whose involvement throughout the year contributed significantly to the smooth running of the Club, including, and in no particular order:
Allens Accountants, our administrators at Stockport; Hadfields, our reporting accountants; James Sharp and S&T, our brokers; our branch ambassadors (any more out there please?); my fellow Committee members and, last but by no means least, you the members for your feedback and thoughts during this most challenging of years.

Looking forward

I began this review by concentrating upon the Club’s investment process rather than focussing upon individual investments. As the unit values shown above indicate, values oscillated wildly over the year so it is useful to be remember that share prices are merely the result of an agreement between a marginal buyer and seller. That does not mean that the market is always right or that the price signals are always an accurate reflection of value. Stock prices are ‘noisy’ and their current levels tell us nothing about where they are going. Value is a moveable feast. Valuation is not a science. Quite the contrary. Value extends to softer, intangible aspects of corporate performance, such as culture, reputation and brands, amongst other things, and is not limited to measurable financial metrics. This is a truth that we always need to bear in mind.

As we hopefully emerge into a summer of light it will be crucial to stick to our principles if we are to navigate what looks set to be a further rollercoaster year of uneven and contradictory news flow for our industry. We know that we cannot predict the future: Covid 19 has taught us that but there are always things we can do better. Perhaps the biggest change will be in how we view the world?

Thank you all

John Hattersley – Chairman – CAMRA Members’ Investment Club  
31st March 2021

Report Of The Chairman

It is impossible and, indeed, it would be inappropriate not to acknowledge head on the issues currently facing the country, the leisure and hospitality sector, the Club and its membership,  but I’m conscious that this report is also a review of the preceding year and will, therefore, address those matters as well.

Up until March the most significant challenges affecting the Club’s investment universe were those arising out of the ongoing political fog swirling around Brexit and the apparent inability of our politicians to grapple with them, together with the largely unforeseen corporate activity in the UK brewing and pub retailing sector.  Of course, a degree of clarity arrived in December following the general election and the subsequent departure of the UK from the EU: however, that is where clarity ended since there is no visibility on the eventual trade deal’s structure. Moreover, at the time of writing it is impossible to know how Coronavirus will disrupt those negotiations.

The merger and acquisition frenzy in the sector took up a lot of the Committee’s portfolio management time. The Club voted against the sale of the Fuller’s brewing business to Asahi and the takeover of Greene King by CKA but the deals went through and the Committee held an investment- only extraordinary meeting to review the portfolio following these events. The proceeds were invested across a broad range of the existing companies and into three new international ones. In order to maintain an interest in the ongoing Greene King business shares were bought in CKA. The Club kept its stake in the Fuller’s pub business but also bought into Asahi to get exposure to Fuller’s brewing arm. By buying into Molson Coors the Club has now got exposure to the UK’s biggest selling ale brand i.e. Doom Bar. The growing influence of international brewers in our market is a fact so we added to our existing positions in Carlsberg ( major distributor of cask beer) and Heineken (owners of Caledonian Brewery and Star Inns). The EI transaction is but the latest (though largest) in the ongoing rationalisation of pub ownership. Unable to invest in Stonegate, the Club added to C&C Group, City Pub Group and New River and put more money into Wetherspoons, Marstons, Mitchell and Butlers and Shepherd Neame.  Whilst we continue to seek opportunities in the smaller operators’ space, we are wary given the squeeze on brewing profits and the illiquidity of many of their shares. It is noticeable that the number of microbreweries seeking crowdfunding finance has slowed appreciably and that one or two companies have fallen by the wayside. Even contributors to SIBA’s publications are beginning to say the market is flooded right now and that bubble-bursting time could be in the not too distant future. According to one source nearly 2000 new beer or cider brands have been launched since 2015.

I mentioned last year that at the end of March 2019 the administration of the Club was formally transferred from Howarth Associates to the Stockport-based accountancy practice of Allens. The transition between the two firms went smoothly but like all such moves it threw up one or two issues that had been hidden for a while. Liaising with the bank took longer than anticipated and aspects of the membership systems creaked a bit more than they should have, but these were quickly resolved with goodwill on all sides. The new website has been well received and we have begun to upgrade and improve our membership record-keeping (with helpful input from CAMRA ) and systems. Mark retired as Company Secretary in October and I would like to thank him for his many years of sound advice and wise counsel. Nick Metcalfe has been appointed as his successor.

Following on from comments made at last year’s Annual Meeting we placed two advertisements, alongside articles, in What’s Brewing and broached the idea of establishing Club ambassadors in branches. The latter has got off to a sure, if gentle, start whilst the exposure in the newspaper does appear to have recruited some new members. Indeed, I’m pleased to report that membership has steadied ( 92 new members : 88 leavers ) and that, encouragingly, the new members who are joining are contributing more per head than those who are leaving, so overall contributions are up year-on-year. Disturbingly, though, the average age of our new joiners is persistently over 60. We have also explored the idea of enabling will beneficiaries to retain a holding in the Club pro tem whilst probate is being finalised. An appropriate resolution will be put to the Annual Meeting which was planned to be held at the Victoria at Beeston on June 13. However, that date is now very doubtful and will almost certainly need to be adjourned. Please await further announcements. In accordance with the Club’s constitution the following Committee members are seeking re-election: Ian Brindley, Chris Excell, Dave Goodwin and myself. There is, of course, the opportunity for new candidates to put themselves forward: please see the details below.

The organised brewery visits received a mixed response. Visits to Banks and Wadworths had to be cancelled due to low interest whilst delayed building works thwarted the Butcombe trip. The trip to Marstons was poorly attended but those to Thwaites and Belhaven were well received. We have now created a specific database for those members who have expressed an interest in trips and if you want to be included but have not already done so please contact the office. These events take up a lot of time to organise and it is frustrating if they are not taken up. The proposed trip to Estonia this year has been cancelled in light of Coronavirus but it is planned to reinstate it for 2021.

I would like to thank  my fellow Committee Members who give so generously of both their time and money ; the Club’s administrator, Allens ; our brokers James Sharp and S&T Wealth Management ; Hadfields for verifying the accounts and all those members who have contributed their ideas and expressed their concerns to us. We do appreciate your feedback.

Last year was one which saw the Club’s financial performance bolstered by unwanted corporate activity during the first half, leading to a degree of overvaluation in some stocks ( which hopefully should not be repeated), and a second half rocked by global issues that, understandably, seriously hurt share prices. Even without the consequences of Covid-19 the investment outlook for the next few months was far from clear. Although, quite understandably, no longer headline news, the need for government to negotiate post-Brexit trade deals (not just with the EU but also with the US and other countries) and wrap them up in under twelve months was never going to be easy. Now those discussions will take place against a background of global disruption and severe economic downturn: the ways forward remain as overgrown and indistinct as ever.

It is barely credible to think that only three months or so ago few of us had heard of Covid-19 and fewer still could foresee the scale of the impending human tragedy. Whilst the primary concern is for the physical wellbeing of individuals we recognise that we’re now living, and investing, through some of the most extreme market movements for a generation. For all investors, daily market swings are unnerving but the scale of this setback has not been experienced since the global financial crisis of 2008. The Club’s investment portfolio is not immune from this. Indeed, the government’s initiative to limit the spread of the disease by restricting the movement of people has seriously impacted the revenues of companies in the brewing and leisure sectors. This might lead to companies going bust, and people being laid off, which will in turn impact economic growth and a wider range of businesses could suffer. Perfectly good companies are at risk of failing due to the cash-flow impact of government decisions. But with adequate government support, the markets will recover, lending will start again and while people and businesses will reassess the risks they are willing to take in an uncertain world, we’ll hopefully return to normal.

Trying to navigate through these immensely difficult circumstances without any clear path, because there is no modern precedent, is made more treacherous because the shock occurred at a time when global stock markets were already highly valued relative to their histories. Therefore, at the time of writing we feel it is appropriate to preserve the Club’s cash position so as to create a reservoir from which to invest in viable companies when the time is right. Equities have fallen significantly but they might well fall further from here. At the investment level much depends upon how the underlying investee companies are affected by, and respond to, these unprecedented events. Are these setbacks pauses or reversals? Whilst the recovery will be protracted, and one can never predict the future nor should one try), it will be right to endeavour to manage the Club through this by taking measured risk. It is a worrying time for everyone and it is likely that returns will not be as strong over the immediate term as those we enjoyed before the onset of the pandemic. We should plan for the long term and recognise that this, like all crises, will pass. The Greek philosopher, Heraclitus, is supposed to have said: “all is in flux, nothing stays still”. In the short term we need some stability but we are dealing with uncertainty. It’s very likely that markets will remain volatile for some time.

 

John Hattersley – Chairman  

Report Of The Chairman

I am pleased to bring you the Club’s report and accounts for the year ended 31 March 2019

It does not seem like twelve months ago that I wrote to you about the challenges the Committee faced in running the Club but it is! Moreover, the challenges faced this year have been very similar to those we met last year.

Recruiting and retaining Club members continues to be at the forefront of our minds and I wish I could report better news on that front. Unfortunately, the Club shares the same dilemmas as the Campaign does when it comes to an aging membership profile and although the Twitter account is proving to be a success we are still not attracting many younger members. Whist we gained 53 new members we said goodbye to 143 resulting in an overall fall in membership of 90. Clearly, since membership of the Campaign is a prerequisite of membership of the Club once a member decides to leave the former (for whatever reason), their Club membership also lapses. There has been a steady, though not dramatic, flow of resignations as a consequence : of course, not everybody who leaves gives us a reason. The “noise” on CAMRA’s Discourse forum has not been helpful since much of the chatter demonstrates a failure to understand what the Club is all about: indeed, quite a few commentators seem to believe it is a physical arm of the Campaign! The Committee has connected with the National Executive about this but with limited success I’m afraid and our desire to have greater exposure in What’s Brewing and closer ties with HQ has yet to bear fruit.

Since we increased the limit on annual contributions last year I’m pleased to report that more than fifty members invested more than £2000 in the Club this year with a handful trusting us with the maximum of £5000. As you know the Club does not offer an income option so Members do occasionally need to withdraw funds but may I remind you that you can always leave the relatively small sum of £20 in the Club until circumstances change and continue to reap the benefits of membership.

At the end of March the administration of the Club was formally transferred from Howarth Associates to the Stockport based accountancy practice of Allens. Prior to this Allens had been shadowing Mark and Jane for some months assisting with accounts preparation and getting to understand our systems and practices. I’m pleased to report that the transition went smoothly and all enquiries are now being handled by Allens. Mark continues in his role as Company Secretary and he prepared the year end accounts and will be leading the organisation of the Annual Club Meeting. This will, once again, be held at the Victoria at Beeston. The guest speaker on June 15 will be Sara Barton from Brewsters Brewery. In accordance with the Club’s constitution the following Committee members will seek re-election : Bob Crumpton, Chris Holmes, Iain Loe and Ann Mace. There is, of course, the opportunity for new candidates to put themselves forward : please see the details below.

The Committee has continued to arrange visits to breweries owned by companies in which the Club invests as well as the infamous International trip! If any member would like to assist in organising these events their help would be most gratefully received. Similarly, if any Members have any bright ideas regarding recruiting more (and younger) Members please convey them!

Over the investment year under review the UK equity market was generally unloved by professional investors. The combination of Brexit uncertainty leading to political disruption in Westminster, a sluggish economy and a nervous currency saw the broader market yield approaching 4.5% : its highest level since the financial crisis of 2008-9. As so often happens a strong market that is run its course refuses to die down smoothly so there were repeated encores but each was less convincing than the last.

It is always worthwhile remembering that whilst individual stocks are fascinating to discuss and follow, investment decisions cannot be made in isolation from the unpredictable factors that affect the broader economy. Given that the Club’s target pool of allowable investments is a relatively small and shallow one and that Members have requested that the Club should be fully invested (that means that at least 90% of its gross assets will be normally invested) if possible the Committee focussed upon the need to prudently manage cash whilst at the same time pursuing the Club’s financial objectives i.e. providing Members with an attractive total return derived from a portfolio of diversified investments involved in the production or retailing of real ale.

So how does the Committee manage the portfolio? The Club has always regarded itself as owners of shares and not traders and, therefore, endeavours to look through the short-term noise generated by the markets and take a longer term stance. Like swimming baths the noise in stockmarkets often comes from the shallow end. So although it is common sense to take the big decisions before the smaller ones – strategy coming before tactics – the Committee does seek to take advantage of short term movements. As a rule, though, it looks to buy shares only when the company’s share price seems to significantly understate its capacity to compound value for shareholders. Apologies if this sounds obvious but it is worth repeating. The price paid for assets is crucial in determining subsequent returns. Pay too much and you can’t perform. Similarly though, it can be prudent to wait before the perceived risks in a company have been resolved before buying. That might mean paying slightly more later than one could have done if one had moved earlier but it manages the risk more effectively. A very low valuation can betray the dubious quality of a business or its balance sheet weakness rather than it just being friendless. Quite often those companies that appear to be bargains are, in fact, expensive mistakes waiting to happen. This evaluation is, of course, a subjective process rather than a mechanical one and mistakes can be made. The Committee does not believe in a ‘one size fits all’ approach but, rather, a nuanced combination of ‘top down’ and ‘bottom up’. Far from seeking to avoid risk altogether it will be taken but only when the time seems right to do so. The Committee resists the temptation to act when it would prefer not to!

During the year most of any surplus cash was invested in the larger, more financially secure companies where dividends weren’t seen to be vulnerable. But when opportunities arose to be more adventurous these were carefully scrutinised. A few 8% Preference shares were bought in Fullers (prior to the announcement) and a switch was made between Youngs A and non-voting shares when the former became too expensive. Fuelled by the availability of apparently endless crowdfunding finance, vendors’ expectations continued to be too rich in the micro-brewing / craft brewing sector, but out of the many opportunities scrutinised two small positions were taken in Loch Lomond and Nethergate. The asset allocation guidelines were reviewed during the year and these, together with a brief commentary on each holding in the portfolio, are now published on the website.

The current environment is not one to be too confident in. So much will depend on how UK politicians manage the EU divorce process from here but the indications regarding growth prospects are not good. Of course, forecasts are not reliable but if the Bank of England is correct in predicting just 1.2% GDP growth during 2019 that will endorse adding in more caution to an already difficult industry backdrop. The transition period post Brexit could be a painful one, so the present conservative positioning of the portfolio seems appropriate but the Committee is prepared to shift it more positively if the circumstances dictate.

I would like to thank my fellow Committee Members who give so freely of their time and expense ; the Club’s outgoing administrator, Howarth Associates, and the incoming team at Allens ; our brokers James Sharp and those members who have contributed their ideas and expressed their concerns to us.

Might I finish by quoting Winston Churchill? He commented that “ the British never draw a line without blurring it”. What was he thinking of?

John Hattersley — Chairman, CAMRA Members’ Investment Club