April 30, 2015

Dear Partner:
The Vanshap Capital Value Fund, LP returned -1.5% net of fees and expenses in the first
quarter of 2015, compared with 1.0% for the S&P 500 and 2.3% for the MSCI World
Indices.
Hellenic Opportunity
Nathan Mayer Rothschild, the London-based family member of the eponymous banking
dynasty, famously suggested that The time to buy is when there's blood in the streets. We
observe that the roads in Athens currently have a distinctive crimson sheen. Since the start of
the political turmoil at the end of last year, we have made a substantial investment in Greek
equities, now amounting to 17% of Fund assets. Among the headlines declaring a Grexit
all but inevitable, we see substantial opportunity.
The Cyclically Adjusted Price to Earnings (CAPE) ratio of the Greek equity market is
currently just two, the lowest in the world to our knowledge, and one-third the multiple of
Russia and Hungary. Considering the relative stability of democracy in the country, we
suspect such a valuation reflects the consensus view that Greeces exit from the Eurozone is
the likely result. While not an infallible strategy, purchasing equity securities in countries
with low CAPE ratios has historically generated exceptional returns over the ensuing decade.
As individual securities analysts ourselves, we have assembled a handful of what we believe
are high quality, well-managed businesses trading at exceptionally attractive valuations.
Negotiations between Greece and the Eurozone have undoubtedly been lengthy and
contentious. We, however, continue to believe an agreement will eventually be strucknot
only because the alternative could have dire consequences, but because recent polls indicate
the Greek populous desires to remain in the currency unionregardless of the cost. While
the quoted prices of our securities will fluctuate based on the deluge of headlines surrounding
the process, we think fundamental analysis and rationality will return to the market over time
Top 5 Holdings March 31, 2015
Company
Detrex Corporation
Character Group
Public Service Properties
Grivalia Properties
Kicking Horse Energy

Country
U.S.
U.K.
U.K.
Greece
Canada

Market Cap (M$)

$47
$106
$38
$827
$126

% of Fund
10.8%
9.5%
7.0%
6.0%
4.7%

% of Company
9.7%
3.8%
7.7%
0.3%
1.5%

1530 Wilson Boulevard, Suite 1020 | Arlington, VA 22209 | (571) 933-6950

and we are confident the valuations of our holdings will more properly reflect the intrinsic
value of those enterprises.
The Portfolio
The largest detractors from performance in the quarter were Detrex Corporation (OTC:
DTRX) and Kicking Horse Energy (CN: KCK). The largest contributors were Character
Group (LON: CCT) and Village Main Reef (SJ: VIL).
The share price of Detrex Corporation has been significantly pressured, presumably driven
by a rather poor fourth quarter earnings result and lack of progress in the search for strategic
alternatives. While revenues did not change materially from the prior year, profitability
declined largely due to unfavorable product mix. Additionally, costs increased due to higher
investments in manufacturing and product development, and expenses stemming from
regulatory compliance. The good news is that these investments appear to now be generating
a return. In late April, the company announced first quarter revenues increased by 7.4% over
the prior year and net income improved by 32%.
Also in late April, we were appointed to the companys board of directors to represent our
significant investment and the interests of all stakeholders. Please note that all comments
regarding Detrex Corporation will continue to be restricted to publicly available information.
We look forward to assisting management and the board in their effort to evaluate and
embrace strategic opportunities to generate shareholder value.
Kicking Horse has been greatly impacted by the steep decline in the price of crude oil. We
recently spoke with CEO Steve Harding who confirmed the company has no desire to
squander its valuable petroleum resources and has therefore slashed development
expenditures. Of the two rigs that were drilling for the company at the start of the year, one
was indefinitely released in January and the other in mid-February for spring break-up, but is
likely to return later in the year. With modest debt levels and relatively low development
costs, we expect Kicking Horse to be a survivor, even in a prolonged downturn, and to thrive
once again should crude prices return to higher levels.
The growth of Character Group continued to settle into the market in the quarter, resulting in
a higher share price. We took the opportunity to modestly reduce our ownership in the
company after significant appreciation and increased, although minimal, investor excitement.
The shares are still valued at only 9x estimated FY2015 cash earnings. Management
continues to believe the share price does not accurately reflect the intrinsic value of the
company, and has therefore been repurchasing shares opportunistically in the market. Orders
for the upcoming holiday season will begin later this summer and news until then is likely to
be minimal.
Village Main Reef (SJ: VIL) is slated to come to an end. As we noted in our last letter, the
company received multiple offers for both individual assets and the entity as a whole and a
financial adviser had been retained to manage a formal solicitation process. In early
February, the board announced the company would be acquired by Heaven-Sent, one of the
2

largest private equity/venture capital firms in Chinafor 1,225 rand, noticeably below our
estimated fair value of 1,500 rand. Through subsequent conversations, we learned that capital
expenditures to extend the life of the Tau Lekoa gold mine would be higher than we had
believed. We expect the transaction to close within the next month or so, though we have
been reducing our position in the meantime.
Over our roughly two-year holding period, we lost about 30% of the capital we invested in
Village Main Reef, a disappointing result. While roughly half the loss is attributable to the
significant depreciation of the South African rand, we nonetheless made numerous analytical
errors. First, as we have noted in prior letters, we drastically underestimated the liabilities
that would ultimately stem from the closure of the Buffels and Blyvoor mines in a lower gold
price environment. Second, we should have been far more wary of what turned out to be a
single asset commodity company, operating in a highly volatile geography, rife with strikes
and other turbulence. Lastly, and relatedly, we should have more carefully considered
investing in a small South African resources company, regardless of the optically low
valuation.
Last quarter, we wrote that Public Service Properties Investments Ltd. (LON: PSPI) was
inching closer to liquidation. In the first quarter, the company took a giant leap toward
dissolution. In mid-February, the board agreed to sell the troubled U.K. assets to tenant
Embrace for only 34.5 million. The sales price was at a significant discount to the stated net
asset value and far below what we believed would be the ultimate value of the portfolio. The
alternative was less appealing than we thought; a 4 million upgrade of the properties with
two or three years required for operational turnaround, without any guarantee of an exit.
After concluding that the incremental return for assuming the risk was meager, we voted to
approve the disposal.
The result of our investment in Public Service was poor. In our second quarter 2013 letter,
we told you we estimated the conservative net asset value to be 41p per share. Assuming the
renewal of domiciliary care contracts in Liverpool, we expect to receive just 29p per share in
total proceeds. Over the two year holding period, we will have earned virtually nothing after
accounting for currency depreciation. In hindsight, we believe the initial investment thesis
was reasonably sound, but that the allocation was far too large. We had closely analyzed the
negotiating position of the company versus the tenant at the time, and concluded that while
not overwhelmingly strong, the existence of alternative operators would result in an
acceptable outcome for the assets. The amount of capital required and the risk associated
with those alternatives grew over time and ultimately proved unpalatable.
We expect the five remaining German care homes, which are in relatively good shape
compared to the U.K. properties, to be liquidated over the coming months. In the interim, the
board executed a compulsory stock redemption, effectively returning 16 million to
shareholdersequivalent to about 60% of the market value. Thus, Public Service has been
reduced to a 3% position in the Fund and will hopefully be nonexistent by year-end.
We recently met with Second Cup Ltd. (CN: SCU) CEO Alix Box and Interim CFO Sandra
Clarke at headquarters and believe the company has made significant progress over the last
3

year. While same store-sales declines continued in the fourth quarter, the trend has improved
materially in 2015. In the first nine weeks of the year, the decline was arrested to just 1.2%,
compared with a drop of 4.7% during 2014. We understand the better result has been driven
by a variety of operational initiatives, including better franchisee oversight and engagement,
along with the success of recent marketing campaignsespecially Flat White. We believe
same-store sales trends are likely to continue to improve, allowing management time to
perfect the store of the future, and execute on their three-year plan to generate earnings of
$0.50 to $0.60 per share, equating to 6x or 7x earnings respectively based on the current
price.
Along with the fourth quarter press release, management announced that the recently opened
downtown Toronto prototype caf had experienced sales increases of more than 30% over
the previous year. While only a single data point, the results are highly encouraging and a
large step in validating the feasibility of the companys plan. We visited the new caf over
the last few weeks and are not surprised to learn of the continued sales improvement.
Notably, not only was the store full of customers, but the demographic was far younger than
typically populating the legacy stores, an element we believe needed to be addressed.
The key now will be to roll out store of the future across the entire base of 347 cafs. We
estimate the renovations to cost about C$400 thousand per location, and to generate a return
for the franchisee of about 25% annually, meaning a four-year, unlevered payback.
Management believes roughly half the store base will be renovated by the end of 2017, which
if achieved, will mark a remarkable transformation from a decaying specialty, stuck-in-the1990s coffee chain, to a formidable, growing Starbucks competitor. Short-term benchmarks
include rollout of the new loyalty program this spring, additional launches of renovated
cafs, and continued operational improvements with the goal of achieving flat same store
sales by year-end.
Fourlis Holdings SA (GA: FOYRK), the Greek retailer profiled in our last letter, declined
materially in the quarter, and has dropped further over recent weeks. Businesses reliant on
consumer spending in Greece have been particularly hard hit during the recent turmoil. Any
optimism that was incorporated into the price has evaporated, with the shares now valued at
only 82% of tangible book value. Interestingly, recent reports from other Hellenic retailers
show no indication of materially declining sales, though we are sure Ikea and Intersport will
be impacted in the short-term. The prospect of normalized earnings has undoubtedly been
pushed further into the future. However, over the next several years, we believe Fourlis,
along with the country as a whole, will likely be on the road to recovery and that the shares
will more accurately reflect intrinsic value.
The environment for our long suffering investment, Fortress Paper (CA: FTP.DB.A), has
improved over recent months. The depreciation of the Canadian dollar versus the U.S. dollar
has been a boon to the companys Thurso dissolving pulp mill. While some operational
improvements have brought costs down, the currency movements should boost annualized
EBITDA by roughly C$15 million when compared to the average rate during 2014, bringing
the group to near breakeven free cash flow. While the rapid appreciation of the Swiss Franc

will negatively impact the Landquart bank note paper operation, we believe the debentures
do not fully reflect the positive fundamental changes which have occurred.
Autohellas
Autohellas SA (GA: OTOEL) is a recent addition to our growing portfolio of high-quality
Greek companies operating with strong brands that are severely mispriced due to current
turmoil. Controlled by the Vassilakis family, one of the wealthiest in the country, Autohellas
represents Hertz, the worlds premier rental car brand, as exclusive franchise partner in
Greece, Cyprus, Romania, Bulgaria, Serbia, and most recently, Ukraine.
Hertz was founded in 1918 by 22 year-old Walter Jacobs, then living in Chicago, who began
with a dozen Ford Model T automobiles. In 1923, he sold the organization to John Hertz,
who was president of the Yellow Cab and Yellow Truck and Coach Manufacturing Company
and renamed the business Hertz Drive-Ur-Self System. In 1925, Hertz sold a majority stake
to General Motors who acquired the remaining shares in 1943. A decade later, John Hertz
repurchased the company before taking it public the next year. Over the ensuing 50 years,
Hertz would be acquired by RCA, sold to UAL Corporation, then Ford Motor Company,
before landing with a private equity consortium in 2005 which returned the company to the
public markets a year later. Today, Hertz Global Holdings operates more than 600,000
vehicles from more 11,000 points of service in 140 countries around the world.
Autohellas origins date back to 1966 when patriarch Theodore Vassilakis signed a contract
with Hertz to operate a fleet of six Volkswagen Beetles on the island of Crete. Moving in a
northerly direction, Vassilakis won the contract to operate on the island of Rhodes in 1972,
with the fleet then numbering 300 automobiles. Two years later, he conquered mainland
Greece, purchasing Hertz Hellas from Hertz Global, renaming the organization Autohellas,
and allowing Vassilakis to operate countrywide.
Throughout the 70s and 80s, Vassilakis continued to expand the group while instilling a
culture of high achievement, winning the European Highest Overall Standards Cup
presented by Hertz Europe in 1983 and 1984. Then in 1989, Autohellas introduced the
concept of fleet management, now known as leasing, providing automobiles to corporations
on long-term hire. With an estimated market share of 22%, Autohellas is the second largest
leasing company in Greece. As we detail below, this successful segment has been hit hard by
the crisis, but is likely to rebound strongly with a Hellenic recovery. As an acknowledgement
of Vassilakas success over the first 30 years and the high-quality organization he had built,
Hertz Global renewed Autohellas franchise agreement for 26 years, until 2023.
With the newly minted agreement in hand, Vassilakis took the company public on the Athens
Stock Exchange in 1999. During the early 2000s, Autohellas expanded into Bulgaria, Cyprus,
and then Romania and Serbia/Montenegro, but remained heavily reliant on the core Greek
business. The crisis that started in 2008 began to greatly impact the leasing segment as
corporations slashed spending, battering the company.

In 2013, Greek tourism began to kick into high gear, and has grown by roughly a quarter
since 2012. As a result, the summers of 2013 and 2014 were hugely profitable for Autohellas
due to Hertzs dominant position in the increasingly popular Greek islands such as Mykonos
and Santorini. These strong tailwinds have contributed to a 44% increase in rental car
revenues over the past two years, making Autohellas a true standout among Greek
corporations.
The Vassilakis family also happens to control Aegean Airlines SA (GA: AEGN), which
they purchased in 1994 and have built in similar spectacular fashion. Then known as Aegean
Aviation, flying charter flights with owned Learjet aircraft, the company has grown into the
countrys leading passenger airline. In 2010, Aegean joined the Star Alliance, the worlds
largest global airline network. Aegean agreed to acquire the other Greek carrier, Olympic
Air, which had become severely distressed due to the economic crisis in 2012. Interestingly,
the EU Commission initially threatened to block the merger, but finally allowed the
transaction due to the on-going Greek crisis and given Olympic's own very difficult
financial situation, Olympic would be forced to leave the market soon in any event."
Now united under the Aegean brand, the company operates 57 planes, the majority of which
are leased Airbus A320 aircraft, flying to 134 destinations in 42 countries across Europe.
With one of the most competitive cost per available seat mile positions in the region, Aegean
dominates domestic travel and is rapidly increasing international routes, carrying both
tourists and business travelers alike.
Autohellas close relationship with Aegean (they are located in the same office building) has
benefitted the business enormously. Hertz is the official rental car brand of Aegean and the
two organizations cooperate in a multitude of ways driving increased volume. The second
benefit from the relationship is more quantifiable. Autohellas owns 11% of Aegean Airlines,
although we believe this is unknown to many market participants, including the sell-side
analysts who cover the stock, one of whom recently published a report completely devoid of
the fact. The company itself does not mention the investment in its presentation. Aegean
shares are also materially undervalued in our view; trading at just 7x current earnings,
without accounting for substantial excess cash on the balance sheet. The current value of
Autohellas stake is 60 million, equating to almost half of the companys market
capitalization.
Though lacking ownership of the Hertz brand itself, we deem Autohellas business to be of
substantial quality. In return for royalty payments, the company is functionally Hertz in the
named countries. In Greece for instance, Autohellas owns the entire infrastructure, including
the airport desks, maintenance and turnaround facilities, and large parking complexes near
Athens International Airport. The strategic value of these assets cannot be underestimated
and replication by an alternative franchisee would be exceedingly difficult, if not impossible.
We also understand that the relationship between Hertz Global and Autohellas to be quite
healthy, so a disruption to the business is unlikely in the future.
Hertz Global recently added to two new brands to the companys repertoire, Dollar Thrifty
through the acquisition of that concern and Firefly, an internally developed banner, self6

described as Cheap Rental Cars. These additions have been extremely helpful to
Autohellas as of late, which historically was unable to penetrate the middle and lower
markets due to the premium positioning of the Hertz brand. Firefly in particular is targeting
holiday/vacation travelers and provided a significant boost to island traffic last summer.
After adjusting for the Aegean ownership, Autohellas shares were valued at just 3x 2014
earnings and 60% of tangible book value at our cost basis, a price we found to be
exceptionally cheap. Should the corporate leasing market, which has declined by some 40%
since 2008, return to more normal levels, we estimate the multiple would decline closer to 2x
earnings. Management has drastically paid down debt throughout the financial crisis,
reducing leverage by 35% over the last six years, now operating at less than half the net debt
to operating income ratio of Hertz Global.
Over the trailing decade, management has grown core book value per share (including
dividends, but excluding assets held for sale, such as the Aegean stake) at 8% annually.
While normally nothing to write home about, we judge the result to be remarkable
considering that seven of those years included a depression. With the recent turnaround in
tourism, core return on equity has risen to the mid-teens, a level we expect to be sustained
barring increased political turbulence or a substantial reversal in the fortunes of Greek
tourism. Over recent years management has maintained capital discipline, returning
significant cash to shareholders, including an 0.80 dividend for 2014, equivalent to a 9%
yield at our average cost.
As noted earlier, Autohellas maintains a variety of vehicle repair and maintenance facilities
around the country. This network combined with a healthy balance sheet, has allowed
management to opportunistically sign a letter of intent to acquire a large auto dealership
network and vehicle importing business, along with significant underlying real estate from a
distressed related party. The purchases will be 100% debt financed by domestic banks on
favorable terms: 2% interest with deferred annual principal payments and a final balloon
maturity due in 10 years. Additionally, the company will be able to immediately use
significant operating loss credits associated with the auto businesses to offset income from
the highly profitable rental business. The transaction essentially allows Autohellas to
participate in both a commercial real estate and auto market recovery in Greece, while
committing no capital for at least four years.
We believe Autohellas is relatively well positioned in the unlikely departure of Greece from
the Euro. The companys debt, provided by a consortium of domestic banks, would likely
convert to drachma should such a currency reappear. On the asset side, we would expect the
Hertz business to continue to collect Euros from rental car bookings, while surplus vehicles
are likely to be inflation protected and could be liquidated over time. Lastly, and most
importantly over the long-term, we suspect that a giant FOR SALE sign on the Greek
islands would significantly boost tourism in the country, benefitting rental car operations.
Nonetheless, risks of a further decline in the leasing business or political calamity disrupting
tourism in the short-term linger.

We have been following Autohellas closely for the last two years, including two visits to
headquarters and multiple conversations with management. In addition, we have spoken with
other Greek managers who hold the Vassilakis family in high regard. As the shares declined
due to the recent political turmoil, we stepped into the market and purchased 1.2% of the
company.
Miscellaneous
We enjoyed seeing many of you once again at our Annual Partners Meeting and appreciate
you braving the wintery conditions to join us.
Thank you for your patience and support. Should you have any questions or comments,
please do not hesitate to contact us.
Sincerely,

Evan Vanderveer
Managing Partner

David Shapiro, CFA

Managing Partner

The views and opinions expressed in this quarterly letter are those of the Managing Partners. Portions of this
letter may contain certain statements relating to future results regarding companies we may invest in which are
forward-looking statements. These statements are not historical facts, but instead represent only our belief
regarding future events, many of which, by their nature, are inherently uncertain and outside of our control.
Such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995.
Forward-looking statements are subject to market, operating and economic risks and uncertainties that may
cause our actual results in future periods to be materially different from any future performance suggested
herein. Factors that may cause such differences include, among others: increased competition, increased costs,
changes in general market conditions, changes in industry trends, changes in the regulatory environment,
changes in loan relationships or sources of financing, changes in management, and changes in information
systems.
The Managing Partners will not publicly update or correct any forward-looking statements to reflect events or
circumstances that subsequently occur or of which we hereafter become aware. This is not an offering or the
solicitation of an offer to purchase an interest in the Vanshap Capital Value Fund, LP (the Fund). Any such
offer or solicitation will only be made to qualified investors in those jurisdictions where permitted by law, and
accompanied by a confidential private placement memorandum.
An investment in the Fund should be considered speculative and involves a high degree of risk. The ability for
investors to withdraw, redeem, or transfer their interests in the Fund are restricted to a degree. There is no
secondary market for Fund interests and none is anticipated to develop. The fees and expenses charged by the
Fund may be higher than the fees and expenses of other investment alternatives and may offset investment
gains. The Fund may not meet its stated investment objectives and there is no guarantee that an investor will
receive a return of all or part of his or her investment. Investment returns may vary significantly over a given
specific period of time.
Fund performance data contained in this letter is reported net of fees which reflects the deduction of the
annual asset management fee of 1.5%, charged quarterly, a performance allocation of 15%, taken annually,
subject to a high water mark and a 5% net hurdle, and other operational expenses incurred by the Fund. Results
are compared to the performance of the S&P 500 Index and MSCI World Index for informational purposes
only. One cannot invest directly in an index.
Past performance is not necessarily representative of future results. The Fund is not designed to resemble the
returns generated by the S&P 500 or MSCI World Indices and Fund volatility may be materially different from
that of the indices. The performance figures include the reinvestment of dividends and capital gains. In the case
of the MSCI World Index, dividends net of applicable local withholding taxes are considered for reinvestment.
Portfolio positions discussed in this letter do not represent all of the securities held, purchased, or sold by the
Fund.
This communication is confidential and may not be reproduced without prior written permission from Vanshap
Capital.