Half-year Report
Hansa , investing to create
long-term growth
Interim Report
Six months ended
30 September 2020
2020
Welcome
I'm pleased to present the 2020 Interim Report for Hansa Investment Company Ltd ("the Company", "HICL") to the shareholders.
As you know, 2020 has been an unprecedented year as the Covid-19 pandemic swept around the globe with a speed and reach that surprised many. It has caused multiple waves of infection, sadly leading to increased mortality rates in many countries. It has also caused economic contraction, forcing governments to implement a variety of restrictive measures to try to reduce the spread of the virus, whilst awaiting medical science's development of effective vaccines. As I write this welcome to you, there are several encouraging signs that a number of long-hoped-for vaccines are ending their trial periods and have been found to be safe and effective, which offers hope that 2021 will see a gradual return to some new normality.
Your Company's portfolio has shown resilience during the past six months. I am pleased to say that the majority of the decline in NAV seen during March 2020 as the markets reacted negatively to the pandemic, has reversed in the last six months and has continued to do so following the period covering this Report. I am also pleased to say your Company and its suppliers have continued to operate successfully during this period, which is testament to their planning and resourcefulness.
Of course, Covid-19 has not been the only news in 2020. The result of the US election seems to have been decided in favour of Joe Biden whilst the UK's exit from the EU is still being negotiated. Despite all this, stock markets are at or near record highs in most countries. I have noted a number of these themes in my Chairman's Statement and I also draw your attention to the Portfolio Manager's Review of the period where many of these topics are expanded upon.
Finally, by the time this Report is published, you will no doubt have noted that the second quarterly interim dividend, totalling 0.8p per share for the year to 31 March 2021 was paid on 30 November 2020.
I wish you and your families well in these difficult times.
Yours sincerely
THIS DOCUMENT IS IMPORTANT and if you are a holder of Ordinary shares it requires your immediate attention. If you are in doubt as to the action you should take or the contents of this document, you should seek advice from an independent financial advisor, authorised if in the UK under the Financial Services and Markets Act 2000, or other appropriately authorised financial advisor if outside of the UK. If you have sold or transferred your Ordinary shares in the Company, you should send this document, immediately to the purchaser or transferee; or to the stockbroker, bank or other agent through whom the sale or transfer was effected for onward transmission as soon as practicable.
COMPANY REGISTRATION AND NUMBER: The Company is registered in Bermuda under company number 54752.
Interim Report
Chairman's Report to the Shareholders
Interim Management Report
Portfolio Manager's Report
Portfolio Statement
Financial Statements
Condensed Income Statement
Condensed Balance Sheet
Condensed Statement of Changes in Equity
Condensed Cash Flow Statement
Notes to the Condensed Financial Statements
Pro-Forma Financial Statements
Condensed Pro-Forma Income Statement for the combined Hansa Investment Company Ltd Group
Condensed Pro-Forma Balance Sheet for the combined Hansa Investment Company Ltd Group
Condensed Pro-Forma Statement of Changes in Equity for the combined Hansa Investment Company Ltd Group
Condensed Pro-Forma Cash Flow Statement for the combined Hansa Investment Company Ltd Group
Notes to the Condensed Pro-Forma Financial Statements
Investor Information
Company Information
Glossary of Terms
Chairman's Report to the Shareholders
JONATHAN DAVIE
Chairman
Introduction
I am pleased to be able to report that our Portfolio Manager and the other suppliers of services to Hansa Investment Company Ltd ("the Company", "HICL") have not been badly affected by the Covid ‑ 19 problem with the result that we have not experienced any additional consequential risks to the management of the Company.
SHAREHOLDER RETURNS
The past six months have shown an increase in net asset value ("NAV") from 230.2p per share to 261.4p, whilst the discount has narrowed from 43.1% to 37.3% for the Ordinary shares and from 41.2% to 34.6% for the "A" Ordinary shares.
The Core Regional and Thematic silos of our portfolio have shown good returns for the past six months. Unfortunately, these have been overshadowed by the continuing disappointing performance of our long-term holding in Ocean Wilson Holdings Ltd ("OWHL") which declined by 6.1% during the period, not helped by the continuing decline of the Brazilian Real against the US Dollar. However, it is useful to remind ourselves of the excellent returns investors have experienced from our investment in OWHL over the past 50 years or so, together with the encouraging recent news that Wilson Sons Ltd and OWHL have decided to fully restore their dividend for the year. History also teaches us that the Real is probably due at least a bounce against the US Dollar due to the improving economy in Brazil and the first signs of some headwinds for the US Dollar. Brazil, like many Emerging Markets, tends to be hit hardest during periods of extreme market weakness but, being leveraged, plays on the subsequent recovery and may do much better in an environment of improving global growth due to greater fiscal impetus.
The performance of our Global Equities silo has also underperformed, which is due to most of these holdings being in the value category which continues to disappoint against growth.
Alec Letchfield continues to manage our Fund portfolio very effectively, manifested by resisting the temptation to sell any of the portfolio during the market slide in March and April.
PROSPECTS
I write this after the US election has taken place, with a continuing resurgence in the number of Covid ‑ 19 cases in the Northern Hemisphere as winter approaches and little sign of a China rapprochement with the West. However, the extremely positive news on a number of vaccine candidates has possibly given the market some impetus for the long-awaited rotation out of Growth Stocks into Cyclicals and Value together with steepening yield curves. It goes without saying that the positive effects for the beaten down travel and hospitality industries will be immense. The potential spending by prospective clients will very substantial, due to the large increases in the savings ratios and the pent-up desire to get out and have some fun with friends. However, the Schiller cyclically adjusted price-to-earnings ratio remains very high, only surpassed in 1929 and 1999 and the increase in IPOs, particularly using Special Purpose Acquisition Companies ("SPACs"), together with heightened Merger and Acquisition activity and increasing retail involvement in the options market leads one to the inevitable conclusion that a bubble may be forming, particularly in the growth stocks.
Notwithstanding the above, there continue to be significant amounts of liquidity on the sidelines which, together with the greater use of fiscal policy, ongoing economic improvement as the impact of Covid-19 diminishes with the commencement of vaccination programmes. This leads us to remain supportive of risk assets. As a result, whilst we wouldn't be surprised to see increased market volatility in the coming months, we continue to focus on the upside in view of our long-term investment horizon.
Despite all the aforementioned challenges, I have great faith that Alec Letchfield, in his position as the CIO of our Portfolio Manager, will continue to find quality investments for our portfolio.
May I take this opportunity to wish the best outcome for all our shareholders by staying safe and healthy in these challenging and uncertain times.
Jonathan Davie
Chairman
26 November 2020
Interim Management Report
The Directors present their Report and Condensed Financial Statements for the period to 30 September 2020.
THE BOARD'S OBJECTIVES
The Board's primary objective is to achieve growth of shareholders' value over the medium to long‑term.
THE BOARD
Your Board consists of the following persons, each of whom brings certain individual and complementary skills and experience to the Board's workings:
Jonathan Davie (Chairman of the Board and Management Engagement Committee), Richard Lightowler (Chairman of the Audit Committee), Simona Heidempergher (Chairman of the Remuneration Committee), William Salomon and Nadya Wells (Chairman of the Nomination Committee).
Individual profiles for each member of the Board can be found in the Company's Annual Report each year and on our website.
BUSINESS REVIEW FOR THE PERIOD TO 30 SEPTEMBER 2020
The Business Review, which includes a discussion of important events which occurred within the period to 30 September 2020, is covered in the Chairman's Report to the Shareholders and the Portfolio Manager's Report.
Hansa Investment Company Ltd is a Bermudan company formed in June 2019 to take on the business of Hansa Trust PLC ("Hansa Trust"). As a company, HICL has limited financial history only having taken on the business of Hansa Trust in August 2019. As a result, the Board present two sets of financial reports for shareholders' review. Firstly, the HICL set of financial reports covering the six months to 30 September 2020 and comparables for the period 21 June 2019 (date of incorporation) to 30 September 2019. In addition, the Board includes a pro‑forma set of accounts amalgamating the financial performance of Hansa Trust for the comparable period 1 April 2019 to 29 August 2019, with the results of HICL for the period 21 June 2019 to 30 September 2019. The Board has prepared these to enable shareholders to make meaningful comparisons between these pro-forma accounts and comparables from Hansa Trust for previous periods.
KEY RISKS FOR THE FINANCIAL YEAR TO 31 MARCH 2021
The key risks and uncertainties relating to the period ended 30 September 2020 and for the year ended 31 March 2021 are materially the same as those reported in the Period-end Report for the Company for the period ended 31 March 2020.
GOING CONCERN BASIS OF ACCOUNTING FOR THE PERIOD TO 30 SEPTEMBER 2020
The Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Interim Financial Statements. The Directors do not know of any material uncertainties to the Company's ability to continue to adopt this approach over a period of at least 12 months from the date of approval of these Financial Statements.
The Directors will include a Long-Term Viability Statement in each Annual Report.
RELATED PARTY TRANSACTIONS
During the period, Hansa Capital Partners LLP charged portfolio management fees and company secretarial fees to the Company, amounting to £1,291,000 excluding VAT (six months to 30 September 2019: £1,289,000; year to 31 March 2020: £2,579,000). Amounts outstanding at 30 September 2020 were £219,000 (30 September 2019: £237,000; 31 March 2020: 392,000).
THE BOARD'S RESPONSIBILITIES
The Board is charged by the shareholders with responsibility for oversight of the affairs of the Company. It involves the stewardship of the Company's assets and liabilities and the pursuit of growth of shareholder value. These responsibilities remain unchanged from those detailed in the last Annual Report.
The Directors confirm to the best of their knowledge that:
The statutory condensed set of Financial Statements contained within the Interim Financial Report further down has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and on a going concern basis.
This Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure and Transparency Rules.
The above Interim Management Report, including the Responsibility Statement, was approved by the Board on 26 November 2020 and was signed on its behalf by:
Jonathan Davie
Chairman
26 November 2020
Don't look down, but Stock Markets might be walking a tightrope
Market backdrop
Whilst a little unnerving at times, we have remained steadfastly pro-equities throughout 2020. The year started well enough but then the Covid-19 induced sell-off in March caused us to pause and question whether or not we had misjudged the situation and, with it, missed calling the next protracted bear market. Ultimately we concluded that the combination of governments and central banks adopting a shock and awe approach to policy making, together with the longer-term attraction of risk assets generally, suggested it wasn't right to pivot.
Happily, this proved to be the correct decision albeit, if we're honest, the strength of the subsequent recovery has surprised us both in terms of its size and speed. Global equities, for example, bounced by 23.8% over the six months to the end of September and by 3.7% in the third quarter. Driving much of this performance was the US stock market and the technology sector in particular, which rose by 27.6% and 40.7% respectively over the six month period. China, reflecting the fact that it was both first into the crisis and has high exposure to technology, was also robust and rose by 24.5% over the period in question.
Even the market laggards generated positive performance over the past six months. At the regional level, despite still being down over the year-to-date, Europe, the emerging markets ex-Asia and the UK were all up for the six month period, rising 19.6%, 15.0% and 3.3% respectively. Similarly, financials rose by 9.0% over the last six months and is now down by 20.3% year-to-date, while energy fell another 1.3% to leave it down 40.8% year-to-date.
Other asset classes were also positive, with exceptionally strong returns from oil, with WTI up by almost 90% for the six month period and gold up another 14.1%. Hedge funds were typically more muted albeit again positive for the period.
Stock markets are increasingly walking a tightrope
Whilst encouraged by the strength of stock market performance in recent months, it does feel the path markets are walking is rapidly becoming a tightrope. With the coming months likely to see rising event risk, combined with increasing signs of market excess, we continue to consider whether or not markets can sustain their current trajectory, or are in danger of falling off it.
Starting with excesses, and even if we ignore the fact that markets have risen incredibly strongly since the March lows, a number of red flags have started to appear over recent months:
Flag 1….increasing stock market concentration
A classic feature of stock market tops is one where a handful of companies and sectors drive performance. With one of the consequences of Covid-19 being the acceleration of many of the trends in the technology sector, increasingly we are seeing adoption rates that we had expected to occur over years compressed into months if not weeks. Online shopping, the transition to the cloud and online banking, to name a few, have all been forced upon us whether we liked it or not. As a result of this and the subsequent outperformance of the technology sector, stock markets have been driven by a handful of large cap technology names, with many old economy companies still very much in bear market territory. Hence whilst the global market is up for the year, in reality this has been driven by the US, which in turn has largely been driven by the 10 mega-cap growth stocks. In fact if we strip out these 10 stocks we find that the US stock market performance is remarkably close to that of the European Index.
Flag 2….the growing use of financial engineering
Another warning flag is the growth in financial engineering and a willingness to take on higher risk, most recently in the growing use of SPACs. Special Purpose Acquisition Companies are companies formed with no commercial operations, but instead seek to raise capital to buy another company and are often called 'blank cheque companies'. The last 18 months have seen record numbers of SPACs being created, with well-known names such as Bill Ackman of Pershing Square fame jumping on the bandwagon with his creation of a $4 billion SPAC which is the largest ever. Whilst the current SPACs are undoubtedly of a higher quality than some of the SPACs listed in the past, they are still a sign that people are prepared to hand over cash for doing deals as yet unannounced. Maybe it really is different this time but one cannot help but note that in the past a rise in the number of SPACs was often associated with fraud and the end of bull markets.
Flag 3….records being set
Often when markets enter their more mature phase records start to be set. One such record has been the level of outperformance of growth versus value. On a rolling 12-month basis to the end of September the Russell 1000 Growth Index has outperformed the Russell 1000 Value Index by some 43.6%. To put this into context this level of outperformance has never happened before and it is even larger than the outperformance that occurred at the height of the internet bubble in the late 1990s, which was followed by seven years of the Value Index outperforming the Growth Index.
Combining these excesses with a period of more challenging news flow makes markets particularly vulnerable to any disappointment. Most obviously on this front is the US presidential election. From a stock market perspective, whilst Trump is undoubtedly a marmite character, he was positive for the US stock market. He judged his own success through the level of the S&P 500, introduced market friendly tax cuts and harangued Jerome Powell, Chairman of the US Federal Reserve, into lowering interest rates. Initially the prospect of a Democratic government was met with caution by markets. Whilst Biden himself is seen as a known entity, a relatively moderate Democrat and not someone to be feared by stock markets, his running mate, Kamala Harris, is seen as leaning more to the left in terms of her views and policies. The fear is that if the more radical left leaning side of the party exerts greater power under a Biden led government then we could see some more extreme policy measures enacted. With Bernie Sanders and Elizabeth Warren both calling for greater taxation, healthcare reform and the break-up of the large cap technology companies, such a shift in US politics could weigh heavily on stock markets globally.
More recently, however, market sentiment has shifted from focusing on some of the longer-term potential negatives of a Democratic led government to the more immediate prospect of greater stability under Biden and potentially more fiscal spending under a Democratled government. With monetary policy increasingly exhausted in terms of its effectiveness in supporting economies, the consensus has shifted from a post ‑ Global Financial Crisis belief that countries should aspire to balance their budgets, to one of viewing greater fiscal spending as key to restoring global economies to health post the impact of Covid-19 and the resultant lockdowns. Typically this is positive for economic growth, companies and stock markets, at least in the early days of its implementation.
Biden will become the next President of the United States. As to who gets control of the Senate, current polls, for what they are worth, suggest that the Republicans are set to retain control albeit the Democrats may still achieve a clean sweep if they win the run-off elections in January. Even if the Republicans do retain control of the Senate under a Democratic president we are not overly cautious on this point. Generally in the early years of a new presidency, it is incumbent upon the Senate to respect the nation's decision and not to undermine the power of the President purely for the sake of partisan gain. This would especially be the case in a post ‑ Covid-19 world with the US population unlikely to look favourably upon a party which prevents fiscal spending designed to save jobs and underpin the economy. Arguably stock markets may actually view the split as being positive with some of the more extreme Democratic policies unlikely to be enacted under a split system.
The other key event risk is that of a second wave in Covid-19 cases as we enter the colder winter months in the Northern hemisphere and as economies reopen, with governments attempting to return countries back to some form of normality. Arguably this should come as little surprise to markets. Even a cursory look at prior epidemics and pandemics, such as SARS, shows that rolling waves in reinfection are entirely normal and to be expected as human contact picks up post-lockdown. Nonetheless one can't help but feel a little cautious if the flare up in infection rates leads to a return of more widespread and protracted lockdowns and the consequential scarring to economies and affected sectors, especially in light of just how strong markets have rebounded post-March.
Our view is that whilst a meaningful return to lockdowns would undoubtedly weigh on markets in the near-term, we see a number of mitigating factors that suggest limited action by long-term investors, such as ourselves, may be the best strategy. The first point is that whilst infection rates have picked up sharply, the number of people being hospitalised has fallen significantly from the first wave. Moreover the mortality rates are also down dramatically. Whilst still very much in the learning phase as to what we know about the virus and its treatment, there are a whole host of reasons underlying these improvements. Doctors have a much better understanding of treatments to both prevent hospitalisation, but also to significantly reduce death rates for those hospitalised. Infection rates have also risen much more sharply in younger people this time round where the potential impacts of the disease are considerably more muted. There is also an active debate as to whether the virulence of the disease is lessening over time and the potential for community immunity as more people are exposed to the disease.
Perhaps the main game changer however is the recent positive news flow on several of the potential vaccine candidates. The interim results of clinical trials were better than anyone had hoped with several vaccines appearing to be over 90% effective. Whilst still very much work in progress, the initial signs are extremely positive and bode well for the other vaccine candidates. Irrespective of the timing of availability, or how long it would take to vaccinate a sufficient proportion of the population to make them effective, we think the main point is that a working vaccine(s) will become available. Stock markets are forward looking discounting machines and the mere prospect of a solution is likely to be enough to enable them to look through the shorter-term challenges as to how and over what time frame a vaccine is brought to market.
From an economic perspective there are also a number of potential negative events that could weigh on stock markets. As alluded to above, the consensus has increasingly shifted from the view that governments should aspire to be fiscally prudent, to one of seeing public spending as preferable to austerity. Even the IMF, which was a staunch advocate of balanced budgets post the Global Financial Crisis, is now arguing that countries should spend their way out of the current malaise. Such policy measures do however come at a cost. Global public debt is expected to hit a record high of almost 100% of the world's GDP in 2020 and classically large scale fiscal policy is typically inflationary.
Clearly if both debt levels and inflation start to spiral out of control this would be a major issue for global stock markets. There is however a scenario that could actually see the current backdrop as providing something of a goldilocks scenario for equity markets. Given the desire by central banks to maintain zero or even negative interest rates, the cost of funding these deficits is negligible (rather perversely in Japan, where two thirds of debt is on negative yields, a big debt burden is actually good for the government finances!). Hence governments can sustain high levels of debt and at the same time increase spending - albeit ensuring they maintain the confidence of financial markets is key if they are to continue accessing funding and if currencies are not to go into freefall.
Equally it would seem entirely logical that governments would pursue a more inflationary backdrop. When debt levels are at such high levels, inflating your way out of the problem seems eminently sensible. The US Federal Reserve's shift to targeting average inflation rates throughout cycles, rather than at one set point, seems to reinforce this view. At this stage we're wary of calling a shift from a multi-year deflationary trend, driven by the deflationary triangle of technology, globalisation and the diminishing power of the labour force, but there is certainly a scenario whereby we could see more inflation entering the system and potentially a more normal interest rate cycle on the back of it. This blend of higher spending and modest inflation is typically very attractive for equities and certainly much better than for bonds at current yields.
Such a scenario as described above also has the potential to change some of the key themes seen in markets in recent times. Better economic growth typically sees emerging markets outperform developed markets due to their higher beta (especially if the US Dollar continues to weaken), cyclicals and real assets may start to perform and, perhaps most importantly, value may start to outperform growth. We note these for now but will develop our thoughts in greater detail in future Hansa House Views.
Conclusion
Clearly the coming months will be testing for global markets. As discussed above, the blend of potential event risk with more mature markets beginning to show some of the characteristics of a market-top undoubtedly makes them more vulnerable to any missteps.
Despite this, for long-term investors such as ourselves we are not minded to attempt to time the markets and we favour sticking to our central view of favouring equities over defensive assets such as government bonds. For all the reasons we have articulated before, such as there being few real alternatives to equities, an abundance of liquidity and an expectation that economies continue to rebound as we emerge from the Covid-19 induced lockdowns, we see little reason for changing our current stance. That is not to say we are dismissive of the risks faced by markets from potential bad news in the coming months. Clearly when stock markets are mature, valuations are high and one starts to see signs of excess, they are undoubtedly vulnerable to any disappointment on the news flow front. Nonetheless, on balance, we see the longer-term upside as reason to maintain a more pro-risk position. As discussed above there are a set of circumstances that could see this outlook improve even further, through a combination of higher growth on the back of higher fiscal expenditure together with modest inflation.
Portfolio Review and Activity
Your Company has returned 14.2% over the financial year to date and -4.7% over the past 12 months on a NAV total return basis. The key performance indicators for the period were 23.8% for the MSCI ACWI NR Index (GBP), 1.2%% for the FTSE UK Gilts All Stocks TR Index, and 0.5% for UK CPI. Over the last 12 months these KPIs were 5.1%, 3.4%, and 0.6%, respectively. The Company's NAV per share increased from 230.2 pence per share at the end of March 2020 to 261.4 pence at the end of September 2020. The Core and Thematic funds continued to perform well this half, while Ocean Wilsons Holdings and Global Equities struggled with the challenging underlying environment in Brazil impacting Wilson Sons. Markets continued to recover from their Covid-19 induced declines with the US and Emerging Markets performing better than European and Latin American markets.
In line with our House View we continue to maintain an equity bias, with a relatively modest exposure to defensive assets which account for just over 10% of the total assets. Undoubtedly the exposure to Brazil has weighed heavily on the Fund in recent years, but with Wilson Sons now accounting for under 10% of NAV we view this as unwarranted in light of the quality of the assets held within the other silos. As noted before the current discount, at 35.5% and 45.8% if we include the discount at Oceans Wilson Holdings looks distinctly unjustified and Wilson Sons is arguably 'in for free'! Ultimately whilst Brazil is highly cyclical we would see the holding in Wilson Sons as providing additional leverage to the Fund as the country exits a multi-year recession and the challenges of Covid-19 start to recede into the background.
Core and Thematic Funds
The Core Regional and Thematic silos both enjoyed comparatively strong halves, returning 24.8% and 36.4% respectively. Over the past 12 months the Core Regional silo was up 9.2% and the Thematic silo was up 29.6%.
In the Core Regional silo, the Fund's US and Japanese holdings were the largest contributors to the return over the half. Pershing Square Holdings was a top contributor, returning 44.6% during the period. Our positions in Lowe's and Chipotle Mexican Grill also contributed positively as the lockdown ended in the US and consumers started spending. Lowe's, in particular, has been a direct beneficiary from the growth in home improvement activity. Chipotle benefitted from an increase in take-out eating during the Covid-19 crisis and with lockdowns easing has seen strong performance as more customers return to eating in. Other strong performers in the US were Findlay Park American, Select Equity and Vulcan Value Equity which were up 21.7%, 22.7% and 27.8%, respectively, over the half.
Of the Japanese funds in the Core Regional silo, Indus Japan Long Only enjoyed a strong half returning 27.9%. This was mainly driven by strong performance in August as investor confidence increased on the hope that progress was being made towards a Covid-19 vaccine. LIXIL, a producer of sanitary ware and home building materials, surged on the back of the sale of two non-core divisions and the streamlining of its product lines as a restructuring plan started to take effect. Retailer Ryohin Keikaku also performed well as it accelerated its restructuring and started selling more merchandise online. Goodhart Partners: Hanjo Fund was slightly more subdued this half, up 14.2%.
Some of the emerging market holdings performed well over the half. Schroder Asian Total Return and NTAsian Discovery Fund were the main contributors in this sector, returning 33.6% and 28.7%, respectively. For the Schroder fund, Taiwan Semiconductor was a strong performer as it reported increased revenues in July and August, while estimates of the potential size of the semiconductor market continued to grow in advance of the launch of Apple's first 5G iPhone. Alibaba was also a positive contributor after reporting record sales in June and the expectation that its cloud-computing business would turn a profit in 2021. Performance for NTAsian was driven by BFI Finance and Mobile World. BFI resumed loan disbursements in July as the lockdown eased in Indonesia, while Mobile reported solid revenue growth in July and August as its grocery chain scaled up. Prince Street DigDec Fund also had a strong half, returning 55.5%.
RA Capital Healthcare was one of the top contributors in the Thematic bucket, returning 34.7% over the half. A position in Zogenix performed well after their fenfluramine drug for treatment of the most severe cases of epilepsy syndrome was approved by US regulators. Axsome Therapeutics also positively contributed after several trials produced positive indications in MDD, migraine and Alzheimer's agitation for a combination therapy it has been developing for some years. The other biotechnology holding, BB Biotech, performed well, returning 28.9%. Other strong performers in the Thematic bucket were GAM Star Disruptive Growth (up 40.2%) and Impax Enviromental Markets (up 34.2%). Impax has benefitted from stock markets broadly rising during the period with Generac, a power systems manufacturer, performing particularly strongly off the back of strong earnings growth and a new home power storage product being launched. DSM, a provider of health, nutrition and materials solutions, also performed well as its animal nutrition business continued to produce strong earnings.
Diversifying Funds
The Diversifying silo ended the half with a return of 3.5% taking the return over the last 12 months to -0.1%. The holdings in this silo are designed to show lower correlation to the equity market.
Apollo Total Return was one of the bigger contributors over the half returning 8.5%. The fund benefitted from broad gains in both Emerging Markets and US High Yield credit early in the period. Lower rated credits continued to outperform their higher rated counterparts throughout the half. The fund continues to be more defensively positioned than the broader market given the concerns over the response of markets to Covid-19. The CTA funds both struggled this half with GAM Systematic Core Macro down 1.8% and Schroder GAIA BlueTrend down 8.3%. The GAM fund generally performs more strongly when markets are more stable, which is what was seen during this half explaining its slightly better performance. BlueTrend performs more strongly when markets are choppy and fast changing.
Global Event Partners recovered after a difficult period at the end of the previous financial year, gaining 19.3% this half. Hard and soft catalyst positions have contributed positively as the US market strongly rebounded from the collapse seen in March. A soft catalyst investment in Elanco Animal Health was a large contributor, following the completion of a merger with Bayer Animal Health which led to enhanced earnings power. An investment in Howmet also gained. BioPharma Credit and Hudson Bay both performed well this half, up 13.4% and 6.4% respectively.
Ocean Wilsons Holdings
Brazil has been hard hit by Covid-19 since the start of this financial year, leading to a dramatic slowdown in economic activity. For the half, the MSCI Brazil was up 14.1% (in GBP terms) with a notable pick up in the financial markets towards the end of the period. The Brazilian Real has continued to devalue which was a drag on the performance of the stock market when looking at it in Sterling terms.
The performance of Wilson Sons this half has been resilient. During the period the results for the first half of 2020 were released, which showed that revenues were down 13% to $174.2 million compared to the same period in 2019 ($199.2 million), principally due to the currency devaluation, a decline in logistics revenues and lower offshore support base revenues. In BRL terms revenues actually rose 11%. That said, operating profit was $4.2 million higher than the comparative period in 2019 at $39.3 million, principally due to improved operating margins in the period. Wilson Sons continues to perform well in challenging conditions.
Port terminals and logistics revenue is predominantly denominated in BRL and so was hardest hit by the devaluation of the BRL against the USD, declining 26%. Container terminal revenue was 16% lower at $67.4 million (2019: $80.6 million) mainly due to the higher average USD/BRL exchange rate. Container volumes handled at the Rio Grande container and Salvador container terminals for the period were marginally lower than the comparative period. Lower international trade and cabotage volumes were partially offset by higher trans ‑ shipment and inland navigation volumes. Cabotage and import volumes decreased 11%, reflecting a slowdown in domestic consumption and industrial activity in Brazil due to the Covid-19 pandemic. Logistics revenue declined 42% to $14.8 million (2019 $25.2 million) due to the end of a specific high-volume contract, the impact of the Covid-19 outbreak on import volumes and the weaker BRL. Brasco revenue decreased $7.0 million to $4.5 million (2019: $11.5 million) against a backdrop of a weak oil and gas sector.
Towage revenue, which is predominantly denominated in USD, increased 11% to $82.3 million (2019: $74.1 million) reflecting an improved sales mix and higher revenue from special operations. Special operations revenue at $8.4 million, was $4.8 million higher than the comparative period (2019: $3.6 million) principally due to higher activity for LNG and an increase in salvage operations.
Wilson Sons has made extensive operational changes during the Covid pandemic to protect staff and maintain continuity of business operations. For example, mandatory pre-boarding Covid-19 testing of towage and offshore support vessel crew and increases in the length of crew shifts to significantly reduce contact risks, together with numerous other precautions have all helped to minimise the risk of Covid contamination in the workplace.
Following a turbulent year so far in global equity markets the valuation of the investment portfolio and cash under management is slightly down at $281.8 million at 30 September 2020, from the 31 December 2019 valuation of $285.3 million, although two dividends of $2.5 million each were paid to Ocean Wilsons Holdings in May and August 2020. The portfolio continues to be biased towards equities, both public and private, reflecting its long-term nature, but also includes some assets which display lower correlation to equity markets.
The Ocean Wilsons Holdings share price fell 2.6% during the half, which takes account of the 24.3 pence dividend paid to the Company in June 2020. Over the last 12 months the share price has fallen by 30.7%, or by 28.2% on a total return basis, also taking account of the June 2020 dividend. The share price represents a discount to the look-through NAV of 49%, based on the market value of the Wilson Sons shares, together with the latest valuation of the investment portfolio.
Alec Letchfield
November 2020
Portfolio Statement
as at 30 September 2020
|
Investments |
Fair value |
Percentage of |
|
Core Regional Funds |
|
|
|
Findlay Park American Fund |
22,882 |
7.3 |
|
Vulcan Value Equity Fund |
16,243 |
5.2 |
|
Select Equity Offshore Ltd |
14,898 |
4.8 |
|
BlackRock European Hedge |
13,100 |
4.2 |
|
Goodhart Partners: Hanjo Fund |
12,346 |
3.9 |
|
Adelphi European Select Equity Fund |
12,260 |
3.9 |
|
Schroder ISF Asian Total Return |
8,862 |
2.8 |
|
Pershing Square Holdings Ltd |
6,958 |
2.2 |
|
Indus Japan Long-Only Fund |
6,457 |
2.1 |
|
Egerton Long-Short Fund Ltd |
6,346 |
2.0 |
|
Prince Street Institutional Offshore Ltd |
5,633 |
1.8 |
|
BlackRock Frontiers Investment Trust PLC |
2,503 |
0.8 |
|
NTAsian Discovery Fund |
2,466 |
0.8 |
|
SR Global Fund Inc. Frontiers Markets |
2,358 |
0.8 |
|
Vanguard FTSE Developed Europe ex UK Equity Index Fund |
1,936 |
0.6 |
|
Total Core Regional Funds |
135,248 |
43.2 |
|
Strategic |
|
|
|
Ocean Wilsons Holdings Investments Limited (through the holding |
29,667 |
9.5 |
|
Wilson Sons (through our holding in Ocean Wilsons Holdings)* |
27,385 |
8.7 |
|
Total Strategic |
57,052 |
18.2 |
|
Global Equities |
|
|
|
Interactive Brokers Group Inc |
4,770 |
1.5 |
|
Exor NV |
3,858 |
1.2 |
|
Nexon Co. Ltd |
3,444 |
1.1 |
|
Samsung Electronics Co Ltd |
3,340 |
1.1 |
|
Iridium Communications Inc |
3,323 |
1.1 |
|
Dollar General |
2,553 |
0.8 |
|
CK Hutchison |
2,484 |
0.8 |
|
Berkshire Hathaway Inc |
2,338 |
0.7 |
|
Hilton Food Group PLC |
2,079 |
0.7 |
|
Alphabet Inc |
2,039 |
0.7 |
|
Orion Engineered Carbons SA |
1,916 |
0.6 |
|
Grupo Catalana Occidente SA |
1,853 |
0.6 |
|
CVS Health Corp |
1,829 |
0.6 |
|
Arch Capital Group Ltd |
1,696 |
0.5 |
|
TripAdvisor Inc |
1,295 |
0.4 |
|
Subsea 7 |
1,192 |
0.4 |
|
C&C Group PLC |
1,057 |
0.3 |
|
Coats Group PLC |
978 |
0.3 |
|
Total Global Equities |
42,044 |
13.4 |
|
Diversifying |
|
|
|
Global Event Partners Ltd |
9,018 |
2.9 |
|
DV4 Ltd** |
8,417 |
2.7 |
|
Hudson Bay International Fund Ltd |
4,101 |
1.3 |
|
Vanguard US Govt Bond Index Fund |
3,004 |
1.0 |
|
MKP Opportunity Offshore Ltd |
2,953 |
0.9 |
|
Selwood AM Liquid Credit Strategy |
2,544 |
0.8 |
|
Keynes Systematic Absolute Return Fund |
2,277 |
0.7 |
|
Apollo Total Return Fund |
2,272 |
0.7 |
|
BioPharma Credit PLC |
1,421 |
0.5 |
|
CZ Capital Absolute Alpha UCITS Fund |
1,231 |
0.4 |
|
GAM Systematic Core Macro (Cayman) Fund |
1,003 |
0.3 |
|
Schroder GAIA Blue Trend |
773 |
0.3 |
|
DV3 Ltd** |
30 |
0.0 |
|
Total Diversifying |
39,044 |
12.5 |
|
Thematic |
|
|
|
GAM Star Fund PLC - Disruptive Growth |
21,308 |
6.8 |
|
Impax Environmental Markets Fund |
3,768 |
1.2 |
|
BB Biotech AG |
3,571 |
1.1 |
|
RA Capital International Healthcare Fund |
3,259 |
1.0 |
|
Worldwide Healthcare Trust PLC |
2,258 |
0.7 |
|
Total Thematic |
34,164 |
10.8 |
|
Total Investments |
307,552 |
98.1 |
|
Net Current Assets |
2,905 |
0.9 |
|
Non-Current Assets |
3,179 |
1.0 |
|
Net Assets |
313,636 |
100.0 |
*Hansa Investment Company Ltd owns 9,352,770 shares in Ocean Wilsons Holdings Limited ("OWHL"). The two subsidiaries of OWHL, Wilson Sons and Ocean Wilsons (Investments) Ltd ("OWIL"), are shown separately above. The fair value of the Company's holding in OWHL has been apportioned across the two subsidiaries in the ratio of the latest reported NAV of OWIL, that being the NAV of OWIL shown per the 30 June 2020 OWHL quarterly update, to the market value of OWHL's holding in Wilson Sons, that being the bid share price of Wilson Sons multiplied by the number of shares held by OWHL at 30 September 2020.
**DV3 Ltd and DV4 Ltd are unlisted Private Equity holdings. As such, its value is estimated as described in Note 1(k) to the Statutory Financial Statements and they are listed as a Level 3 Asset in note 21 of the Statutory Financial Statements and Note 10 of the Pro-forma Financial Statements 31 March 2020. All other valuations are either derived from information supplied by listed sources, or from pricing information supplied by third party fund managers.
Condensed Income Statement
For the six months ended 30 September 2020
|
|
(Unaudited) Six months ended 30 September 2020 |
(Unaudited) 21 June 2019 to 30 September 2019 |
(Audited) 21 June 2019 to 31 March 2020 |
||||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Gains/(losses) on investments held at fair value through profit or loss |
- |
38,310 |
38,310 |
- |
2,989 |
2,989 |
- |
(50,965) |
(50,965) |
|
Foreign exchange losses |
- |
(47) |
(47) |
- |
- |
- |
- |
(104) |
(104) |
|
Investment income |
2,817 |
- |
2,817 |
149 |
- |
149 |
1,159 |
- |
1,159 |
|
|
2,817 |
38,263 |
41,080 |
149 |
2,989 |
3,138 |
1,159 |
(51,069) |
(49,910) |
|
Portfolio management fees |
(1,231) |
- |
(1,231) |
(227) |
- |
(227) |
(1,441) |
- |
(1,441) |
|
Other expenses |
(592) |
- |
(592) |
(750) |
- |
(750) |
(1,488) |
- |
(1,488) |
|
|
(1,823) |
- |
(1,823) |
(977) |
- |
(977) |
(2,929) |
- |
(2,929) |
|
Profit/(loss) before finance costs |
994 |
38,263 |
39,257 |
(828) |
2,989 |
2,161 |
(1,770) |
(51,069) |
(52,839) |
|
Finance costs |
- |
- |
- |
(1) |
- |
(1) |
(1) |
- |
(1) |
|
Profit/(loss) for the period |
994 |
38,263 |
39,257 |
(829) |
2,989 |
2,160 |
(1,771) |
(51,069) |
(52,840) |
|
Return per Ordinary and 'A' non ‑ voting Ordinary share |
0.8p |
31.9p |
32.7p |
(0.7)p |
2.5p |
1.8p |
(1.5)p |
(42.6)p |
(44.1)p |
The Company does not have any income or expense not included in the Profit for the period. Accordingly the "Profit for the period" is also the "Total Comprehensive Income for the period", as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.
The total column of this Statement represents the Income Statement, prepared in accordance with IAS 34. The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above Statement derive from continuing operations.
Condensed Balance Sheet
as at 30 September 2020
| (Unaudited) 30 September 2020 £000 | (Unaudited) 30 September 2019 £000 | (Audited) 31 March 2020 £000 |
Non‑current assets |
|
|
|
Investments in subsidiary at fair value through profit or loss^ | 3,179 | 138,179 | 3,179 |
Investments held at fair value through profit or loss | 307,552 | 333,139 | 273,264 |
| 310,731 | 471,318 | 276,443 |
Current assets |
|
|
|
Trade and other receivables | 102 | 116 | 2,503 |
Cash and cash equivalents | 6,380 | 1,330 | 1,066 |
| 6,482 | 1,446 | 3,569 |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables | (3,577) | (138,585) | (3,713) |
Net current assets/(liabilities) | 2,905 | (137,139) | (144) |
|
|
|
|
Net assets | 313,636 | 334,179 | 276,299 |
|
|
|
|
Capital and reserves |
|
|
|
Called up share capital | 1,200 | 1,200 | 1,200 |
Contributed surplus | 326,979 | 330,819 | 327,939 |
Retained earnings | (14,543) | 2,160 | (52,840) |
Total equity shareholders' funds | 313,636 | 334,179 | 276,299 |
|
|
|
|
Net asset value per Ordinary and 'A' non‑voting Ordinary share | 261.4p | 278.5p | 230.2p |
^This represents Hansa Investment Company Ltd's investment in Hansa Trust and its associated intercompany loan at fair value.
Condensed Statement of Changes in Equity
For the six months ended 30 September 2020
(Unaudited)
| Share capital | Contributed Surplus reserve | Retained earnings | Total |
Net assets at 1 April 2020 | 1,200 | 327,939 | (52,840) | 276,299 |
Profit for the period | - | - | 39,257 | 39,257 |
Dividends | - | (960) | (960) | (1,920) |
Net assets at 30 September 2020 | 1,200 | 326,979 | (14,543) | 313,636 |
Condensed Statement of Changes in Equity
For the period 21 June 2019 to 30 September 2019
(Unaudited)
| Share capital | Contributed Surplus reserve | Retained earnings | Total |
Net assets at 21 June 2019 | - | - | - | - |
Issue of share capital 29 August 2019 | 1,200 | - | - | 1,200 |
Transfer of assets from Hansa Trust | - | 330,819 | - | 330,819 |
Profit for the period | - | - | 2,160 | 2,160 |
Net assets at 30 September 2019 | 1,200 | 330,819 | 2,160 | 334,179 |
Condensed Statement of Changes in Equity
For the period 21 June 2019 to 31 March 2020
(Audited)
| Share capital | Contributed Surplus reserve | Retained earnings | Total |
Net assets at 21 June 2019 | - | - | - | - |
Issue of share capital 29 August 2019 | 1,200 | - | - | 1,200 |
Transfer of assets from Hansa Trust | - | 330,819 | - | 330,819 |
Loss for the period | - | - | (52,840) | (52,840) |
Dividends | - | (2,880) | - | (2,880) |
Net assets at 30 September 2019 | 1,200 | 327,939 | (52,840) | 276,299 |
Condensed Cash Flow Statement
For the six months ended 30 September 2020
| (Unaudited) Six months ended 30 September 2020 £000 | (Unaudited) Period 21 June 2019 to 30 September 2019 £000 | (Audited) Period 2020 £000 |
Cash flows from operating activities |
|
|
|
Profit/(loss) before finance costs | 39,257 | 2,161 | (52,839) |
Adjustments for: |
|
|
|
Realised losses/(gains) on investments | 4,028 | - | (644) |
Unrealised (gains)/losses on investments | (42,338) | (2,989) | 51,609 |
Foreign exchange | 47 | - | 104 |
Decrease/(Increase) in trade and other receivables | 2,401 | (116) | (2,503) |
(Decrease)/Increase in trade and other payables | (136) | 363 | 534 |
Purchase of non-current investments | (8,412) | - | (17,059) |
Sale of non-current investments | 12,434 | - | 22,980 |
Net cash inflow/(outflow) from operating activities | 7,281 | (581) | 2,182 |
Cash flows from financing activities |
|
|
|
Interest paid on bank loans | - | (1) | (1) |
Drawdown of loan | - | 43 | - |
Inter-Company Loan with Hansa Trust | - | 1,869 | 1,869 |
Dividends paid | (1,920) | - | (2,880) |
Net cash (outflow)/inflow from financing activities | (1,920) | 1,911 | (1,012) |
Increase in cash and cash equivalents | 5,361 | 1,330 | 1,170 |
Cash and cash equivalents at start of year/period | 1,066 | - | - |
Foreign exchange | (47) | - | (104) |
Cash and cash equivalents at end of period | 6,380 | 1,330 | 1,066 |
Notes to the Condensed Financial Statements
1 ACCOUNTING POLICIES
(a) Basis of preparation
The Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS"). These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ("IASC") that remain in effect, to the extent that IFRS have been adopted by the European Union.
These Financial Statements are presented in Sterling because that is the currency of the primary economic environment in which the Company operates.
The Financial Statements have been prepared on an historical cost and going concern basis, and also in line with the Board's analysis of the impact of Covid-19 on the Company except for the valuation of investments. The Financial Statements have also been prepared in accordance with the AIC Statement of Recommended Practice ("SORP") for investment trusts, issued by the AIC in October 2019 to the extent that the SORP does not conflict with IFRS. The principal accounting policies adopted are set out below.
(b) Basis of non-consolidation
IFRS 10 stipulates that subsidiaries and associates of Investment Entities are not consolidated but, rather, stated at fair value unless the conditions for certain exemptions from this treatment are met. Hansa Investment Company Ltd meets all three characteristics of an Investment Entity as described by IFRS 10. The Company has one, 100% owned, subsidiary Hansa Trust PLC. The Company became the 100% owner of Hansa Trust's shares as part of the Scheme of Arrangement on 29 August 2019. It is the Intention for Hansa Trust PLC to be dissolved now that the legal title of the portfolio Investments have been transferred to the Company.
(c) Presentation of Income Statement
In order to better reflect the activities of an investment company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature, has been presented alongside the Income Statement.
(d) Non-current investments
As the Company's business is investing in financial assets, with a view to profiting from their total return in the form of income received and increases in fair value, investments are classified at fair value through profit or loss on initial recognition in accordance with IFRS 9. The Company manages and evaluates the performance of these investments on a fair value basis, in accordance with its investment strategy and information about the investments is provided on this basis to the Board of Directors.
Investments are recognised and de-recognised on the trade date. For listed investments fair value is deemed to be bid market prices, or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange's electronic trading service, covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 constituents, along with some other securities.
Fund investments are stated at fair value through profit or loss as determined by using the most recent available valuation. In some cases, this will be by reference to the most recent valuation statement supplied by the fund's manager. In other cases, values may be available through the fund being listed on an exchange or via pricing sources such as Bloomberg.
Private equity Investments are stated at fair value through profit or loss as determined by using various valuation techniques, In accordance with the International Private Equity and Venture Capital Valuation Guidelines. In the absence of a valuation at the balance sheet date, additional procedures to determine the reasonableness of the fair value estimate for Inclusion In the financial statements may be used. These could Include direct enquiries of the manager of the Investment to understand, amongst others, the valuation process and techniques used, external experts used in the valuation process and updated details of underlying portfolio. In addition, the Company can obtain external Independent valuation data and compare this to historic valuation movements of the asset. Further, recent arms-length market transactions between knowledgeable and willing parties where available might also be considered. The investment in the Company's subsidiary undertaking Is stated at fair value.
Unrealised gains and losses, arising from changes in fair value, are included in net profit or loss for the period as a capital item in the Income Statement and are ultimately recognised in the Capital Reserves.
(e) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, short-term deposits and cash funds with an original maturity of three months or less and are subject to an insignificant risk of changes in capital value.
(f) Investment Income and return of capital
Dividends receivable on equity shares are recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends are recognised when the Company's right to receive payment is established. Dividends and Real Estate Investment Trusts' ("REIT") income are all stated net of withholding tax. In many cases, Bermudan companies cannot recover foreign incurred taxes withheld on dividends and capital transactions. As a result, any such taxes incurred will be charged as an expense and included here.
When an investee company returns capital to the Company, the amount received is treated as a reduction in the book cost of that investment and is classified as sale proceeds.
(g) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except as follows:
(i) expenses which are incidental to the acquisition or disposal of an investment are included in gains on investments held at fair value through profit or loss in the Income Statement.
(h) Taxation
Under current Bermuda law, the Company is not required to pay taxes in Bermuda on either income or capital gains. The Company has received an undertaking from the Bermuda government exempting it from all local income, withholding and capital gains taxes being imposed and will be exempted from such taxes until 31 March 2035.
(i) Foreign Currencies
Transactions denominated in foreign currencies are recorded in the local currency, at the actual exchange rates as at the date of the transaction. Assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rate of exchange prevailing at the balance sheet date. Any gain or loss arising from a change in exchange rates, subsequent to the date of the transaction, is included as an exchange gain or loss in the capital or revenue column of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature respectively.
(j) Reserves
Contributed surplus
The following are credited or charged to this reserve via the capital column of the Income Statement:
gains and losses on the disposal of investments;
exchange differences of a capital nature;
expenses charged to the capital column of the Income Statement in accordance with the above accounting policies; and
increases and decreases in the valuation of investments held at the balance sheet date.
Retained Earnings
The following are credited or charged to this reserve via the revenue column of the Income Statement:
• net revenue recognised in the revenue column of the Income Statement.
(k) Significant Judgements and Estimates
The key significant estimate to report, concerns the Company's valuation of its holding in DV4 Ltd. DV4 is valued using the most recent estimated NAV as advised to the Company by DV4, adjusted for any further drawdowns, distributions or redemptions between the valuation date and 30 September 2020. The most recent valuation statement was received on 25 August 2020 stating the value of the Company's holding as at 30 June 2020. The Company has considered the ongoing impact of Covid-19, the associated financial impact on certain industries and its potential impact on asset values. In the absence of a valuation for 30 September 2020 from DV4, the Company performed additional procedures to determine the reasonableness of the fair value estimate for inclusion in the Financial Statements. Direct enquiries of the manager of DV4 were made in July 2020 to understand, amongst others, valuation process and techniques used, external experts used in the valuation process and updated details of underlying property portfolio. In addition, the Company has obtained external independent valuation data and compared the historic valuation movements of DV4 to that data. Based on the information obtained and additional analysis performed the Company is satisfied that DV4 is carried in these Financial Statements at an amount that represents its best estimate of fair value at 30 September 2020. It is believed the value of DV4 as at 30 September 2020 will not be materially different, but this valuation is based on historic valuations by DV4, does not have a readily available third party comparator and, as such, is an estimate. There are no significant judgements.
(l) Intercompany loan
The Intercompany loan Is recognised at cost, being the fair value of the consideration receivable. The amounts falling due for repayment within one year are Included under current liabilities In the Balance Sheet.
2 INCOME
| (Unaudited) Six months ended 30 September 2020 £000 | (Unaudited) 21 June to 30 September 2019 £000 | (Audited) 21 June 2019 to 31 March 2020 £000 |
Income from quoted investments |
|
|
|
Dividends | 2,817 | 149 | 1,158 |
|
|
|
|
Other income |
|
|
|
Interest receivable on AAA rated money market funds | - | - | 1 |
Total income | 2,817 | 149 | 1,159 |
3 DIVIDENDS PAID
| (Unaudited) Six months ended 30 September 2020 £000 | (Unaudited) 21 June to 30 September 2019 £000 | (Audited) 21 June 2019 to 31 March 2020 £000 |
Third interim dividend for 2020 (paid 28 February 2020): 0.8p | - | - | 960 |
Fourth interim dividend for 2020 (paid 29 May 2020): 0.8p | 960 | - | - |
First interim dividend for 2021 (paid 28 August 2020): 0.8p | 960 | - | 1,920 |
| 1,920 | - | 2,880 |
Note: The second interim dividend payable for the period ended 31 March 2021 was announced on 13 October 2020. The payment totalling 0.8p per share (£0.96 million) was paid on 30 November 2020.
4 RETURN PER SHARES
The returns stated below are based on 120,000,000 shares, being the weighted average number of shares in issue during the period.
| Revenue | Capital | Total | |||
| £000 | Pence per share | £000 | Pence per share | £000 | Pence per share |
Six months ended 30 September 2020 (Unaudited) | 994 | 0.8 | 38,263 | 31.9 | 39,257 | 32.7 |
Period 21 June to 30 September 2019 (Unaudited) | (829) | (0.7) | 2,989 | 2.5 | 2,160 | 1.8 |
Period 21 June 2019 to 31 March 2020 (Audited) | (1,771) | (1.5) | (51,069) | (42.6) | (52,840) | (44.1) |
5 FINANCIAL INFORMATION
The financial information for the six months ended 30 September 2020 was approved by a committee of the Board of Directors on 26 November 2020.
6 NET ASSET VALUE PER SHARE
The NAV per share is based on the net assets attributable to equity shareholders of £313,636,000 (30 September 2019: £334,179,000; 31 March 2020 £279,299,000) and on 120,000,000 shares, being the number of shares in issue at the period ends.
7 COMMITMENTS AND CONTINGENCIES
The Company has no outstanding commitments as at 30 September 2020 (30 September 2019: £nil; 31 March 2020: £nil.)
8 PRINCIPAL RISKS AND UNCERTAINTIES
The principal financial and related risks faced by the Company fall into the following broad categories - External and Internal. External risks to shareholders and to their returns are those that can significantly influence the investment environment within which the Company operates, including: government policies, taxation, economic recession, declining corporate profitability, rising inflation and interest rates and excessive stock market speculation. Internal and operational risks to shareholders and to their returns are: portfolio (stock and sector selection and concentration), balance sheet (gearing), and/or administrative mismanagement.
A review of the current period and the outlook for the Company can be found in the Chairman's Report to the Shareholders and in the Portfolio Manager's Review.
Information on each of these areas is given in the Strategic Report within the Period End Report for the period ended 31 March 2020. In the view of the Board these principal risks and uncertainties are applicable to the remaining six months of the financial year as they were to the six months under review.
9 FAIR VALUE HIERARCHY
Fair Value Hierarchy
IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability not based on observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy, as detailed below:
30 September 2020 (Unaudited) | Level 1 | Level 2 | Level 3 | Total |
Financial assets at fair value through profit or loss |
|
|
|
|
Quoted equities | 115,807 | - | - | 115,807 |
Unquoted equities | - | - | 8,447 | 8,447 |
Fund investments | - | 183,298 | - | 183,298 |
Investment in subsidiary | - | - | 3,179 | 3,179 |
Fair value | 115,807 | 183,298 | 11,626 | 310,731 |
|
|
|
|
|
30 September 2019 (Unaudited) | Level 1 | Level 2 | Level 3 | Total |
Financial assets at fair value through profit or loss |
|
|
|
|
Quoted equities | 157,652 | - | - | 157,652 |
Unquoted equities | - | - | 9,340 | 9,340 |
Fund investments | 3,508 | 162,639 | - | 166,147 |
Investment in subsidiary | - | - | 138,179 | 138,179 |
Fair value | 161,160 | 162,639 | 147,519 | 471,318 |
|
|
|
|
|
31 March 2020 (Audited) | Level 1 | Level 2 | Level 3 | Total |
Financial assets at fair value through profit or loss |
|
|
|
|
Quoted equities | 116,310 | - | - | 116,310 |
Unquoted equities | - | - | 9,276 | 9,276 |
Fund investments | - | 147,678 | - | 147,678 |
Investment in subsidiary | - | - | 3,179 | 3,179 |
Fair value | 116,310 | 147,678 | 12,455 | 276,443 |
|
|
|
|
|
There have been no transfers during the period between levels.
The Company's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date of the event or change in circumstances that caused the transfer to occur.
A reconciliation of fair value measurements in Level 3 is set out in the following table:
| (Unaudited) 30 September 2020 Equity investments £000 | (Unaudited) 30 September 2019 Equity investments £000 | (Audited) 31 March 2020 Equity investments £000 |
Opening Balance | 12,455 | - | - |
Purchases (Capital Drawdown) | - | 9,340 | 9,276 |
Purchase of Hansa Trust PLC | - | 332,019 | 332,019 |
Distributions received from Hansa Trust PLC | - | (193,840) | (328,840) |
Total gains or losses included in gains on investments in the Income Statement: |
|
|
|
- on assets sold | - | - | - |
- on assets held at year end | (829) | - | - |
Closing Balance | 11,626 | 147,519 | 12,455 |
|
|
|
|
As at 30 September 2020, the investments in DV3 and DV4 Ltd have been classified as Level 3. The investments in DV3 and DV4 have been valued using the most recent estimated NAV as advised to the Company by DV3 and DV4, adjusted for any further drawdowns, distributions or redemptions between the valuation date and 30 September 2020. The most recent valuation statement was received on 25 August 2020, with an estimated NAV based on the unaudited capital statement of DV3 and DV4 as at 30 June 2020. If the value of the unquoted Level 3 equity investments were to increase or decrease by 10%, while all other variables had remained constant, the return and net assets attributable to shareholders for the period ended 30 September 2020 would have increased or decreased by £844,700 respectively. Additionally, the investment in the Company's subsidiary at 30 September is also shown as a Level 3 asset.
Introduction to the Pro-Forma Financial Statements
For the six months ended 30 September 2020
NOTE OF EXPLANATION:
During the 12 month period ended 31 March 2020, the Scheme of Arrangement ("the Scheme") to re-domicile the business of HICL's predecessor, Hansa Trust, via a Scheme was brought to shareholders for their consideration. At a series of shareholder votes on 29 July 2019, the Scheme received strong support from shareholders which, following Court approval, resulted in the transfer of the business (all assets and liabilities) on 29 August 2019 from Hansa Trust to HICL (HICL having been incorporated on 21 June 2019). At the same time, the shares of Hansa Trust were de-listed and cancelled before being reissued to HICL. HICL then issued new shares to the former Hansa Trust shareholders with the same two share classes being retained, but with five HICL shares being issued for every one share of Hansa Trust that had been cancelled.
From the perspective of an ongoing shareholder, whilst there are a number of legal, jurisdictional and Board changes as a result of the Scheme, the key facets of the business remain unchanged. The investment strategy and policy remain unchanged.
HICL was incorporated on 21 June 2019 for the sole purpose of continuing the business of Hansa Trust. As a result, International Accounting Standards require that the Financial Statements for HICL present only the results of HICL from the date of incorporation (21 June 2019) and do not incorporate comparable information from Hansa Trust. The Board believes it is more meaningful to present to shareholders the results of operations of Hansa Trust and HICL on a pro-forma combined basis for the six month period from 1 April 2020 to 30 September 2020 and include comparable information for the period 1 April 2019 to 30 September 2019. The comparable information incorporates elements of Hansa Trust operations (1 April 2019 to 30 September 2019) as well as HICL (21 June 2019 to 30 September 2019). Therefore, in addition to the required Interim Financial Statements further down, the Board also presents a number of relevant pro-forma statements further down that amalgamate Hansa Trust and HICL, on a pro‑forma basis, and are shown as "Hansa Investment Company Ltd Group" or "Combined Group". The pro-forma Financial Statements seek to paint a fuller picture of the historical performance of the business, regardless of which legal entity that business sat in at a point in time. Similarly, the Board presents the results of the Combined Group for the 12 months to 31 March 2020 as a relevant comparative period.
Condensed Pro-Forma Income Statement for the combined Hansa Investment Company Ltd Group
For the six months ended 30 September 2020
| (Unaudited) Six months ended 30 September 2020 | (Unaudited) Six months ended 30 September 2019 | (Unaudited) Year ended 31 March 2020 | ||
| Hansa Trust Total £000 | Hansa Investment Company Total £000 | Combined | Combined | Combined |
Gains/(losses) on investments held at fair value through profit or loss | - | 38,310 | 38,310 | (4,015) | (57,969) |
Foreign exchange losses | - | (47) | (47) | 8 | (96) |
Investment income | - | 2,817 | 2,817 | 6,112 | 7,122 |
| - | 41,080 | 41,080 | 2,105 | (50,943) |
Portfolio management fees | - | (1,231) | (1,231) | (1,227) | (2,441) |
Other expenses | - | (592) | (592) | (2,128) | (2,866) |
| - | (1,823) | (1,823) | (3,355) | (5,307) |
Profit/(Loss) before finance costs | - | 39,257 | 39,257 | (1,250) | (56,250) |
Finance costs | - | - | - | (1) | (1) |
Profit/(Loss) for the period | - | 39,257 | 39,257 | (1,251) | (56,251) |
Return per Ordinary and 'A' non‑voting Ordinary share | - | 32.7p | 32.7p | (1.0)p | (46.9)p |
The Group does not have any income or expense not included in the Profit/(Loss) for the period. Accordingly the "Profit/(Loss) for the period" is also the "Total Comprehensive Income for the period", as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.
Separate revenue and capital return columns are not shown above to aid the reader and avoid unnecessary complexity.
Condensed Pro-Forma Balance Sheet for the combined Hansa Investment Company Ltd Group
as at 30 September 2020
| (Unaudited) Combined Group 2020 £000 | (Unaudited) Combined Group 2019 £000 | (Unaudited) Combined Group 2020 £000 |
Non‑current assets |
|
|
|
Investments held at fair value through profit or loss | 307,552 | 333,139 | 273,264 |
Current assets |
|
|
|
Trade and other receivables | 102 | 116 | 2,503 |
Cash and cash equivalents | 6,380 | 1,330 | 1,066 |
| 6,482 | 1,446 | 3,569 |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables | (398) | (406) | (534) |
Net current assets | 6,084 | 1,040 | 3,035 |
|
|
|
|
Net assets | 313,636 | 334,179 | 276,299 |
|
|
|
|
Capital and reserves |
|
|
|
Called up share capital | 1,200 | 1,200 | 1,200 |
Contributed surplus reserve | 326,979 | 330,819 | 327,939 |
Retained earnings | (14,543) | 2,160 | (52,840) |
Total equity shareholders' funds | 313,636 | 334,179 | 276,299 |
|
|
|
|
Net asset value per Ordinary and 'A' non‑voting Ordinary share | 261.4p | 278.5p | 230.2p |
Condensed Pro-Forma Statement of Changes in Equity for the combined Hansa Investment Company Ltd Group
For the six months ended 30 September 2020 (Unaudited)
| Share capital | Capital redemption reserve | Contributed | Retained earnings | Total |
Net assets at 1 April 2020 | 1,200 | - | 327,939 | (52,840) | 276,299 |
Profit for the period | - | - | - | 39,257 | 39,257 |
Dividends | - | - | (960) | (960) | (1,920) |
Net Assets 30 September 2020 | 1,200 | - | 326,979 | (14,543) | 313,636 |
Condensed Pro-Forma Statement of Changes in Equity for the combined Hansa Investment Company Ltd Group
For the six months ended 30 September 2019 (Unaudited)
| Share capital | Capital redemption reserve | Contributed | Retained earnings | Total |
Net assets at 1 April 2019 | 1,200 | 300 | - | 335,850 | 337,350 |
Hansa Trust loss for the period | - | - | - | (3,411) | (3,411) |
Dividends paid by Hansa Trust | - | - | - | (1,920) | (1,920) |
Capital reorganisation as part of the scheme | - | (300) | 330,819 | (330,519) | - |
Hansa Investment Company Ltd profit for the period | - | - | - | 2,160 | 2,160 |
Net assets at 30 September 2019 | 1,200 | - | 330,819 | 2,160 | 334,179 |
Condensed Pro-Forma Statement of Changes in Equity for the combined Hansa Investment Company Ltd Group
For the year ended 31 March 2020 (Unaudited)
| Share capital | Capital redemption reserve | Contributed | Retained earnings | Total |
Net assets at 1 April 2019 | 1,200 | 300 | - | 335,850 | 337,350 |
Hansa Trust loss for the year | - | - | - | (3,411) | (3,411) |
Dividends paid by Hansa Trust | - | - | - | (1,920) | (1,920) |
Capital reorganisation as part of the scheme | - | (300) | 330,819 | (330,519) | - |
Hansa Investment Company Ltd loss for the year | - | - | - | (52,840) | (52,840) |
Dividends paid by Hansa Investment Company Ltd | - | - | (2,880) | - | (2,880) |
Net assets at 31 March 2020 | 1,200 | - | 327,939 | (52,840) | 276,299 |
Condensed Pro-Forma Cash Flow Statement for the combined Hansa Investment Company Ltd Group
For the six months ended 30 September 2020
| (Unaudited) | (Unaudited) Combined Group 30 September 2019 £000 | (Unaudited) Combined Group 31 March 2020 £000 |
Cash flows from operating activities |
|
|
|
Profit/(loss) before finance costs | 39,257 | (1,250) | (56,250) |
Adjustments for: |
|
|
|
Realised losses/(gains) on investments | 4,028 | (2,407) | (3,051) |
Unrealised (gains)/losses on investments | (42,338) | 6,422 | 61,020 |
Foreign exchange | 47 | (8) | 96 |
Decrease/(increase) in trade and other receivables | 2,401 | 1,002 | (1,385) |
(Decrease) in trade and other payables | (136) | (1,670) | (1,499) |
Purchase of non-current investments | (8,412) | (12,925) | (29,984) |
Sale of non-current investments | 12,434 | 11,562 | 34,542 |
Net cash inflow from operating activities | 7,281 | 726 | 3,489 |
Cash flows from financing activities |
|
|
|
Interest paid on bank loans | - | (1) | (1) |
Drawdown of loan | - | 43 | - |
Dividends paid | (1,920) | (1,920) | (4,800) |
Net cash (outflow) from financing activities | (1,920) | (1,878) | (4,801) |
Increase/(decrease) in cash and cash equivalents | 5,361 | (1,152) | (1,312) |
Cash and cash equivalents at 1 April | 1,066 | 2,474 | 2,474 |
Foreign exchange | (47) | 8 | (96) |
Cash and cash equivalents at end of period/year | 6,380 | 1,330 | 1,066 |
Notes to the Condensed Pro-Forma Financial Statements
1 ACCOUNTING POLICIES
(a) Basis of preparation
The Pro-Forma Financial Statements of the Company have been prepared under the historical cost convention, except for the measurement at fair value of investments, and primarily using the principles of International Financial Reporting Standards ("IFRS") as adopted by the European Union, with the following significant departures:
Hansa Investment Company Ltd and, as of the implementation of the Scheme of Arrangement on 29 August 2019, its 100% subsidiary Hansa Trust PLC together are referred to as the "Group" or "Combined Group" for the purposes of the Pro-Forma Financial Statements. Under IFRS 10 'Consolidated Financial Statements', from 29 August 2019 onwards, Hansa Investment Company Limited ('HICL') meets the definition of an investment entity and as such any subsidiaries, namely Hansa Trust PLC, are accounted for at fair value through profit or loss in accordance with IFRS 9 'Financial Instruments'. These Pro-Forma Financial Statements have been prepared assuming any subsidiaries are consolidated, rather than accounted for at fair value. Prior to 29 August 2019, Hansa Trust was a standalone entity - itself deemed to be an investment entity.
A consequence of the consolidation of subsidiaries is that these Pro-Forma Financial Statements are Consolidated Financial Statements and therefore contain comparative and historical information which encompasses the whole Group. Practically, comparative and historical information is derived from Hansa Trust.
The Group has not presented a Consolidated Income Statement in accordance with the Guidance Issued by the Association of Investment Companies with respect to the allocation between Income and Capital. Income and Capital columns have been combined for each consolidated entity to simplify the presentation of the Statement itself.
EPS / NAV per share for comparable numbers brought forward from Hansa Trust have been restated to reflect the new number of Hansa Investment Company Ltd shares in issue. EPS and NAV per share throughout the Interim Report reflect the number of Hansa Investment Company Ltd shares in issue.
The Directors have adopted the proposed departures, as they believe the results of the Pro-Forma Financial Statements better enable shareholders to understand the elements of the value of the Company at the year end as well as compared to prior years.
These Pro-Forma Financial Statements are presented in Sterling, the currency of the primary economic environment in which the Company operates.
2 INCOME
| (Unaudited) Hansa Trust Six months ended £000 | (Unaudited) Hansa Investment Six months ended £000 | (Unaudited) Combined Group | (Unaudited) Combined Group | (Unaudited) Combined Group |
Income from quoted investments |
|
|
|
|
|
Dividends | - | 2,817 | 2,817 | 6,108 | 7,117 |
Other income |
|
|
|
|
|
Interest receivable on AAA rated money market funds | - | - | - | 4 | 5 |
Total income | - | 2,817 | 2,817 | 6,112 | 7,122 |
3 DIVIDENDS PAID & DECLARED
| (Unaudited) Combined Group Six months ended 30 September 2020 | (Unaudited) Combined Group | (Unaudited) Combined Group |
Second interim dividend for Hansa Trust 2019 (paid May 2019): 1.6p | - | 1,920 | 1,920 |
First interim dividend for 2021 (paid August 2020): 0.8p (2020: 0.8p) | 960 | - | 960 |
Second interim dividend for 2020 (paid November 2019): 0.8p (2019: 0.8p) | - | - | 960 |
Third interim dividend for 2020 (paid February 2020): 0.8p | - | - | 960 |
Fourth interim dividend for 2020 (paid May 2020): 0.8p | 960 | - | 960 |
| 1,920 | 1,920 | 5,760 |
Note: The second interim dividend for 2021, paid by HICL in November 2020, was 0.8p per share.
4 RETURN PER SHARES
The returns stated below are based on 120,000,000 shares, being the weighted average number of shares in issue during the period.
| Hansa Trust | Hansa Investment Company | Combined Group | |||
£000 | Pence per share | £000 | Pence per share | £000 | Pence per share | |
Six months ended 30 September 2020 (Unaudited) | - | - | 39,257 | 32.7 | 39,257 | 32.7 |
Six months ended 30 September 2019 (Unaudited) | (3,411) | (2.8) | 2,160 | 1.8 | (1,251) | (1.0) |
Year ended 31 March 2020 (Unaudited) | (3,411) | (2.8) | (52,840) | (44.1) | (56,251) | (46.9) |
5 FINANCIAL INFORMATION
The Interim pro-forma financial information was approved by a committee of the Board of Directors on 26 November 2020.
6 NET ASSET VALUE PER SHARE
The NAV per share is based on the net assets attributable to equity shareholders of £313,636,000 (30 September 2019: £334,179,000; 31 March 2020: £276,299,000) and on 120,000,000 shares, being the number of shares in issue at the period end for HICL.
7 COMMITMENTS AND CONTINGENCIES
The Company has no outstanding commitments as at 30 September 2020 (30 September 2019: £nil; 31 March 2020: £nil).
8 FAIR VALUE HIERARCHY
IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); an
Level 3: inputs for the asset or liability not based on observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy - are detailed below:
30 September 2020 (Combined Group) (Unaudited) | Level 1 | Level 2 | Level 3 | Total |
Financial assets at fair value through profit or loss |
|
|
|
|
Quoted equities | 115,807 | - | - | 115,807 |
Unquoted equities | - | - | 8,447 | 8,447 |
Fund investments | - | 183,298 | - | 183,298 |
Net fair value | 115,807 | 183,298 | 8,447 | 307,552 |
30 September 2019 (Combined Group) (Unaudited) | Level 1 | Level 2 | Level 3 | Total |
Financial assets at fair value through profit or loss |
|
|
|
|
Quoted equities | 157,652 | - | - | 157,652 |
Unquoted equities | - | - | 9,340 | 9,340 |
Fund investments | 3,508 | 162,639 | - | 166,147 |
Net fair value | 161,160 | 162,639 | 9,340 | 333,139 |
31 March 2020 (Combined Group) (Unaudited) | Level 1 | Level 2 | Level 3 | Total |
Financial assets at fair value through profit or loss |
|
|
|
|
Quoted equities | 116,310 | - | - | 116,310 |
Unquoted equities | - | - | 9,276 | 9,276 |
Fund investments | - | 147,678 | - | 147,678 |
Net fair value | 116,310 | 147,678 | 9,276 | 273,264 |
There have been no transfers between levels during the period.
The Group's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date of the event or change in circumstances that caused the transfer to occur.
A reconciliation of fair value measurements in Level 3 is set out in the following table. For the purposes of these pro-forma accounts, transfers of assets from Hansa Trust to HICL have not been deemed to represent a purchase/sale:
| (Unaudited) Combined Group September 2020 | (Unaudited) Combined Group September 2019 |
(Unaudited) Combined Group |
Opening Balance | 9,276 | 10,393 | 10,393 |
Transferred from Level 1: | - | - | - |
Purchases (Capital Distribution) | - | - | - |
Sales (Capital Distribution) | - | (2,254) | (2,254) |
- on assets sold | - | - | - |
- on assets held at year end | (829) | 1,201 | 1,137 |
Closing Balance | 8,447 | 9,340 | 9,276 |
As at 30 September 2020, the investments in DV3 and DV4 Ltd have been classified as Level 3. The investments in DV3 and DV4 have been valued using the most recent estimated NAV as advised to the Company by DV3 and DV4, adjusted for any further drawdowns, distributions or redemptions between the valuation date and 30 September 2020. The most recent valuation statement was received on 25 August 2020, with an estimated NAV based on the unaudited capital statement of DV3 and DV4 as at 30 June 2020. If the value of the unquoted Level 3 equity investments were to increase or decrease by 10%, while all other variables had remained constant, the return and net assets attributable to shareholders for the period ended 30 September 2020 would have increased or decreased by £844,700 respectively. Additionally, the investment in the Company's subsidiary at 30 September is also shown as a Level 3 asset.
Investor Information
The Company currently manages its affairs so as to be a qualifying investment company for ISA purposes, for both the Ordinary and 'A' non-voting Ordinary shares. It is the present intention that the Company will conduct its affairs so as to continue to qualify for ISA products. In addition, the Company currently conducts its affairs so shares issued by Hansa Investment Company Ltd can be recommended by independent financial advisers to ordinary retail investors, in accordance with the Financial Conduct Authority's ("FCA") rules in relation to non‑mainstream investment products and intends to continue to do so for the foreseeable future. The shares are excluded from the FCA's restrictions which apply to non‑mainstream investment products, because they are excluded securities as defined in the FCA Handbook Glossary. Finally, Hansa Investment Company Ltd is registered as a Reporting Financial Institution with the US IRS for FATCA purposes.
Investor Disclosure
AIFMD
Hansa Investment Company Ltd's AIFMD Investor Disclosure document can be found on its website. The document is a regulatory requirement and summarises key features of the Company for investors. It can be viewed at: www.hansaicl.com/shareholder-information/regulatory-information.aspx
Packaged Retail and Insurance-based Investment Products ("PRIIPs")
The Company's AIFM, Hanseatic Asset Management LBG, is responsible for applying the product governance rules defined under the MiFID II legislation on behalf of Hansa Investment Company Ltd. Therefore, the AIFM is deemed to be the 'Manufacturer' of Hansa Investment Company's two share classes. Under MiFID II, the Manufacturer must make available Key Information Documents ("KIDs") for investors to review if they so wish ahead of any purchase of the Company's shares. Links to these documents can also be found on the Company's website for good measure: www.hansaicl.com/shareholder-information/regulatory-information.aspx
Capital Structure
The Company has 40,000,000 Ordinary shares of 1p each and 80,000,000 'A' non‑voting Ordinary shares of 1p each in issue. The Ordinary shareholders are entitled to one vote per Ordinary share held. The 'A' non‑voting Ordinary shares do not entitle the holders to vote or receive notice of meetings, but in all other respects they have the same rights as the Company's Ordinary shares.
Contact Details
Email: hiclenquiry@hansacap.com
Website: www.hansaicl.com
Company Secretary (and Company's Registered Office)
Conyers Corporate Services (Bermuda) Limited
Clarendon House, 2 Church Street
PO Box HM666, Hamilton HM CX
Bermuda
Phone: +1 441 279 5373
Website: www.conyers.com
Please contact the Portfolio Manager, as below, if you have any queries concerning the Company's investments or performance.
Portfolio Manager
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hiclenquiry@hansacap.com
Website: www.hansagrp.com
The Company's website includes the following:
- Monthly Fact Sheets
- Stock Exchange Announcements
- Details of the Board Statements
- Annual and Interim Reports
- Share Price Data Reports
- Shareholder Presentations
Please contact the Registrars, as below, if you have a query about a certificated holding in the Company's shares.
Registrars
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey GY2 4LH
(If you do not have internet access you can call the Shareholder Support Centre on 0871 664 0300 if calling from the UK (calls cost 12p per minute plus your phone company's access charge) or +44 371 664 0300 if not calling from the UK (calls outside the UK will be charged at the applicable international rate).
The Registrars are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales.
Email: enquiries@linkgroup.co.uk
www.linkassetservices.com
Share Price Listings
The price of your shares can be found on our website and in the Financial Times under the heading 'Investment Companies'.
In addition, share price information can be found under the following:
ISIN Code
Ordinary shares BMG428941162
'A' non-voting Ordinary shares BMG428941089
SEDOL
Ordinary shares BKLFC18
'A' non-voting Ordinary shares BKLFC07
Reuters
Ordinary shares HAN.L
'A' non-voting Ordinary shares HANA.L
Bloomberg
Ordinary shares HAN LN
'A' non-voting Ordinary shares HANA LN
TIDM
Ordinary shares HAN
A' non‑voting Ordinary shares HANA
Legal Entity Identifier: 213800RS2PWJXSZQDF66
Useful Internet Addresses
Association of Investment Companies www.theaic.co.uk
London Stock Exchange www.londonstockexchange.com
TrustNet www.trustnet.com
Interactive Investor www.iii.co.uk
Morningstar www.morningstar.com
Edison www.edisongroup.com
Financial Calendar
Company year end 31 March
Annual Report sent to shareholders June
Annual General Meeting July
Announcement of Half Year results November
Interim Report sent to shareholders December
Interim dividend payments August,
November,
February & May
Company Information
Registered in Bermuda company number: 54752
BOARD OF DIRECTORS
Jonathan Davie (Chairman)
Simona Heidempergher
Richard Lightowler
William Salomon
Nadya Wells
SECRETARY AND REGISTERED OFFICE
Conyers Corporate Services (Bermuda) Limited
Clarendon House
2 Church Street
PO Box HM666
Hamilton HM CX
Bermuda
PORTFOLIO MANAGER and Additional administrative services provider
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
AUDITOR
PricewaterhouseCoopers LTD
Washington House
4th Floor, 16 Church Street
Hamilton HM11
Bermuda
SOLICITORS - BERMUDA
Conyers Dill & Pearman Limited
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
SOLICITORS - UK
Dentons
1 Fleet Place
London EC4M 7RA
REGISTRAR
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH
CUSTODIAN
Banque Lombard Odier & Cie SA
11 Rue de la Corraterie
1204 Geneva
Switzerland
STOCKBROKER
Winterflood Investment Trusts
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
ADMINISTRATOR
Maitland Administration Services Limited
Springfield Lodge
Colchester Road
Chelmsford
Essex CM2 5PW
ALTERNATIVE INVESTMENT FUND MANAGER
Hanseatic Asset Management LBG
Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1WD
Glossary of Terms
Association of Investment Companies ("AIC")
The Association of Investment Companies is the UK trade association for closed-ended investment companies. It represented Hansa Trust. Despite the Company not being UK domiciled, the Company is UK listed and the Board considers that the AIC's guidance is still very relevant to the operations of the Company.
Alternative Investment Fund Managers Directive ("AIFMD")
The AIFMD is a regulatory framework for alternative investment fund managers ("AIFMs"), including managers of hedge funds, private equity firms and investment trusts. Its scope is broad and, with a few exceptions, covers the management, administration and marketing of alternative investment funds ("AIFs"). Its focus is on regulating the AIFM rather than the AIFs.
Annual Dividend / Dividend
The amount paid by the Company to shareholders in dividends (cash or otherwise) relating to a specific financial year of the Company. The Company's dividend policy is to announce its expected level of dividend payment at the start of each financial year. Barring unforeseen circumstances, the Company then expects to make four interim dividend payments each year - at the end of August, November and February during that financial year and at the end of May following the end of the financial year.
Bid Price
The price at which you can sell shares determined by supply and demand.
Capital Structure
The stocks and shares that make up a company's capital i.e. the amount of ordinary and preference shares, debentures and unsecured loan stock etc. which are in issue.
Closed-ended
A company with a fixed number of shares in issue.
Depositary/Custodian
A financial institution acting as a holder of securities for safekeeping.
Discount
When the share price is lower than the NAV, it is referred to as trading at a discount. The discount is expressed as a percentage of the NAV.
Expense Ratio
An expense ratio is determined through an annual calculation, where the operating expenses are divided by the average NAV. Note there is also a description of an additional PRIIPs KID Ongoing Charges Ratio explained in the 31 March 2020 Period End Report.
Five Year Rolling NAV Return (per annum)
The rate at which, compounded for five years, will equal the five year NAV total return to end March, assuming dividends are always reinvested at pay date.
Five Year NAV and Share Price Total Return
Rebased from 0% at the start of the five year period, this is the rate at which the Company's NAV and share prices would have returned at any period from that starting point, assuming dividends are always reinvested at pay date. The Company will continue to quote results from its predecessor, Hansa Trust PLC, as part of that reporting so shareholders can see the longer-term performance of the portfolio.
Gearing
Gearing refers to the level of borrowing related to equity capital.
Hedging
Strategy used to reduce risk of loss from movements in interest rates, equity markets, share prices or currency rates.
Issued Share Capital
Issued share capital is the total number of shares subscribed to by the shareholders.
Key Information Document ("KID")
This is a document of a form stipulated under the PRIIPs Regulations. It provides basic, pre-contractual, information about the Company and its share classes in a simple and accessible manner. It is not marketing material.
Key Performance Indicators ("KPIs")
A set of quantifiable measures that a company uses to gauge its performance over time. These metrics are used to determine a company's progress in achieving its strategic and operational goals and also to compare a company's finances and performance against other businesses within its industry.
Market Capitalisation
The market value of a company's shares in issue. This figure is found by taking the stock price and multiplying it by the total number of shares outstanding.
Mid Price
The average of the Bid and Offer Prices of a particular traded share.
Net Asset Value ("NAV")
The value of the total assets minus liabilities of the company.
Net Asset Value Total Return
See Total Return.
Offer Price
The price at which you can buy shares determined by supply and demand.
Ordinary Shares
Shares representing equity ownership in a company allowing investors to receive dividends. Ordinary shareholders have the pro‑rata right to a company's residual profits. In other words, they are entitled to receive dividends if any are available after payments to financial lenders and dividends on any preferred shares are paid. They are also entitled to their share of the residual economic value of the company should the business unwind.
Hansa Investment Company Ltd has two classes of Ordinary share. The Ordinary (40 million shares) and the 'A' non-voting Ordinary shares (80 million shares). Both have the same financial interest in the underlying assets of the Company and receive the same dividend, but differ only in that only the former shares have voting rights, whereas the latter do not. They trade separately on the London Stock Exchange, nominally giving rise to different share prices at any given time.
Premium
When the share price is higher than the NAV it is referred to as trading at a premium. The premium is expressed as a percentage of the NAV.
Packaged Retail and Insurance-based Investment Product ("PRIIP")
Packaged retail investment and insurance-based products ("PRIIPs") make up a broad category of financial assets that are regularly provided to consumers in the European Union. The term PRIIPs, created by the European Commission to regulate the underlying market, is defined as any product manufactured by the financial services industry, to provide investment opportunities to retail investors, where the amount repayable is subject to fluctuation because of exposure to reference values, or the performance of underlying assets not directly purchased by the retail investor.
Shareholders' Funds/Equity Shareholders' Funds
This value equates to the NAV of the Company. See NAV.
Spread
The difference between the Bid and Ask price.
Tradable Instrument Display Mnemonics ("TIDM")
A short, unique code used to identify UK-listed shares. The TIDM code is unique to each class of share and to each company. It allows the user to ensure they are referring to the right share. Previously known as EPIC.
Total Return
When measuring performance, the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realised over a given period of time.
Total Return - Shareholder
The Total Return to a shareholder is a measure of the performance of the company's share price over time. It combines share price appreciation/depreciation and dividends paid to show the total return to the shareholder expressed as an annualised percentage.
VIX Index
The VIX, or the CBOE Volatility Index, is a widely used measure of the implied volatility of the stock market, based on S&P 500 index options. It is calculated and published by the Chicago Board Options Exchange.
Hansa Investment Company Ltd
Clarendon House
2 Church Street
PO Box HM666
Hamilton HM CX
Bermuda
T : +44 (0) 207 647 5750
E : hiclenquiry@hansacap.com
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www.hansaicl.com
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