TIDMHAN TIDMHAN TIDMHANA
RNS Number : 2976T
Hansa Investment Company Limited
23 November 2021
Hansa , investing to create long-term growth
Interim Report
Six months ended
30 September 2021
20 2 1
Welcome
I am pleased to present the 2021 Interim Report for Hansa
Investment Company Limited ("the Company", "HICL") to the
shareholders.
The Covid-19 pandemic has continued to dominate the news
headlines during 2021, but I am pleased to say that many of those
reports have been regarding vaccination success as well as the
ever-increasing bank of knowledge the worldwide scientific
community is accumulating in the treatment and defence against the
virus. There is a huge challenge to protect the populations of
Developing World countries, where access to vaccination remains
generally poor, but there is a sense that the battle is being won.
I am also pleased to say your Company and its service providers
have continued to operate successfully during this period, which is
testament to their planning and resourcefulness.
I draw your attention to the detailed Statement written by Alec
Letchfield of our Portfolio Manager, Hansa Capital Partners LLP
("HCP"). You'll note Alec's current views on the wider market and
also specific thoughts on your Company's portfolio of assets. In
summary, whilst Alec flags potential storm clouds on the horizon
for global markets, I am pleased to say that the portfolio has
shown good performance over the six months covered by this
Report.
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 2022 was paid on 26
November 2021.
With best wishes
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
Investor Information
Company Information
Chairman's Report to the Shareholders
JONATHAN DAVIE
Chairman
Introduction
I am pleased to report that our Portfolio Manager and other
service providers to Hansa Investment Company remain resilient and
have not been operationally affected by the continuing Covid-19
problems.
SHAREHOLDER RETURNS
The past six months have shown an increase in net asset value
("NAV") from 306.6p to 322.0p, whilst the discount has narrowed
from 35.4% to 33.1% for the Ordinary shares and from 35.3% to 34.3%
for the "A" Ordinary shares.
The Core Regional and Thematic silos have shown increases of
9.9% and 4.8% respectively against an increase in the MSCI ACWI NR
Index of 8.9%. It was also very encouraging to see our long-term
holding in Ocean Wilson Holding Ltd ("OWHL") increase by 20.9% in
the period.
The lesson from history about a potential increase in the value
of the Brazilian Real I mentioned in my Interim Statement last year
has failed to materialise. That said, the Real has stabilised which
is encouraging against a background of drought, frost which has
devastated the coffee crop and the continuing high rate of Covid-19
deaths, which at the time of writing are thankfully starting to
decline rapidly.
Our global equity portfolio has declined 2.9%, mainly due to its
exposure to value rather than growth.
I am pleased to report that our Manager, Alec Letchfield,
continues to manage our portfolio with great thoughtfulness and
diligence, which you will see from his report, despite the volatile
environment.
PROSPECTS
The outlook for stock markets remains challenging, partially as
a result of labour shortages, supply disruption creating
bottlenecks and Covid-19 which continues to wreak havoc in many
countries.
All the above, together with ample liquidity and ultra-low
interest rates, are beginning to develop noticeable inflationary
trends, creating an increasing amount of pressure for Central Banks
to act to prevent inflation getting out of control. None of the
above is helped by international tensions, particularly between
China and the western democracies led by the United States.
Perhaps one of the bigger surprises has been the sudden
appearance of energy shortages as the northern hemisphere winter
looms. Striking examples include a cargo of LNG which, in early
2020, was priced at about $10m, is now trading at about $280m, or
that oil traded at less than zero one day on the US futures market
in April 2020 against a price at the time of writing of
approximately $86 per barrel.
To my mind the oil price will remain firm for a number of
reasons. On the supply side the search for new reserves and shale
production has declined rapidly, whilst demand in the developing
countries is rising and global demand is now almost back to where
it was before the pandemic started. Whilst inflationary in the near
future, this may prove to be the decisive factor to create
deflationary forces in the longer-term.
It is very difficult to forecast where and when inflation will
peak in the present cycle. All we know for certain is that the
present problems of shortages, disruption and quantitative easing
which are some of the reasons for noticeable wage inflation, will
come to a close to be followed by a surplus of goods which will
signal the start of a deflationary period.
On a positive note, it is encouraging to see some commitments
being made on a number of issues at the COP26 Climate Change
Conference held in Glasgow, particularly the abandonment of
deforestation and reductions in methane--emissions. It would be
remiss of me not to write about HICL's actions and thoughts on the
present ESG debate. On the matter of investment policy, as reported
in the Year-end Report, our Portfolio Manager continues to develop
its Responsible Investment Policy which the Board supports. As a
long-term investor, HCP has a natural desire to be a responsible
investor and good corporate citizen. This is reflected in the
belief that such businesses and investments are likely to generate
superior long-term returns and, furthermore, consideration of such
issues is an important element in the assessment of potential
risks. The Responsible Investment Policy seeks to incorporate ESG
factors into investment decision--making. The Manager is not
pursuing an exclusionary policy through negatively screening
potential funds or companies and thereby restricting our investment
universe, but instead will engage with those companies and funds
which they feel are falling short on their responsibilities.
However, there is an expectation that our existing investments
should take ESG issues seriously, to clearly report on them and to
aspire to do the right thing. Additionally, as you may also recall
when HICL became domiciled in Bermuda, your Board decided to make
the relevant carbon offset payments on travel, which we continue to
do through GreenFleet Australia, a leading not-for-profit
environmental organisation on a mission to protect our climate by
restoring forests.
Alec Letchfield's comments reflect a more nuanced approach to
investment opportunities, with the possibility of greater
volatility and more modest returns, whilst sticking with a
continuing strong bias towards equity investment.
Let us all hope the Covid-19 challenge continues to decline as
we all learn to cope with this coronavirus.
May I wish you all seasonal good wishes and much good health,
and prosperity for 2022.
Jonathan Davie
Chairman
23 November 2021
Interim Management Report
The Directors present their Report and Condensed Financial
Statements for the period to 30 September 2021.
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 2021
The Business Review, which includes a discussion of important
events which occurred within the period to 30 September 2021, is
covered in the Chairman's Report to the Shareholders and the
Portfolio Manager's Report.
Hansa Investment Company Limited is a Bermudan company formed in
June 2019 to take on the business of Hansa Trust Ltd ("Hansa
Trust"). As a company, HICL has limited financial history only
having taken on the business of Hansa Trust in August 2019.
Therefore, when discussing the medium and longer-term financial
performance of the Company and its portfolio, the Board will
continue to incorporate the financial performance from Hansa Trust,
as well as HICL where relevant.
KEY RISKS FOR THE FINANCIAL YEAR TO 31 MARCH 2022
The key risks and uncertainties relating to the period ended 30
September 2021 and for the year ended 31 March 2022 are materially
the same as those reported in the Year-end Report for the Company
for the year ended 31 March 2021. Specifically, with regard to
Covid-19, the Board is of the opinion that the worst is already
behind us and is optimistic that the ongoing global vaccine
rollout, as well as the multitude of other treatment strategies
will limit the future economic damage from this virus. The Board,
with the Portfolio Manager, continues to focus on the likely future
economic impacts as the world emerges from the pandemic and how
these, in turn should influence our investment approach.
GOING CONCERN BASIS OF ACCOUNTING FOR THE PERIOD TO 30 SEPTEMBER
2021
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 GBP1,601,000 excluding VAT (six months to 30 September
2020: GBP1,291,000; year to 31 March 2021: GBP2,742,000). Amounts
outstanding at 30 September 2021 were GBP261,000 (30 September
2020: GBP219,000; 31 March 2021: GBP251,000).
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 condensed set of Financial Statements contained within
the Interim Financial Report 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 23 November
2021 and was signed on its behalf by:
Jonathan Davie
Chairman
23 November 2021
All Change, Please
Market backdrop......
With stock markets enjoying stellar returns over the past 18
months it increasingly feels like much of the low hanging fruit has
now been picked. The combination of economies rebounding, as
countries reopened from their Covid-19-induced hibernation,
together with a wall of liquidity, has served to turbocharge asset
prices. Over the half-year however we have started to see some
cracks beginning to appear in this goldilocks environment for
global markets.
Economies, having generally recovered well, are now showing
signs of rolling over, with lead indicators increasingly pointing
towards slower growth as the year progresses. Partially this is a
function of the maths with it impossible for the extreme growth
exhibited over the past year to continue forever, but also because
Covid-19 has reared its head again. The delta variant, in
particular, caused a number of countries to either slow their
reopening process or to tighten restrictions again. Global supply
chains have also come under pressure. With demand exceeding supply
as economies reopen many areas have experienced bottlenecks,
choking growth in the process. To date we have seen bottlenecks
form in important sectors such as fuel, natural gas,
semi-conductors and the automotive industry.
The outlook for liquidity is also deteriorating. Time and time
again in the current cycle central banks have stepped in to shore
up markets through liquidity injections, which reached
unprecedented levels during last year's pandemic. So far in the
current cycle this wall of liquidity has had little impact on
inflation and, instead, deflation has been the main challenge. This
year however inflation appears to be rearing its ugly head
again.
Driving this rise in inflation has been the introduction of
fiscal spending on top of what was already an extraordinarily loose
monetary picture. Having seen little fiscal stimulus post the
global financial crisis due to concerns over high debt levels,
governments felt they had little choice but to start spending given
the gravity of the potential impact of the pandemic on jobs and the
broader economy. Unfortunately, fiscal policy tends to be more
inflationary in nature and, once the spigot is opened, it is often
very hard for politicians to wean themselves off this additional
expenditure. Combine this with the bottlenecks created as economies
reopen and it is unsurprising that we have seen prices spike in a
number of sectors, in particular commodities, cars and lumber and a
corresponding jump in wages in leisure and transport.
The big debate of course is whether this is temporary or more
structural in nature. We'll touch on this point a little later but
it is clear to us now that the lows we saw in inflation last year
have almost certainly passed with the real question now, being
whether inflation stops at manageable levels or reaches a point
that necessitates central bankers to rapidly withdraw liquidity.
Markets, having previously forecast that central banks would not
act anytime soon as they seemed more worried about employment and
the health of the economy, are now shifting to anticipating that
quantitative easing ends sooner and interest rates go up earlier
than previously thought.
Hence the goldilocks environment we have been experiencing for
the past year is shifting to a more nuanced backdrop, with perhaps
the greatest fear being that we are heading into a period of
stagflation i.e. falling growth and rising inflation. It is not
surprising then that stock markets have proven to be more volatile
recently.
In terms of market returns world equities were up for the half,
gaining 9.0%, but underlying this was a 2.1% fall in September. The
US was positive over the half, rising by 11.8%, but again fell by
2.6% in September, while the returns in the UK and Europe were 8.3%
and 8.4% for the half and 0.1% and -2.7% in September
respectively.
Amongst the outliers, Japanese equities were up by 4.3% and
5.0%, respectively, for the half and September, receiving a modest
boost from the more positive Covid-19 data and the confirmation of
a new prime minister. In contrast China fell by 14.2% and 3.0% in
the half and September, respectively, reflecting a nasty
combination of slowing growth, debt default concerns in relation to
the property group Evergrande and government action to reassert
their influence on the technology and education sectors.
Highlighting one of our key concerns and themes for the coming
years, this poor equity market performance was accompanied by
generally weak bond markets. Whilst historically the balanced
portfolio, a 60%:40% blend of equities and bonds, had typically
performed well with good bond market performance offsetting periods
of poor equity market performance, we fear this might not be the
case in the future. For the half global bonds returned 2.1%, UK
Government bonds -0.2% and US Treasuries 4.2%.
Finally, in the alternatives space, hedge funds were modestly up
over the half-year, whereas commodities produced robust returns
rising by 23.8% with oil in particular strong over the period.
Thematic exposure......
One of the most successful areas of our investment approach has
been our thematic silo. Reflecting our long-term investment
philosophy, this silo typically attempts to identify those sectors
which possess structural growth characteristics and generate above
market returns. Occasionally we will invest in more tactical areas
but primarily this element of the portfolio will focus on those
areas which, we believe, will provide us with persistent secular
growth.
In terms of our current themes we have favoured technology and
biotechnology and more recently added exposure to impact investing.
All have similar characteristics, most notably being at the
forefront of the changing world in which we live and exhibiting
growth levels typically well ahead of the broader market at a time
when overall growth has been lacklustre.
One of the key questions to investing in this area is knowing
when to jump on or off the train. There have been many occasions
during the current cycle when we have questioned whether or not it
is time to get off. Valuations often move into the more expensive
territory, or there are recurring questions over regulation that
lead many commentators to periodically call the top of the market.
Generally, however, these structural growth companies have been
able to grow into their valuations and, importantly, as a rule of
thumb these trends go on for longer than most people
anticipate.
The current backdrop however does make us pause and ask if we
have gone past our stop. Valuations in certain areas are looking
extended, but more importantly the changing economic and interest
rate landscape potentially has important implications for the
prospects of growth sectors such as technology and biotech. In an
environment where growth is hard to come by, as has been the case
in recent years, the scarcity value of sectors such as technology,
biotech and impact companies is very high. Combining this scarcity
premium with a negative real interest rate backdrop means we can
attribute higher valuations to such long duration names.
Hence if we are moving back into a more conventional growth and
inflation environment, buoyed by fiscal spending, the scarcity
value of higher growth sectors diminishes. Why buy expensive growth
names when more cyclical names can be purchased at lower
valuations? Furthermore, if this environment results in interest
rates normalising then the value we can attribute to higher growth,
longer duration names falls.
Compounding these concerns we have started to see a number of
warning flags raised on our favoured sectors. Technology for
example, which has benefited from the confluence of the internet
shifting from being the domain of academics to being available to
the masses, the ability to manipulate and store huge quantities of
data and the advent of mobile communications, has now started to
show signs of excess. From a market dominance perspective
technology has now become the largest sector by size and number
within market indices. Having previously represented just 3% of
companies in the S&P 500 in 1970, tech names now account for
28% of the S&P including six of the top 10 companies. Looking
back through time it is incredibly rare for the dominant companies
of 10 years back to be the dominant companies of the future.
This dominance has also called into question the level of power
exhibited by the big tech names. Many of the larger technology
companies have adopted a Pac-Man approach of buying newer, smaller
technology companies such that they prevent happening to themselves
what they did to the incumbent bricks and mortar names which they
disintermediated. Similarly there are signs that they are abusing
their market power with access to consumer data giving many tech
companies an unparalleled insight into how we live, shop and manage
our lives.
The danger from such dominance is that governments start to wage
war on the tech giants in an effort to stymie their powers.
Illustrating this risk has been the situation in China over recent
months. China was the one region that appeared to be developing a
similar tech ecosystem to that of the US, creating their own tech
behemoths who had access to a huge market, with consumers prepared
to give up their data in exchange for cheap goods and services.
With most commentators assuming that the Chinese government was
happy to accept the trade-off, creating an industry on a par with
that of the US, it therefore came as a huge shock when the
authorities stepped in and started regulating the tech names and
wiping huge amounts of value off the Chinese technology sector in
the process. The danger is that this greater regulation and
oversight becomes a global phenomenon with the recent Meta
Platforms (formerly Facebook) whistle-blower case illustrating the
scale of the problem.
Biotechnology also faces challenges. Whilst in many ways
vindicated by the instrumental part the sector played in the
development of Covid-19 vaccines, there is a persistent threat of
pricing controls in the US. The US is faced with a ticking time
bomb from the ever-rising level of health care costs which
currently account for around 11% of US GDP. If these are not
tackled then the country faces spiralling debt levels and
inequality, with poorer parts of society unable to receive adequate
healthcare. Whilst the biotechnology sector argues that it is part
of the solution rather than problem, helping to reduce overall
healthcare costs which they say are primarily down to high care
costs and not drug prices, there are persistent calls for the cost
of drugs to be regulated.
Finally, impact led sectors have been buoyed by a powerful shift
towards ESG investing. The sector is in practice a broad church
ranging from electric vehicles to more effective energy usage to
optimising how we consume food and water. Nonetheless the huge
momentum towards all things ESG has meant many areas are
potentially in bubble territory. It is, for example, hard to square
how Tesla's market capitalisation is greater than that of the
entire automotive industry, when it produces just 500,000 cars a
year compared to the 25.2m cars produced by Volkswagen, Toyota and
GM.
The big question then is whether it is time to reduce our
weighting to these sectors and refocus the portfolios on the more
cyclical and value areas of the market?
Our view is that whilst current events certainly lend themselves
towards more balance in the portfolios, we do not believe that the
longer-term structural trends are fundamentally broken. Cycles are
often characterised by dominant multi-year trends, but within this
there are periods where these trends are temporarily out of favour
and other sectors come to the fore. This feels like one such
period.
Technology has already seen quite a shakeout in its more
expensive areas, but despite this we continue to view the sector as
only part way through its journey. Whilst perhaps the pace of new,
revolutionary technologies will slow, with it hard to replicate
such new and novel technologies as social media, Google and the
smart phone, it still feels like we are very much only part of the
way through the journey as to how they are adopted in our everyday
lives and the way in which companies operate. The scale and impact
of this adoption process will continue to be huge. Similarly we are
not arguing that the tech giants of today will continue to be the
dominant ones of the future (although many would argue that a
number of these companies possess monopolistic powers and will
remain pervasive unless they are broken up by governments), but
instead that new technology companies will come along and displace
the current names.
Similarly in the biotechnology sector it again appears we are
still travelling rather than arriving. Whilst historically the
biotech sector was much smaller and more volatile, it has undergone
a structural change in recent years. With research and development
previously the domain of the big cap pharma companies who were
struggling to replace older blockbuster drugs coming off patent, it
became obvious they just weren't set up to allocate capital
efficiently in the drug discovery process. In contrast smaller,
more nimble biotech companies were particularly adept at
discovering drugs and developing new ways to tackle diseases and
the challenges presented by an ageing population. Big cap pharma
has morphed into the development and sales units for these new
products, as was illustrated during Covid-19 with Pfizer buying in
the vaccine developed by BioNTech. Greater regulation is likely to
remain an ongoing issue with it being easy for politicians to sound
tough on drug pricing, but in practice it makes little sense to
discourage the discovery of new and better drugs that keep people
out of hospitals.
The impact sector is more difficult to break down given its
breadth and certainly some areas do look expensive. Nonetheless we
remain of the view that the necessity to protect the environment
will generate significant investment opportunities in the years
ahead. This challenge will only be exacerbated as developing
nations become wealthier and, in the process, consumers want to
purchase more products such as meat and cars with all the
corresponding challenges in terms of energy consumption and harmful
emissions.
Hence whilst the current uptick in inflation, cyclical growth
and the historic lack of investment in many commodities will
underpin the more cyclical areas of the market, ultimately these
remain sectors you may not want to own forever and forecasting
their drivers remains challenging to impossible. Not least you have
to both purchase them well and sell them well, which history shows
is very difficult to do consistently. In contrast those sectors
generating structural growth have the wonderful advantage that
ultimately their growth will bail you out over time.
Summary.......
It undoubtedly feels as though the best of the current cycle has
passed. The powerful combination of economies rebounding from their
Covid-19 lows, together with huge quantities of liquidity created a
wonderful backdrop for global stock markets. With the market
returns over recent years being well above the average it would be
surprising if we weren't in for a period of more modest returns and
greater volatility.
Saying this it is also the case that we continue to view
equities as our favoured asset class. Whilst they may well generate
lower returns in the future they continue to look far more
attractive than bond markets, where the combination of low yields,
rising inflation and interest rate increases looks particularly
unappetising.
Inflation is likely to remain the key debate in the near-term.
With the reopening process creating considerable challenges,
inflation has spiked sharply and, in the process, brought forward
the likelihood of both earlier and higher interest rate rises. The
big question is whether this inflation morphs from being temporary
to structural. At this stage we are minded to view the lows in
inflation as having been set, but equally we are not of the opinion
it will lead to structurally problematic inflation in the
longer-term. We are, however, watching the situation closely and
will certainly change our position if the evidence points in this
direction.
At the sector level we advocate more balance in the portfolio,
not least to hedge against higher more persistent inflation, whilst
remaining firmly wedded to structural growth sectors such as
technology, biotech and impact, whether this is through the public
or private markets. It is also our plan to come back to our
thoughts on impact investing in a later House View with the sector
an area of growing importance in the investment world.
Portfolio Review and Activity
Your Company produced a return of 8.8% for the first half of the
financial year on a NAV total return basis, giving a total return
of 28.4% over the last 12 months. There has been good performance
from the Core funds. The Thematic and Diversifying silos have also
made gains albeit a little more muted, while Global Equities made a
negative return over six months. Ocean Wilsons Holdings has been a
strong contributor to performance in recent months, with a total
return of 20.9% over six months and 72.5% over 12 months. The key
performance indicators for the six-month period were 8.9% for the
MSCI ACWI NR Index (GBP), -0.2% for the FTSE UK Gilts All Stocks TR
Index and 2.7% for UK CPI. Over the last 12 months these KPIs were
22.2%, -6.8% and 3.0%, respectively. The Company's net asset value
per share increased from 306.6 pence per share at the end of March
2021 to 332.0 pence per share at the end of September 2021.
Core and Thematic Funds
The Core Regional silo produced a stronger return than the
Thematic silo over the first half of the financial year. The Core
Regional silo gained 9.9%, while the Thematic silo was up 4.8%.
Over the last 12 months, however, the Thematic silo has been
stronger with a gain of 25.5%, compared to one of 20.7% for the
Core Regional silo.
During the last six months the North American holdings have once
again made significant contributions to performance. Three of the
four positions produced strong mid-teens returns, while Pershing
Square Holdings was up 4.8%. Vulcan Value's 16.5% return was the
strongest, followed by 16.0% from Select Equity and 14.7% from
Findlay Park American. Contributors to Select's performance
included Ceridian HCM, which provides human capital management
software, Repligen, whose products are used in the manufacturing of
biologic drugs and PerkinElmer which serves the laboratory services
market including with equipment used for genetic screening and drug
discovery.
The two Japan funds, Goodhart Partners: Hanjo Fund and Indus
Japan Long Only Fund were both positive but the Indus fund was
notably stronger, with a return of 12.9% compared to 1.5% from the
Hanjo fund over the last six months. The Hanjo fund's focus on
smaller cap companies has meant many of its portfolio holdings have
been ignored by the market recently and its 12 month return has
been -3.7%, while Indus Japan has performed much more strongly over
that period and is up 28.1%. Two of the strongest contributors for
the Indus fund more recently have been Daiichi Sankyo and Kadokawa.
Daiichi Sankyo is a pharmaceutical company with a number of
products including antibody-drug conjugates ("ADC") for the
treatment of cancers as well as vaccines. The company announced
another partnership with AstraZeneca over the summer which will see
the companies work together on datopotamab, a clinical-stage ADC
for lung cancer. Kadokawa is a publishing and media company that is
expected to benefit from Japan's growing market for animated
content, while it also has an online education business that is
performing well.
Emerging markets have had a more difficult six months, although
there were still some strong returns within this section of the
portfolio. The weaker performing holdings included the passive
iShares Core MSCI Emerging Markets ETF which declined 0.3%, and the
Schroder Asian Total Return Fund that was down 0.7%. However, the
NTAsian Discovery Fund, which is focused on the smaller economies
of south east Asia, gained 22.2%, which takes its 12 month return
to an extremely strong 55.0%. Several of the fund's largest
positions did very well, particularly those listed in Vietnam,
where investors focused on the improving vaccination rates and
recovery prospects for 2022 despite the impact of strict lockdowns
dampening company results. Mobile World Group has had a very strong
period despite reporting a decline in revenues in August, as over
70% of its stores were affected by the lockdown. However, online
and delivery sales grew 30% over the year, and its grocery chain
was a bright spot with 54% revenue growth in August. The IT
conglomerate FPT has benefited from the pandemic and delivered
strong revenue and net profit growth in the first eight months of
the year. Frontier markets have been notably stronger than emerging
markets this year, although the BlackRock Frontiers Investment
Trust delivered a relatively muted gain of 2.1% over the last six
months, bringing it to be up 37.4% over 12 months.
The Thematic holdings have experienced mixed returns over the
first half of the financial year. Having led the markets for so
long, the technology sector and growth equities more generally,
have been a little more muted and they were particularly weak in
the latter half of September. Despite this the GAM Star Disruptive
Growth Fund gained 3.8% and remains up 29.5% over 12 months. Li
Auto was a notable detractor, with the stock buffeted by concerns
around Chinese regulation, although the manager continues to like
the fundamentals of the business, which is exposed to key secular
trends such as the electrification of cars. Two of the healthcare
positions fell over the last six months, with RA Capital
International Healthcare down 3.9% and Worldwide Healthcare Trust
down 1.6%, while BB Biotech managed to deliver a gain of 5.9%.
Significantly stronger performance was achieved by Impax
Environmental Fund and the SPDR MSCI World Financials ETF, which
were up 13.3% and 12.2%, respectively, over the last six
months.
Diversifying Funds
The Diversifying silo has produced a return of 3.6% over the
last six months, taking its return over 12 months to a pleasing
8.7%. It has been particularly encouraging that the silo has
continued to deliver good returns in an environment where cash and
bonds have been flat or negative. The holdings in this silo are
intended to show lower correlations to the equity market.
The macro trading fund Hudson Bay International continues its
good performance, delivering another 4.6% over six months which
brings it to now be up a very impressive 20.6% over 12 months. The
other macro fund, MKP Opportunity, has performed less well, falling
0.2% in the last six months, and it is up only 3.1% over 12 months.
The two CTA funds have performed strongly so far this financial
year, with GAM Systematic Core Macro and Schroder GAIA BlueTrend up
8.4% and 6.2%, respectively. The fixed income portion of the
Diversifying silo also produced positive returns over the last six
months, with BioPharma Credit leading with a gain of 6.9% while
Selwood Liquid Credit Strategy, Apollo Total Return and Lazard
Convertible Global (purchased in July) returned 3.2%, 2.4% and
1.3%, respectively. Weaker performance has come from CZ Absolute
Alpha Fund (-3.1%) and Global Event Partners (+0.2%), but these two
funds remain up 9.3% and 13.9%, respectively, over the last
year.
Global Equities
The portfolio fell 2.9% over the past six months, with the
biggest positive contributors being Alphabet, CTT and CVS Health.
The biggest detractors were Interactive Brokers, TripAdvisor and
Nexon.
We invest on a five-to-ten-year time horizon which allows us to
ignore short-term noise and focus on the long-term value creation
of the businesses we own. This is certainly not regarded as the
most exciting or popular way to participate in the stock market at
the moment, not least because still we experience the same
short-term volatility, as traders move in and out of the market on
a weekly, daily, or hourly basis.
We saw a spike in volatility towards the end of the quarter,
when the ever-important US Treasury bond yield began to move
higher. This particular indicator is important because it is used
as the proxy for the risk-free rate in many stock valuation models.
When valuing a company using a discounted cashflow model, investors
apply a discount rate to model the present value of a stock's
future cashflows (the price they are willing to pay for those
cashflows today); this discount rate is the sum of the risk-free
rate plus a risk premium. In simple terms, if an investor uses a
lower discount rate to discount a company's future cashflows, they
will end up with a higher price than they would do were they using
a higher discount rate. This is important to understand because it
goes some way to explaining market conditions over the past few
years. Lower discount rates, driven by lower risk-free rates,
thanks to loose monetary policy, have resulted in investors being
willing to pay ever higher prices for the future cashflows of
businesses, some of which may not be generating revenue at all at
present. The value of businesses with less exciting growth
prospects but good cash generation are less appealing, when an
investor can pay a 'reasonable' price for huge prospective future
revenues from growth businesses in the longer term.
In recent years we have focused on less glamorous stocks that do
not offer the promise of astronomical revenue growth, not because
we don't believe they can grow at those rates, but because the
price was too high. When the risk-free rate rises, our lower priced
holdings seem more attractive on a relative basis and our portfolio
benefits. We saw this effect in the last seven days of September
when treasury yields rose and the portfolio's holdings performed
well, whilst the market suffered.
Declining treasury yields over the past six months have
certainly had a detrimental effect on the portfolios short-term
performance, but should they continue to rise we expect a similarly
positive benefit. Although it is frustrating that moves in the bond
markets have been dictating performance, we are focused on
long-term value creation and nowhere is that clearer than at our
second largest holding, Interactive Brokers.
We last wrote in detail about Interactive Brokers at the end of
2019; since then the price of the stock is c.30% higher, but the
value of the business has grown even faster. In 2019 we wrote "the
market's concerns now centre on low interest rates, slowing account
growth and zero commission trading". The backdrop of low interest
rates (expectations of which drive bond yields) has worsened, but
the move by other companies to zero commission trading has not hurt
the business at all. If anything, it has helped the business, as it
popularised stock trading and meant that the savvier traders
graduated to using the Interactive Brokers platform.
As a reminder, the company makes money in two ways: commissions
on trades and net interest income ("NII"). The latter is the
difference between the interest it receives and the interest it
pays out. There is no doubt that the business has been hurt by
interest rates falling from 1.5% to 0% today, as not only are they
failing to earn interest on their $85 bn of client deposits, but
they previously offered clients the highest rates amongst their
peers, so have lost a valuable marketing tool. The collapse in
interest rates meant they missed out on an extra $239m in NII in
2020. The good news is that rates cannot go much lower than current
level, and profits are expected to be boosted by $102m for every
25bps increase in interest rates.
The account growth concern from 2019, when it slowed to 15%, has
also dissipated. Since then, accounts have exploded from 689,000 to
1.54 m, a 58% annualised growth rate. Client equity growth has kept
pace, growing from $174 bn to $353 bn, meaning the average client
equity remains at around $250k, far higher than upstart peers like
Robin Hood.
The founder and Chairman Thomas Peterffy's long-term goal is to
get to 80 m accounts. Whilst we think that may be a tad ambitious,
we do expect 20% growth in accounts annually, for the next several
years. We believe paying 19x earnings for this fast-growing
business, which is currently under-earning relative to its
potential, is a great place to be, regardless of the current
interest rate environment.
During the past six months we sold our remaining holdings in
Nexon and Iridium, and trimmed our position in Samsung Electronics,
in part to fund purchases in Coats Group and ViaSat.
Ocean Wilsons Holdings
The two parts of the business within the holding company
structure are recovering well from the effects of the pandemic,
although port congestion, particularly in Asia, had a negative
impact on container volumes during September. The Ocean Wilsons
Holdings' share price has fallen back a little recently as the
market takes stock after its recent very strong performance, but it
remains up over six months. Its total return was 20.9% over the
last six months and 72.5% over the last year. The share price
represents a discount to the look--through NAV of 42.3%, based on
the market value of the Wilson Sons shares together with the latest
valuation of the investment portfolio.
The investment portfolio shares many characteristics with the
portfolio held directly within Hansa Investment Company, with a
preference for funds with clearly-defined strategies, run by
managers with skin in the game. It also has a significant private
equity programme invested in Limited Partnerships, and many of
these funds have been delivering strong returns in recent years.
After paying out $2.5m for dividend payments in May 2021, the
portfolio was valued at $335.9m at the end of June 2021, up from
$332.7m at the end of April 2021 and $310.3m at the end of December
2020. The gross time--weighted performance over the first six
months of the 2021 calendar year was 9.5%, which is strongly ahead
of the 5.7% return of the Performance Benchmark.
Plans to relist the Wilson Sons subsidiary on the Novo Mercado
segment of the stock market, which requires the company to adopt
corporate governance practices over and above those required by
Brazilian law, have progressed well. The company relisted on 25
October. It is hoped that this will stimulate a further rerating of
Wilson Sons and ultimately Ocean Wilsons.
The second quarter results for Wilson Sons (released in August)
were strong, with earnings of $41.1m, 11.3% higher than the same
quarter in 2020. Operating results were boosted by trade flow
growth, while the effect of port congestion have not yet caused
significant declines. Increased domestic economic activity drove
higher import and transhipment volumes, although there were signs
that logistic bottlenecks and a lack of empty containers were
challenging exports volume growth. The Salvador terminal had an
all-time record first half, handling 184,000 TEU, while the Rio
Grande terminal grew total volumes by 10.8% against the second
quarter in the previous year.
The towage division also delivered good results, driven by large
commodity volumes as chemicals and oil performed well. The number
of harbour manoeuvres in the second quarter was up 8.8% from last
year and revenue per manoeuvre also grew. However, demand for oil
and gas offshore support services remains challenging, with an
oversupply of offshore platform supply vessels.
Alec Letchfield
November 2021
Portfolio Statement
as at 30 September 2021
Investments Fair Percentage of
value Net Assets
GBP000
Core Regional Funds
Findlay Park American Fund 29,220 7.3
Vulcan Value Equity Fund 23,470 5.9
Select Equity Offshore Ltd 21,628 5.4
BlackRock Strategic Hedge Fund 15,225 3.8
Schroder ISF Asian Total Return 12,340 3.1
Adelphi European Select Equity Fund 12,291 3.1
Goodhart Partners: Hanjo Fund 11,891 3.0
Pershing Square Holdings Ltd 8,854 2.2
Indus Japan Long-Only Fund 8,275 2.1
Prince Street DigDec Fund Ltd 7,433 1.9
Egerton Long-Short Fund Ltd 6,678 1.7
Vanguard FTSE Developed Europe ex UK Equity Index
Fund 4,680 1.2
iShares Core EM IMI UCITS ETF 4,285 1.1
NTAsian Discovery Fund 3,821 0.9
BlackRock Frontiers Investment Trust PLC 3,297 0.8
Total Core Regional Funds 173,388 43.5
Strategic
Wilson Sons Limited (through our holding in Ocean
Wilsons Holdings)* 53,072 13.3
Ocean Wilsons Investments Limited (through the
holding in Ocean Wilsons Holdings)* 37,650 9.5
Total Strategic 90,722 22.8
Global Equities
Exor NV 4,824 1.2
Interactive Brokers Group Inc 3,591 0.9
CK Hutchinson 2,643 0.7
Group Catalana Occidente SA 2,572 0.6
Orion Engineered Carbons SA 2,515 0.6
Alphabet lnc 2,278 0.6
Arch Capital Group Ltd 2,123 0.5
Subsea 7 2,066 0.5
Viaset Inc 1,959 0.5
CVS Health Corp 1,950 0.5
Marel 1,927 0.5
Dollar General 1,896 0.5
Coats Group PLC 1,786 0.5
Berkshire Hathaway Inc 1,761 0.4
Samsung Electronics Co Ltd 1,741 0.4
Hilton Food Group PLC 1,580 0.4
TripAdvisor Inc 1,329 0.3
C&C Group PLC 1,216 0.3
CTT-Correios de Portugal 1,000 0.3
Total Global Equities 40,757 10.2
Diversifying
Global Event Partners Ltd 10,270 2.6
DV4 Ltd** 8,870 2.2
Hudson Bay International Fund Ltd 4,948 1.3
MKP Opportunity Offshore Ltd 3,045 0.8
Selwood AM Liquid Credit Strategy 2,614 0.7
Keynes Systematic Absolute Return Fund 2,458 0.6
Apollo Total Return Fund 2,444 0.6
Lazard Convertible Global 2,157 0.6
Vanguard US Govt Bond Index Fund 1,689 0.4
CZ Capital Absolute Alpha UCITS Fund 1,346 0.3
BioPharma Credit PLC 1,326 0.3
GAM Systematic Core Macro (Cayman) Fund 1,148 0.3
Schroder GAIA BlueTrend 922 0.2
Total Diversifying 43,237 10.9
Thematic
GAM Star Fund PLC - Disruptive Growth 26,069 6.5
Impax Environmental Markets Fund 5,243 1.3
BB Biotech AG 4,245 1.1
SPDR MSCI World Financials UCITS ETF 3,323 0.8
RA Capital International Healthcare Fund 3,087 0.8
Worldwide Healthcare Trust PLC 2,306 0.6
Total Thematic 44,273 11.1
Total Investments 392,377 98.5
Net Current Assets 6,047 1.5
Net Assets 398,424 100.0
*Hansa Investment Company Limited 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 2021 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 2021.
**DV4 Ltd Is an unlisted Private Equity holding. As such, its
value is estimated as described in Note 1(k) to the Statutory
Financial Statements and is listed as a Level 3 Asset in note 20 of
the Statutory Financial Statements 31 March 2021. All other
valuations are either derived from information supplied by listed
sources, or from pricing information supplied by third party fund
managers.
Financial Statements
Condensed Income Statement
For the six months ended 30 September 2021
(Unaudited) (Unaudited)
Six months ended Six months ended (Audited)
30 September 30 September Year ended
2021 2020 31 March 2021
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gains on investments held
at fair value through profit
or loss - 29,472 29,472 - 38,310 38,310 - 93,032 93,032
Foreign exchange gains/(losses) - 6 6 - (47) (47) - (181) (181)
Investment income 5,157 - 5,157 2,817 - 2,817 6,350 - 6,350
5,157 29,478 34,635 2,817 38,263 41,080 6,350 92,851 99,201
Portfolio management fees (1,519) - (1,519) (1,231) - (1,231) (2,621) - (2,621)
Other expenses (662) - (662) (592) - (592) (1,149) - (1,149)
(2,181) - (2,181) (1,823) - (1,823) (3,770) - (3,770)
Income for the period 2,976 29,478 32,454 994 38,263 39,257 2,580 92,851 95,431
Return per Ordinary and 'A'
non--voting Ordinary share 2.5p 24.5p 27.0p 0.8p 31.9p 32.7p 2.2p 77.4p 79.6p
The Company does not have any income or expense not included in
the Profit for the period. Accordingly the "Income 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 2021
(Unaudited) (Unaudited) (Audited)
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Non --current assets
Investments in subsidiary at fair value through
profit or loss^ - 3,179 3,179
Investments held at fair value through profit
or loss 392,377 307,552 365,268
392,377 310,731 368,447
Current assets
Trade and other receivables 17 102 177
Cash and cash equivalents 6,450 6,380 2,833
6,467 6,482 3,010
Current liabilities
Trade and other payables (420) (3,577) (3,567)
Net current assets/(liabilities) 6,047 2,905 (557)
Net assets 398,424 313,636 367,890
Capital and reserves
Called up share capital 1,200 1,200 1,200
Contributed surplus 325,719 326,979 326,019
Retained earnings/(accumulated losses) 71,505 (14,543) 40,671
Total equity shareholders' funds 398,424 313,636 367,890
Net asset value per Ordinary and 'A ' non --voting
Ordinary share 332.0p 261.4p 306.6p
^This represents Hansa Investment Company Limited' s investment
in Hansa Trust Ltd and its associated intercompany loan at fair
value. As part of the dissolution process, since the prior
year-end, the remaining value of Hansa Trust Ltd was transferred to
HICL via a capital reduction process, leaving a negligible value on
30 September 2021. On 9 November 2021, Hansa Trust Ltd was
dissolved and removed from the Register of Companies held at UK
Companies House.
Condensed Statement of Changes in Equity
For the six months ended 30 September 2021
(Unaudited)
Contributed
Share Surplus Retained
Capital Reserve Earnings Total
GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2021 1,200 326,019 40,671 367,890
Profit for the period - - 32,454 32,454
Dividends - (300) (1,620) (1,920)
Net assets at 30 September 2021 1,200 325,719 71,505 398,424
Condensed Statement of Changes in Equity
For the six months ended 30 September 2020
(Unaudited)
Contributed
Share Surplus Retained
Capital Reserve Earnings Total
GBP000 GBP000 GBP000 GBP000
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 2019 1,200 326,979 (14,543) 313,636
Condensed Statement of Changes in Equity
For the year ended 31 March 2021
(Audited)
Contributed
Share Surplus Retained
Capital Reserve Earnings Total
GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2020 1,200 327,939 (52,840) 276,299
Profit for the year - - 95,431 95,431
Dividends - (1,920) (1,920) (3,840)
Net assets at 31 March 2021 1,200 326,019 40,671 367,890
Condensed Cash Flow Statement
For the six months ended 30 September 2021
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Cash flows from operating activities
Profit before finance costs 32,454 39,257 95,431
Adjustments for:
Realised (gains)/losses on investments (1,601) 4,028 2,011
Unrealised gains on investments (27,871) (42,338) (95,043)
Foreign exchange (6) 47 181
Decrease in trade and other receivables 160 2,401 2,326
Increase/(decrease) in trade and other payables 32 (136) (146)
Purchase of non-current investments (3,894) (8,412) (27,416)
Sale of non-current investments 6,257 12,434 28,444
Net cash inflow from operating activities 5,531 7,281 5,788
Cash flows from financing activities
Dividends paid (1,920) (1,920) (3,840)
Net cash outflow from financing activities (1,920) (1,920) (3,840)
Increase in cash and cash equivalents 3,611 5,361 1,948
Cash and cash equivalents at start of period 2,833 1,066 1,066
Foreign exchange 6 (47) (181)
Cash and cash equivalents at end of period 6,450 6,380 2,833
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 the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
with International Accounting Standard 34 (IAS 34), 'Interim
Financial Reporting', as adopted by the European Union (EU). The
interim financial statements should be read in conjunction with the
Company's Year End Report for the year ended 31 March 2021, which
have been prepared in accordance with International Financial
Reporting Standards ("IFRS") adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. IFRS means standards
and interpretations issued (or adopted) by the International
Accounting Standards Board (IASB) (they comprise: International
Financial Reporting Standards, International Accounting Standards
(IAS) and Interpretations developed by the IFRS Interpretations
Committee or the former Standing Interpretations Committee (SIC))
or IFRS that have been adopted in the relevant jurisdiction.
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 April
2021 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 Limited meets all three
characteristics of an Investment Entity as described by IFRS 10.
The Company had one, 100% owned, subsidiary Hansa Trust Ltd. The
Company became the 100% owner of Hansa Trust's shares as part of
the Scheme of Arrangement on 29 August 2019. On 9 November 2021,
Hansa Trust Ltd was dissolved and removed from the Register of
Companies held at UK Companies House.
(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. As part of the dissolution process, since the prior
year-end, the remaining value of Hansa Trust Ltd was transferred to
HICL via a capital reduction process, leaving a negligible value on
30 September 2021. On 9 November 2021, Hansa Trust Ltd was
dissolved and removed from the Register of Companies held at UK
Companies House.
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) Retained Earnings
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.
Revenue Reserves
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 2021. The most recent valuation
statement was received on 2 August 2021 stating the value of the
Company's holding as at 31 March 2021. 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 2021 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. It has been confirmed with DV4's
manager that the valuation procedures discussed in July 2020 are
still the same used now. In addition, the Company
has compared the historic valuation movements of DV4 to the
FTSE350 Real Estate Index. 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 2021. It is
believed the value of DV4 as at 30 September 2021 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 was recognised at cost, being the fair
value of the consideration receivable. The amounts falling due for
repayment within one year were Included under current liabilities
In the Balance Sheet. The Intercompany loan was repaid as part of
the dissolution process. Since the prior year-end, the remaining
value of Hansa Trust Ltd was transferred to HICL via a capital
reduction process, leaving a negligible value on 30 September 2021.
On 9 November 2021, Hansa Trust Ltd was dissolved and removed from
the Register of Companies held at UK Companies House.
(m) Operating Segments
The Company considers it has one operating segment for the
purposes of IFRS8.
2 INCOME
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Income from quoted investments
Dividends 5,157 2,817 6,350
Total income 5,157 2,817 6,350
3 DIVIDS PAID
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
GBP000 GBP000 GBP000
Fourth interim dividend for 2021 (paid 28 May
2021): 0.8p (2020: 0.8p) 960 960 960
First interim dividend for 2022 (paid 31 August
2021): 0.8p (2021: 0.8p) 960 960 960
Second interim dividend for 2021 (paid 30 November
2020): 0.8p - - 960
Third interim dividend for 2021 (paid 28 February
2021): 0.8p - - 960
1,920 1,920 3,840
Where there has been no revenue available for distribution by
way of dividend for the year, dividends have been paid from
contributed surplus which is permitted by Bermudan company law.
Note: The second interim dividend payable for the period ended
31 March 2022 was announced on 7 October 2021. The payment
totalling 0.8p per share (GBP0.96 million) was paid on 26 November
2021.
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
Pence Pence Pence
GBP000 per share GBP000 per share GBP000 per share
Six months ended 30 September
2021 (Unaudited) 2,976 2.5 29,478 24.5 32,454 27.0
Six months ended 30 September
2020 (Unaudited) 994 0.8 38,263 31.9 39,257 32.7
Year ended 31 March 2021 (Audited) 2,580 2.2 92,851 77.4 95,431 79.6
5 FINANCIAL INFORMATION
The financial information for the six months ended 30 September
2021 was approved by a committee of the Board of Directors on 23
November 2021.
6 NET ASSET VALUE PER SHARE
The NAV per share is based on the net assets attributable to
equity shareholders of GBP398,424,000 (30 September 2020:
GBP313,636,000; 31 March 2021 GBP367,890,000) 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
2021 (30 September 2020: GBPnil; 31 March 2021: GBPnil.)
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 Year End Report for the year ended 31 March 2021.
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:
Level Level Level
1 2 3 Total
30 September 2021 (Unaudited) GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 144,579 - - 144,579
Unquoted equities - - 8,870 8,870
Fund investments 14,537 224,391 - 238,928
Fair value 159,116 224,391 8,870 392,377
Level Level Level
1 2 3 Total
30 September 2020 (Unaudited) GBP000 GBP000 GBP000 GBP000
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
Level Level Level
1 2 3 Total
31 March 2021 (Audited) GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 136,680 - - 136,680
Unquoted equities - - 8,055 8,055
Fund investments 14,188 206,345 - 220,533
Investment in subsidiary - - 3,179 3,179
Fair value 150,868 206,345 11,234 368,447
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) (Unaudited) (Audited)
30 September 30 September 31 March
2021 2020 2021
Equity Equity Equity
investments investments investments
GBP000 GBP000 GBP000
Opening Balance 11,234 12,455 12,455
Liquidation of Hansa Trust Ltd* (3,179) - -
Total gains or losses included in gains on investments
in the Income Statement:
- on assets held at year end 815 (829) (1,221)
Closing Balance 8,870 11,626 11,234
* The Intercompany loan was repaid as part of the Strike-Off
process. Since the prior year-end, the remaining value of Hansa
Trust Ltd had been transferred to HICL via a capital reduction
process leaving a negligible value at 30 September 2021.
As at 30 September 2021, the investment in DV4 Ltd has been
classified as Level 3. The investments in DV4 has been 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 2021. The most recent
valuation statement was received on 2 August 2021, with an
estimated NAV based on the unaudited capital statement of DV4 as at
31 March 2021. 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 2021
would have increased or decreased by GBP887,000 respectively.
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 Limited 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 Limited is registered
as a Reporting Financial Institution with the US IRS for FATCA
purposes.
Investor Disclosure
AIFMD
Hansa Investment Company Limited'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
Limited. 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 0371 664 0300. Calls are charged at the standard
geographic rate and will vary by provider. 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.
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
Hansa Investment Company Limited www.hansaicl.com
Association of Investment Companies www.theaic.co.uk
London Stock Exchange www.londonstockexchange.com
TrustNet www.trustnet.com
Interactive Investor www.ii.co.uk
Edison www.edisongroup.com
AJ Bell www.youinvest.co.uk
Barclays Stockbrokers www.barclays.co.uk
Hargreaves Lansdown www.hl.co.uk
Financial Calendar
Company year end 31 March
Annual Report sent to shareholders June
Annual General Meeting July/August
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
independent 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
Hamilton Centre
Rodney Way
Chelmsford
Essex CM1 3BY
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 prior to the redomiciliation of the business. Despite
the Company not being UK domiciled, the Company is UK listed and
operates in most ways in a similar manner to a UK Investment Trust.
Therefore, the Company follows the AIC Code of Corporate Governance
and the Board considers that the AIC's guidance on issues facing
the industry remains 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 2021 Annual 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 Ltd, 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. In the case of historic
Information, the KPIs will be compared against data of both the
Company and, prior to the Company's formation, from Hansa Trust
Ltd.
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 Limited 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. In the case of historic Information, the Total Return
will Include data against data of both the Company and, prior to
the Company's formation, from Hansa Trust Ltd.
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
Visit us at
www.hansaicl.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR LXLFLFFLBFBV
(END) Dow Jones Newswires
November 23, 2021 07:14 ET (12:14 GMT)
Hansa Investment (LSE:HAN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hansa Investment (LSE:HAN)
Historical Stock Chart
From Jul 2023 to Jul 2024
