TIDMHAN TIDMHAN TIDMHANA
RNS Number : 7370T
Hansa Investment Company Limited
16 November 2023
Chairman's Report
Dear Shareholder
Shareholder returns
The past six months have shown an increase in net asset value
("NAV") from 305.8p per share at 31 March 2023 to 317.4p per share
at 30 September 2023. In addition, shareholders have also received
a dividend of 1.6p during the period.
There has also been a reduction of the discount from 43.1% to
40.6% for the Ordinary shares and from 44.2% to 41.6% for the 'A'
non-voting Ordinary shares. The Ordinary share price has increased
from 174.0p to 188.5p whilst the 'A' non-voting Ordinary share
price has increased from 170.5p to 185.5p. More details about our
results and longer-term performance can be found further below as
well as in our Portfolio Manager's detailed review of markets and
portfolio performance in his Report below.
Strategy
The near-zero inflation and interest rates experienced by many
for the last decade are giving way to a, historically, more normal
backdrop for markets. Mindful of this, Alec Letchfield and his team
at Hansa Capital Partners ("the Manager"), supported by the Board,
have continued to look for opportunities to broaden and diversify
the portfolio by including more exposure to Value holdings as well
as looking outside of the US market, whose returns have dominated
the last decade, to others such as Japan where there are more
attractive valuations. Additionally, our exposure to Private
Markets has continued to grow with commitments made to several more
funds since our Annual Report. Alec expands on these topics in his
Report.
Ocean Wilsons Holdings Limited
As I have mentioned previously, our holding in Ocean Wilsons
Holdings Limited ("Ocean Wilsons", "OWHL") consists of two parts:
an investment in the Brazilian maritime and port operator Wilson
Sons Limited ("Wilson Sons") equating to about 70% of the value of
Ocean Wilsons as at 30 September 2023 and an investment portfolio
which makes up the balance.
On 12 June 2023, OWHL announced it was undertaking a strategic
review involving its investment in Wilson Sons and that it will
consider all strategic options. At the time of writing there have
been no further announcements on this matter. It is, however,
encouraging to see that Wilson Sons continues to meet investor
expectations and that the Brazilian Real continues to perform well
against the US Dollar. The Board awaits further updates, as I am
sure do all shareholders. It should be borne in mind that as stated
by Ocean Wilsons, there can be no certainty as to the outcome of
its deliberations and decisions.
Please rest assured that the Hansa Investment Company Limited
("HICL") board remains vigilant on this very important issue for
all our shareholders and continues to review and update potential
strategic options.
Prospects
As in my past recent reports, I continue to be cautious about
the future direction of both equity and bond markets. I have been
surprised by the strength of the US equity markets and the
continuing divergence of the bond and equity markets.
My own view is that there are some hard yards ahead in the drive
to get back to the 2% inflation era. In no particular order, I
think service industry inflation is going to remain sticky, El Niño
will be a threat to food prices next year and the present problems
in the Middle East probably mean oil prices are unlikely to fall
very far.
Rising interest rates, creating a lowering of demand, will help
to reduce inflationary pressures, although the ever-increasing debt
levels in most parts of the world, particularly those of many
governments, will tend to keep longer-term interest rates higher
than they otherwise would be, causing a certain degree of crowding
out, thereby creating challenges for the private sector.
It will be interesting to see if Chairman Powell starts to make
any comments about the substantial increases in US government debt
at a time of full employment. Apart from wartime, the combination
of accelerating government borrowing at a time of very low
unemployment has never been seen before. None of the large problems
facing governments have gone away, whether it is conflicts, higher
interest rates to combat inflation, the reduction in globalisation
or trade spats.
Let us hope Europe can get through the coming winter without too
many difficulties with gas supplies. The positives are that the
storage tanks are full and the price much lower than last year.
However, problems in the Straits of Hormuz or with Israeli gas
supply could cause difficulties.
Discount Management
Whilst our discount has reduced slightly, the Board remains
cognisant that it has not narrowed more. However, a combination of
jittery markets and details of the outcome of the Ocean Wilsons
review of its strategic options in Wilson Sons still awaited, has
resulted in slow progress.
The Board has considered a programme of share buybacks but has
repeatedly concluded it would not have a significant effect on the
discount at which the shares trade in the medium term, the main
reason being that buybacks would reduce the number of shares of the
Company in the market, and hence their liquidity. The Company would
also need to hold a more liquid investment portfolio to fund such
buybacks. Furthermore, any buyback increases the percentage of the
Ocean Wilsons holding in the portfolio. In current markets there
are several examples of other investment trusts that recently have
tried and failed to improve their discounts using share buy back
programmes.
Dividends
Your Board has decided to continue with its existing dividend
policy, which is to pay four similar interim dividends, each of
0.8p per share (annually, in total, 3.2p per share), until it is
fully covered by net revenue income and then increase it in line
with any increase in the net revenue income of the Company.
Currently the income generated by the portfolio is insufficient to
meet this dividend commitment and the shortfall is made up from the
Company's reserves. In principle, your Board does not believe it to
be in the Company's best interests to use capital as a source from
which to pay dividends.
Company Bye-Laws
At the Company's AGM on 27 July 2023, a resolution was passed to
adopt new Company Bye-Laws. One of the changes made requires
shareholders to supply, if requested, information relating to their
tax residency. As I explained in the Annual Report, globally tax
authorities and government agencies require financial institutions,
including investment companies such as ours, to collect and report
certain tax information in relation to their shareholders.
Failure by those shareholders to supply the required
information, causes the Company to submit incomplete returns, with
the consequent risk of penalties or censure by the authorities. The
Bye-Law changes enable the Company to take the necessary measures
in relation to those few shareholders who refuse to provide the
information required, so as to enable the Company to satisfy its
reporting requirements. In principle, this should only affect a
very small number of our shareholders who are personally on our
share register, approximately 140 shareholders holding collectively
less than 1% of our share capital across both share classes.
The Company, through its Registrar Computershare, is in the
process of writing to this small group of shareholders again to
seek the required information. I urge you to respond if you receive
such a letter. If you are in doubt about its veracity, please
contact Computershare directly who can explain the situation and
the steps you need to take.
Company Auditor
Also, at the Company's most recent AGM in July 2023,
PricewaterhouseCoopers Ltd of Bermuda ("PwC") was appointed to
audit the Company for the financial year ended 31 March 2024.
Shareholder Event
As many of you will know, we held a shareholder presentation
event at The Mayfair Hotel in London on 27 September 2023. The
presentation was also live-streamed via our website for those who
couldn't attend in person.
As well as presentations by myself, William Salomon and Alec
Letchfield, we received a number of questions from attendees. The
event was well received and the Board will look to host a similar
event in September 2024.
For those of you who were not able to attend, the video of that
event is available via the Company website.
As I mentioned at our shareholder meeting on 27 September 2023,
the Board plans to review both our present discount management
policy and our dividend policy whatever the outcome of the Ocean
Wilsons strategic review.
ESG Matters
The Board is responsible for the Company's ESG policy. In 2020,
the Board adopted our Manager's Responsible Investing Policy which
it continues to develop and refine in line with the evolving nature
of ESG's integration within Financial Services. As we have
previously reported, in 2022 the Hanseatic Group, of which our
Manager is part, became signatories to the UN PRI, a UN-supported
network of investors that works to promote sustainable investment.
I am pleased to report our Manager has recently completed its first
annual submission to the UN PRI and has also implemented a new
operational due diligence procedure that has been integrated into
the investment process.
Jonathan Davie
Chairman
16 November 2023
Portfolio Manager's Report
Rise of the machines.
Market review
The first half of the financial year started positively before
we saw a number of cracks develop in this rather rosy picture.
Having rallied sharply up to the end of July, buoyed by the
goldilocks combination of waning inflation, with the US seeing its
inflation rate falling from 6.5% at the beginning of the calendar
year to 3.7% in September and a growing expectation that interest
rates would peak and ultimately fall in early 2024 combined with
economic growth that remained robust - the latter half of the
period saw investors start to question if they had been somewhat
premature in their expectations.
Whilst headline inflation has undoubtedly been rattling back in
the US, many commentators still fear that core, underlying,
inflation is stickier and will remain higher than deemed acceptable
by central bankers. Similarly, markets also appear to have got
ahead of themselves on the outlook for interest rates. Initially,
as headline inflation started to fall, expectations for the peak in
rates were pulled forward and the US Federal Reserve was expected
to start cutting rates in the early part of next year. Latterly,
this has been pushed back with the Fed sounding more hawkish,
raising their 'dot plot' median rate by 50bps, suggesting there
would be fewer cuts and, at the same time, the European Central
Bank ("ECB") lifted their deposit rate to an all-time high of 4% in
September.
The net effect of this re-evaluation of inflation and interest
rates was a significant sell off in bond markets, sending bond
yields to multi-year highs around the world. The all-important US
10-year Treasury yield rose by 110bps to 4.57% during the half,
with the 30-year bond yield seeing its biggest quarterly increase
in Q3 2023 since Q1 2009. Much the same story was seen elsewhere,
with the German 10-year bund yield nearing 3%, a yield we haven't
seen since 2011 and even the moribund Japanese 10-year bond yield
moved away from zero, rising to 0.76%, which is the highest since
2013.
The scale and rapidity of the rise in bond yields also served to
reawaken fears of contagion amongst those areas of the financial
world that had binged on cheap debt. From private equity to banking
to the insurance world, we are seeing questions being asked as to
where the next collapse might appear. To date we haven't seen a
replay of the challenges faced in the US regional banking market
earlier this year, or the UK liability pension issues catalysed by
the Truss government late last year, but this might just be a
question of time.
Unsurprisingly the blend of higher inflation and rates,
softening growth and, for the first time in many years, bond yields
looking far more attractive saw equities also come off the boil
later in the half, but performance was still largely positive.
Global equities increased by 3.8% and US equities by 6.1% while
European equities fell by 1.2%. The UK, which has a
disproportionate exposure to energy markets and Japan, where the
change process continues to gain traction, increased 1.8% and 5.9%,
respectively. Post the quarter end US Treasury yields continued to
rise with the 10-year Treasury yield reaching a 16-year high pushed
by strong US economic data. The outbreak of war in Israel and Gaza
has the potential to be the spark that ignites an already volatile
region. While markets have so far viewed the impact of the conflict
on world markets as minimal and the conflict itself has remained
relatively contained, any wider conflagration would no doubt
significantly stress several markets, particularly oil and natural
gas.
Outlook
Despite these questions being asked about markets, our view on
the wider market backdrop is little changed. We continue to believe
the outlook is better now than it was last year with rates and
inflation nearing their peaks, even if there is the inevitable
debate on exactly when and where this peak is, combined with growth
that looks more robust than many of the doomsayers would have you
believe. This is not to say that the prospects for markets are not
without their risks and, in particular, we would highlight two very
real dangers. Number one is that central banks remain too hawkish
for too long, keeping policy too tight and ultimately catalysing a
recession. Unfortunately, central bankers have form here having
often overtightened historically, pushing economies into recession
in the process. Time will tell.
The second concern is the adjustment from a low
inflation/interest rate economy to a higher, more normal, interest
rate and inflation economy. We are not in the camp of believing we
are entering a period of structurally very high inflation and
rates, but do view the last ten years of near zero rates as being
something of an anomaly and the current process is actually a
return to normality. Nonetheless, the adjustment process could
prove a painful one. Already we have seen problems in the US
regional banking sector and the UK pension LDI market, but these
have been relatively contained and failed to cause a systemic
problem within markets. Other areas that have used copious amounts
of cheap debt include the commercial real estate sector and private
equity. Certainly the former looks to be vulnerable and both will
need to be watched carefully for signs of structural contagion.
Banks will also need to be monitored, albeit they have
significantly improved their balance sheets post the Global
Financial Crisis which will hopefully ensure they avoid a black
hole this time around.
From a portfolio positioning perspective, we are increasingly
running a more balanced approach. Whilst equities remain our core
exposure, a zero-rate backdrop turbo charged markets and in
particular favoured focusing almost entirely on longer duration
assets such as technology. In the current higher rate world we have
been adding more diversity in the form of value at the sector level
and countries such as Japan at the country level. Similarly, whilst
historically our defensive silo has been almost entirely populated
by hedge funds and, importantly, having little exposure to bonds
when rates were zero and inflation low, again we are looking to
broaden this out. We have recently added a major position in
insurance, given the surge in insurance rates with returns buoyed
by a dearth of capital, as many insurance investors nursed losses
from high levels of claims in recent years. Perhaps most notably
though, with bonds suffering significant falls in the prices over
the last 18 months and now showing positive real yields for the
first time in many years, we are currently running our slide rule
over the space with a view to re-entering. As ever, given our view
that market timing is challenging to impossible, with few to no
investors persistently doing it well, we will be gently and
progressively leaning in as opportunities present themselves.
Rise of the machines
In general, stock markets exhibit variations of similar themes,
all with their own nuances, but essentially more or less a repeat
of what has been seen before. Occasionally, however, something
comes along which is game-changing - having the potential to lead
to a structural shift in the way in which we live and creating new
opportunities for investing. We may be on the cusp of just such a
moment with the advent of Artificial Intelligence ("AI").
Whilst the concept of AI has been around for decades,
essentially since neural networks came to the fore, this year has
seen something of an 'iPhone moment' with a sharp acceleration in
its use. As a result, many AI linked companies have seen their
share prices surge exponentially and fears have increased that AI
would mean the beginning of the end for much of the workforce and,
at the extreme, an existential challenge for mankind.
For this half's commentary we try to address some of these
issues, albeit recognising that predicting the impact of new
technologies is challenging and has the scope to make commentators
look extremely foolish with hindsight!
What is AI and why is this AI's moment?
AI as a concept has been around since the 1940s/50s and is
defined as the ability for a computer or computer-controlled robot
to perform tasks commonly associated with humans. Initially, AI was
very narrow in its application with computers being trained to
perform very specific tasks, but importantly they didn't have the
ability to learn and evolve. Examples include simple recommendation
engines, such as which film you should watch on Netflix or
recommendations for other products you may like on Amazon, to more
complex forms such as IBM's Deep Blue chess machine which was
sufficiently advanced that it was able to win a match against a
reigning chess world champion.
In contrast what we are seeing now is Deep Learning whereby
computers have the ability to learn and plan, eliminating much of
the need for human intervention. This is a key progression. A
further subset of this is Generative AI whereby computer models can
generate new, original content that resembles existing data and is
indistinguishable from what might be generated by humans. A further
subset of this is Large Language Models (LLM) which are designed to
generate text-based models.
Given that the concept of AI has been discussed since the days
of Alan Turing (who proposed a 'learning machine'), it might be
asked why has AI suddenly exploded in its use over the last year?
Well, like many technological advancements, they reach an 'iPhone
moment' when all the necessary component parts come into existence.
Take, for example, the invention of the aeroplane. Whilst the
Wright Brothers were credited with inventing the plane in the early
part of the 20th century, in practice many of the principles on the
concept of flying machines were discovered by a little-known
British inventor called George Cayley who was born over 100 years
before the Wright brothers' first flight. The Wright brothers'
success however was largely dependent on the invention of the
combustion engine and, in particular, motorcycle engines due to
their lightness essential for successful motorised flight. In
contrast Cayley only had the steam engine at his disposal which,
unfortunately for him, was far too heavy for flight!
In much the same way, AI has benefited from the coming together
of large data sets, computers with the processing power to work
with vast volumes of data and an acceleration in the development of
machine learning algorithms.
The poster child for this revolution has been ChatGPT. Developed
by OpenAI, Chat Generative Pre-Trained Transformer is a LLM
designed to mimic human conversation. It is able to answer
questions in a conversational way, answer follow-up questions,
learn from its interactions and challenge incorrect premises.
Following the launch of GPT-3.5 in late 2022, ChatGPT became the
fastest growing consumer software application in history, gaining
one million users within just five days and reaching over 100
million users in two months, all with zero marketing spend. The
latest version, GPT-4 was released in March 2023. Moreover, its
success has started an arms race with all the major tech groups
launching their own versions, including Google, Baidu and Meta,
hoping no doubt to monetise on ChatGPT's achievements, but also to
prevent themselves being disintermediated just as they did to other
companies in the past. Nobody wants to be tomorrow's Nokia!
Why is AI important?
Much hyperbole surrounds the potential impact of AI but is this
just a fad, in the same vein as most cryptocurrencies, or is it
really the game changer that many are predicting?
Spoiler alert, we think it is the real deal as we do see AI
having the potential to revolutionise many areas of work and the
way in which we live, albeit predicting how it evolves is
challenging, just as few predicted the spectacular growth in the
app economy post the invention of the iPhone. Already, we are
seeing AI make breakthroughs in processes previously the domain of
humans and seemingly impossible for computers to replicate. Ranging
from facial recognition to understanding speech, AI driven systems
have now caught up with, and even exceeded in some cases, the
results produced by humans.
This though just scratches the surface. As AI systems evolve,
the newer forms of generative AI can learn from large sets of
images and can create new, unique images based on trained data.
Companies engaging in marketing campaigns will no longer have to
retain graphic designers to create their images or buy photos from
image photobanks but instead AI systems will create precisely the
image they require at minimal cost. This newfound creativity
doesn't stop here and will also extend to video and music synthesis
and even social media content generation. AI and machine learning
algorithms are also the perfect candidates for quantum processing
when the questions are more complicated than classical computers
can calculate, though this field is still at a very early stage of
development. This will eventually increase the speed with which AI
can solve problems.
AI also has the potential to advance mankind. Autonomous
vehicles are becoming a reality, as deep learning enables
self-driving cars to detect and recognise objects, lane detection,
pedestrian tracking and to respond to their surroundings, albeit
driving has proven to be more difficult for AI to master than many
of its creators anticipated. Similarly, in the field of healthcare
AI can assist in diagnosing diseases, analysing medical images and
predicting data outcomes, contributing to more accurate diagnosis
and personalised treatment plans. No longer will a patient have to
wait to book an appointment with a doctor in an already
overstretched healthcare system. Instead, AI driven computers will
instantly, and more accurately, assess their symptoms and make
better diagnosis of their illness based on vast datasets of
up-to-date medical data rather than information taught to a doctor
30 years ago at medical school. Their treatment will then be
personalised to that individual rather than, for example, assuming
that a 15-year-old male child is the same as an elderly female with
a multitude of other conditions.
Extrapolating the impact of this from the specific to the
general is, unsurprisingly, challenging. In terms of where we are
now, a recent survey by the Harris Poll showed that approximately
70% of US companies now report using generative AI in their
operations. As to the future, Goldman Sachs believes that
widespread AI adoption could result in a 10-year period where
annual productivity growth is as much as 1.5% higher than it
otherwise would have been and that generative AI alone could form a
$7 trillion market or increase global GDP by 7%. To put this into
context, this would be comparable to the two largest productivity
booms since 1900, namely the widespread adoption of electricity and
the PC/internet. Geographically, the US would likely lead the way
given its head start in many areas of AI development. China may
well be catching up given its investment in AI related technology,
albeit much depends on the success of the US's campaign to restrict
China's access to cutting edge technology and vital components. In
terms of asset classes, the natural beneficiary would be equities
due to higher earnings from the productivity boom, although the
drivers of stock market performance will vary significantly
depending on which sectors are deemed winners and which are seen as
losers.
Will AI lead to mass unemployment and a fundamental change to
the way in which we work?
Whilst much has been discussed on the potential positive impacts
of AI, there is an increasingly vocal part of society who are
warning of the negative effects from AI, ranging from fears of mass
unemployment to the abuse of how AI is used and even to threats to
the existence of mankind. This then leads onto the thorny subject
as to whether AI should be restricted in any way and its
regulation.
From a jobs' perspective the threat from AI has turned
technology disruption on its head. Previously it was the low paid,
unskilled manual workers who were most at risk from technology,
with their jobs under threat from either automation or robotics.
This saw a multitude of manual workers, such as those in the
textile industry, agriculture, or car production, being replaced by
machines. AI, however, is affecting a different part of society.
Initially AI was impacting those in jobs that require repetitive
tasks, some level of data analysis and routine decision making.
Now, however, with the development of advanced LLMs, we are seeing
jobs which are further up the food chain vulnerable to being
replaced. Notably those jobs that involve writing, calculating and
high-level analysis are all increasingly susceptible to
replacement, with people working in accountancy, administration,
call centres and primary care likely to see part or all of their
jobs being replaced or augmented by AI. In contrast we have the
rather binary situation whereby those working in lower end, manual
or service-related industries such as mechanics, hairdressers and
painters, being hard to replace as are those in higher end, more
complex jobs or requiring high-touch human interaction and
personalised decision making.
Our view however is that AI should not be restricted in order to
protect jobs. The advancement in human thinking and technology has
been replacing jobs for a millennia and in the process raised the
standard of living many thousands of times. We suspect few would
want to go back to living in mud huts and surviving through
subsistence farming. Instead we should see this as an opportunity
to improve the way in which people live and, if history is anything
to go by, new jobs will evolve and provide people with better life
outcomes. Undoubtedly governments and society will need to think
carefully as to how economies remain sufficiently dynamic, such
that those affected can retrain as opposed to creating areas of
mass unemployment and prevent an even bigger income inequality gap
from forming. However, with many developed countries facing aging
populations and crippling labour shortages in certain industries,
AI is likely to be a more palatable solution than increasing
immigration or retirement ages.
More challenging is how we deal with AI being used for nefarious
reasons. This ranges from school children using AI to cheat on
their homework, to enabling terrorists to create bioweapons. This
is likely to result in changes to how society works and greater
regulation which may ultimately stymie some of the good uses AI can
be used for. Teachers, for example, are already having to use AI to
produce mock answers for the homework they set to check if children
are using it and it may mean the end of coursework for setting
grades, penalising those children who perform less well under exam
conditions. Similarly, whilst AI is a wonderful enabler and can be
used, for example, to code by a person who previously had no coding
ability, it also facilitates such evils as bioweapon development
for terrorist groups who previously lacked the ability. Clearly bad
people will always find a way of doing bad things but much like the
gun, AI does have the scope to magnify their actions. Whilst we are
generally anti-regulation, with governments typically bad at
regulating new tech and pressure groups using it for their own
purposes, we suspect regulation will ultimately prove inevitable,
and to some extent desirable, in this area.
Is AI a bubble?
If we are right and AI is the real deal, is this already
reflected in share prices and, indeed, are we already in bubble
territory? Well, unfortunately, new paradigms and bubbles almost
invariably go hand in hand and whilst many new paradigms meet, if
not exceed, some of the wildest expectations, making money from
them can be very challenging if all the good news is in the price.
Take for example the internet boom of the late 90s. Few would deny
the internet has evolved in ways that were barely conceivable at
the time. However, as illustrated below, if we look at the top ten
tech names of 1999, the peak of the dotcom bubble, only one of
those names, Microsoft, has exceeded the performance of the S&P
over the subsequent 23 years. The simple fact is that even if a new
epoch in technology is upon us, valuations matter, and if they're
already priced for perfection, generating returns to investors is
likely to be impossible even if they meet these lofty
expectations.
All is not lost, however. Whilst many names such as Nvidia have
already seen their share prices surge exponentially, given we are
still at the dawn of AI's development there will be many companies
that are not overpriced and indeed there will be many companies who
are yet to evolve who will play a leading role in the AI
revolution.
It is also not just about playing those companies which are at
the forefront of developing the AI technologies but also those
companies in more traditional industries who intelligently adopt AI
to streamline their own processes, improving efficiency and margins
within their businesses. Many management teams will prove to be
immobile and resistant to change, or unable to evolve due to other
factors such as trade union influence, and will likely see their
businesses fall by the wayside versus more forward-looking
companies who are early adopters.
An area to watch closely will be that of big tech. It is very
rare for yesterday's successful companies to become tomorrow's
winners. Inevitably large companies become intransient as they
become bound down by committees and processes and often the
founders who had the vision to build the group are replaced by less
visionary professional CEOs. This time may be different. The
current big tech companies know all too well the dangers of
disintermediation, after all they did exactly this to many other
companies in the past. AI is also in their ballpark with companies
such as Microsoft and Google at the forefront of AI development.
They are blessed with very deep pockets and even if they see the
technology pivoting in a direction which is different from the
route they have been pursuing, they have demonstrated their
willingness to buy companies in their desire to stay ahead.
Perhaps the biggest danger, however, is not which company
succeeds, but which country succeeds. The current AI development
has a whiff of the atomic bomb race with both the US and China
racing to become the dominant player in the field. The danger may
be that a country becomes overly dominant and rather than using AI
for good, uses it for advancing its own success at the expense of
others.
Conclusion
2023 has seen two important themes playing out. First, the
normalisation process from the excesses of the past ten years
whereby we exit a zero inflation/interest rate world and return to
a more normal backdrop and, second, the acceleration of the AI
trend. In the former, we watch carefully for signs of
dysfunctionality, aware that such events can lead to systemic risks
especially in those areas that have binged on cheap debt, including
real estate and private equity. We have also been broadening out
our portfolios, especially at the sector level, where we have been
adding value exposure to our growth holdings. Whilst still of the
view we are mid-change in the technological revolution that has
been playing out in recent years, we also believe that a higher
rate backdrop makes value investing a far more profitable
enterprise. Similarly, at the country level we are increasingly
seeing opportunities outside the US, in countries such as Japan
which is undergoing a period of change combined with attractive
valuations. In the more defensive space we have added to our
insurance exposure and, for the first time in a decade, we are
running our slide rule over bonds having studiously avoided them
for many years.
In terms of how we capitalise on the acceleration of the AI
trend, we are following a two-pronged approach. In the public space
our model of using specialist external managers to invest on our
behalf should stand us in good stead. We are blessed in having
great managers such as Ben Rogoff at Polar Capital, who has been at
the forefront of technology investing for many years. Importantly
he has managed money through both the good and the bad times and
has the scars to bear for it when markets move from bubble to bust.
Secondly, we are playing the private space through investing in
venture capital. We have long believed in the concept that the one
thing you can be certain about is change and have sought to protect
ourselves and, indeed, capitalise on this through investing in
venture capital. The managers of these funds, such as Khosla
Ventures, specialise in identifying and investing in new
technologies and concepts. These types of managers are at the
cutting edge of this change process and AI will likely form a
cornerstone of their funds in the years to come.
Portfolio Review and Activity
During the first half of the financial year the NAV total return
of your Company was 4.3%, ahead of the 3.8% rise of the MSCI ACWI
NR Index (GBP) and strongly ahead of the 6.0% decline of the FTSE
UK Gilts All Stocks TR Index. While they rose over the period,
global equity markets have been somewhat bumpy, as investors have
become more concerned about the prospect of rates remaining higher
for longer. Many of the large tech stocks (the so-called
Magnificent Seven - Alphabet, Amazon, Apple, Meta, Microsoft,
Nvidia and Tesla) that have driven market returns this year started
to decline over the summer, which weighed on the overall market.
Sterling weakness against a strong dollar boosted returns measured
in sterling. Government bonds continued their decline as yields
rose, especially at the long end in the US Treasury market.
Commodities were a notable outperformer, with energy gaining as oil
production cuts were implemented by Saudi Arabia and Russia.
Over the last 12 months the NAV total return was 8.5%, while the
MSCI ACWI NR Index gained 10.2%, UK CPI is up 6.7% and the FTSE UK
Gilts All Stocks TR Index has fallen 2.5%. Over both the half year
and the last 12 months the performance has compared very favourably
with the classic 60:40 equity/bond balanced portfolio, which fell
0.2% over six months and is up 5.0% over 12 months.
The position in Ocean Wilsons Holdings gained a strong 14.5%
over the first half of the year and it is now up 26.5% for the past
year. We believe its investment portfolio offers very useful
diversification benefits, with significant exposure to private
equity including venture capital. The Brazilian market has
performed more strongly recently, helped by improving sentiment
towards the country, which should be supportive of its Wilson Sons
position. Increasing global trade and more activity in the offshore
energy sector are helping to drive improved operational results for
the company.
The Company's net asset value per share rose from 305.8 pence at
the end of March 2023 to 317.4 pence at the end of September 2023,
with 1.6 pence per share being paid out as a dividend during the
period.
Core and Thematic Funds
The Core Regional silo made a gain of 3.2% during the first half
of the financial year, while the Thematic silo rose 1.9%. For the
last 12 months, the two silos' returns were 5.8% and 1.4%,
respectively.
Most of the North American holdings made positive returns over
the first half of the financial year. The weakness of the large cap
technology names in the second quarter, that had driven index
returns earlier in the year, made it somewhat easier for active
managers to begin to outperform. Findlay Park American and Pershing
Square Holdings made returns of 9.1% and 6.4%, respectively. Select
Equity delivered a gain of 3.3%, iShares Core S&P 500 ETF
increased 7.6%, while Armistice Capital, a position that was added
in June and which invests long and short in the healthcare,
consumer and TMT sectors, was down 1.7%. Beutel Goodman US Value
lagged the other holdings with a fall of 0.7%. The Findlay Park
fund owns just three of the mega-cap tech stocks (Microsoft,
Alphabet and Nvidia), with a combined weighting of 9.2% versus
25.4% for the Russell 1000 benchmark. The managers continue to find
better opportunities in mid-cap companies with compelling growth
and quality characteristics, but without the rising competitive
intensity and regulatory pressures that face the mega-cap
companies. Some of the fund's top active positions that contributed
to its positive performance over the first half included EOG
Resources (oil and gas), Arthur J. Gallagher (insurance broker) and
Intuit (accounting software). The Select fund had some strong
contributors in its technology, industrials and financials
exposures, with names such as Morningstar (information services),
Martin Marietta Materials (construction materials) and Brown &
Brown (insurance brokers) performing well.
Performance in Japan was mixed, with Indus Japan being flat
while Goodhart: Hanjo fell 5.6%. Over 12 months the Indus fund is
up 5.2%, while the Hanjo fund has declined 2.6%. The Indus fund is
fairly concentrated with 36 names and holdings such as Nippon
Shinyaku (pharmaceutical manufacturer) and Pan Pacific (discount
stores) performed well later in the period. While the Indus fund
has substantial exposure to large-cap names, the Hanjo fund focuses
on small and mid-cap names and unfortunately has not kept pace with
the broader Japan market this year.
Egerton Long-Short Fund has returned 2.9% during the first half
of the financial year, and is up 1.6% over 12 months. There was
strong performance from energy positions, such as Cenovus Energy
that gained over 20%. The manager believes this Canadian company is
undervalued as a low-cost oil producer, with long reserve life that
should deliver strong cash flow generation and returns to
shareholders. Its reserves require limited capital spending, as
they have low decline rates, and their method of extraction
involves less environmental impact than mining or fracking. While
investors are grappling with the valuation of traditional energy
sources against the backdrop of carbon-free technologies, the
manager notes that Canadian oil companies and the government are
negotiating the world's largest carbon capture project which could
sequester up to 12m tons of CO2 per year. Another theme in the fund
is travel, with positions such as Ryanair, Booking Holdings and
Hilton Worldwide, which delivered strong gains over the first half
of the year.
Within the emerging and frontier market holdings, NTAsian
Discovery and BlackRock Frontiers Investment Trust have performed
strongly during the first half of the financial year with returns
of 4.7% and 9.5%, respectively. Over the last 12 months the
BlackRock trust has performed very well, being up 16.2%, while the
NTAsian fund is up just 0.1%. The NTAsian fund has its largest
country weight in Vietnam, where the economy is showing
accelerating growth. The largest position is FPT, an IT
conglomerate which has reported strong revenue growth led by its
global IT services division. The company has recently announced
plans to invest $100m into the US market, as well as a new contract
with the European Union Aviation Safety Agency. The stock gained
35% during the first half of the year. The BlackRock Frontiers
Trust's good performance has been aided by some of its financials
holdings, which is its largest sector exposure at 38%. Banks such
as National Bank of Greece and Commercial International Bank Egypt
contributed good performance, with other strong performers being
Elm Co, an IT services business in Saudi Arabia and the Philippine
property developer Ayala Land.
There were mixed performances in the Thematic holdings during
the first half of the financial year, although they included some
very strong returns. RA Capital International Healthcare gained
12.9%, although Worldwide Healthcare Trust was flat. The
portfolio's exposures to commodity equities diverged as iShares
MSCI World Energy ETF rose by 11.5%, taking it to a 15.4% return
over the last year, while iShares MSCI Global Metal and Mining
Producers ETF fell back 4.5%, although it too has been strong over
the last 12 months, with a return of 10.6%. Polar Capital Global
Insurance Fund returned 8.3% which brings its 12 month return to
13.0%.
Diversifying Funds
The Diversifying holdings provide an alternative source of
returns whilst dampening volatility and displaying low beta to the
equity market. While their longer-term performance has been
positive, they delivered a slight decline of 0.4% in the first half
of the financial year and have fallen by 2.2% over the last 12
months. However, the returns over both periods have beaten the
losses in the bond markets, with the UK Gilt Index being down 6.0%
in the past six months and down 2.5% over the year.
Many of the holdings in this part of the portfolio performed
well during the quarter, although DV4 Limited, the private real
estate vehicle that is gradually liquidating its assets, declined
by 10.4% owing to some asset markdowns earlier in the period which
reflected rising property yields. In the trend-following CTA funds,
Schroder GAIA BlueTrend displayed strong performance with a rise of
9.0%, but GAM Systematic Core Macro fell by 0.3%. However, both
remain down over 12 months given the difficult period of
performance they endured in late 2022. The event-driven fund Global
Event Partners returned 1.4% this half year, leaving it down just
0.2% over the last year.
Nephila Iron Catastrophe Fund, the specialist strategy fund
investing in catastrophe bonds and other insurance-related
securities, which we added to the portfolio last quarter, has
performed strongly, with a return since purchase of 12.3%. It is
pleasing to see this performance in the early days of owning the
fund. Strong returns are not surprising given that valuations in
the space appear extremely attractive, however, we are now in the
most active period of the year for US hurricanes and how the season
develops will have a significant influence on the fund's
performance.
Despite the very difficult environment for sovereign bond
investors, with steeply rising yields affecting the US Treasury
curve, several of the diversifying fixed income holdings managed to
deliver positive performance. Brevan Howard Absolute Return
Government Bond Fund made a gain of 1.3%, as it recovers from its
difficult period of performance in March 2023 and it is down 1.5%
over 12 months. Selwood Liquid Credit Strategy has continued its
period of excellent performance, with a gain of 8.7% over six
months and is now up 36.7% over the last year. Apollo Total Return
Fund also gained, being up another 3.8% to be up 5.4% over 12
months. The position in the passive Vanguard US Government Bond
Index Fund lost 4.8% during the first half of the financial year
and is down 1.9% over the last year.
Global Equities
The portfolio rose 2.4% over the first half, with the biggest
contributors being Subsea 7, Interactive Brokers and Arch Capital.
The biggest detractors were Orion, Dollar General and ViaSat.
In addition to buying Eurowag, we added to our positions in
Interactive Brokers, GCO, Subsea 7, Bergman & Beving, Glencore
and CTT. To fund these purchases, we sold our positions in CVS,
Dollar General and Viasat, and reduced our holdings in Arch, EXOR
and CK Hutchison.
Ocean Wilsons Holdings
As the largest integrated provider of port and maritime
logistics in Brazil, we believe the Ocean Wilsons' subsidiary,
Wilson Sons, is well-placed to perform in the coming years. The
business has a strong competitive position, being the leading
provider of towage services in Brazil with the largest and most
modern fleet, as well as operating major container terminals in the
north and south of the country: Rio Grande and Salvador. The
company is benefiting from the continuing recovery in global trade,
as well as a rebounding demand for its offshore energy-linked
services, which should provide the basis for improved performance
of the firm's assets.
There has been further evidence of improving results across the
business, with the second quarter results (released in August)
showing strong revenue growth. Results in the towage division were
particularly strong, with higher volumes, a larger deadweight of
ships attended and an increase in average revenue per manoeuvre. In
the container terminal division, operational growth has been mainly
driven by robust volume recovery at the Rio Grande terminal.
Operational data for the first nine months of the year show strong
growth, with total volumes in the container terminals division
being 12.0% higher than last year and the number of vessel
turnarounds in the offshore support bases being more than 50%
higher than the previous period, thanks to markedly higher demand
for the company's offshore energy-linked services. In the second
quarter Wilson Sons' shipyard delivered WS Rosalvo, the third of a
series of six tugboats which will add over 90 tonnes of bollard
pull to the fleet by 2024. The vessel is already operational in the
port of Açu.
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. The portfolio delivered a return of
4.5% over the first six months of 2023, with particularly strong
performance coming from its core regional exposures. The most
recent valuation for the investment portfolio was $299.7m as at end
June 2023, which represents an increase of 0.5% from March 2023 and
an increase of 2.0% from December 2022. Performance has been helped
by thematic exposures to energy and commodities, as well as the
private market investments which have demonstrated resilience. Some
of the largest private equity positions include venture capital
funds of funds managed by Stepstone, US buyout and growth funds
managed by KKR and TA Associates and a financials-focused fund
managed by Reverence Capital. Dividends totalling $5.5m, in two
tranches, were paid to the parent company from the portfolio in May
and June.
On 12 June 2023, the Board of Ocean Wilsons Holdings made an
announcement in which they confirmed they are undertaking a
strategic review involving their investment in Wilson Sons. The
review, which will consider all potential strategic options, is
currently at an early stage and there can be no certainty as to its
outcome. There have been no further announcements regarding the
progress of this review, but we will report on any developments as
they are made known.
Alec Letchfield
Chief Investment Officer
October 2023
Case Study
Eurowag
In this quarter, we welcomed a new addition to our portfolio -
Eurowag. Historically known as a pure-play fuel card and toll
payment provider for the European trucking industry, Eurowag has
undergone a remarkable transformation over the last few years.
Since 2017, the company has shifted its strategic focus towards
becoming an end-to-end provider of software solutions for the
industry, spanning from payments to fleet management and
telematics.
It has a diverse client base given the fragmentation in the
market and it now enjoys 28% of revenue coming from subscriptions.
Management has a very sizeable ownership stake, while the growth
outlook is promising. Drivers of growth include increased market
penetration within the fragmented customer base, as well as the
untapped potential to provide additional services to existing
customers, facilitated by a forthcoming integrated platform. We
believe the company is conservatively valued, with the integrated
platform's success effectively being provided as a free option,
given the 10% free cash flow yield.
Our view on the company differs from others', as we foresee a
future in which the company could multiply in size if the
transition proves successful. We believe the market currently
undervalues this potential, largely due to a challenging IPO in
late 2021 and investor caution surrounding UK small/midcap
companies, with limited stock market history and Eastern European
exposure.
It's important to acknowledge the associated risks. Eurowag
carries higher leverage than we would ideally prefer, with a net
debt to EBITDA ratio of 2.9x. Moreover, the success of integrating
new businesses and the ability to deliver the new platform are not
guaranteed and may potentially divert management's attention from
the cash-generating payments business. We have opted to take a
measured approach by establishing a smaller position, guided by our
belief in limited downside risk. We plan to lay out a series of
milestones to monitor the progress of our thesis, including
reducing debt below 2.5x, increasing average revenue per user and
expanding the number of trucks served. In the journey ahead, we
remain cautiously optimistic about Eurowag's potential and we are
committed to making informed, milestone-driven decisions in the
best interest of our investors.
The Portfolio
As at 30 September 2023
Fair value % of net
Investments GBP000 assets
=================================================== ========== ========
Core regional funds
--------------------------------------------------- ---------- --------
Findlay Park American Fund 26,749 7.0
--------------------------------------------------- ---------- --------
iShares Core S&P 500 UCITS EFT 22,978 6.0
--------------------------------------------------- ---------- --------
Select Equity Offshore Ltd 18,991 5.0
--------------------------------------------------- ---------- --------
BlackRock Strategic Hedge Fund 14,472 3.8
--------------------------------------------------- ---------- --------
Schroder ISF Asian Total Return 10,374 2.7
--------------------------------------------------- ---------- --------
Pershing Square Holdings Ltd 9,862 2.6
--------------------------------------------------- ---------- --------
iShares Core MSCI Europe UCITS ETF 8,246 2.2
--------------------------------------------------- ---------- --------
Schroder ISF Global Recovery 8,082 2.1
--------------------------------------------------- ---------- --------
BA Beutel Goodman US Value Fund 7,914 2.1
--------------------------------------------------- ---------- --------
Indus Japan Long-Only Fund 7,179 1.9
--------------------------------------------------- ---------- --------
Armistice Capital Offshore Fund Ltd 6,790 1.8
--------------------------------------------------- ---------- --------
Goodhart Partners: Hanjo Fund 6,061 1.6
--------------------------------------------------- ---------- --------
KLS Corinium Emerging Markets Equity Fund 4,486 1.2
--------------------------------------------------- ---------- --------
NTAsian Discovery Fund 4,262 1.1
--------------------------------------------------- ---------- --------
iShares Core EM IMI UCITS ETF 4,121 1.1
--------------------------------------------------- ---------- --------
BlackRock Frontiers Investment Trust PLC 3,808 1.0
--------------------------------------------------- ---------- --------
164,375 43.2
--------------------------------------------------- ---------- --------
Strategic
--------------------------------------------------- ---------- --------
Wilson Sons (through our holding in Ocean Wilsons
Holdings Limited)(1) 54,209 14.2
--------------------------------------------------- ---------- --------
Ocean Wilsons (Investments) Limited (through the
holding in Ocean Wilsons Holdings Limited)(1) 36,139 9.5
--------------------------------------------------- ---------- --------
90,348 23.7
--------------------------------------------------- ---------- --------
Global equities
--------------------------------------------------- ---------- --------
Interactive Brokers Group Inc 5,103 1.3
--------------------------------------------------- ---------- --------
Subsea 7 4,142 1.1
--------------------------------------------------- ---------- --------
Grupo Catalana Occidente SA 4,101 1.1
--------------------------------------------------- ---------- --------
Orion Engineered Carbons SA 3,658 1.0
--------------------------------------------------- ---------- --------
Arch Capital Group Ltd 3,478 0.9
--------------------------------------------------- ---------- --------
Exor NV 2,731 0.7
--------------------------------------------------- ---------- --------
Coats Group PLC 2,511 0.7
--------------------------------------------------- ---------- --------
Bergman & Beving 2,371 0.6
--------------------------------------------------- ---------- --------
CK Hutchison 1,865 0.5
--------------------------------------------------- ---------- --------
Glencore PLC 1,856 0.5
--------------------------------------------------- ---------- --------
CTT Correios de Portugal 1,327 0.3
--------------------------------------------------- ---------- --------
Eurowag 1,288 0.3
--------------------------------------------------- ---------- --------
34,431 9.0
--------------------------------------------------- ---------- --------
Diversifying
--------------------------------------------------- ---------- --------
Global Event Partners Ltd 7,853 2.1
--------------------------------------------------- ---------- --------
DV4 Ltd(2) 7,778 2.0
--------------------------------------------------- ---------- --------
Hudson Bay International Fund Ltd 5,266 1.4
--------------------------------------------------- ---------- --------
MKP Opportunity Offshore Ltd 3,274 0.9
--------------------------------------------------- ---------- --------
Schroder GAIA BlueTrend 3,143 0.8
--------------------------------------------------- ---------- --------
GAM Systematic Core Macro (Cayman) Fund 3,114 0.8
--------------------------------------------------- ---------- --------
Nephila Iron Catastrophe Fund Ltd 2,841 0.7
--------------------------------------------------- ---------- --------
Selwood AM - Liquid Credit Strategy 2,682 0.7
--------------------------------------------------- ---------- --------
Apollo Total Return Fund 2,505 0.7
--------------------------------------------------- ---------- --------
Keynes Dynamic Beta Strategy Offshore Fund Limited 2,467 0.6
--------------------------------------------------- ---------- --------
Prana Absolute Return Fund 2,016 0.5
--------------------------------------------------- ---------- --------
Brevan Howard Absolute Return Government Bond Fund 1,753 0.5
--------------------------------------------------- ---------- --------
Vanguard US Government Bond Index Fund 1,431 0.4
--------------------------------------------------- ---------- --------
BioPharma Credit PLC 1,279 0.3
--------------------------------------------------- ---------- --------
Lazard Convertible Global 714 0.2
--------------------------------------------------- ---------- --------
48,116 12.6
--------------------------------------------------- ---------- --------
Thematic assets
--------------------------------------------------- ---------- --------
Polar Capital Funds - Global Insurance Fund 7,451 2.0
--------------------------------------------------- ---------- --------
Polar Capital Funds - Global Technology Fund 5,902 1.5
--------------------------------------------------- ---------- --------
GAM Star Fund PLC - Disruptive Growth 4,302 1.1
--------------------------------------------------- ---------- --------
Impax Environmental Markets Fund 3,276 0.9
--------------------------------------------------- ---------- --------
Worldwide Healthcare Trust PLC 3,011 0.8
--------------------------------------------------- ---------- --------
RA Capital International Healthcare Fund 2,984 0.8
--------------------------------------------------- ---------- --------
iShares MSCI World Energy Sector UCITS ETF 2,387 0.6
--------------------------------------------------- ---------- --------
iShares MSCI Global Markets & Mining Producers ETF 1,728 0.5
--------------------------------------------------- ---------- --------
BB Biotech AG 1,570 0.4
--------------------------------------------------- ---------- --------
32,611 8.6
--------------------------------------------------- ---------- --------
Total investments 369,881 97.1
--------------------------------------------------- ---------- --------
Net current assets 11,000 2.9
--------------------------------------------------- ---------- --------
Net assets 380,881 100.0
(1) 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) Limited ("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 2023 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 2023.
(2) 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 2023. All other
valuations are either derived from information supplied by listed
sources, or from pricing information supplied by third party fund
managers.
Half-Year Management Report
The Directors present their Report and Condensed Financial
Statements for the period to 30 September 2023.
The Board's objectives
The Board's primary objective is to achieve growth of
shareholders' value over the medium to long term by investing in a
diversified and multi-strategy portfolio.
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 and Senior Independent Director).
Individual profiles for each member of the Board can be found in
the Company's Annual Report each year. These can also be found on
our website together with summaries of each of the Governance
Committees of the Board.
Business Review for the period to 30 September 2023
The Business Review includes a discussion of important events
which occurred within the period to 30 September 2023 and is
covered in the Chairman's Report and the Portfolio Manager's
Report.
Hansa Investment Company Limited ("HICL", "the Company") is a
Bermudan company formed in June 2019 to take on the business of
Hansa Trust Ltd ("Hansa Trust") which transferred to it in August
2019. As a company, HICL has approximately four years of direct
financial history. 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.
Principal risks for the financial year to 31 March 2024
The key risks and uncertainties relating to the period ended 30
September 2023 and for the year ending 31 March 2024 are materially
the same as those reported in the Annual Report for the Company for
the year ended 31 March 2023. The principal risks and uncertainties
identified are:
External
-- Market risk - long-term company share performance
-- Performance risk, share price, liquidity and discount
monitoring
-- Tax, accounting, legal and regulatory risks
-- Reputational risk
Internal
-- Operational risk
-- Gearing/balance sheet risk
Going Concern basis of accounting for the period to 30 September
2023
The Directors consider it appropriate to adopt the going concern
basis of accounting in preparing these Half-Year 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 administrative services fees to the Company,
amounting to GBP1,439,000 excluding VAT (six months to 30 September
2022: GBP1,406,000; year to 31 March 2023: GBP2,824,000). Amounts
outstanding at 30 September 2023 were GBP239,000 (30 September
2022: GBP231,000; 31 March 2023: GBP241,000).
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 Half-Year Financial Report have been prepared in accordance
with International Accounting Standard 34 'Interim Financial
Reporting' and on a going concern basis.
-- This Half-Year 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 Half-Year Management Report, including the Statement
of the Board's Responsibilities, was approved by the Board on 16
November 2023 and was signed on its behalf by:
Jonathan Davie
Chairman
16 November 2023
Income Statement
For the six months ended 30 September 2023
(Unaudited) Six (Unaudited) Six
months ended months ended (Audited) Year
30 September 30 September ended 31 March
2023 2022 2023
============================== ------------------------- --------------------------- ---------------------------
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
============================== ======= ======= ======= ======= ======== ======== ======= ======== ========
Gains/(losses) on investments
held at fair value through
profit or loss - 12,324 12,324 - (30,520) (30,520) - (14,924) (14,924)
------------------------------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Foreign exchange (losses)/gains - (335) (335) - 346 346 - 327 327
------------------------------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Investment income 6,186 - 6,186 6,003 - 6,003 6,892 - 6,892
------------------------------- ------- ------- ------- ------- -------- -------- ------- -------- --------
6,186 11,989 18,175 6,003 (30,174) (24,171) 6,892 (14,597) (7,705)
------------------------------ ------- ------- ------- ------- -------- -------- ------- -------- --------
Portfolio management
fees (1,439) - (1,439) (1,406) - (1,406) (2,824) - (2,824)
------------------------------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Other expenses (900) - (900) (659) - (659) (1,527) - (1,527)
------------------------------- ------- ------- ------- ------- -------- -------- ------- -------- --------
(2,339) - (2,339) (2,065) - (2,065) (4,351) - (4,351)
------------------------------ ------- ------- ------- ------- -------- -------- ------- -------- --------
Income/(losses) before
finance costs 3,847 11,989 15,836 3,938 (30,174) (26,236) 2,541 (14,597) (12,056)
------------------------------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Finance costs - - - (1) - (1) (1) - (1)
------------------------------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Income/(losses) for the
period 3,847 11,989 15,836 3,937 (30,174) (26,237) 2,540 (14,597) (12,057)
------------------------------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Return per Ordinary and
'A' non-voting
Ordinary share 3.2p 10.0p 13.2p 3.3p (25.2)p (21.9)p 2.1p (12.2)p (10.1)p
The Company does not have any income or expense not included in
the Profit for the period. Accordingly the "Income/(losses) 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.
Balance Sheet
As at 30 September 2023
(Audited)
(Unaudited) (Unaudited) Year ended
30 September 30 September 31 March
2023 GBP000 2022 GBP000 2023 GBP000
================================================ ------------- ------------- ------------
Non-current assets
------------------------------------------------ ------------- ------------- ------------
Investments held at fair value through profit
or loss 369,881 343,518 353,262
------------------------------------------------- ------------- ------------- ------------
369,881 343,518 353,262
------------------------------------------------ ------------- ------------- ------------
Current assets
------------------------------------------------ ------------- ------------- ------------
Trade and other receivables 5,615 93 128
------------------------------------------------- ------------- ------------- ------------
Cash and cash equivalents 5,845 11,406 13,987
------------------------------------------------- ------------- ------------- ------------
11,460 11,499 14,115
------------------------------------------------ ------------- ------------- ------------
Current liabilities
------------------------------------------------ ------------- ------------- ------------
Trade and other payables (460) (312) (412)
------------------------------------------------- ------------- ------------- ------------
Net current assets 11,000 11,187 13,703
------------------------------------------------- ------------- ------------- ------------
Net assets 380,881 354,705 366,965
------------------------------------------------- ------------- ------------- ------------
Capital and reserves
------------------------------------------------ ------------- ------------- ------------
Called up share capital 1,200 1,200 1,200
------------------------------------------------- ------------- ------------- ------------
Contributed surplus 322,839 323,799 323,799
------------------------------------------------- ------------- ------------- ------------
Retained earnings 56,842 29,706 41,966
------------------------------------------------- ------------- ------------- ------------
Total equity shareholders' funds 380,881 354,705 366,965
------------------------------------------------- ------------- ------------- ------------
Net asset value per Ordinary and 'A' non-voting
Ordinary share 317.4p 295.6p 305.8p
Statement of Changes in Equity
Contributed
surplus Retained
For the six months ended 30 September Share capital reserve earnings
2023 (unaudited) GBP000 GBP000 GBP000 Total GBP000
====================================== ------------- ----------- --------- ------------
Net assets at 1 April 2023 1,200 323,799 41,966 366,965
--------------------------------------- ------------- ----------- --------- ------------
Profit for the period - - 15,836 15,836
--------------------------------------- ------------- ----------- --------- ------------
Dividends - (960) (960) (1,920)
--------------------------------------- ------------- ----------- --------- ------------
Net assets at 30 September 2023 1,200 322,839 56,842 380,881
Contributed
surplus Retained
For the six months ended 30 September Share capital reserve earnings
2022 (unaudited) GBP000 GBP000 GBP000 Total GBP000
====================================== ------------- ----------- --------- ------------
Net assets at 1 April 2022 1,200 324,759 56,903 382,862
--------------------------------------- ------------- ----------- --------- ------------
Loss for the period - - (26,237) (26,237)
--------------------------------------- ------------- ----------- --------- ------------
Dividends - (960) (960) (1,920)
--------------------------------------- ------------- ----------- --------- ------------
Net assets at 30 September 2022 1,200 323,799 29,706 354,705
Contributed
surplus Retained
For the year ended 31 March 2023 Share capital reserve earnings
(audited) GBP000 GBP000 GBP000 Total GBP000
================================= ------------- ----------- --------- ------------
Net assets at 1 April 2022 1,200 324,759 56,903 382,862
---------------------------------- ------------- ----------- --------- ------------
Loss for the year - - (12,057) (12,057)
---------------------------------- ------------- ----------- --------- ------------
Dividends - (960) (2,880) (3,840)
---------------------------------- ------------- ----------- --------- ------------
Net assets at 31 March 2023 1,200 323,799 41,966 366,965
Cash Flow Statement
For the six months ended 30 September 2023
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended 30 ended 30 Year ended
September September 31 March
2023 GBP000 2022 GBP000 2023 GBP000
=================================================== ------------ ------------ ------------
Cash flows from operating activities
--------------------------------------------------- ------------ ------------ ------------
Profit/(loss) before finance costs 15,836 (26,236) (12,056)
---------------------------------------------------- ------------ ------------ ------------
Adjustments for:
--------------------------------------------------- ------------ ------------ ------------
Realised gains on investments (1,369) (1,646) (5,571)
---------------------------------------------------- ------------ ------------ ------------
Unrealised (gains)/losses on investments (10,955) 32,166 20,495
---------------------------------------------------- ------------ ------------ ------------
Foreign exchange 335 (346) (327)
---------------------------------------------------- ------------ ------------ ------------
(Increase)/decrease in trade and other receivables (5,487) 108 73
---------------------------------------------------- ------------ ------------ ------------
Increase/(decrease) in trade and other payables 48 (56) 44
---------------------------------------------------- ------------ ------------ ------------
Purchase of non-current investments (40,892) (49,695) (78,568)
---------------------------------------------------- ------------ ------------ ------------
Sale of non-current investments 36,597 55,643 90,368
---------------------------------------------------- ------------ ------------ ------------
Net cash (outflow)/inflow from operating
activities (5,887) 9,938 14,458
---------------------------------------------------- ------------ ------------ ------------
Cash flows from financing activities
--------------------------------------------------- ------------ ------------ ------------
Interest paid on bank loans - - -
--------------------------------------------------- ------------ ------------ ------------
Dividends paid (1,920) (1,920) (3,840)
---------------------------------------------------- ------------ ------------ ------------
Net cash outflow from financing activities (1,920) (1,921) (3,841)
---------------------------------------------------- ------------ ------------ ------------
(Decrease)/increase in cash and cash equivalents (7,807) 8,017 10,617
---------------------------------------------------- ------------ ------------ ------------
Cash and cash equivalents at start of period 13,987 3,043 3,043
---------------------------------------------------- ------------ ------------ ------------
Foreign exchange (335) 346 327
---------------------------------------------------- ------------ ------------ ------------
Cash and cash equivalents at end of period 5,845 11,406 13,987
Notes to the Financial Statements
1 Accounting policies
Hansa Investment Company Limited is a company limited by shares,
registered and domiciled in Bermuda with its registered office
shown on further on. The principal activity of the Company is an
investment vehicle.
(a) Basis of preparation
The Financial Statements of the Company have been prepared in
accordance with International Financial Reporting Standards
("IFRS") means standards and interpretations issued (or adopted) by
the International Accounting Standards Board (they comprise:
International Reporting Standards, International Accounting
Standards ("IAS") and Interpretations developed by the IFRS
Interpretations Committee or the former Standing Interpretations
Committee ("SIC")).
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 in line with the assertion of the
Board further on in the report. 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 July
2022, to the extent that the SORP does not conflict with IFRS. The
principal accounting policies adopted are set out below.
(b) 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.
(c) 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 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 which is
considered to be fair value at the Balance Sheet date. 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, valuation process and techniques used, external experts
used in the valuation process and updated details of the 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.
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.
(d) 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.
(e) 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.
(f) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the revenue column of the Income Statement
except expenses which are incidental to the acquisition or disposal
of an investment which are charged to the capital column of the
Income Statement.
(g) 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.
(h) 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 losses 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.
(i) 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.
Under Bermuda Company Law, Retained Earnings and Contributed
Surplus Reserve are both distributable.
(j) 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 2023. The most recent valuation
statement was received on 18 September 2023, stating the value of
the Company's holding as at 30 June 2023. In the absence of a
valuation for 30 September 2023 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 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 the prior year are still the
same used now. In addition, the Company has compared the historic
valuation movements of DV4 to the FTSE350 Real Estate Index and
CBRE Monthly 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 2023. It
is believed the value of DV4 as at 30 September 2023 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.
(k) Adoption of new and revised standards
At the date of authorisation of these Financial Statements there
were no standards and amendments to standards, which have not been
applied in these Financial Statements.
In the current financial period the Company has applied the
following amendments to standards:
-- Amendments to IAS1 'Classification of liabilities as current
or non-current' (effective for accounting periods beginning on or
after 1 January 2023).
-- IFRS 17, 'Insurance contracts' (effective for accounting
periods beginning on or after 1 January 2023).
-- Amendments to IAS 8 'Definition of Accounting Estimates'
(effective for accounting periods on or after 1 January 2023).
-- Amendments to IAS 1 and IFRS Practice Statement 2 'Disclosure
of Accounting Policies' (effective for accounting periods on or
after 1 January 2023).
-- Amendments to IAS 12 'Deferred Tax related to Assets and
Liabilities arising from a Single Transaction' (effective for
accounting periods on or after 1 January 2023).
There is no material impact on the Financial Statements or the
amounts reported from the adoption of these amendments to the
standards.
(l) Operating Segments
The Company considers it has one operating segment for the
purposes of IFRS 8.
2 Income
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended 30 ended 30 Year ended
September September 31 March
2023 GBP000 2022 GBP000 2023 GBP000
======================== ------------ ------------ ------------
Income from investments
------------------------ ------------ ------------ ------------
Dividends 6,186 6,003 6,892
------------------------ ------------ ------------ ------------
Total income 6,186 6,003 6,892
Note: the significant majority of Income received from
investments relates to dividends paid by Ocean Wilsons Holdings
Limited. As such, income does not accrue evenly throughout the
year.
3 Dividends paid
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended 30 ended 30 Year ended
September September 31 March
2023 GBP000 2022 GBP000 2023 GBP000
================================================== ------------ ------------ ------------
Fourth interim dividend for 2023 (paid 26
May 2023): 0.8p (2022: 0.8p) 960 960 960
-------------------------------------------------- ------------ ------------ ------------
First interim dividend for 2024 (paid 25 August
2023): 0.8p (2023: 0.8p) 960 960 960
-------------------------------------------------- ------------ ------------ ------------
Second Interim dividend for 2023 (paid 25
November 2022): 0.8p - - 960
-------------------------------------------------- ------------ ------------ ------------
Third Interim dividend for 2023 (paid 24 February
2023): 0.8p - - 960
-------------------------------------------------- ------------ ------------ ------------
Total income 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 2024 was announced on 10 October 2023. The payment
totalling 0.8p per share (GBP0.96m) was paid on 24 November
2023.
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
2023 (Unaudited) 3,847 3.2p 11,989 10.0p 15,836 13.2p
----------------------------------- ------ ---------- -------- ---------- -------- ----------
Six months ended 30 September
2022 (Unaudited) 3,937 3.3p (30,174) (25.2p) (26,237) (21.9p)
----------------------------------- ------ ---------- -------- ---------- -------- ----------
Year ended 31 March 2023 (Audited) 2,540 2.1p (14,597) (12.2p) (12,057) (10.1p)
5 Financial information
The financial information for the six months ended 30 September
2023 was approved by a committee of the Board of Directors on
16 November 2023.
6 Net asset value per share
The NAV per share is based on the net assets attributable to
equity shareholders of GBP380,881,000 (30 September 2022:
GBP354,705,000; 31 March 2023 GBP336,965,000) and on 120,000,000
shares being the number of shares in issue at the period ends.
7 Commitments and contingencies
The Company has the following outstanding commitments as at 30
September 2023 (30 September 2022: GBPnil; 31 March 2023:
GBP2.0m).
Commitment
in local Converted
Fund currency to GBP
========================== ------------ ------------
GGV Discovery IV - Asia $600,000 GBP491,562
-------------------------- ------------ ------------
GGV Discovery IV - US $600,000 GBP491,562
-------------------------- ------------ ------------
Khosla Ventures VIII $1,200,000 GBP983,123
-------------------------- ------------ ------------
TA Associates XV $3,600,000 GBP2,949,369
-------------------------- ------------ ------------
Triton VI EUR1,740,000 GBP1,509,368
-------------------------- ------------ ------------
TrueBridge Direct Fund III $300,000 GBP245,781
-------------------------- ------------ ------------
Total GBP6,670,765
None of these commitments had been drawn down as at 30 September
2023. As at the time of signing of this Report, TrueBridge Direct
Fund III had drawn a net amount of $105,000 and Khosla Ventures
VIII had drawn $84,000.
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 severely 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 and in the Portfolio
Manager's Review.
Information on each of these areas is given in the Strategic
Report within the Annual Report for the year ended 31 March 2023.
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
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 Balance Sheet are grouped into the fair value hierarchy, as
detailed below:
Level 2
30 September 2023 (unaudited) Level 1 GBP000 GBP000 Level 3 GBP000 Total GBP000
======================================= -------------- ------- -------------- ------------
Financial assets at fair value through
profit or loss
--------------------------------------- -------------- ------- -------------- ------------
Quoted equities 144,308 - - 144,308
--------------------------------------- -------------- ------- -------------- ------------
Unquoted equities - - 7,778 7,778
--------------------------------------- -------------- ------- -------------- ------------
Fund investments 39,461 178,334 - 217,795
--------------------------------------- -------------- ------- -------------- ------------
Fair Value 183,769 178,334 7,778 369,881
Level 2
30 September 2022 (unaudited) Level 1 GBP000 GBP000 Level 3 GBP000 Total GBP000
======================================= -------------- ------- -------------- ------------
Financial assets at fair value through
profit or loss
--------------------------------------- -------------- ------- -------------- ------------
Quoted equities 138,909 - - 138,909
--------------------------------------- -------------- ------- -------------- ------------
Unquoted equities - 2,122 9,555 11,677
--------------------------------------- -------------- ------- -------------- ------------
Fund investments 36,799 156,133 - 192,932
--------------------------------------- -------------- ------- -------------- ------------
Fair Value 175,708 158,255 9,555 343,518
Level 2
31 March 2023 (audited) Level 1 GBP000 GBP000 Level 3 GBP000 Total GBP000
======================================= -------------- ------- -------------- ------------
Financial assets at fair value through
profit or loss
--------------------------------------- -------------- ------- -------------- ------------
Quoted equities 136,942 - - 136,942
--------------------------------------- -------------- ------- -------------- ------------
Unquoted equities - - 9,132 9,132
--------------------------------------- -------------- ------- -------------- ------------
Fund investments 37,826 169,362 - 207,188
--------------------------------------- -------------- ------- -------------- ------------
Fair Value 174,768 169,362 9,132 353,262
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
2023 equity 2022 equity 2023 equity
investments investments investments
GBP000 GBP000 GBP000
========================================== ------------- ------------- ------------
Opening Balance 9,132 8,917 8,917
------------------------------------------ ------------- ------------- ------------
Purchase - - -
------------------------------------------ ------------- ------------- ------------
Sale - - -
------------------------------------------ ------------- ------------- ------------
Total (losses) or gains included in gains
on investments in the Income Statement:
------------------------------------------ ------------- ------------- ------------
on assets held at period end (1,354) 638 215
------------------------------------------ ------------- ------------- ------------
Closing Balance 7,778 9,555 9,132
As at 30 September 2023, 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 2023. The most recent
valuation statement was received on 18 September 2023, with an
estimated NAV based on the unaudited capital statement of DV4 as at
30 June 2023. If the value of the unquoted Level 3 equity
investments were to increase or decrease by 10%, while all other
variables remained constant, the return and net assets attributable
to shareholders for the period ended 30 September 2022 would have
increased or decreased by GBP778,000 respectively.
Investor Information
Company 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.
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.
Secretary and registered office
Conyers Corporate Services (Bermuda) Limited
Clarendon House
2 Church Street PO Box HM666
Hamilton HM CX Bermuda
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.
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 be found on the Company's website:
www.hansaicl.com.
Service providers
Independent Auditor
PricewaterhouseCoopers LTD
Solicitors - Bermuda
Conyers Dill & Pearman Limited
Solicitors - UK
Dentons UK and Middle East LLP
Custodian
Banque Lombard Odier & Cie SA
Stockbroker
Winterflood Investment Trusts
Administrator
Apex Fund Administration Services (UK) Ltd, formerly named
Maitland Administration Services Limited
Alternative Investment Fund Manager
Hanseatic Asset Management LBG
Financial calendar
Company year end
31 March
Annual Report sent to shareholders
June
Annual General Meeting
July/August
Shareholder presentation
September
Announcement of half-year results
November
Half-year Report released to shareholders
December
Interim dividend payments
August, November, February and May
Share price listings
The price of your shares can be found on our website. In
addition, share price information for Ordinary shares / 'A'
non-voting Ordinary shares can be found via the following
codes:
ISIN
BMG428941162 / BMG428941089
SEDOL
BKLFC18 / BKLFC07
Reuters
HAN.L / HANA.L
Bloomberg
HAN LN / HANA LN
TIDM
HAN / HANA
Legal Entity Identifier
213800RS2PWJXS2QDF66
Further information about Hansa Investment Company Limited,
including monthly fact sheets, Stock Exchange announcements and
shareholder presentations, can be found on the Company's website:
www.hansaicl.com
Please contact the Portfolio Manager, as below, if you have any
queries concerning the Company's investments or performance.
Portfolio Manager and additional administrative services
provider
Hansa Capital Partners LLP
50 Curzon Street
London
W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hiclenquiry@hansacap.com
Website: www.hansagrp.com
Please contact the Registrars, as below, if you have a query
about a certificated holding in the Company's shares.
Registrar
Computershare Investor Services (Bermuda) Limited
c/o 13 Castle Street
St Helier
Jersey
JE1 1ES
Telephone: +44 (0) 370 707 4040
Email: info@computershare.co.je
Website: www.computershare.com/je
If you have a query, you can call our Shareholder helpline on
+44 (0) 370 707 4040. Calls are charged at the standard geographic
rate and will vary by provider. Calls outside the United Kingdom
will be charged at the applicable international rate. Lines are
open between 08:30 - 17:30, Monday to Friday excluding public
holidays in England and Wales.
Glossary of Terms
Association of Investment Companies ("AIC")
The Association of Investment Companies is the UK trade
association for closed-ended investment companies
(www.theaic.co.uk). 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 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. The UK regulatory authorities
have introduced legislation from 1 January 2023 to amend some of
the disclosures in the KID for UK shareholders. The Company's AIFM
will be producing both UK KIDs and European KIDs going forward.
Key Performance Indicators ("KPIs")
A set of quantifiable measures 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 a
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
shares - the Ordinary shares (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 per share, 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. See also Key Information Document ("KID").
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.
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END
IR EQLFFXFLBFBB
(END) Dow Jones Newswires
November 16, 2023 10:05 ET (15:05 GMT)
Grafico Azioni Hansa Investment (LSE:HAN)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Hansa Investment (LSE:HAN)
Storico
Da Giu 2023 a Giu 2024