TIDMHAN TIDMHAN TIDMHANA
RNS Number : 9835Q
Hansa Investment Company Limited
24 June 2020
Hansa , investing to create long-term growth
Period End Report
For the Period Ended
31 March 2020
Welcome
I'm pleased to present the first Period-End Report for Hansa
Investment Company Ltd ("the Company", "HICL") to the
shareholders.
2019 and the start of 2020 have been extremely busy. HICL was
incorporated in Bermuda and was listed in the London Stock Exchange
on the 29 August 2019, following the transfer of business from
Hansa Trust PLC ("Hansa Trust"). Latterly, and as I write this to
you, we find ourselves in unprecedented times with the world in a
struggle against a virus that has claimed the lives of hundreds of
thousands of people globally and rocked economies and financial
systems to their cores.
Despite the corporate changes during the year, the Investment
Policy and underlying portfolio remained largely unchanged and
continued to be managed by our Portfolio Manager, Hansa Capital
Partners LLP ("HCP"). Alec Letchfield understandably has focused
his piece on the impact the virus has had on markets and on our
portfolio, as well as considering where events might go from here.
You can read his update later in this Report.
Our Interim Report in September 2019 included a good deal of
information on the Scheme of Redomiciliation. This Period-End
Report will repeat elements of that information for those readers
who might have missed it.
You will also note some administrative changes: as part of the
Scheme of Redomiciliation, our new Company issued five shares for
every one Hansa Trust share. This has led to changes in the quoted
NAV per share, market share price of each class of share and
dividends per share when they are announced. The Company also pays
quarterly dividends rather than semi-annual. As a newly formed
company, HICL has no historical performance. To give shareholders a
more meaningful representation of the performance of the portfolio
since 1 April 2019, we have also included a non-statutory,
pro-forma unaudited set of Financial Statements incorporating the
performance of Hansa Trust as relevant, as well as the required
statutory Financial Statements since HICL's inception. I would
encourage you to look at both the statutory Financial Statements as
well as the non-statutory, pro-forma, Financial Statements included
in this Report. Together they paint a more meaningful picture of
performance for the year and also comparable historical
information. Our Board has also undergone a change with three new
Directors. Biographies of our Directors can be found on the
Company's website (www.hansaicl.com) and within this Report.
I wish you and your families well during these challenging
times.
Yours sincerely
THIS DOCUMENT IS IMPORTANT and if you are a holder of Ordinary
shares it requires your immediate attention. If you are in doubt as
to the action you should take or the contents of this document, you
should seek advice from an independent financial advisor,
authorised if in the UK under the Financial Services and Markets
Act 2000, or other appropriately authorised financial advisor if
outside of the UK. If you have sold or transferred your Ordinary
shares in the Company, you should send this document, immediately
to the purchaser or transferee; or to the stockbroker, bank or
other agent through whom the sale or transfer was effected for
onward transmission as soon as practicable.
COMPANY REGISTRATION AND NUMBER: The Company is registered in
Bermuda under company number 54752.
Chairman's Report to the Shareholders
JONATHAN DAVIE
Chairman
Introduction
This is my first Period-End Report to shareholders since
becoming Chairman of Hansa Investment Company Ltd ("the Company",
"HICL") on 29 August 2019 and it comes at a very challenging time
for all of us, due to the Coronavirus pandemic. I am pleased to be
able to say all your Directors and the many people who support the
Company with various services are presently fit and well.
You will hopefully all be aware that the business successfully
redomiciled to Bermuda in August 2019, following the substantial
vote in favour of our proposals in July 2019 which culminated in
the formation of HICL. That said, the Investment Objective, Policy
and Strategy, as well as the key service providers, most notably
our Portfolio Manager, remain unchanged. The Company continues to
seek to achieve its investment objective of growing the Company
over the medium to long-term by primarily investing in third-party
funds and global equities.
As a result of the redomicile and formation of a new Company;
when past performance of the business is referenced, the Board
considers the performance of the Company to be combined with the
relevant history from its predecessor, Hansa Trust. As such, this,
and future Reports, will reference the combined performance of, and
comparisons between, Hansa Trust & HICL and portfolio
performances, with notes, where relevant, explaining how the data
has been derived. Pro-forma financial information is provided in
the Financial Statements at the back of this document to reflect
this combined and historical performance.
Shareholder Returns
The past six months since the Interim Report has shown a decline
in the Net Asset Value ("NAV") of 48.3p per share, from 278.5p per
share to 230.2p per share as at 31 March 2020. Similarly, over the
past 12 months since 1 April 2019, NAV has declined 50.9p per share
from 281.1p per share. During the past six months, the discount has
increased from 32.0% to 43.1% for the Ordinary shares and from
32.8% to 41.2% for the "A" Ordinary shares over the same period.
This compares with an increase in the discount from 30.5% to 43.1%
for the Ordinary share and from 30.6% to 41.2% for the "A" Ordinary
shares over the 12 month period.
There have been two drivers to the fall in NAV. Firstly, Ocean
Wilson Holdings Ltd ("OWHL") and, secondly, Covid-19. The fall in
the NAV for the 12 months to 31 March 2020 was 16.9% (Total
Return), principally caused by the 42.1% fall in the price of OWHL
which reflected the fall in the Wilson Sons share price from R$37.1
to R$28.4 over the 12 month period, combined with a 25% fall in the
value of the Real against the US Dollar. The NAV decline of 7.4% in
the portfolio ex Ocean Wilson is similar to the fall of 7.0% in the
MSCI All Country World Index (GBP).
This is a disappointing result for the period. Many investment
companies with a March year-end will be reporting results heavily
impacted by Covid-19. I am pleased to say our NAV has recovered by
13.3% (Total Return) as at the date of 19 June 2020 and the
Directors continue to see long-term value in OWHL. Indeed, some of
your Directors have increased their holdings in your Company in the
past six months. I bought a further 25,000 Ordinary share and
100,000 "A" Ordinary shares in the period and William Salomon also
added 380,000 Ordinary shares and 20,000 "A" Ordinary shares.
Simona Heidempergher has also made an initial investment of 6,400
"A" Ordinary shares.
Prospects
I mentioned in my Interim Report the perverse effects that
Quantitative Easing ("QE") had had on investment decisions and the
deferment of recessionary forces. Well, the Coronavirus pandemic
has certainly brought QE back into the forefront of the battle, to
reduce the number of businesses going under during the lockdown and
ensure that citizens still have access to some income and the
ability to feed their families. The timing of the end of this
pandemic is impossible to predict, hence making it particularly
challenging for making investment decisions. As Yogi Berra once
said "it ain't over till it's over"! However, it is already clear
the only possible end to the present unsustainable situation will
be when a suitable vaccine is discovered and a significant majority
of the population has been inoculated. It is of course possible the
pandemic will evaporate when "herding" has succeeded in infecting
about 60% of the population with the virus, or the lockdown has
succeeded in banishing it. History tells us that without a suitable
vaccine it will revisit us at least once more, probably during the
winter months. It is also disappointing to see a "beggar thy
neighbour" attitude and lack of a coordinated international effort
by governments to meet the challenge head on. I am also fearful in
particular of how the relationship between China and the West
develops as we come out of this crisis. The National People's
Congress declaration of new security plans for Hong Kong in
defiance of the 1997 "One Country Two Systems" agreement with the
UK does not bode well for the future.
This, combined with an inevitable decline in global trade, the
still to be felt effects of Brexit, the sharp decline in the oil
price, the possibility of more countries adopting negative interest
rates, the uncertainty of the direction of inflation or deflation
and the spectre of climate change hovering over us all makes this a
very challenging time for investment managers.
Choppy waters remain but the Board is confident that our Manager
can navigate these and work towards achieving our investment
objectives. Indeed, since the 31 March the fund is up 12.9% to
GBP312.0m as at 19 June 2020, having also paid out a GBP960k
dividend in May 2020.
Changes to the Board
In my first statement to you in the Interim Report, I noted that
a number of corporate changes had occurred. Given this is the first
Period-End of the Company, I should like to repeat elements of that
Statement and start by thanking my fellow Directors at Hansa Trust
for their years of dedicated service to the company. Their wisdom
and insights brought much value to all shareholders. I should also
like to take this opportunity to thank Mr Teideman, who has retired
having been a consultant to Hansa Trust. Mr Teideman was also a
director of Hansa Trust for 12 years between 1991 and 2003 and
then, more recently, a consultant to the audit committee.
I should like to welcome and introduce our new Directors:
Richard Lightowler, who is a resident of Bermuda and a retired
KPMG Partner, is taking over from me as Chairman of the Audit
Committee. He has extensive experience in risk and corporate
governance and significant transaction experience including
redomiciliations.
Simona Heidempergher, who has extensive experience as an
executive and non-executive director in a range of companies,
including listed companies, investment funds and research
organisations, across multiple jurisdictions. Simona is a director
of, among other entities, TR European Growth Trust and Henderson
Asset Management Investment Trust - both listed on the London Stock
Exchange.
Nadya Wells has 25 years' experience in emerging and frontier
markets as a long-term investor and corporate governance
specialist. She spent 13 years as portfolio manager with the
Capital Group, investing in Global Emerging Markets and prior to
that five years with INVESCO Asset Management Limited investing in
public and private equity managing a closed ended fund.
The Directors have overall responsibility for and oversight of
the Company's activities. The Directors are responsible for
determining its investment objective, policy and strategy,
reviewing the investment activity and performance and the control
and supervision of the Portfolio Manager.
The biographies of the Directors can be found later on in the
report as well as on the Company's website.
SCHEME OF REDOMICILIATION
I include below a brief summary of the project.
In 2018 the board of Hansa Trust began to formally consider
redomiciling to an alternative jurisdiction, as a result of
increasing concerns over the political climate in the UK and the
instability and uncertainty this created for Hansa Trust. Hansa
Trust's globally diversified assets, very few of which were
UK-based, enabled the opportunity to redomicile without
significantly impacting the existing structure or anticipated
performance of the business as a whole.
After due consideration of a number of potential jurisdictions,
Bermuda was deemed by the Hansa Trust board as the most appropriate
jurisdiction, in order to mirror the existing investment strategy,
portfolio and capital structure, without any material impact on
returns. A proposal to this effect ("the Scheme") was duly put to
shareholders by the board of Hansa Trust on 29 July 2019 and was
passed by shareholders of both share classes, who voted in
significant numbers and overwhelmingly in favour of the Scheme.
The Scheme was sanctioned by the Court on 27 August 2019.
Following this, Hansa Trust successfully redomiciled its business
to Bermuda pursuant to the Scheme as of 29 August 2019, whereupon
shareholders in Hansa Trust became shareholders in Hansa Investment
Company Limited, a new Bermudan registered company.
On 29 August 2019, pursuant to the Scheme, the issued share
capital of Hansa Trust was de-listed and cancelled. New shares were
re-issued by the Company at that time and, on 29 August 2019,
40,000,000 Ordinary shares of one pence each ("Ordinary shares")
were admitted to listing on the premium segment of the Official
List and 80,000,000 'A' Ordinary shares of one pence each (" 'A'
Ordinary shares") were admitted to listing on the standard segment
of the Official List and in respect of each class, were admitted to
trading on the Main Market of the London Stock Exchange.
Ordinary Shareholders and 'A' Ordinary Shareholders in Hansa
Trust at close of business on 28 August 2019 will have received
five Ordinary shares or 'A' Ordinary shares respectively in Hansa
Investment Company Limited in exchange for each existing share
held.
For more information please see the Company's prospectus
https://www.hansaicl.com//media/Files/H/Hansa-Investment-Company-Limited/documents/hansa-investment-company-ltd-prospectus.pdf
Following 29 August 2019, all day-to-day business operations of
Hansa Trust terminated and all ongoing operations are within HICL.
Many of the service providers that worked for Hansa Trust have been
retained by the Company although there have been some changes. The
current key suppliers are summarised later in the report.
The Board has estimated the total cost of the project to
research and deliver the redomiciliation of the business to be c
GBP2.1m (equivalent to 17.8 p per share or 0.78% of 31 March 2020
NAV). This cost has been incurred over two financial years -
initially by Hansa Trust during its 2018/19 financial year followed
by Hansa Trust and HICL during the financial year 2019/20.
Environmental, social and Corporate Governance ("ESG")
Matters
ESG considerations will play an increasingly important part in
the decision making processes of funds and their Managers the world
over.
As a Board, we have asked our Manager to review their ESG
processes and report back in due course. We are of the view that
good returns and well run sustainable business models will go hand
in hand.
Further, we are cognisant that, as part of the redomicile of the
business to Bermuda, and in a normal, non-Covid-19, year there will
be a substantial increase in Director travel to attend Board
meetings in Bermuda. Therefore, as a matter of policy, the Board
has elected to offset the carbon impact specifically of travel on
behalf of the business. This is detailed more fully in the
Organisation and Objectives section of the report.
Company Auditor
As previously announced, the Board of the Company have appointed
PricewaterhouseCoopers Ltd of Bermuda ("PwC") to audit the
Company.
On behalf of the Board, I extend our well wishes to you, our
shareholders, and your families during these unprecedented
times.
Jonathan Davie
Chairman
24 June 2020
I would draw shareholders' attention to the Glossary of Terms
which can be found at the end of this Period-End Report. I hope it
is helpful in understanding a business, ever more complicated by
regulation and jargon.
The Board of Directors
The Directors who served the Company during the period to 31
March 2020 are:
Jonathan Davie
(Chairman)
Jonathan became a Director and Chairman of the Company in June
2019. He remains a Director of Hansa Trust PLC whilst it is run
down, joining that board in January 2013. He is also a partner of
First Avenue Partners, an alternatives advisory boutique.
Jonathan qualified as a Chartered Accountant and then joined
George M. Hill and Co. and became an authorised dealer on the
London Stock Exchange. The firm was acquired by Wedd Durlacher
Mordaunt and Co. where Jonathan became a partner in 1975. He was
the senior dealing partner of the firm on acquisition by Barclays
Bank to form BZW in 1986.
Jonathan developed BZW's Fixed Income business prior to becoming
chief executive of the Global Equities Business in 1991. In 1996 he
became deputy chairman of BZW and then vice chairman of Credit
Suisse First Boston in 1998 on their acquisition of most of BZW's
businesses. He focused on the development of Credit Suisse's Middle
Eastern business. He retired from Credit Suisse in February
2007.
Total
Meetings Period
attended Meetings
Strategic 1 1
Board 2 2
Audit Committee 1 1
Richard Lightowler
(Audit Committee Chairman)
Richard became a Director of the Company in June 2019. Richard
has 25 years' experience in public accounting and recently retired
as partner of KPMG in Bermuda after 19 years in that role. He was
head of the KPMG Insurance Group in Bermuda for 14 years, a member
of the firm's Global Insurance Leadership Team and Global Lead
Partner for large international insurance groups listed on the New
York and London Stock Exchanges.
Richard has significant regulatory experience, advising the
Bermuda Monetary Authority and working with clients regulated by
the PRA, FRC and FCA as well as other international regulators. He
has a continuing role advising the Bermuda Monetary Authority on
regulatory matters. He also has extensive experience in risk and
corporate governance and significant transaction experience
including redomiciliations. Richard is based in Bermuda. Richard
also holds directorships with Geneva Re and Oakley Capital.
Total
Meetings Period
attended Meetings
Strategic 1 1
Board 2 2
Audit Committee 1 1
Simona Heidempergher
Simona became a Director of the Company in June 2019. Simona has
extensive experience as an executive and non-executive director in
a range of companies, including listed companies, investment funds
and research organisations, across multiple jurisdictions.
For the past 17 years, she has been director of Merifin Capital,
an established European privately owned investment company. Prior
to this she had roles as a research associate at Heidrick &
Struggles, a leading executive-level search and leadership
consultancy firm and as project coordinator at Ambrosetti Group, an
Italian consulting company. Currently, Simona is the lead
independent non-executive director of Aquafil SpA where she is
Chairman of the audit and risk committee and a member of the
remuneration committee. Alongside this, Simona is a member of the
Board of Directors of the Stramongate Group, a Luxembourg public
company, TR European Growth Trust, a Henderson Asset Management
Investment Trust listed on the London Stock Exchange and FBK
Fondazione Bruno Kessler, a research organisation.
Total
Meetings Period
attended Meetings
Strategic 1 1
Board 2 2
Audit Committee 1 1
William Salomon
William became a Director of the Company in June 2019. He
remains a Director of Hansa Trust PLC whilst it is run down,
joining that board in 1999 and has a significant, long standing,
investment in the Company.
William's experience in investments and finance is important to
the Board in developing and monitoring investments in special
investment themes and in the Company's strategic investment through
Ocean Wilsons Holdings Limited in Wilson Sons.
William is the senior partner of Hansa Capital Partners LLP
("Hansa Capital Partners"), the Portfolio Manager and Additional
Administrative Services Provider, deputy chairman of Ocean Wilsons
Holdings Limited and its listed subsidiary Wilson Sons Limited. He
is also a shareholder representative on the investment advisory
committee for DV4 Ltd ("DV4") and Chairman of ScotGems PLC
investment trust. William was formerly the vice chairman of Close
Asset Management Limited and chairman of the merchant bank Rea
Brothers PLC.
Total
Meetings Period
attended Meetings
Strategic 1 1
Board 2 2
Audit Committee 1 1
Nadya Wells
Nadya became a Director of the Company in June 2019. Nadya has
25 years' experience in emerging and frontier markets as a
long-term investor and corporate governance specialist. She spent
13 years as portfolio manager with the Capital Group investing in
Global Emerging Markets and prior to that five years with INVESCO
Asset Management Limited, investing in public and private equity
managing a closed ended fund. She started her career in management
consultancy with Ernst & Young.
She holds non-executive directorships at Sberbank of Russia
where she is chair of the Audit Committee and sits on risk and
strategy committees and at Baring Emerging Europe plc where she is
Senior Independent Director. She also works in academia conducting
research and consulting in the public and private sector on
financing in Global Health. She holds an MBA from INSEAD,
France.
Total
Meetings Period
attended Meetings
Strategic 1 1
Board 2 2
Audit Committee 1 1
Note:
1) On incorporation on 21 June 2019, the Company was set up with
two initial Directors, Dawn Griffiths and Christopher Garrod. Both
served from incorporation until 26 June 2019 when, at the Company's
first Board meeting, the current Board members were appointed.
2) As part of the incorporation of the Company, a number of
set-up meetings occurred involving, at different times during the
process, the initial Directors, or combinations of one or more of
the current Directors. These meetings have not been listed above as
they are not recurring operational meetings.
3) Dividend policy is set by the Board as a whole. At the time
of announcement of a quarterly dividend, if such announcement did
not coincide with a scheduled meeting of the Board, a committee of
the Board meets to consider the financial information required
before such an announcement can be officially released. These
meetings are not listed above..
The Board
Board members are selected based on their individual and
complementary skills and experience and their ability to commit
sufficient time to drive the Company's success. All Directors will
retire at each AGM and offer themselves for consideration for
re--election. The Board recommends the re--appointment of each of
the Directors, based on their continuing contribution to the
Company and its shareholders.
The Board is charged by the shareholders with the responsibility
for looking after the affairs of the Company. It involves the
stewardship of the Company's assets and liabilities and the pursuit
of growth of shareholder value in accordance with the investment
objective. These responsibilities are discharged in many ways and
are explained below.
INVESTMENT OBJECTIVE AND POLICY, STRATEGY
The Company objective is to grow the net assets of the Company
over the medium to long-term by investing in a diversified and
multi-strategy portfolio.
The Company will seek to achieve its investment objective by
investing in third-party funds, global equities and other
international financial securities. The Company may invest in
quoted and unquoted securities. The Company's portfolio will
typically comprise at least 30 investments.
The Company holds a strategic position in the share capital of
OWHL which represents the Company's largest holding. The Company
will not make further investments into OWHL.
The Company has no set maximum or minimum exposures to any asset
class, geography or sector and will seek to achieve an appropriate
spread of risk by investing in a diversified global portfolio of
securities and other assets.
INVESTMENT STRATEGY
The Portfolio Manager, engaged by and acting on behalf of the
Company, seeks to build a multi-strategy portfolio by seeking
investments across four key investment categories, in addition to
its strategic investment in OWHL:
Core - investments, typically through third-party funds, that
the Company can expect to hold throughout the economic cycle;
Thematic - investments, typically through third-party funds,
that reflect key investment themes which the Portfolio Manager
believes will generate excess returns;
Diversifying Assets - investments, typically through
third--party funds and directly, that creates asset diversification
within the portfolio; and
Global Equities - a diversified portfolio of global equities
identified by the Portfolio Manager as having long term growth
potential.
While the proportion of the portfolio represented by each of
these categories will vary over time, the Board establishes
parameters for the Portfolio Manager based on its view of the
global investment markets. At the Period-End, the Board had set the
following guidelines for each category as a percentage of the
portfolio (including the strategic investment in OWHL):
Core: 0-45%
Thematic: 0-25%
Diversifying Assets: 0-40%
Global Equities: 0-40%
Following the Period-End, at its May meeting, the Board
increased the upper limit of the Core silo to 50%. All other limits
remain unchanged.
The Portfolio Manager has a strong focus on seeking undervalued
investments and those not readily available to the general public.
The Company's size and flexible structure also enables it to invest
in unconventional investments, which often cannot be accommodated
by more traditional, larger fund managers, typically less flexible
in their approach. These investments range from those sectors
benefiting from structurally higher growth, such as technology, to
assets which the Company believes stand on unwarranted discounts to
their intrinsic value, including other listed investments
companies..
Investment Monitoring AND KEY PERFORMANCE INDICATORS
The Company believes this investment strategy may produce
returns not replicated by movements in any market index.
Furthermore, the Board considers that the use of a single benchmark
will not always offer Shareholders the relevance and the clarity
needed with regard to the performance of the Company.
The Board's primary goal is for the Company to generate returns
for Shareholders and so will compare the Company's performance
against that of a safe return from an appropriate Government bond -
for this the Board has elected to follow the FTSE Gilts All Stocks
TR Index (Bloomberg: FTFIBGT). The Board's second goal is for the
Company to achieve returns that are higher than inflation and use
the UK's CPI (Bloomberg: UKRPCHVJ) as the KPI for comparison.
Finally, the Board compares the Company's returns with those of
its: (i) peer group; and (ii) an appropriate index - for which the
Board has elected to follow the performance in GBP of the MSCI All
Country World Index excluding Frontier Markets (Bloomberg:
NDUEACWF).
POLICY ON BOARD COMPOSITION
Appointments to the Board are made on merit and against
objective criteria, in accordance with the AIC Corporate Governance
Code. The Board considers it is of paramount importance to
shareholders that, after consideration of the skills and experience
needed by the Board, candidates are chosen on the basis of merit
only and that there should be no discrimination in the choice of
Directors for any reason.
Long -- Term Performance
TEN YEAR COMPANY PERFORMANCE STATISTICS
Net Asset
Value per
share -
Ordinary
Year ended Shareholders' and 'A' Annual
31 March Funds Ordinary Dividends Ordinary 'A' Ordinary Ordinary 'A' Ordinary
2020 GBP276.3m 230.2p 3.2p 130.9p 135.5p 43.1% 41.2%
2019 GBP337.3m 281.1p 3.2p 195.5p 195.0p 30.5% 30.6%
2018 GBP323.1m 269.3p 3.2p 198.5p 195.5p 26.3% 27.4%
2017 GBP307.5m 256.3p 3.2p 173.3p 169.6p 32.4% 33.8%
2016 GBP255.6m 213.0p 3.2p 146.0p 145.1p 31.5% 31.9%
2015 GBP273.3m 227.8p 3.2p 172.0p 165.5p 24.5% 27.3%
2014 GBP287.4m 239.5p 3.2p 175.9p 175.5p 26.6% 26.7%
2013 GBP259.9m 216.6p 3.0p 166.8p 163.0p 23.0% 24.7%
2012 GBP268.2m 223.5p 2.8p 181.0p 178.3p 19.0% 20.2%
2011 GBP264.1m 220.1p 0.7p 194.2p 190.5p 11.8% 13.5%
2010 GBP215.0m 179.2p 5.0p 151.0p 147.0p 15.7% 18.0%
The table includes information relating to HICL and historic
information relating to Hansa Trust PLC. The year ended 31 March
2020 notes HICL information. The historic year ends 2019-2010 all
relate to Hansa Trust PLC. So that data is consistent and
comparable, the historic data in columns "Net Asset Value per
Share", "Annual Dividends" and "Share Price (Bid)" have been
restated to reflect that there are five times as many shares in
issue in each share class of HICL as there were in Hansa Trust
PLC.
To 31 March 2020 1 year 3 years 5 years 10 years
Share Price Total
Return
Ordinary shares
(%) (31.6)% (20.3)% (16.5)% 1.7%
'A' non--voting
Ordinary shares
(%) (29.0)% (15.6)% (10.0)% 8.5%
To 31 March 2020 1 year 3 years 5 years 10 years
Net Asset Value Total Return Performance
Net Asset Value
(%) (16.9)% (6.7)% 8.0% 44.5%
Organisation and Objectives
This section explains how the Board has organised the Company
and seeks to deliver its objectives.
BOARD COMMITTEES
The Directors consider that, in order to fulfil their
responsibilities as the Directors of the Company, they should all
be members of every sub-committee where possible.
Audit Committee
The Audit Committee, which meets at least twice a year, consists
of all independent Directors of the Board. Richard Lightowler is
the Chairman of the Audit Committee.
The AIC Code of Corporate Governance ("the AIC Code") indicates
that all independent Directors can be members of the Audit
Committee. The Board is of the opinion that, particularly as the
Company has relatively few directors, shareholders benefit from the
views of all Directors. Therefore, Jonathan Davie, as Chairman of
the Company, is also a member of this Committee. The Board further
acknowledges that the Code states all Committee members should be
independent. Therefore, William Salomon is not a member of the
Committee.
Nomination Committee
The independent members of the Board fulfil the function of the
Nomination Committee. The Committee is chaired by Nadya Wells.
Appointments are made on merit and against objective criteria in
accordance with the AIC Code. The Board considers it is of
paramount importance to shareholders that, after consideration of
the skills and experience needed by the Board, candidates are
chosen on the basis of merit only and that there should be no
discrimination in the choice of directors for any reason. The Board
has determined that all Directors will retire and offer themselves
for re-election each year at the AGM and this policy includes any
Directors appointed during the year.
Management Engagement Committee
The independent members of the Board fulfil the function of the
Management Engagement Committee. The Committee is chaired by
Jonathan Davie. The level of management fees, level of service
provided and the performance of the Portfolio Manager are reviewed
on a regular basis to ensure these remain competitive and in the
best interests of shareholders. The Board, after the annual
recommendation of this Committee, considers the engagement of the
Portfolio Manager to be in the best interests of the
shareholders.
Remuneration Committee
The independent members of the Board fulfil the function of the
Remuneration Committee. The Committee is chaired by Simona
Heidempergher. The level of Directors' fees is monitored annually
and will be formally reviewed every three years, in the light of
their duties and also relative to other comparable companies.
Requirements of s172 UK Companies Act
In line with disclosures of its UK investment company peers, the
Board intends to describe how it has met the requirements of s172
of the UK Companies Act as applicable to your Company. This
includes an explanation of how the Board has sought to promote the
Company for the benefit of its members, how it has taken into
account the likely long-term consequences of decisions and how it
fosters relationships with stakeholders. The Board has identified
the Company's shareholders and its main service providers as its
key stakeholders.
SHAREHOLDER INTERACTION & PROMOTING THE COMPANY
The shareholder base is a mixture of retail investors, wealth
managers, asset managers and private clients across both classes of
the Company's shares. The Board monitors the changes in each
shareholder base at its quarterly Board meetings. The Company
communicates through publication of Year-end and Interim Financial
Statements, through detailed quarterly and monthly factsheets as
well as through the Company's website. The Company will also hold a
UK based shareholder meeting with presentations by the Board and
key service providers to keep shareholders informed.
The Board seeks to understand the opinions of a wide variety of
shareholders. This was of particular importance during the 2019
redomiciliation project whereby the views of a significant number
of shareholders were solicited as the project progressed and
comments were reflected where the Board felt it appropriate. The
Company maintains a dedicated email address for shareholders to
contact the Board (HICLenquiry@hansacap.com).
The Board aims to provide transparency and clarity to investors
and to promote demand for the Company's shares, creating a positive
impact on the discount.
Promotion of the Company is also part of the discount policy,
the purpose of which is to encourage outside demand for the
Company's shares and thereby reduce any discount at which the
shares sell in relation to the NAV.
The Company has the following initiatives and activities:
Recognising the growing number of retail investors, we continue
to develop the Period-End and Interim Reports, the monthly and
quarterly factsheet and the website to make them more interesting
and easier to use.
Edison Research produces written research on the Company, its
investments and its progress. Edison also facilitates wider access
to IFA and investor platforms. Such research is distributed to many
thousands of investors.
Edison also facilitates an ongoing program of outreach meetings
between the Portfolio Manager and existing and potential
investors.
The remit of Winterflood Securities, as the Company's corporate
stockbroker, is to assist in proactively promoting the Company and
enhancing its market coverage.
In addition to Edison and Winterflood Securities initiatives,
our Portfolio Manager, Hansa Capital Partners, is increasing the
numbers of presentations to existing and potential investors.
We are working with Link Asset Services, the Company's
Registrars, and Orient Capital, the Company's Register Analyst, to
improve our understanding of our shareholder base and to
proactively contact key shareholder groups to promote interest.
Long-Term impact of decisions
The Board believes that consideration of environmental, social
and governance ("ESG") factors will play an increasingly important
part in the decision making processes of funds and their managers
the world over. As a Board, we have asked our Manager to review its
ESG processes and report back to the Board in due course. We are of
the view that good returns and well run sustainable business models
will go hand in hand.
SERVICE PROVIDERS
Service Provider Policy
The Board consists entirely of non-executive Directors; it
delegates the day to day implementation of its policies to third
party service providers. The Board has contractually delegated to
external organisations the management of the investment portfolio,
the custodial services which include safeguarding of the assets and
the day to day accounting and company secretarial requirements.
Each of these contracts is only entered into after proper
consideration of the quality and cost of services, which are
regularly reviewed and monitored either by the Board or its
Committees. The Board recognises it is these key service providers
and, importantly, their staff who are critical to the success and
smooth running of your Company.
The Board, in seeking to engage organisations which can provide
the relevant levels of experience and expertise at an acceptable
cost, carries out the following activities:
Monitors third party suppliers, performance and costs
The Board, at its regular meetings, reviews reports prepared by
both the Portfolio Manager and the Administrator, which enable it
to monitor the performance and costs of the third party suppliers
to the Company. The Additional Administrative Services Provider
("AASP") has an ongoing dialogue with each supplier to monitor its
processes and systems and feedback any concerns that might be
arising. In addition, a Director will seek to meet with key
suppliers once a year (or more frequently as is necessary).
Monitors Portfolio Manager performance
The Board reviews reports prepared by the Portfolio Manager at
its regular meetings, which enables it to monitor the investment
risks and returns. The Portfolio Manager attends each Board meeting
to provide an update on Investment Performance and enable the
Directors to actively question the risks and investment performance
within the portfolio.
Determines investment strategy, guidelines and restrictions
The Board determines the investment strategy in conjunction with
the Portfolio Manager. The strategy is monitored regularly and
refinements are made to it as required, with formal review at the
Board's annual strategy meeting.
The Board issues formal investment guidelines and restrictions,
compliance with these is reported by the Portfolio Manager's
compliance officer on a regular basis and is also monitored
independently by the Administrator and Alternative Investment Fund
Manager ("AIFM").
Determines gearing levels and capital preservation through the
use of hedging instruments
The Board, taking account of advice from the Portfolio Manager,
determines the maximum level of borrowings the Company will
undertake at the time of borrowing. Details of the borrowing limits
can be found later in the report.
The key service provider relationship to the Company is Hansa
Capital Partners as the Portfolio Manager and Additional
Administrative Services Provider to the Company.
THE PROVIDERS
Portfolio Manager & Additional Administrative Services
Provider
Hansa Capital Partners LLP ("HCP") is the Portfolio Manager for
the Company. It is responsible for all assets in the portfolio
other than the Company's investment in OWHL. The Board is in
regular contact with the investment management team at HCP which is
led by Alec Letchfield. Additionally, Alec Letchfield is invited to
quarterly meetings of the Board to formally present portfolio
updates and discuss market trends. The Portfolio Manager's detailed
review of the year can be found further on in the report.
HCP charges an investment management fee at an annual rate of 1%
of the net assets of the Company (after any borrowings) but, after
deducting the value of the investment in OWHL, on which no fee is
payable. Hanseatic Asset Management LBG, a company connected to
Hansa Capital Partners LLP and which is also the AIFM, separately
charges an investment management fee to the investment subsidiary
of OWHL.
The terms of the portfolio management agreement permit either
party to terminate the agreement by giving to the other not less
than 12 months' notice, or such shorter period as is mutually
acceptable. There is no agreement between the Company and the
Portfolio Manager concerning compensation in respect to the
termination of the agreement. In its annual assessment of the
Portfolio Manager, the Board concluded that, because of the skills
and experience of the management team it is in the best interest of
shareholders that the Portfolio Manager remains in place under the
present terms. Details of the fees paid to the Portfolio Manager
can be found in Note 3 of the accounts.
HCP also acts as the Additional Administrative Services Provider
("AASP") to the Company. This role ensures a number of the day to
day processes for the Company are carried out as well as providing
oversight of, and a liaison between, a number of the Company's
service providers and the Company itself. HCP is paid GBP115,000
per annum for this service. HCP is not the Company Secretary - see
below.
Auditor
The Company's Auditor is PricewaterhouseCoopers Ltd ("PwC"), a
Bermudan registered firm. The Board have developed a strong working
relationship during the Auditor's first year with the Company and
have been happy with the rigour and challenge offered. The
reappointment of PwC as Auditor to the Company will be proposed at
the forthcoming AGM.
Auditor independence rules restrict the amount and type of
non-audit related work that can be performed by a company's
auditor. Any non-audit related work must be pre-approved by the
Board. Currently, PwC provides only audit services to the Company
(Details in Note 4 of the accounts).
Company Secretary
The Company engages Conyers Corporate Services (Bermuda) Ltd
("Conyers") as its Company Secretary. During the period to 31 March
2020, the Company Secretary has charged GBP17,647 for the period
ended 31 March 2020.
Alternative Investment Fund Manager
As a Bermudan resident, the Company is defined as a non -- EU
Alternative Investment Fund ("AIF") under the EU's Alternative
Investment Fund Manager's Directive ("AIFMD"). As such, the Company
and the AIFM are only subject to the AIFMD rules in a limited way -
specifically in relation to marketing of the Company's shares in
the EU. The Company appointed Hanseatic Asset Management LGB, with
effect from 29 August 2019, to act as its AIFM with
responsibilities for the Portfolio Management and Risk Management.
The AIFM has sub-contracted to Hansa Capital Partners LLP the
provision of Portfolio Management services. The AIFM does not
charge a direct fee for its services although it does recharge any
third party fees incurred.
Administrator
The Company engages Maitland Administration Services Limited as
its Administrator. The Administrator has charged GBP81,653 for the
period ended 31 March 2020.
Custodian
The Company has engaged Banque Lombard Odier & Cie SA
("Lombard Odier") as the Company's Custodian. During the period to
31 March 2020, Lombard Odier charged GBP78,806 for the Custodial
service.
KEY PERFORMANCE INDICATORS and other measures
The Board, regularly and at least quarterly, reviews the returns
and the performance of the Company, including an analysis using the
KPIs listed below.
The Board considers that the use of a single benchmark will not
always offer shareholders the relevance and the clarity needed with
regard to the performance of their Company against its investment
objective. The overall assessment of the performance of the Company
with reference to the KPIs is given by the Chairman is his report
above.
Returns are compared with a number of measures including the
return of a government bond, using the 10 year UK Gilt Return (FTSE
All Stocks Gilts Total Return Index); to the rate of inflation
(real returns are important to shareholders) and with those of our
peer group and appropriate indices for different elements of the
portfolio.
Additionally, whilst not specifically KPIs, the cost of managing
the Company is monitored against the NAV (the ratio between costs
and NAV is also known as the 'ongoing charges percentage per annum
ratio'); and the discount/premium the shares sell at in relation to
the NAV are likewise monitored.
The Board of Directors monitors the returns made in absolute
(firstly) and relative (secondly) terms against the KPIs
established. The comparisons are made over 1, 3, 5 and 10 year time
horizons.
i) Shareholders - Total Returns
To 31 March 2020 1 year 3 years 5 years 10 years
Share Price Total
Return
Ordinary shares (31.6)% (20.3)% (16.5)% 1.7%
'A' non--voting
Ordinary shares (29.0)% (15.6)% (10.0)% 8.5%
ii) Company - Total Returns
These comparisons are used to determine the effectiveness of the
Investment Strategy and of the Portfolio Management. The KPIs below
should also be noted.
To 31 March 2020 1 year 3 years 5 years 10 years
NAV (16.9)% (6.7)% 8.0% 44.5%
Relative comparison
Peer group average (13.5)% (6.7)% 10.3% 62.9%
* See website for peer group members
iii) Discount/Premium
A comparison is made between the (discount)/premium of the
Company's two classes of shares, those of the Company's peer group
and of the AIC average.
1 year 3 years 5 years 10 years
To 31 March 2020 average average average average
Ordinary shares
(%) (33.5) (29.2) (29.3) (25.4)
'A' non-voting
Ordinary shares
(%) (33.5) (30.8) (30.9) (26.9)
Peer group (%) (7.4) (7.5) (7.4) (7.4)
AIC (%) (6.4)
Note: AIC only produces AIC average for 1 year.
During the period, the Board considered the following Investment
Companies to be HICL's Peers (noted with their AIC Sector):
Artemis Alpha Trust (UK All Companies)
AVI Global Trust (Global)
Caledonia (Global)
Capital Gearing (Flexible)
Fidelity Special Values (UK All Companies)
Henderson Opportunities (UK All Companies)
Henderson Alternative Strategies (Flexible)
RIT Capital Partners (Flexible)
Ruffer Investment Co (Flexible)
Witan (Global)
iv) Expense ratios
To 31 March 2020 1 year 3 years 5 years 10 years
Ongoing annual
charges (%) 1.1 1.2 1.1 1.0
To comply with the Packaged Retail and Insurance-based
Investment Products Regulation ("PRIIP"), the Company has issued a
PRIIP's Key Information Document ("KID") for each of its two share
classes. In the PRIIPs, KID regulations are very prescriptive as to
how costs are calculated and presented. In particular, as well as
the costs of the Company itself noted above, the PRIIPs calculation
also incorporates the costs of the directly held fund investment
vehicles themselves, but not those for directly held equities.
Based upon the financial results for the year to 31 March 2020, the
PRIIPs KID cost ratio is 1.82% per annum.
v) Key Performance Indicators
The following are the KPIs the Board uses to assess the returns
of elements of the portfolio and of the Company as a whole.
To 31 March 2020 1 year 3 years 5 years 10 years
FTSE UK Gilts
All Stocks
TR Index 9.9% 14.5% 26.1% 77.3%
UK CPI Inflation 1.5% 6.0% 8.9% 22.4%
MSCI ACWI NR (GBP) (7.0)% 5.8% 37.8% 116.9%
LIMITS
Investment Guidelines
The Portfolio Manager, on behalf of the Company, seeks to build
a multi-strategy portfolio by seeking investments across four key
investment categories under its mandate:
Core - investments, typically through third-party funds, that
the Company can expect to hold throughout the cycle;
Thematic - investments, typically through third-party funds,
that reflect key investment themes which the Portfolio Manager
believes will generate excess returns;
Diversifying Assets - investments, typically through
third--party funds and directly, that creates asset diversification
within the portfolio;
Global Equities - a diversified portfolio of global equities
identified by the Portfolio Manager as having long-term growth
potential.
While the proportion of the portfolio represented by each of
these categories will vary over time, the Board may set parameters
for the Portfolio Manager based on its view of the global
investment markets. At the current time, the Board has set the
following guidelines for each category as a percentage of the
portfolio value (including the strategic investment in OWHL):
Core: 0-45%
Thematic: 0-25%
Diversifying Assets: 0-40%
Global Equities: 0-40%
The above limits were in place throughout the period. Subsequent
to the period end, but prior to the date of signing of this Report,
the upper limit for Core assets was increased to 50%.
Borrowing Limits
The Board believes shareholders' returns may be enhanced if the
Company borrows money at appropriate times for the purpose of
investment. The Company has an unsecured lending facility through
its Custodian, Lombard Odier. The Board have agreed to a nominal
maximum loan of GBP30m, subject to there being sufficient value and
diversity within the portfolio to meet the lender's borrowing
requirements. The Portfolio Manager is able to utilise that
facility as required up to the upper limit available.
PRINCIPAL RISKS
The Board reviews the principal risks from the perspective of
the long-term shareholders, the main risk being that over the
long--term (which we determine to be greater than five years) they
do not make a return from their investment in the Company. The
Board considers and monitors the principal risks facing the
Company, including those that would threaten its business model,
future returns, solvency and liquidity. The Board considers the
risks the Company, and therefore shareholders, face can be divided
into external and internal risks.
External risks
External risks to shareholders and their returns are those that
can severely influence the investment environment within which the
Company operates. These risks include anti-business government
policies, protracted economic recession, declining corporate
profitability, increased taxation, high unemployment and high,
uncontrolled, inflation. The impact of such an environment could
lead to sharp rises in interest rates and a decline in equity and
bond markets. Deflation is also a source of concern in some
countries, but unless deflation accelerated sharply it is not
thought to be a significant impediment to growth. However, it may
lead to negative interest rates which could damage the banking
system's profitability and the levels of savings available for
investment. At their Board meetings and at the annual strategy
meeting, the Directors and the Management consider long-term risks
that concern them, including:
Instability - political and economic - particularly associated
with Brazil.
Economic, currency and equity declines.
Societal and structural changes, regardless of source/reason but
quite possibly triggered by Covid-19, that potentially impact the
Company's investment strategy and its ability to generate growth
over the medium to long--term.
The growth of global debt.
It should be stressed these are the external risks which most
concern the Directors and the Management, not forecasts of future
events. The mitigation of these risks is achieved by sensible stock
and sector diversification and adherence to the Board's investment
restrictions and guidelines.
Internal Risks
Internal and operational risks to shareholders and their returns
are:
portfolio (stock and sector selection and concentration),
balance sheet (gearing),
administrative mismanagement. In respect of the risks associated
with administration, changes to the current taxation environment of
Bermuda.
The Board also considers the risks to the Company's two share
prices, apart from those mentioned above, which includes the risk
of higher discounts. The Board monitors the discount and seeks to
identify the drivers and manage through transparent communication
and shareholder engagement. However, given the Company's stated
objective of increasing shareholder value over the long-term, the
Board does not consider short--term NAV or share price volatility
to be a risk to long--term shareholders.
Details of how the principal risks arising from financial
instruments (as determined by the Financial Reporting Council) are
managed, have been summarised in Note 20 of the Financial
Statements.
Covid-19
The Board focuses on events that damage economies and which may,
as a result, impact the Company's ability to make a return for
shareholders over the medium to long-term. From its recognition as
a growing issue by the World Health Organisation in early 2020,
Covid-19 continues to disrupt economies across the globe. At this
stage it is unclear as to the longer term impact of the disease on
both broader economies, corporate profitability and potential
company defaults. We are however comforted by the extent and speed
of both government and central bank actions which hopefully will
help counterbalance the impacts of the disease and enable stock
markets to look through to more normalised market conditions.
That said, this report is being delivered at a time when the
future is very uncertain, with a wide range of possible outcomes.
In its report, the Portfolio Manager comprehensively explains both
the portfolio performance in the last quarter, when the impact of
the virus compared to previous pandemics became clearer, as well as
its views for the future.
However, it is also worth considering some of the more
structural elements of the Company and its service providers at
this time of uncertainty:
Gearing: Whilst the Company has access to a loan facility, that
facility is relatively modest compared to the Company's size and
remains largely unused. As a result, regardless of the severe
valuation reductions experienced in the final quarter ended 31
March 2020, the Company is not forced to sell assets to manage debt
covenants.
Discount management: The Company has stated previously that,
whilst it has the ability to buy back shares, it does not believe
doing so is an effective, long-term, method to reduce the discount
for the benefit of all shareholders. With the market sell-off and
the widening of discounts across the industry, the Company's
discount management policy has the benefit of not forcing the sales
of assets to raise cash to adhere to a discount management
mechanism by facilitating share buy backs. Additionally, the
repurchase of the Company's shares would further concentrate our
OWHL exposure and, therefore, our exposure to Brazilian risk.
Dividend: The Company announced in May its expected dividend
level and schedule for the year 2020/21 which involved leaving the
level and timing of dividends unchanged from the previous period.
Barring unforeseen circumstances, the Board expects to continue to
follow that guidance regardless of the amount of income raised from
dividends received in any given period.
Liquidity of the portfolio: Cash requirements are monitored
closely. If lower dividend income was to lead to a short-term
cashflow requirement, such as for expenses or dividend payments,
the Company could meet that requirement through a combination of
sales of liquid assets or use of the Company's loan facility for a
short time. A significant proportion of the portfolio (circa 90%)
has daily or weekly liquidity. Underlying investments are largely
in publicly traded investments.
Key service providers: The Board is pleased to report that all
the Company's key service providers have executed their business
continuity plans successfully and that, at the time of writing, the
day to day business of operating the Company has transitioned quite
seamlessly to a working-from-home environment for these service
providers Additionally, during lockdown, the Board continues to
meet but makes use of videoconferencing facilities rather than
meeting face to face.
The Board is confident the Company is securely positioned
despite these unprecedented times and equipped to navigate through
as the future becomes clearer.
DIVID POLICY AND DIVID PAYMENTS
Dividend Policy
The Board's dividend policy is to pay four similar interim
dividends each year. The Board will declare the rate of the four
dividends at the beginning of the financial year in question. The
Board anticipates dividends to be paid in August, during the
financial year, followed by November and February with the fourth
being paid in the May following the end of the financial year. The
Company expects the dividends to grow over time reflecting the
longer -- term returns of the portfolio. If circumstances are such
that the level of cash income generated by the portfolio is
insufficient to meet the dividend commitment, the shortfall may be
made up from the Company's reserves. Under certain one -- off
circumstances an extra and final dividend may be proposed at the
Company's Annual General Meeting.
During the Company's first Period-End, due to the timing of the
Scheme of Arrangement, the Company paid its first and second
interim dividends at the same time in November 2019. The Company
paid the third quarter dividend in February 2020 and the fourth
dividend, as expected, following the Period-End in May 2020.
Dividend Payments
The dividends paid are as follows:
2020
GBP000
Ordinary and 'A' non-voting
Ordinary shares
First and Second interim
paid 1.6p (November 2019)
per share 1,920
Third interim paid 0.8p
(February 2020) per share 960
Fourth interim paid 0.8p
(May 2020) per share 960
Total dividends 3,840
The Board is not proposing a final dividend per Ordinary and 'A'
non-voting Ordinary share classes.
Discount Policy
The discount policy of HICL is to encourage the demand for the
shares, by ensuring it has an investment policy that is attractive
to investors and which is likely to produce above average returns
over the long-term and then to promote the Company and its
prospects, so as to encourage the demand for its shares and to
deliver clear and transparent reporting through regular shareholder
communications.
The Board does not believe it can manage the discount in the
short-term through a share buy-back policy. Furthermore, the Board
does not believe buying in its own shares is in the best long-term
interest of shareholders because:
it reduces the number of shares outstanding and therefore the
liquidity of the shares in the market place; less liquidity may
cause a rise in the discount;
it means a liquid portfolio needs to be maintained, compromising
the ability to have a portfolio of special situations; the
maintenance of the long-term investment policy and its portfolio
takes precedence over the short-term discount policy;
the holding in OWHL would represent an even greater percentage
of the portfolio and buying back shares would raise the relative
exposure to Brazil, which the Board does not wish to do; and
buying back shares treats the symptoms of the problem of lack of
demand, not the cause.
Insurance
The Company through its Bye-Laws has indemnified its Directors
and Officers to the fullest extent permissible by law. During the
year the Company also purchased and maintained liability insurance
for its Directors and Officers.
Going Concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
including its financial position, are set out in the Chairman's
Report to the Shareholders, the Portfolio Manager's Report and
other elements of the Strategic Report. Additionally, given the
unprecedented times we are living through, a section specifically
considering Covid-19 has been added later on in the report,
following the risk analysis.
After due consideration of the Balance Sheet, activities of the
Company, estimated liabilities for the next 12 months and having
made appropriate enquiries, the Directors have concluded the
Company has adequate resources to continue in operational existence
for the foreseeable future. Assets of the Company consist of
securities, the majority of which are traded on recognised stock
exchanges, or open ended funds run by established managers. For
this reason, they continue to adopt the going concern basis in
preparing the Financial Statements.
Longer-Term Viability Statement
In addition to the Statement of Going Concern, the Directors are
also required to make a statement concerning the longer--term
viability of the Company. As stated previously in the wider
Strategic Report, the Directors consider 12 months to be a
relatively short time frame when considering performance and look
to the longer--term for both the performance and risks associated
with the Company. The Directors consider a period of five years to
be a more representative period which aligns to the Portfolio
Manager's longer-term horizon. This period is sufficiently long to
manage short-term market volatility and allow longer-term
performance to work through. The Board continually monitors the
Investment Strategy and Investment Guidelines issued to the
Portfolio Manager and AIFM and directs those entities to target
long-term capital preservation. Further, whilst the Board has
sanctioned the use of gearing, the facility available to the
Portfolio Manager is relatively small compared to the NAV of the
Company. Finally, a number of the more significant costs in each
financial year are contracted to be calculated, on the basis of the
underlying NAV of the Company. As such, in a period of negative
portfolio performance, the cost base should also fall.
Barring unforeseen circumstances and taking account of the
Company's current position including the recent effects of the
Covid-19 pandemic, the principal risks, the longer-term strategy
for the portfolio including a diversified and liquid asset base and
the lack of gearing, the Directors confirm they have a reasonable
expectation that the Group will continue to operate and meet its
liabilities as they fall due for the next five years. Whilst there
is currently a great deal of uncertainty from Covid-19, there will
be new opportunities arising from changes to people's lives and it
is important we identify those emerging trends for the long-term
growth of the portfolio.
Streamlined Energy & Carbon Reporting ("SECR") and
Greenhouse Gas Emissions ("GGE")
Hansa Investment Company Ltd has no direct greenhouse gas
emissions to report from the day to day operations of its business.
However, as noted in the Chairman's Report to the Shareholders, as
a result of the Scheme of Redomicilation, the attendance of
Directors at meetings of the Board in Bermuda will increase travel
related carbon emissions. The Board has assessed the emissions
associated with these trips to be "Scope 3 Indirect Emissions" for
the purposes of the SECR. The Board has further estimated the
emissions associated with the flights to be in the region of 102
tonnes of CO2 (inclusive of the radiative effect of high altitude
aircraft emissions and contrails) for the period ended 31 March
2020. The Board has assessed that the Company does not have other
Indirect Emissions to report, as all other emissions will be
associated with the operations of service providers and be reported
by them if appropriate.
As a result of the above flights, the Company has sought to
offset their carbon emissions by partnering with an environmental
group who specifically operate carbon offset projects. During the
period to 31 March 2020, the Company partnered with Greenfleet
Australia - a not-for-profit group which plants and maintains
native forestry in Australia.
Social, Community, Human Rights, Employee Responsibilities
Policy
The Company does not have any employees. The Company has no
direct social, community or human rights impact. Its principal
responsibility to shareholders is to ensure the investment
portfolio is properly invested and managed.
Portfolio Manager's Report
The Day(s) the Earth Stood Still
Market backdrop
There are decades where nothing happens and there are weeks
where decades happens - this is what we saw with the outbreak of
the coronavirus. Hence having seen a fairly benign first nine
months of the year, with a backdrop of improving in economic growth
and the US Federal Reserve cutting interest rates, markets were
thrown into turmoil in March as the full extent of the impact of
coronavirus became apparent.
Initially markets were complacent. Whilst the first death from
COVID-19 had been reported in China as early as January 2020, the
prevailing view at the start of the year was that this would follow
a similar pattern as prior epidemics, such as SARS and Ebola. These
were seen as problems that primarily impacted emerging rather than
developed markets and the death tolls, whilst always a tragedy,
were low. Consequently most investors treated the situation as an
event risk which are normally short and sharp with stock markets
quickly recovering to historic highs.
The realisation that COVID-19 was quite different from previous
viruses set off a domino effect. Governments, having initially
tried to keep economies open to shore up economic growth, came to
realise that whilst coronavirus may not be as fatal as SARS, its
contagion rates were much higher. Belatedly they limited travel,
closed borders and ultimately locked economies down, realising that
if healthcare systems were not to be overwhelmed, they needed to
slow the pace of infection. As a result we now have the
unprecedented situation whereby 95% of world economies have
effectively come to a full-stop.
The impact on stock markets has been equally dramatic. Having
seen the peak in markets as recently as the 12 February, markets
fell sharply as they priced in the full extent of the damage
COVID-19 was having on individuals, corporates and the broader
economy. It wasn't so much the extent of the falls (although even
these have been large), but rather the speed and volatility of the
declines. We have seen three consecutive days of +/-9% moves in the
S&P 500, the first time that has happened since 1929 and one
week saw an 18% rally, the strongest rise since 1933. From the peak
in markets in February to their respective troughs in March the US,
World, European and Asian stock markets fell by 26.9%, 25.8%, 28.5%
and 21.5%, taking the 12 month numbers to 3.9%, 7.0%, 11.4% and
7.9% respectively.
Outside of blue-chip government bonds, bond markets have been
equally hard hit, at least initially. Credit markets in particular
have been under intense pressure as the global shutdown has weighed
on company balance sheets and, particularly in the high yield
space, raised the prospect of a significant rise in defaults from
current low levels. Sectors such as airlines saw their spreads
widen by 1440 basis points with similar carnage in the energy
sector. As discussed below, more recently government plans to
purchase various credits has seen a sharp reversal in some of these
moves.
Within the commodity space the oil markets have suffered from
the twin challenges of a price war between two of the largest
producers, Saudi Arabia and Russia, combined with a precipitous and
dramatic decline in demand. To the end of March WTI has fallen by
64.3% over the past 12 months and as we write we have the
unprecedented situation whereby prices in the US have become
negative for the first time in history. With storage capacity
running out producers have been forced to pay buyers to take oil
off their hands.
Intra-market life is equally unusual. Normally those sectors
that led the market on the way up tend to be the ones that lead the
market on the way down. Hence one would have expected growth and
technology to be the worst affected as markets sold-off in March
and value, which has been a laggard for many years, to demonstrate
relative out-performance. In fact the opposite has been the case.
Any company that can demonstrate growth in the current environment,
combined with an acceleration of many of the tech trends seen in
recent years, has resulted in these companies being winners. In
contrast with many value companies possessing weak balance sheets,
and greater cyclicality, their performance has deteriorated
further.
At its worst point the price discovery mechanism of stock
markets ceased to function normally, as liquidity became the
determining factor resulting in normal relationships between asset
classes breaking down and certain markets such as ETFs failing.
The coming months
Unlike more conventional economic downturns, which tend to
snowball progressively over a period of time, the current situation
has seen growth spectacularly fall off a cliff. Whilst there are
wide variations across sectors, a number of industries have simply
ceased to trade. Travel, high street retailers and restaurants, for
example, have seen profitability crushed and only those with strong
balance sheets will survive. It is likely many industries and
smaller companies will need government intervention to ensure
survival.
The net impact will be a sharp fall in Q2 GDP. Whilst akin to
pinning the tail on the donkey, some brokers are already
forecasting US Q2 GDP falling by in excess of 30% on an annualised
basis. For 2020 as a whole early indications are for US GDP to fall
by over 6% and Europe by 9%. From an employment perspective the
situation is equally severe. At the beginning of April, US jobless
claims had risen to 16.9m due to the effects of the lockdown.
Adding these to the existing unemployed gives an unemployment rate
of 14.7% and it is entirely possible this will exceed 20% in the
near-term.
The impact on corporate earnings is less clear. As is often the
case analysts have been slow to adjust their earnings forecasts,
instead waiting for guidance from company management in the coming
reporting seasons. Certainly the forecasts in the market place are
far too high and will be cut sharply in the coming months.
GDP growth
Real GDP Growth
2018 2019 2020 2021 2022
GS GS Bloomberg GS GS
Percent Change yoy Consensus
USA 2.9 2.3 (6.2) 1.2 5.5 3.5
Japan 0.3 0.7 (3.1) (0.8) 1.1 0.9
Euro Area 1.9 1.2 (9.0) (0.1) 7.8 4.1
Germany 1.5 0.6 (8.8) 0.1 8.9 3.6
France 1.7 1.3 (7.4) (0.4) 6.4 4.1
Italy 0.7 0.3 (11.6) (2.0) 7.9 4.4
Spain 2.4 2.0 (9.7) 1.3 8.5 5.4
UK 1.3 1.4 (7.5) 0.4 7.3 4.2
China 6.6 6.1 3.0 4.0 8.5 5.0
Advanced Economies 2.3 1.8 (5.9) 0.7 5.7 3.3
Emerging Markets 5.0 4.2 1.5 3.3 6.6 4.9
World 3.7 3.1 (1.8) 2.5 6.2 4.2
Source: Goldman Sachs
Recognising the unprecedented nature of the current situation
and the damage being done to both companies and individuals,
central banks and governments have been quick to step in to offer
support. Central banks started by cutting interest rates, with the
US Federal Reserve cutting to zero and the Bank of England to 0.1%.
Similarly on the Quantitative Easing front the Fed and the Bank of
England have re-joined the European Central Bank and the Bank of
Japan in restarting their QE programmes. Whilst we have long been
of the view that such measures have had an increasingly limited
impact on economies, we suspect central banks are most concerned
with the health of financial markets and injecting liquidity into
the system. It is at times such as these where maintaining the
normal operation of markets is the primary concern and economic
growth secondary.
Part of the central bank package included the Fed announcing it
would purchase corporate bonds in addition to government bonds.
Initially they discussed purchasing $200bn of mortgage bonds, but
this has been followed by plans to buy investment grade credit,
including 'fallen angels', and limited purchases of high yield
ETFs. This mutualisation of debt has seen bonds rally sharply off
the bottom and spreads tighten significantly.
Governments were slower to react to the unfolding crisis but
have been getting up to speed quickly. The US announced a $2.6
trillion fiscal stimulus, which is both in excess of 10% of GDP and
nearly double anything seen over the past 100 years. To get a feel
for the scale of these packages, the flagship programme Coronavirus
Aid, Relief and Economic Security ("CARES") Act is more than twice
the size of the American Recovery and Reinvestment Act post the
Global Financial Crisis ("GFC"). Other countries have announced
similar measures including state loan guarantees, support for
employees being furloughed and even helicopter money. It is
estimated that the global stimulus (monetary, fiscal and liquidity)
has now totalled approximately 11% of global GDP.
Whilst still early days we suspect that, although the impact on
corporate profitability and household balance sheets will
undoubtedly be severe, these measures have probably averted a
depression and meltdown of the financial system.
The exit process
Over the next few months markets will undergo a discovery
process. As the company reporting season gets underway we will have
a better feel as to how different companies and sectors have fared.
These will likely fit into three broad groups: (1)Those companies
that have seen their trading impacted but have the necessary
balance sheet strength and access to bond markets or loans to
weather the storm; (2)Those companies who are potential winners
such as the on-line and technology companies, with the move to a
tech enabled economy likely to be accelerated by current events;
and (3)The casualties represented by companies with poor balance
sheets and an inability to access additional capital to tide them
over, resulting in liquidity events. At this stage it is difficult
to gauge the split between the three different groups but we
suspect the current bounce in markets may well prove to be a bear
market rally, as investors fully digest the damage caused by the
current lockdown.
Whilst this discovery process will be an important part of the
markets' return to health it is not, in our view, the most
important factor. Our sense is that most investors have written off
the rest of 2020, treating it as a nine month gap in economic
growth and corporate profitability. Instead the much more important
element is the nature and shape of the exit process. Initially
investors thought any recovery would be V-shaped with the ending of
the lockdown period resulting in companies and individuals
returning to normality rapidly. Increasingly though it has become
apparent there are other, less optimistic, scenarios that are
equally possible.
If we look at the SARS epidemic one of its features was a number
of false peaks in infection rates. On a number of occasions the
authorities thought they had the disease under control only to see
it flare up again. The jury is out with respect to coronavirus.
China, if the data is to be believed, seems to be managing the exit
process well but the evidence from other countries such as South
Korea is less positive. Importantly, China has two factors in its
favour; being able to closely monitor the movements of its
population and ensuring near full compliance if the authorities
decide to lockdown certain areas again. In contrast the populations
of western economies are likely to be less compliant in the
longer-term and for many poorer nations prolonged periods of
lockdown will likely lead to a greater danger of death through
starvation, rather than coronavirus, with many living on a hand --
to -- mouth basis.
Hence we think there is a real danger that the lockdown will
come to an end in the next couple of months, only for infection
rates to rise again resulting in the need for further lockdowns.
Perhaps more worryingly, we could see a number of permutations to
this, with the rate of infection easing over the summer months only
to rise again in the colder winter period.
Key to the different scenarios will be whether or not
populations form a herd immunity to the disease and the development
of vaccines or therapeutic treatments that improve the recovery
process and mortality rates. We won't go into this in depth, apart
from to say that developing vaccines is difficult (they still
haven't developed one for SARS) and takes time. In reality at this
point we simply can't say with any certainty as to how these
factors play out or, indeed, whether or not the disease mutates and
people can be re -- infected.
The really important point however is this - the longer the
lockdown persists the greater the scarring to economies,
individuals and companies. If the current situation continues to
the end of the year or longer, the greater the number of companies
and individuals who will come under pressure and the more anaemic
the subsequent recovery will be. Already we suspect there will be
certain companies and industries which will never recover with the
impairment permanent.
Structural changes
Most recessions and bear markets are cyclical in nature. That
is, in a normal cycle excesses build up in the system which are
purged through the recessionary process and eventually life returns
to normality. It is possible this won't be the case post COVID-19
with it fundamentally changing the way in which we live. Whilst
still early days we are already seeing tentative signs of permanent
changes in a number of different areas:
The Demise of Globalisation. Globalisation already looked to
have peaked before the advent of COVID-19. Donald Trump had waged
war on those countries producing cheap imports, arguing that they
damaged the domestic workforce and local industries. Recent events
are likely to reinforce this view with globalisation creating
supply chains that are overly dependent on other nations and fall
down when one link in the chain fails. Further, it is likely that
certain key industries will be repatriated with the shortages
created by the virus leading to countries withholding key products
for their own needs at the expense of others.
The Nationalisation of Industries. The complete shutdown in
trading in a number of industries and the inability to gain access
to funding may well require governments to step in to ensure their
survival. Whereas much of this funding may come in the form of
government backed loans, it is possible governments may end up
owning some sectors and companies should they ultimately be unable
to repay the loans. Already we are seeing governments instructing
banks to lend to those companies in need and cut their dividends,
effectively requiring them to perform a social service and becoming
utility-like in nature.
The Collapse of the European Project. Successful economic unions
require the mutualisation of debt and for stronger nations to
support the weaker nations. With some countries such as Italy and
Spain more exposed to the virus than others it is likely they will
require support from the stronger member states. To date this has
not been forthcoming, with the populations of member states such as
Germany and the Netherlands unwilling to fund their weaker
neighbours. Further, trust, another key feature of a successful
union, has been lacking with certain countries proven to be bad
actors withholding key medical supplies from other member states.
One suspects a number of key members will be questioning the
benefit of the union when the dust settles.
Ballooning National Debt Levels. The unprecedented actions of
both central banks and governments, whilst arguably necessary to
ensure the continued functioning of the global financial system,
will lead to a massive increase in government debt levels and
central bank balance sheets. Comparisons are already being made
with war time funding with the budget deficit in the US expected to
hit 19% of GDP this year, comparable to 1944 and 1945 (it hit 30%
in 1943). The question of course is how do we reduce this in the
future? Here the jury is out. Some argue the debt taken on now will
need to be paid off by future generations. We take a more sanguine
view. Often countries can grow their way out of debt, just as they
did post the Second World War. Alternatively, provided the debt is
internalised and interest rates remain low it is possible to
sustain high debt levels, as Japan and Italy have done, for many
years.
Behavioural Changes. This may take a variety of different forms.
Some believe there will be social changes, with people putting
health above that of maximising money. Others argue it will
accelerate the trend towards home working and reduce the need to
travel, with communication systems and the Cloud being well and
truly stress-tested in recent weeks. The degree to which companies
have managed to operate remotely wouldn't have been possible as
little as five years back.
This list could go on further with questions on the structure of
the ETF market, the prospect of a sharp rise in litigation as
companies and individuals default on contracts and so on.
Conclusion
Unlike in conventional cyclical downturns and bear markets,
where we have a playbook as to how they develop over time, we
really have very few terms of reference as to how the current
situation evolves. Because of this the coming months will be key as
to how the current situation resolves itself. With nearly 95% of
global economies shut-down when the virus was at its most rampant,
clearly the impact on economic growth and company profitability
will be severe. Equally despite government and central bank
interventions it is also possible that we will see a sharp rise in
defaults potentially necessitating government bail -- outs.
Offsetting this though are some quite powerful drivers. One of
the features of markets in the current cycle has been the
persistent use of central bank liquidity. Whilst the impact of this
on economies has been debatable, its impact on stock markets and
asset prices generally has been overwhelming. Further, the
combination of high levels of liquidity and zero interest rates has
served to make many assets, and equities in particular, look very
cheap when compared to bond prices. Hence although arguably not
especially cheap in their own right, equities have benefited from
the fact that there really is no alternative. It is for these
reasons that we maintained our pro-equity position within the
portfolio when many were panicking.
Therefore we see a tug-of-war at present between extremely poor
short term news flow versus some powerful liquidity drivers and a
willingness for investors to look through the near term challenges.
We suspect the situation will wax and wane throughout this year but
certainly at present, with many investors holding large amounts of
cash, the pain trade of rising markets is winning the battle.
From a positioning perspective, we have been fortunate in that
we favour those managers who possess a quality bias and focus on
companies with strong fundamentals. This will hopefully not only
enable their companies to survive in the midst of the storm, but
also to prosper as we come out the other side. Perhaps the biggest
risk is that if we have seen the bottom in economies then it is
possible that more cyclical, value focused companies would offer
the most leverage as we exit the process. We suspect that in
general our managers are not positioned for this, with instead a
bias towards growth and quality.
In our defensive silo we have focused on those hedge funds and
bond funds we believe to be both defensive and uncorrelated to the
wider economy and equity markets. In practice this is much harder
than it sounds, with normal relationships and correlations often
breaking down in periods of peak stress as the illiquidity that
typically occurs in the depths of a crisis results in most assets
falling, leaving few places to hide. However, so far we have been
pleasantly surprised by the performance of our defensive silo. On
the whole our managers have performed as expected with a number of
notably strong performers. A couple of our credit managers have
performed less well than we would have hoped, as spreads widened to
post GFC levels, but ultimately we believe these to be
mark-to-market losses as opposed to permanent impairments of
capital.
Ultimately we count ourselves fortunate to be long-term
investors with permanent capital. This should enable us to weather
the storm and hopefully take advantage of any pockets of
irrationality as we move through this crisis.
Portfolio Review and Activity
Given the impact of COVID-19 on markets your Company has
returned -16.9% for the financial year on an NAV total return basis
with most of the decline occurring in the final quarter of the
year. The key performance indicators for the financial year were
-7.0% for the MSCI ACWI NR Index, 9.9% for the FTSE UK Gilts All
Stocks TR Index, and 1.5% for UK CPI. The main detractor from
performance this year has been Ocean Wilsons Holdings with the
investment silos generally performing well versus broader markets
as highlighted below. Excluding the Ocean Wilson Holdings position,
the fund fell by just 7.4%. The Company's net asset value per share
decreased from 281.1 pence at the end of March 2019 to 230.2 pence
at the end of March 2020. Post the year-end your company has
rebounded by 13.3% (total return), with the NAV rising to 260.0
pence as at 19 June 2020.
Core and Thematic Funds
Over the financial year the Core Regional and Thematic silos
have outperformed world stock markets with the Core Regional silo
down 4.6% while the Thematic silo was up 1.8%.
In the Core Regional silo BlackRock European Hedge Fund was a
standout performer returning 19.7% over the year. This fund takes
both long and short positions, although it is normally net long,
which gave it the ability to weather the market volatility seen in
the final quarter of the year. The fund enjoyed a strong month in
January 2020, with almost all areas of the portfolio contributing
to the positive return. A position in Lonza, a Swiss chemicals
company, was the top performer boosted by better than expected
sales and profit. Positions in Mastercard and S&P Global also
performed well. In March during the market sell-off the fund's
short positions were the largest positive contributors compensating
for declines in the majority of the long positions, although the
long book outperformed the market. The speed with which the manager
reduced gross exposure in March was key to maintaining a strong
overall return for the fund. Adelphi European Select Equity fell
with broader markets in the final quarter of the financial year,
taking the annual return to -0.3%, but was still significantly
ahead of the MSCI Europe index which was down 11.4%.
The US market has also endured an extremely difficult end to the
financial year but Pershing Square Holdings managed to end the year
up 13.8%. This manager became very concerned about the spread of
COVID-19 in China early in the final quarter and so bought credit
default swaps (CDS) on various investment grade and high yield
indices, as protection for the portfolio. The manager closed out
the positions in March, making a significant profit, and reinvested
the proceeds into several core holdings in the portfolio such as
Berkshire Hathaway, Hilton, Restaurant Brands and repurchasing
Starbucks at far more attractive valuations. Findlay Park American
was down 0.7% for the year after to a difficult final quarter but
was still ahead of the S&P 500 index thanks to its quality
bias. Vulcan Value Equity and Select Equity were down 6.0% and 9.2%
respectively, again due to significant declines in the final
quarter.
Although the Chinese market was one of the better performers, as
the country started to lift its lockdown restrictions, other
emerging and frontier markets were particularly badly hit during
the final quarter of the year, and several of the portfolio's
holdings there were significant detractors. NTAsian Discovery fell
by 35.3% over the year as it suffered from poor performance in
South East Asian markets and its smaller cap bias. The two frontier
market focused holdings, SR Global Frontier Markets and BlackRock
Frontiers Investment Trust , fell by 15.8% and 34.6%, respectively,
over the year. The BlackRock trust experienced some very large
falls among its holdings, particularly in the financial and energy
sectors, and its largest position PT Astra, an Indonesian
motorcycle and auto company, declined by over 50%.
In the Thematic silo the technology and healthcare sectors
outperformed the rest of the market. GAM Star Disruptive Growth
(formerly GAM Star Technology) performed well returning 8.0% over
the year. The technology sector has been boosted by strong
performance from software companies and those that supply services
used for remote working. The fund's largest positions in Microsoft
and Amazon have both been largely unaffected by the market slowdown
at the end of the year with Amazon in particular seeing a surge in
demand for online shopping as consumers are unable to leave their
homes. Worldwide Healthcare also performed strongly, up 7.8%, but
BB Biotech has endured a more difficult year, down 16.4%. With
additional demand for many healthcare services and hope of a
biotechnological solution to COVID-19 many of Worldwide
Healthcare's holdings held slightly firmer than others during the
final quarter drawdown. However BB Biotech has struggled as
investors moved into large cap biotech companies throughout the
year creating a volatile environment in the smaller cap space which
the manager made the decision to solely focus on in 2018.
Diversifying Funds
The Diversifying silo produced a positive return of 2.9% for the
financial year, an encouraging outcome given the turmoil in wider
markets. The holdings in this silo are designed to show lower
correlation to the equity market.
Schroder GAIA BlueTrend was one of the stronger contributors
over the year returning 18.0%. This systematic fund follows a
momentum driven approach which has proven to be more successful
during the market selloff as the momentum factor has significantly
outperformed the value factor. The portfolio's other systematic
fund, GAM Systematic Core Macro , follows an approach that has a
50:50 split between momentum and value which led it to small
increase of 2.9% over the year. It seems that BlueTrend performs
more strongly in choppy, fast changing markets while GAM
outperforms in more benign, upwards trending markets. We therefore
believe that a blend of the two strategies offers an attractive
systematic exposure.
Another strong performer in the diversifying silo was Vanguard
US Government Bond Index which returned 11.3% over the year.
Investors flocked to buy assets considered to be safe as equity
markets collapsed in early March. This behaviour is to be expected
in market drawdowns and hence US Treasuries remain a core part of
the diversifying silo. Hudson Bay also performed well this year
returning 7.8% with the fund again demonstrating its resilience
when equity markets struggle.
Global Event Partners had a more difficult year, down 7.1%, with
the fund's equity market exposure in the final quarter of the
financial year accounting for most of the decline. The manager has
not seen any mergers or acquisitions break down as a result of the
market drawdown and so is generally optimistic that performance
should pick up when economies start to re-open. The fund was
cautiously positioned coming into the year with plenty of hedges
covering the downside but these were insufficient to mitigate such
a large market decline. CZ Absolute Alpha also struggled this year
producing a negative return of -5.9% with all of the decline
occurring in the final quarter of the financial year.
Global Equities
The direct equity portion of the portfolio was down 16.6% over
the course of the year, with its biggest positive contributors
being Hansteen , Dollar Genera l and Nexon . The biggest detractors
were Orion Engineered Carbons , TripAdvisor and Hyve Group .
The year was progressing well for our holdings until the fears
around COVID-19 hit the market. We would normally expect to
outperform the market during drawdowns, as we have done in previous
negative quarters. However, business models that would normally be
recession resistant such as Hyve's conference and exhibition
business, and C&C's pub and restaurant distribution business
suddenly went from operating normally to generating no revenue as a
result of lockdown orders.
Despite owning businesses at discounts to their intrinsic value
this margin of safety failed to offer any protection in the rapid
market sell-off. The stocks that were trading cheaper than the
market going into this period of volatility fared even worse than
the market, compounding the previous three years of
underperformance for "value" stocks.
So what is there to be positive about?
We are excited by the prospect of long term returns now
available from our current holdings, which are trading at close to
50% of intrinsic value. Such a discount suggests that there is over
100% upside from today's levels to what we believe these businesses
are worth. Additionally, their intrinsic values should continue to
improve.
For the purposes of better explaining why we are so excited
about the valuation discount, we have split the portfolio into
three: Beneficiaries - those businesses that have benefited in some
way from the impact of the virus; Unaffected long term - those that
will be unaffected in the long term; and, Threatened - those which
are directly threatened by recent developments.
Beneficiaries - 26% of the portfolio
Our largest holding, Interactive Brokers has seen account growth
jump to record levels over the past couple of months. Whilst they
are negatively impacted by 0% interest rates in the short term, the
new clients create huge future earnings power. Other businesses in
this category are Hilton Food , Nexon and Dollar General .
Unaffected long term - 65%
This is where the vast majority of the companies reside. Some
will have short term hits to earnings, but we believe there is a
very low chance of permanent impairment of capital. Exor for
example, has seen a decline in the value of its Fiat and CNHI
holdings, but it is in the process of selling its reinsurance
business which should deliver an extra EUR32 a share in net cash by
year end. That can be used to buy other businesses. In fact, at the
end of the most recent quarter they announced a $200m investment
into the ride hailing company Via which they agreed with very
attractive terms given the current lack of strategic venture
investors.
Threatened - 9%
Hyve , C&C and TripAdvisor all have businesses that will be
directly impacted. Hyve is the most exposed as its conference and
exhibitions will all need to be postponed or cancelled. This
creates a short term cash flow problem as people are reticent to
book events that may not occur if lockdowns and social distancing
continue. The stock fell 80% over the quarter as it became apparent
that lockdowns would essentially stop all business activity. There
are a number of scenarios where the business is worth multiples of
the current share price, and as such, we believe the risk reward of
holding the shares remains compelling. They may have to raise some
equity in order to get through this period, which would lead to a
portion of the value being permanently impaired, but even in that
scenario the valuation remains persuasive.
We have thoroughly reviewed our holdings and believe that the
vast majority of the businesses will come out stronger, with no
permanent capital impairment, and we have been adding to several of
these. During the quarter we increased our positions in Interactive
Brokers , Orion Engineered Carbons , Iridium , TripAdvisor , Hyve
Group , Howard Hughes , C&C , CK Hutchison , Exor and CVS . We
also initiated a new position in the Japanese games maker Nexon .
In order to fund these we sold our positions in Bayer and Nutrien
.
In times like these, investors naturally become much more
focused on the short term which makes sense given that humans are
conditioned to focus on the most immediate threats. However, in
financial markets, making decisions based on short term
expectations can lead to poor outcomes over the longer term. We
remain focused on what we think these businesses will look like in
3-5 years. Whilst some of our businesses will face a short term
impact on profits, we strongly believe that their value is in the
cash flows they can produce over their lifetimes, not the
extrapolation of the next quarter's cash flow. Whilst the impact of
COVID-19 on the portfolio has been painful in the short term, for
the majority of our holdings in this silo it should have minimal
impact on long term intrinsic values. We do not know if this will
be reflected in valuations in the next week, month or quarter but
we are excited about the long term positioning of the global equity
silo.
Ocean Wilsons Holdings
Prior to the global coronavirus crisis, the Brazilian economy
was slowly continuing its recovery following a multi-year recession
between 2014 and 2016. In the fourth quarter of 2019 it expanded by
0.5%, which meant that it had grown 1.1% over the year. However,
the impact of the pandemic is now beginning to be felt, although it
is too early to properly understand its magnitude or duration. It
will, however, have a negative effect on foreign trade and
container imports, and so the business of Wilsons Sons is likely to
be significantly affected. At the same time, the sharp decline in
the oil price will hamper the oil service business, which was
already facing weak demand and is now likely to be compounded by
reduced investment by the international oil majors. Wilson Sons has
established a technical crisis committee to manage the company's
response to the pandemic, and has been implementing various
measures as appropriate since January. The company has taken a
precautionary approach in order to increase its cash position and
preserve financial flexibility. At the end of March, cash
equivalents and short-term investments amounted to $96.8m and in
the first quarter the company signed financing agreements totalling
US$24.6m (denominated in Brazilian Real) to reinforce short-term
liquidity.
Following the end of the quarter, the first quarter results were
released for Wilson Sons. These were little impacted by the effects
of COVID-19, but expectations for the second quarter are lower. In
May, operational numbers show that over the first five months of
the year, container terminal volumes are down 0.9% on last year and
towage manoeuvres are down 4.5%. For the first quarter, there was a
3.3% decrease in EBITDA in dollar terms ($36.1m vs $37.3m in 2019),
although this was 14.4% higher in R$ terms. Earnings fell mainly as
a result of decreases in logistics and offshore support base
results.
Container terminal revenues declined as Brazil's economic growth
remained sluggish, although cost reductions mitigated some of the
losses. The Rio Grande terminal reported weaker volumes, and was
affected by cancellations caused by the Chinese New Year as well as
the Coronavirus outbreak. However, the Salvador terminal reported a
12.4% increase in operating volumes, with strong performance from
transhipments and imports, with a big rise in solar panel imports
for the development of photovoltaic power plants. The civil works
to extend its principal quay were 95% complete at the end of March.
When extended, the 800m quay will facilitate access for bigger
ships to the port and to the largest economy in the north-east of
Brazil.
The towage division has been exposed to a reduction in iron ore
exports and a very competitive environment affecting volumes.
However, revenues were up 4.1% in the first quarter as overall
prices improved, despite weaker volumes. The oil services division
continues to explore alternative revenue streams for its off-hire
vessels and base areas. The company remains focused on increasing
cash flow and improving capacity utilisation across its businesses
in order to maximise shareholder value.
The Ocean Wilsons Investment subsidiary was valued at $285.3m at
the end of December 2019, which represented an increase of $26.4m
(10.2%) from the valuation at the end of December 2018 ($258.9m),
and a further $4.75m in dividends was also paid out from the
portfolio during this time. The portfolio continues to be biased
towards equities, both public and private, reflecting its long-term
nature, but also includes some assets which display lower
correlation to equity markets.
The Ocean Wilsons Holdings share price fell by 42.1%, or 39.4%
on a total return basis, over the last twelve months which takes
account of the 53.9 pence dividend that was paid to the Company in
June 2019. The share price represents a discount to the
look-through NAV of 43.1%, based on the market value of the Wilson
Sons shares together with the latest valuation of the investment
portfolio.
Alec Letchfield
May 2020 .
Portfolio Statement
Fair value Percentage of
Investments GBP000 Net Assets
Core Regional Funds
Findlay Park American Fund 18,799 6.8
Vulcan Value Equity Fund 12,706 4.6
Select Equity Offshore Ltd 12,143 4.4
BlackRock European Hedge 11,011 4.0
Goodhart Partners: Hanjo Fund 10,808 3.9
Adelphi European Select Equity Fund 9,556 3.4
Schroder ISF Asian Total Return 6,632 2.4
Indus Japan Long Only Fund 6,129 2.2
Egerton Long-Short Fund Ltd 5,496 2.0
Pershing Square Holdings Ltd 4,848 1.8
Prince Street Institutional Offshore
Ltd 3,623 1.3
BlackRock Frontiers Investment Trust
PLC 2,234 0.8
SR Global Fund Inc. Frontier Markets 2,051 0.7
NTAsian Discovery Fund 1,916 0.7
Vanguard FTSE Developed Europe ex UK
Equity Index Fund 1,608 0.6
Total Core Regional Funds 109,560 39.6
Strategic
Wilson Sons (through the holding in
Ocean Wilsons Holdings) * 34,105 12.3
Ocean Wilsons Investments Limited (through
the holding in Ocean Wilsons Holdings)
* 26,688 9.7
Total Strategic 60,793 22.0
Global Equities
Interactive Brokers Group Inc 4,434 1.6
Berkshire Hathaway Inc 3,568 1.3
Exor NV 3,306 1.2
Iridium Communications Inc 3,023 1.1
Alphabet Inc 2,999 1.1
CK Hutchison 2,903 1.1
CVS Health Corp 2,871 1.0
Dollar General 2,740 1.0
Samsung Electronics Co Ltd 2,657 1.0
Nexon Co. Ltd 2,097 0.8
Orange 2,068 0.7
Hilton Food Group PLC 1,869 0.7
C&C Group PLC 1,792 0.6
White Mountains Insurance Group Ltd 1,460 0.5
TripAdvisor Inc 1,199 0.4
Orion Engineered Carbons SA 1,182 0.4
Howard Hughes Corp 882 0.3
Subsea 7 818 0.3
Hyve Group 646 0.2
Total Global Equities 42,514 15.3
Diversifying
DV4 Ltd ** 9,276 3.4
Global Event Partners Ltd 7,557 2.7
Hudson Bay International Fund Ltd 3,852 1.4
Vanguard US Govt Bond Index Fund 2,984 1.1
MKP Opportunity Offshore Ltd 2,921 1.1
Selwood AM -- Liquid Credit Strategy 2,488 0.9
Keynes Systematic Absolute Return Fund 2,216 0.8
Apollo Total Return Fund 2,095 0.8
BioPharma Credit PLC 1,297 0.5
CZ Absolute Alpha UCITS Fund 1,218 0.4
GAM Systematic Core Macro (Cayman)
Fund 1,022 0.4
Schroder GAIA BlueTrend 842 0.3
Total Diversifying 37,768 13.8
Thematic Assets
GAM Star Technology Fund 15,197 5.5
Impax Environment Markets Fund 2,808 1.0
BB Biotech AG 2,771 1.0
Worldwide Healthcare Trust PLC 1,853 0.7
Total Thematic 22,629 8.2
Total Investments 273,264 98.9
Net Current Assets 3,035 1.1
Net Assets 276,299 100.0
Note:
* Hansa Investment Company Ltd owns 9,352,770 shares in Ocean
Wilsons Holdings Limited ("OWHL"). In order to better reflect Hansa
Investment Company's exposure to different market silos, the two
subsidiaries of OWHL, Wilson Sons and Ocean Wilsons (Investments)
Ltd ("OWIL"), are shown separately above. The fair value of Hansa
Investment 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 31 December 2019
OWHL Financial Statements, 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 31 March
2020.
** DV4 Ltd is an unlisted Private Equity holding. As such, its
value is estimated as a Level 3 Asset in Note 21. All other
valuations are either derived from information supplied by listed
sources or from pricing information supplied by third party fund
managers.
Shareholder Profile and Engagement
Capital Structure
The Company has 40,000,000 Ordinary shares of 1p (1/3 of the
total capital) and 80,000,000 'A' non-voting Ordinary shares of 1p
(2/3 of the total capital) 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.
Shareholder Profile
The Company's shares owned at 31 March 2020 are as follows:
'A' non--voting
Ordinary Ordinary
shares shares
Institutional
& Wealth
Managers 16,207,959 40.52% 74,493,575 93.12%
Directors 11,010,745 27.53% 2,165,500 2.71%
Private Individuals 12,731,005 31.83% 2,836,406 3.55%
Other 50,291 0.13% 504,519 0.63%
40,000,000 80,000,000
Substantial Shareholders
As at 31 March 2020, the Directors were aware of the interests
(opposite) in the Ordinary shares of the Company, which exceeded 3%
of the voting issued share capital of that class.
The following information is disclosed in accordance with the
DTR 7.2.6 of the FCA Disclosure Guidance and Transparency
Rules.
The Company's capital structure and voting rights are summarised
above and in Note 15 of the Financial Statements.
The giving of powers to issue or buy back the Company's shares
requires an appropriate resolution to be passed by shareholders.
Proposals for the renewal of the Board's powers to buy back shares
are set out in the Notice of the Annual General Meeting later on in
the report.
There are: no restrictions concerning the transfer of securities
in the Company; no special rights with regard to control attached
to securities; no agreements between holders of securities
regarding their transfer known to the Company; no agreements which
the Company is party to that affect its control following a
takeover bid; and no agreements between the Company and its
Directors concerning compensation for loss of office.
Notwithstanding the foregoing, the Company may require any holder
of shares to transfer some or all of its shares (or otherwise
refuse to register any transfer of shares) to avoid the Company, if
the Company were a company which was resident for tax purposes in
the United Kingdom, being regarded as a "close company" as defined
in s.414 of the UK Income and Corporation Taxes Act 1988, to
another person whose holding of such shares, in the sole and
conclusive determination of the Board, would not cause the Company
to be a close company. Additionally, the Company's Bye -- Laws
provide for the voting rights of Ordinary shares to be
automatically reallocated to other shareholders to prevent the
Company becoming a close company. The reallocation mechanism
operates where a transfer of shares or other change in the
interests of holders of shares occurs and would cause the Company
to become a close company. In these circumstances, the voting
rights attaching to the affected shares are reallocated by
enhancing the voting rights of the smallest registered shareholders
on a temporary basis pending the operation of the compulsory
transfer provisions referred to above.
No. of
voting % of voting
shares shares
Nomolas Ltd 10,347,125 25.9%
Victualia Limited Partnership 10,347,125 25.9%
These holdings are correct as of 31 March 2020 and have not
changed as at the signing date of these Financial Statements.
William Salomon is interested in 10,347,125 of the shares held
by Victualia Limited Partnership, representing 25.9% of the voting
share capital. In addition, William Salomon has further interests
in the Company's shares; the total interest is detailed in the
Directors' Interests section below.
As at 24 June 2020, the date of signing of the Period-End
Financial Statements, there have been no disclosures to the Company
of changes of interests under DTR 5.
BOARD AND MANAGEMENT SHAREHOLDINGS
Directors and Directors' Interests
The present members of the Board are shown earlier on in the
report.
The Board's policy is that all Directors retire annually. All
Directors being eligible, at the forthcoming Annual General
Meeting, will retire and seek re-election in accordance with the
Board's policy. The contracts of employment between the Company and
each of the Directors do not allow for any compensation payment in
the event of loss of office.
The interests of Directors and their connected parties in the
Company at 31 March 2020 are shown below:
'A' non--voting
Ordinary shares Ordinary shares Nature
of 1p each of 1p each of interest
2020 % 2020 %
W Salomon 10,959,345 27.40% 1,935,500 2.42% Beneficial
J Davie 45,000 0.11% 230,000 0.29% Beneficial
S Heidempergher 6,400 0.02% 0 0.00% Beneficial
Total 11,010,745 27.53% 2,165,500 2.71% Beneficial
As at 24 June 2020, the date of signing the Period-End Financial
Statements, there were no changes to report to the Directors'
holdings other than Mr Salomon's holdings had increased to
11,119,345 Ordinary and 2,045,500 'A' non-voting Ordinary
shares.
William Salomon is the senior partner of Hansa Capital Partners
LLP. Fees payable to Hansa Capital Partners LLP amounted to
GBP1,490,188 (including Portfolio Management and AASP functions).
The fees outstanding at the year-end amounted to GBP396,880. During
the year, no rights to subscribe for the shares of the Company were
granted to, or exercised by Directors, their spouses or infant
children.
PORTFOLIO MANAGER'S INTERESTS
As at 24 June 2020, the date of signing of this Period-End
Report, the management and staff of the Portfolio Manager's group,
excluding the holding of William Salomon, shown above, were
interested in approximately 10.3m shares in the Company - a mixture
of Ordinary and 'A' non-voting Ordinary shares.
Notice Period for General Meetings
The Company's Bye--Laws permit the Company's general meetings
(other than AGMs) may be held on 14 days' notice. Accordingly,
Special Resolution 11 will propose that the period of notice for
general meetings of the Company (other than AGMs) shall not be less
than 14 days' notice.
ANNUAL GENERAL MEETING
The Company's Notice of Annual General Meeting is included in
this Report.
Authority to repurchase 'A' non-voting Ordinary shares
A resolution will be proposed at the forthcoming AGM, seeking
shareholder approval for the renewal of the authority for the
Company to repurchase its own 'A' non-voting Ordinary shares. The
Board believes the ability of the Company to repurchase its own 'A'
non-voting Ordinary shares in the market could potentially benefit
all equity shareholders of the Company in the long-term. The
repurchase of 'A' non-voting Ordinary shares at a discount to the
underlying NAV would enhance the NAV per share of the remaining
equity shares.
The Company's Bye-Laws are drafted in such a way that the
Company may from time to time purchase and cancel its own shares.
However, the Company requires that shareholders' approval to
repurchase shares be sought. At the AGM the Company will therefore
seek the authority to purchase up to 11,992,000 'A' non-voting
Ordinary shares (representing 14.99% of the Company's issued 'A'
non-voting Ordinary share capital, the maximum permitted under the
FCA Listing Rules), at a price not less than 1p per share (the
nominal value of each share) and not more than 5% above the average
of the middle-market quotations for the five business days
preceding the day of purchase or, where a series of transactions
have taken place the higher of the last independent trade and
current highest independent bid on the trading venue where the
purchase(s) will be carried out. The authority being sought, the
full text of which can be found in the Notice of Meeting, will last
until the date of the next AGM.
The Company is seeking authority to use its realised capital
reserve to allow repurchase of shares in the market. The decision
as to whether the Company repurchases any shares will be at the
absolute discretion of the Board. Any shares purchased will be
cancelled.
The Directors consider that all the resolutions to be proposed
at the forthcoming AGM as set out in the Notice of AGM In this
report, are in the best interests of shareholders as a whole and
unanimously recommend all shareholders to vote in favour. Guidance
on how to vote at the AGM can also be found in the notes to the
Notice of AGM in this report.
If the Board considers a significant proportion of votes have
been cast against a resolution at the AGM, the Company will
explain, when announcing the results of voting, what action it
intends to take to understand the reasons behind the results of the
vote.
Approval of the Directors
The Directors consider the Period-End Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy.
For and on behalf of the Board
Jonathan Davie
Chairman
24 June 2020
Report of the Directors
The Directors have chosen to report on some of those items
within the body of the Strategic Report, while others remain within
the Report of the Directors.
ITEMS INCLUDED WITHIN THE STRATEGIC REPORT
The following items are listed within the Strategic Report:
Statement of the existence of qualifying indemnity provisions
for Directors.
Dividend policy and payments made during the year are summarised
in the Organisation & Objectives section.
Names of Directors, at any time in the year - see earlier in the
report for the Directors' details and attendance at Company
meetings.
Greenhouse Gas Emissions.
Policy on Board Composition.
Stakeholder Engagement - While the Company has no employees,
suppliers or customers, the Directors give regular consideration to
the need to foster the Company's business relationships with its
stakeholders, in particular with shareholders and service
providers. The effect of this consideration upon the principal
decisions taken by the Company during the financial year is set out
in further detail in the Strategic Report later on in this
report.
ITEMS REPORTED WITHIN THE DIRECTORS' REPORT
Disclosure to the Auditor of Relevant Audit Information
The Directors confirm that, so far as they are aware, having
made such enquiries and having taken such steps as they consider
they reasonably ought, they have provided the Auditor with all the
information necessary for it to be able to prepare its report. In
doing so each Director has made himself aware of any information
relevant to the audit and established that the Company's Auditor is
aware of that information. The Directors are not aware of any
information relevant to the audit of which the Company's Auditor is
unaware.
Capital Structure
The Company's Capital Structure is described in the "Investor
Information Section".
Corporate Governance Report
The Corporate Governance Report, including the Financial Risk
Management Review of the Company, is included later in this
document.
Future Developments and Post Balance Sheet Events
The Board notes that, as a result of the worldwide market
reaction to the Covid-19 pandemic during February and March 2020,
the portfolio experienced a swift and short--term reduction at that
time. Since the balance sheet date of 31 March 2020, the value of
the portfolio has increased markedly. As at the 19 June 2020, being
the most recent value available at the time of signing of this
Report, the total value of the Company is GBP312.0m This is 12.9%
higher than at the 31 March 2020 balance sheet date, having also
paid out a GBP960k dividend in May 2020.
APPROVAL OF THE DIRECTORS
The Directors consider the Period-End Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy. Further details demonstrating the Company's performance,
business model and strategy have been included within the Strategic
Report in this document.
For and on behalf of the Board
Jonathan Davie
Chairman
24 June 2020
Corporate Governance Report
CORPORATE GOVERNANCE CODE
Internal Controls
The UK Corporate Governance Code ("UK Code") (issued July 2018
Code for accounting periods beginning on or after 1 January 2019),
which can be found on the website of the Financial Reporting
Council ("FRC") (www.frc.org.uk), requires the Directors of UK
listed companies to review the effectiveness of the Company's risk
management and system of internal controls on an annual basis. The
Directors recognise the importance of sound corporate governance,
robust risk management processes and effective systems of internal
controls. They review the effectiveness of these on at least an
annual basis. The Directors, through the procedures outlined below,
keep the system of risk management and internal controls under
review. The Board has identified risk management controls in the
key areas of business objectives, accounting, compliance,
operations and secretarial as areas to be included in the extended
review.
The Board recognises its ultimate responsibility for the
Company's system of risk management and internal controls and for
monitoring their effectiveness. In order to perform this
responsibility the Board receives regular reports on all aspects of
risk management and internal control from the Company's service
providers (including financial, operational and compliance
controls, risk management and relationships with other service
providers); the Board will instigate necessary action in response
to any significant failings or weaknesses identified by these
reports. However, it must be noted this system is designed to
manage rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
Financial Reporting
The Board has a responsibility to present a fair, balanced and
understandable assessment of annual, half--year and other price
sensitive public reports and reports to regulators, as well as to
provide information required to be presented by statutory
requirements. To ensure this responsibility is fulfilled, all such
reports are reviewed and approved by the Board prior to their
issue.
The Board confirms there have been no specific events since 31
March 2020, of which the Board is aware, which would have a
material impact on the Company. However, the Board also notes that,
as a result of the worldwide market reaction to the Covid-19
pandemic during February and March 2020, the portfolio experienced
a swift and short-term reduction at that time. Since the balance
sheet date of 31 March 2020, the value of the portfolio has
increased markedly. As at the 19 June 2020, being the most recent
value available at the time of signing of this Report, the total
value of the Company is GBP312.0m. This is 12.9% higher than at the
31 March 2020 balance sheet date, having also paid out a GBP960k
dividend in May 2020.
COMPLIANCE WITH THE PROVISIONS OF THE UK CORPORATE GOVERNANCE
CODE
The Board of Hansa Investment Company Ltd has considered the
Principles and Provisions of the AIC Code. The AIC Code addresses
the Principles and Provisions set out in the UK Code, as well as
setting out additional Provisions on issues that are of specific
relevance to the Company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the FRC in
the UK, provides more relevant information to shareholders.
The Company has complied with the Principles and Provisions of
the AIC Code.
The AIC Code is available on the AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
ASSOCIATION OF INVESTMENT COMPANIES CODE
The AIC Code has 17 principles. The Principles are listed below
together with the Board's response as to how it seeks to meet the
Principle's recommendation:
Board Leadership and Purpose
successful company is led by an effective board, whose role is
to promote the long-term sustainable success of the company,
generating value for shareholders and contributing to wider
society.
The Board is formed of five Directors with a complementary mix
of skills and experience to lead the Company. Two Directors served
on the board of the Company's predecessor, Hansa Trust PLC, whilst
three Directors are newly appointed to HICL. All have significant
and relevant experience. All Directors are focused on generating
long-term value for shareholders and there is significant share
ownership in the Company's shares amongst the Directors. .
The board should establish the company's purpose, values and
strategy, and satisfy itself that these and its culture are
aligned. All directors must act with integrity, lead by example and
promote the desired culture.
The Board believes that the Company's purpose, values and
strategy are clear: to create long--term growth of shareholder
value. The Board sets the standard for openness and professionalism
that the Company's key service providers follow. In particular,
there is regular interaction between the Board and the Company's
Portfolio Manager and also AASP for day to day liaison with other
service providers.
The board should ensure that the necessary resources are in
place for the company to meet its objectives and measure
performance against them. The board should also establish a
framework of prudent and effective controls, which enable risk to
be assessed and managed.
The Board receives regular and detailed reports from the
Portfolio Manager regarding investment performance as well as
market trends and views on risks. The Board has set a number of
KPIs against which the performance of elements of the portfolio can
be considered. The Board receive regular risk and compliance
reporting.
In order for the company to meet its responsibilities to
shareholders and stakeholders, the board should ensure effective
engagement with, and encourage participation from, these
parties.
The Board considers its stakeholders to be its shareholders and
its key suppliers. It actively engages with shareholders via an
annual meeting, quarterly factsheets, website communication and
annual investor day, with feedback also received through outreach
programmes such as Edison, as well as direct one-to-one
correspondence. The Board engages with other key suppliers through
the operations of its AASP on a day to day basis, as well as via an
annual meeting with each or more frequently if an issue arises.
Principle E is omitted by the AIC Code.
Division of Responsibilities
The chair leads the board and is responsible for its overall
effectiveness in directing the company. They should demonstrate
objective judgement throughout their tenure and promote a culture
of openness and debate. In addition, the chair facilitates
constructive board relations and the effective contribution of all
non-executive directors, and ensures that directors receive
accurate, timely and clear information.
The Chairman is Jonathan Davie who joined Hansa Trust PLC as a
Director in January 2013 - also serving as Chair of its Audit
Committee. The Chairman promotes and encourages active
participation from all Directors at Board meetings. Further, whilst
adhering to membership guidelines, sub-committees also seek to
include as many Directors as possible to ensure a broad range of
views. All Directors receive regular monthly and quarterly
information prepared by the Portfolio Manager and Administrator, as
well as portfolio performance presentations from the Portfolio
Manager.
The board should consist of an appropriate combination of
directors (and, in particular, independent non-executive directors)
such that no one individual or small group of individuals dominates
the board's decision making.
The Board consists of five Directors. All have financial
backgrounds but each also brings individual specialisms and
experience that are complimentary. Their biographies are noted
earlier in this document. Four Directors are deemed independent.
The fifth, William Salomon, is the Senior Partner of the Company's
Portfolio Manager and, therefore, is deemed non-independent. All
Directors are non-executive. All Directors are actively involved in
decisions and committees unless conflicts exist which preclude
this. Therefore, Mr Salomon does not participate in the evaluation
of the performance of the Portfolio Manager due to his role as
Senior Partner of that firm. Nor does he participate in decisions
regarding the Company's largest asset (by value) OWHL, due to him
being a Director of that company. Finally, Mr Salomon is not a
member of the Audit Committee due to his non-independent status
although he does attend meetings of that Committee.
Non-executive directors should have sufficient time to meet
their board responsibilities. They should provide constructive
challenge, strategic guidance, offer specialist advice and hold
third party service providers to account.
The Directors consider that they have sufficient time to meet
their responsibilities. A formal timetable exists for the Board
meetings and sub-committees. In considering appointments and
potential conflicts of interests the Board considers the available
time each Director has to commit to the Company. The Portfolio
Manager and AASP report to scheduled Board meetings, giving the
Directors the opportunity to challenge performance, raise issues
and offer guidance.
The board, supported by the company secretary, should ensure
that it has the policies, processes, information, time and
resources it needs in order to function effectively and
efficiently.
The Company Secretary and AASP support the Board in identifying
and monitoring all governance matters. Additionally, Directors are
able to consult external professional advisors to assist them in
the performance of their duties as and when required. Board
reporting and materials are refined on an ongoing basis.
Composition, succession and evaluation
Appointments to the board should be subject to a formal,
rigorous and transparent procedure, and an effective succession
plan should be maintained. Both appointments and succession plans
should be based on merit and objective criteria and, within this
context, should promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
The Board has appointed a Nominations Committee chaired by Nadya
Wells. The Committee meets annually to give full and ongoing
consideration to succession planning. Ahead of any appointment, the
Committee is tasked with evaluating the skills required of a
candidate to ensure the Board retains the range of skills required.
The Company believes a diverse Board brings many benefits and, as
such, there is no restriction placed on Board membership.
The board and its committees should have a combination of
skills, experience and knowledge. Consideration should be given to
the length of service of the board as a whole and membership
regularly refreshed.
The Directors have a broad range of backgrounds including
Investment Management, finance and banking as well as operational
experience. Biographies of all Directors are shown earlier in this
document. As noted in J above, the Nominations Committee is tasked
with maintaining a broad range of skills and experiences at times
of succession.
Annual evaluation of the board should consider its composition,
diversity and how effectively members work together to achieve
objectives. Individual evaluation should demonstrate whether each
director continues to contribute effectively.
The Nominations Committee is responsible for the ongoing
consideration of Board composition and to identify any skills gap -
now or in the future. The Nomination Committee considers Board
effectiveness at least annually.
Audit, risk and internal control
The board should establish formal and transparent policies and
procedures to ensure the independence and effectiveness of external
audit functions and satisfy itself on the integrity of financial
and narrative statements.
The Board has specifically delegated the appointment and
monitoring of the Company's external Auditor to its Audit
Committee. The Company's Auditor was formally appointed in November
2019. The tender process was led by the Chairman of the Audit
Committee. To ensure independence, the Company's Auditor does not
provide other services to the Company. The Company rigorously
follows policy and procedure to ensure effectiveness of the
external audit and integrity of financial reporting.
The board should present a fair, balanced and understandable
assessment of the company's position and prospects.
The Board considers and approves all relevant shareholder
communications. The Period-End report is reviewed by the Board to
ensure it presents a fair and balanced view including commentary on
going concern and long-term viability. The Audit Committee
considers the fairness of the Financial Statements before
recommending them to the Board for approval.
The board should establish procedures to manage risk, oversee
the internal control framework, and determine the nature and extent
of the principal risks the company is willing to take in order to
achieve its long-term strategic objectives.
Principal risks are identified by the Board and risk appetite
established against these risks. Day to day risk management is
undertaken by the Portfolio Manager and AASP within the parameters
established by the Board. The Board meets with the Portfolio
Manager at each scheduled Board meeting where there is opportunity
to discuss particular aspects of the portfolio and associated
risks. Operational risk and compliance reporting are also regularly
discussed by the Board.
Remuneration
Remuneration policies and practices should be designed to
support strategy and promote long-term sustainable success.
The remuneration of Directors is overseen by the Remuneration
Committee, chaired by Simona Heidempergher. The Directors each
receive a fixed annual fee and do not receive any additional
element based on performance of the Company. Additionally,
Directors offer themselves annually for re-election at the
Company's AGM.
A formal and transparent procedure for developing policy on
remuneration should be established. No director should be involved
in deciding their own remuneration outcome.
The Directors' Remuneration Report notes that each Director is
paid a fixed fee representative of their roles and additional
responsibilities on the Board. This fee level is reviewed by the
Remuneration Committee making use of external evidence before being
recommended to the wider Board.
Directors should exercise independent judgement and discretion
when authorising remuneration outcomes, taking account of company
and individual performance, and wider circumstances.
The Directors' Remuneration Report notes that each Director is
paid a fixed fee representative of their roles and additional
responsibilities on the Board. There are no additional
performance-related elements to any Director's remuneration.
COMPLIANCE WITH THE FINANCIAL CONDUCT AUTHORITY UKLA LISTING
RULES
The Directors are responsible for ensuring that:
Adequate accounting records are kept, that are sufficient to
show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the Financial Statements are
consistent with the requirements under the UK Companies Act
2006.
The assets of the Company are safeguarded; and for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Report of the Directors and other information included in
the Period-End Report is prepared in accordance with Company Law in
the UK. The Directors are also responsible for ensuring the
Period-End Report includes information required by the Listing
Rules of the FCA.
The Company has effective internal control systems, designed to
ensure that adequate accounting records are maintained; and that
financial information on which the business decisions are made,
which is issued for publication, is reliable. Such a system of
internal control can provide only reasonable, but not absolute,
assurance against material misstatement or loss.
The Company Financial Statements for each financial year are
prepared in accordance with IFRS, as adopted by the EU. The
Directors must not approve the Financial Statements unless they are
satisfied they give a true and fair view of the state of affairs
and profit or loss of the Company for that period.
In preparing these Financial Statements, the Directors are
required to:
select suitable accounting policies and apply them
consistently;
make judgements and estimates that are reasonable and
prudent;
state whether they have been prepared in accordance with IFRS as
adopted by the EU; and
prepare the Financial Statements on the going concern basis,
unless it is inappropriate to presume the Company will continue in
business.
Under the FCA UKLA Listing Rules and the UK Code, the Board is
responsible for:
Disclosing how it has applied the principles and complied with
the provisions of the AIC Code and, thereby, the UK Code, or where
not, to explain the reasons for divergence.
Reviewing the effectiveness of the Company's systems of risk
management and internal controls.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website: www.HansaICL.com. Visitors to the website need
to be aware that legislation governing the preparation and
dissemination of the Financial Statements may differ from
legislation in their own jurisdictions.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
The Financial Statements, prepared in accordance with applicable
international accounting standards and present fairly, in all
material respects, the financial position of Hansa Investment
Company Ltd.
The Strategic Report, including the Chairman's Report to the
Shareholders and the Report of the Directors includes a fair review
of the development and performance of the business and the position
of the Company, together with a description of the principal risks
and uncertainties it faces.
The Directors consider the Period-End Report and Financial
Statements, taken as a whole, are fair, balanced and
understandable. Further detail demonstrating the Company's
performance, business model and strategy has been included within
the Strategic Report.
For and on behalf of the Board
Jonathan Davie
24 June 2020
Audit Committee Report
The Audit Committee comprises solely independent directors, as
required by the AIC Code and endorsed by the FRC. It is chaired by
Richard Lightowler. Given the size of the Board, and the range of
experience they bring, all non-committee Directors are invited to
attend the Audit Committee meetings. However, only the independent
member Directors are able to vote. Recommendations of the Audit
Committee are brought before the whole Board for discussion and
ratification.
The terms of reference of the Committee are determined by the
Committee and approved by the Board and include, but are not
restricted to, the following:
To consider and make a recommendation to the Board as to the
appointment of the external Auditor, tendering of the external
audit, approval of the annual audit fee and any questions relating
to the resignation or dismissal of the Auditor.
To determine with the external Auditor the nature and scope of
the audit.
To review and monitor the independence of the external Auditor
including pre-approval, of any, non-audit services to the
Company.
To consider the performance of the Auditor.
To review the Half-Year and Period-End Financial Reports before
submission to the Board, focusing particularly on:
any changes in accounting policies and practices;
major judgemental areas;
significant adjustments resulting from the audit;
the going concern assumption;
compliance with Accounting Standards and Governance Codes;
compliance with FCA Listing Rules and legal requirements;
and
valuation of unquoted investments.
To discuss issues and matters arising from the annual audit with
the Auditor.
To review the Auditor's audit findings and responses to it,
including holding an executive session with the Auditor.
To review and monitor the effectiveness of the Company's
Internal Control and Risk framework prior to endorsement by the
Board.
To review service providers' AAF 01/06 or ISAE 3402 reports.
During the period the Audit Committee ran a tender process, led
by the Audit Committee Chairman, to appoint the Company's Auditor.
This robust process considered the skills, competencies and
experience of each tendering firm, and resulted in the appointment
of PricewaterhouseCoopers Bermuda Ltd as the Company's Independent
Auditor.
In discharging its duties and, in particular, matters relating
to the approval of the Period-End Report, Half-Year Report and the
review of the Company's internal controls, the Committee considers
reports and presentations made by the Company's Auditor,
Administrator, Company Secretary, Additional Administrative
Services Provider (including those of its Compliance Officer) and
Legal Advisers.
In its review of the Financial Statements, the Committee pays
particular attention to the ownership of assets, the valuations of
the portfolio, recognition of income and areas of significant
judgement. In this regard we receive regular reporting from the
Manager and reports on the effectiveness of internal controls in
these areas. In addition the Committee understand and discuss the
Auditor's scope of work in these areas.
With regard to the ownership of assets, the Company's Custodian
and Administrator have confirmed the ownership of all assets to the
Audit Committee's satisfaction. With regard to the valuations, the
Audit Committee notes that 67% of the portfolio by value is held in
assets that are listed on an exchange, hence forming the basis of
the valuation. Further, of the remaining 33% unquoted fund
investments, the majority primarily hold traded securities.
Valuations for these funds are supplied by third party managers.
The Audit Committee recognises that the 42% of the total portfolio
are Level 1 and 53% are Level 2 securities. The Committee is
satisfied with the valuation process. With regard to revenue
recognition, the Audit Committee reviewed the external Auditor's
approach to the audit prior to the commencement of the audit. The
results of the audit in this area were discussed with the external
Auditor and there were no significant issues arising in relation to
the recognition of revenue.
The Audit Committee considers the potential need for an internal
audit function on an annual basis, recognising the FRC guidance on
proportionality. The Audit Committee considers internal compliance
testing at the Administrator and Portfolio Manager to be
sufficiently independent and robust to negate the need for a
standalone internal audit function.
The Committee is authorised by the Board to investigate any
activity within its terms of reference, to seek any information it
requires from any officer or service provider to the Company, to
obtain outside legal or other independent professional advice and
to secure the attendance of third parties with relevant experience
and expertise if it considers this necessary.
The Chairman of the Audit Committee formally reports to the
Board following each Audit Committee meeting and on other occasions
as requested by the Board.
A separate evaluation of Committee members is not conducted.
Rather, their suitability and effectiveness is considered as part
of the annual Board evaluation process which is described within
the Corporate Governance Report further on in this document.
The Audit Committee, having considered its responsibilities and
its reporting to the Board, confirms it is not aware of any matter
which it should bring to the attention of either the Board or the
Auditor and considers the Period-End Report, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
The Audit Committee considers the external Auditor's
independence, objectivity and the cost effectiveness of the audit
process through a process of feedback from the Company advisors,
including the Company Secretary, AASP and Portfolio Manager. The
Committee also meet with the Auditor in executive session to
discuss the Period-End Report, the work the Auditor has carried out
and any matters raised. The current audit partner is Scott
Watson-Brown who has led the audit.
The level of non-audit services provided to the Company by the
Auditor is monitored, as is the Auditor's objectivity in providing
such services, to ensure that the independence of the audit team
from the Company is not compromised. No non-audit services are
provided by PricewaterhouseCoopers Ltd to the Company. Further
information on fees paid to the Auditor is contained in "Other
Expenses" within Note 4 of the Financial Statements.
For and on behalf of the Audit Committee.
Richard Lightowler
Audit Committee Chairman
24 June 2020
Directors' Remuneration Report
The Board produces a separate report on the Directors'
Remuneration and, by approving it, confirms its accuracy. There are
elements of the Directors' Remuneration Report that are subject to
audit as disclosures in accordance with "IAS 24 - Related Party
Disclosures" which have been presented here. These are labelled as
"audited", with the Auditor's report included in this document.
Ordinary resolutions for the approval of this Report will be put
to shareholders at the forthcoming AGM.
ANNUAL STATEMENT
The Company has five non-executive Directors. The Board has
appointed a Remuneration Committee. The Chairman of this Committee
is Simona Heidempergher who has signed this statement on behalf of
the Board.
This is the first year of the Company's operation. Each Director
was appointed during June 2019 following the creation of the
Company. Going forward, each Director will present themselves for
annual re-election at the Company's AGM.
POLICY ON DIRECTORS' REMUNERATION
The Board's policy is that the remuneration of non-executive
Directors should include a basic pay level and should reflect the
experience of the Board as a whole, be appropriate for the work
carried out and the responsibilities, financial and reputational
risks undertaken, including additional remuneration for any roles
in addition to the responsibilities of the non-executive director
role - for example, the chairman. The remuneration does not include
a performance related element and Directors do not receive bonuses,
share options, pensions or long-term incentive schemes. The total
remuneration of the Board will be kept within the limits set out in
the Company's Bye-Laws, as amended from time to time.
The fees for the non-executive Directors are within the limits
(maximum total fee of $350,000) as set out in the Company's
Bye-Laws. The maximum is set as a USD amount. The equivalent is
GBP282,258 if translated at the applicable rate on 31 March
2020.
DIRECTORS' SERVICE CONTRACTS
It is the Board's policy that every Director has a service
contract. None of the service contracts is for a fixed term. The
terms of appointment provide that a Director shall retire and be
subject to re-election at the first AGM after appointment. The
Board has decided each Director will retire annually at the AGM and
seek re-election as appropriate. The terms also provide that either
party may give three months' notice. In certain circumstances a
Director may be removed without notice and compensation will not be
due on leaving office. There are no agreements between the Company
and its Directors concerning compensation for loss of office.
FUTURE POLICY TABLE
All of the Directors are non-executive, whose only remuneration
is a fee. The implementation of the above policy could give rise to
the following increase in fees:
Potential
Current future
total fee total fee
GBP000 GBP000
Non--executive 144* 282**
Director fees
Note:
* This fee represents a part year from incorporation to 31 March
2020. For information, annual current Director fees are noted in
the table below.
** This amount is the current upper limit of remuneration of
$350,000, converted at the exchange rate to GBP on 31 March
2020.
POLICY FOR NOTICE PERIODS
The current Directors' service contracts stipulate three months'
written notice to be given by either the Director or the Company to
terminate the services of a Director. The Board consider this is
sufficient notice to ensure an orderly hand over between the
parties.
SHAREHOLDERS' VIEWS ON REMUNERATION POLICY
The formal views of unconnected shareholders have not been
sought in the preparation of this policy.
EMPLOYEES
The Company does not have any employees, only non--executive
Directors.
ANNUAL REPORT ON REMUNERATION
Directors' Emoluments (Audited)
The Company does not have any employees, only non--executive
Directors who receive only a basic fee, plus repayment of expenses
incurred in the course of performing their duties. Therefore, the
use of the detailed remuneration table, as prescribed in the
legislation, is not appropriate here. A condensed table showing the
information relevant to the Directors' remuneration is shown in its
place.
The Directors who received fees during the year received the
following emoluments in the form of fees. For clarity, these
amounts are quoted in the currency as per their service contract.
Additionally, given the Company has not existed for a full 12 month
period, their current annual fee is also quoted as well as a
conversion to Sterling where required. This conversion has been
made at the relevant exchange rate on 31 March 2020:
Annual
2020 2020 Annual Fee
Fee Total Fee in GBP
GBP000 GBP000 $000 GBP000
Jonathan Davie
(Chairman) 33 33 70 57
Richard Lightowler 37 37 60 48
Simona Heidempergher 31 31 50 40
William Salomon 12 12 25 20
Nadya Wells 31 31 50 40
144 144 255 205
The Company also pays the expenses of the Directors to attend
the Board meetings.
DIRECTORS' INTERESTS (AUDITED)
Directors must seek permission from the Chairman before trading
in shares, taking note of any Closed Periods. Other than that,
there are no specific rules on Directors' shareholdings.
The interests of Directors and their connected parties in the
Company at 31 March 2020 are shown below.
'A' non--voting
Ordinary Ordinary
shares of shares Nature
1p each of 1p each of interest
2020 2020
Jonathan
Davie 45,000 230,000 Beneficial
William
Salomon 10,959,345 1,935,500 Beneficial
Simona Heidempergher 6,400 - Beneficial
As at 24 June 2020, the date of signing of these Period-End
Financial Statements, there were no changes to report to the
Directors' holdings other than Mr Salomon's holdings had increased
to 11,119,345 Ordinary and 2,045,500 'A' non-voting Ordinary
shares.
William Salomon is the senior partner of Hansa Capital Partners
LLP. Fees payable to Hansa Capital Partners LLP amounted to
GBP1,490,188. The fees outstanding at the year -- end amounted to
GBP396,880. During the year, no rights to subscribe to the shares
of the Company were granted to, or exercised by Directors, their
spouses or infant children.
DIRECTORS' ATTANCE
The Directors meet as a Board on a quarterly basis and at other
times as necessary and the table below sets out the number of
operational meetings and the attendance at them by each
Director.
Audit
Strategic Board Committee
Number of meetings
held 1 2 1
Number of meetings attended:
Jonathan Davie
(Chairman) 1 2 1
Richard Lightowler 1 2 1
Simona Heidempergher 1 2 1
William Salomon 1 2 1
Nadya Wells 1 2 1
Notes:
1) On incorporation on 21 June 2019, the Company was set up with
two initial Directors, Dawn Griffiths and Christopher Garrod. Both
served from incorporation until 26 June 2019 when, at the Company's
first Board meeting, the current board members were appointed.
2) As part of the incorporation of the Company, a number of
set-up meetings occurred involving, at different times during the
process, the initial Directors, or combinations of one or more of
the current Directors. These meetings have not been listed above as
they are not recurring operational meetings.
3) Dividend policy is set by the Board as a whole. At the time
of announcement of a quarterly dividend, if such announcement did
not coincide with a scheduled meeting of the Board, a committee of
the Board meets to consider the financial information required
before such an announcement can be officially released. These
meetings are not listed above.
STATEMENT OF VOTING AT THE AGM
The Directors' Remuneration Report will be presented at the
Company's first AGM in due course for approval by shareholders.
On behalf of the Board, I confirm that the above Report on
Directors' Remuneration summarises, as applicable, for the year
ended 31 March 2020:
(a) the major decisions on Directors' remuneration;
(b) any substantial changes relating to Directors' remuneration made during the year; and
(c) the context in which those changes occurred and decisions
have been taken.
For and on behalf of the Board
Simona Heidempergher
Chairman of the Remuneration Committee
24 June 2020
Independent Auditor 's Report to the Board of Directors and
Shareholders of Hansa Investment Company Ltd.
Report on the audit of the financial statements
Our opinion
In our opinion, the financial statements present fairly, in all
material respects, the financial position of Hansa Investment Company
Ltd. (the Company) as at 31 March 2020, and its financial performance
and its cash flows for the period 21 June 2019 to 31 March 2020
in accordance with International Financial Reporting Standards as
adopted by the European Union.
What we have audited
Hansa Investment Company Ltd.'s financial statements, included
In this document, comprise:
the income statement for the period 21 June 2019 to 31 March 2020;
the balance sheet as at 31 March 2020;
the statement of changes in equity for the period 21 June 2019 to
31 March 2020;
the cash flow statement for the period 21 June 2019 to 31 March
2020; and
the notes to the financial statements, which include significant
accounting policies.
Certain required disclosures have been presented elsewhere in the
Period End Report and Accounts (the "Period End Report"), rather
than in the notes to the financial statements. These are cross-referenced
from the financial statements and are identified as audited.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the financial statements section of our
report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the
International Ethics Standards Board for Accountants' Code of
Ethics for Professional Accountants (IESBA Code) and the ethical
requirements of the Chartered Professional Accountants of Bermuda
Rules of Professional Conduct (CPA Bermuda Rules) that are relevant
to our audit of the financial statements in Bermuda. We have
fulfilled our other ethical responsibilities in accordance with the
IESBA Code and the ethical requirements of the CPA Bermuda
Rules.
Our audit approach
Overview
Overall materiality: GBP2,763,000 based on 1% of
Materiality net assets.
--------------------------------------------------------
Audit scope In addition to determining materiality, we also
assessed, amongst other factors, the following in
designing our audit:
- the risk of material misstatement in the financial
statements
- significant accounting estimates
- the risk of management override of internal controls
--------------------------------------------------------
Key audit matters Valuation and existence of investments
Accuracy, occurrence and completeness of investment
income
Consideration of impacts of COVID-19
Audit scope
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we considered where management made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of
internal controls, including, among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
We tailored the scope of our audit in order to perform
sufficient work to enable us to provide an opinion on the financial
statements as a whole, taking into account the structure of the
Company, the accounting processes and controls, and the industry in
which the Company operates.
Materiality
The scope of our audit was influenced by our application of
materiality. An audit is designed to obtain reasonable assurance
whether the financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They
are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain
quantitative thresholds for materiality, including the overall
materiality for the financial statements as a whole as set out in
the table below. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures and to evaluate the
effect of misstatements, both individually and in aggregate, on the
financial statements as a whole.
Overall materiality GBP2,763,000
How we determined it 1% of net assets.
-------------------------------------
Rationale for the materiality We applied this benchmark, which is
benchmark applied generally accepted auditing practice
for investment company audits.
-------------------------------------
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above GBP138,000 as well
as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key Audit Matter How our audit addressed the key audit
matter
Valuation and existence We tested the existence of the investment
of investments portfolio by agreeing the holdings for
Refer to notes 1(d) and investments to an independent custodian
10 to the financial statements confirmation. No differences were identified
for disclosures of related by our testing which required reporting
accounting policies and to those charged with governance.
balances. Listed investments We tested the valuation
The investment portfolio of the listed equity investments by agreeing
at the period end comprised the prices used in the valuation to independent
listed investments valued third-party sources. No misstatements
at GBP183 million (67%) were identified by our testing which required
and unlisted investments reporting to those charged with governance.
valued at GBP90 million Unlisted investments We understood and
(33%). We focused on the evaluated the controls around the pricing
existence of both listed of unlisted investments including the
and unlisted investments, final approval of the valuation by the
as listed investments comprise Manager and the Board. We assessed the
the majority of the investments approach used by the Manager in valuing
balance and unlisted investments these investments, which comprised obtaining
are, individually and in the most recent valuation provided by
aggregate, material to the the fund administrator for each investment
financial statements. We at the period end.
focused on the valuation We obtained a direct confirmation of the
of listed investments because investments held and the price from each
listed investments represent fund administrator. We used these two
the principal element of key inputs to recalculate the valuation
the net asset value as disclosed applied by management. This recalculation
on the Balance Sheet in was performed for 100% of the unlisted
the financial statements. investments.
We also focused on the valuation We obtained an understanding of the underlying
of the unlisted investments methodology applied to each unlisted investment
as the valuation of these through review of their most recently
investments is material available audited financial statements
to the net asset value. to evaluate whether it was based on fair
value.
Based on the procedures detailed above,
no misstatements were identified which
required reporting to those charged with
governance.
-------------------------------------- ---------------------------------------------------
Accuracy, occurrence and We assessed the accounting policy for
completeness of investment dividend income recognition for compliance
income with accounting standards and the AIC
Refer to notes 1(f) and SORP and performed testing to evaluate
2 to the financial statements whether income had been accounted for
for disclosures of related in accordance with this stated accounting
accounting policies and policy. We found that the accounting policies
balances. implemented were in accordance with accounting
We focused on the accuracy, standards and the AIC SORP, and that income
occurrence and completeness has been accounted for in accordance with
of dividend income recognition the stated accounting policy.
as incomplete or inaccurate We tested the accuracy of dividend receipts
income could have a material by agreeing the dividend rates from investments
impact on the Company's to independent market data. No misstatements
net asset value and dividend were identified which required reporting
cover. We also focused on to those charged with governance.
the accounting policy for To test for completeness, we tested, for
income recognition and its a sample of investment holdings in the
presentation in the Income portfolio, that all dividends declared
Statement as set out in in the market by investment holdings had
the requirements of The been recorded. We tested occurrence by
Association of Investment testing that all dividends recorded in
Companies Statement of Recommended the period had been declared in the market
Practice (the "AIC SORP") by investment holdings, and we traced
as incorrect application a sample of dividends received to bank
could indicate a misstatement statements. Our testing did not identify
in income recognition. any misstatements which required reporting
to those charged with governance.
We also tested the allocation and presentation
of dividend income between the revenue
and capital return columns of the Income
Statement in line with the requirements
set out in the AIC SORP by determining
reasons behind dividend distributions.
Our procedures did not identify any misstatements
which required reporting to those charged
with governance.
-------------------------------------- ---------------------------------------------------
Consideration of impacts We evaluated the Directors' assessment
of COVID-19 of the impact of the COVID-19 pandemic
Refer to notes 1(a) and on the Company by:
24 to the financial statements Evaluating management's assessment of
which disclose the basis operational impacts, considering their
of preparation of the financial consistency with other available information
statements and the impact and our understanding of the business
of the COVID-19 pandemic. and assessing the potential impact on
From a small number of cases the financial statements.
of an unknown virus in 2019, Testing the impact of COVID-19 on the
the COVID-19 viral infection valuation of sampled investments.
has become a global pandemic. We obtained and evaluated the Directors'
It has caused disruption going concern assessment which reflects
to supply chains and travel, conditions up to the point of approval
slowed global growth and of the Period End Report.
caused volatility in global We obtained evidence to support the key
markets and in exchange assumptions and forecasts driving the
rates during the first quarter Directors' assessment. This included reviewing
of 2020 and to date. the Directors' assessment of the Company's
The coronavirus impacted financial position and forecasts, their
global capital markets significantly assessment of liquidity as well as their
in March 2020. The Company's review of the operational resilience of
net assets were GBP276.3m the Company and oversight of key third
at 31 March 2020. party service providers.
The Directors have prepared Having performed the above, we satisfied
the financial statements ourselves that, even though COVID-19 could
of the Company on a going negatively impact the Company's results
concern basis, and believe and cash flows, management's use of the
this assumption remains going concern basis of accounting was
appropriate. This conclusion appropriate.
is based on the assessment We assessed the disclosures presented
that, notwithstanding the in the Period End Report in relation to
significant market uncertainties, COVID-19 by:
they are satisfied that Reading the other information, including
the Company has adequate the Principal Risks and Viability Statement
resources to continue in set out in the Strategic Report, and assessing
operational existence for its consistency with the financial statements
the foreseeable future and and the evidence we obtained in our audit.
that the Company and its Our conclusions relating to other information
key third party service are set out in the 'Other information'
providers have in place section of our report.
appropriate business continuity
plans and will be able to
maintain service levels
through the coronavirus
pandemic.
-------------------------------------- ---------------------------------------------------
Other information
Management is responsible for the other information. The other
information comprises the Period End Report (but does not include
the financial statements and our auditor's report thereon).
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information identified above
and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this
regard.
UK Corporate Governance Code
We have nothing to report in respect of our responsibility to
report when the Directors' statement relating to the Company's
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified, under the Listing
Rules of the FCA, for review by the auditors.
Responsibilities of management and those charged with governance
for the financial statements
Management is responsible for the preparation and fair
presentation of the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union and for such internal control as management
determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, management is responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Company's financial reporting process.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made
by management.
Conclude on the appropriateness of management's use of the going
concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or
conditions may cause the Company to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partner on the audit resulting in this
independent auditor's report is Scott Watson-Brown.
PricewaterhouseCoopers Ltd
Hamilton, Bermuda
24 June 2020
Income Statement
For the period 21 June 2019 to 31 March 2020
21 June to
31 March 2020
Revenue Capital Total
Notes GBP000 GBP000 GBP000
Losses on investments held at fair
value through profit or loss 10 - (50,965) (50,965)
Exchange losses on
currency balances - (104) (104)
Investment income 2 1,364 - 1,364
1,364 (51,069) (49,705)
Portfolio management
fees 3 (1,441) - (1,441)
Other expenses 4 (1,488) - (1,488)
(2,929) - (2,929)
Losses before finance costs and
taxation (1,565) (51,069) (52,634)
Finance costs 5 (1) - (1)
Losses before taxation (1,566) (51,069) (52,635)
Taxation 6 (205) - (205)
Losses for the period (1,771) (51,069) (52,840)
Return per Ordinary and 'A' non-voting
Ordinary share 8 (1.5p) (42.6p) (44.1p)
The Company does not have any income or expense not included in
the above statement. Accordingly, the "Loss for the period" is also
the "Total comprehensive income for the period", as defined in IAS
1 (revised) and no separate Statement of Comprehensive Income has
been presented.
The total column of this statement represents the Company's
Income Statement, prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union. The supplementary revenue and capital return columns are
both prepared under guidance published by the AIC.
All revenue and capital items in the above Statement derive from
continuing operations.
The accompanying notes further on in this report are an integral
part of this Statement.
Balance Sheet
As at 31 March 2020
2020
Notes GBP000
Non-current assets
Investments in subsidiary at fair value
through profit or loss^ 9 3,179
Investments held at fair value through profit
or loss 10 273,264
276,443
Current assets
Trade and other receivables 12 2,503
Cash and cash equivalents 13 1,066
3,569
Current liabilities
Trade and other payables 14 (3,713)
Net current liabilities (144)
Net assets 276,299
Capital and reserves
Called up share capital 15 1,200
Contributed surplus 16 327,939
Retained earnings 17 (52,840)
Total equity shareholders' funds 276,299
Net asset value per Ordinary and 'A' non-voting
Ordinary share 18 230.2p
The Financial Statements of Hansa Investment Company Limited,
registered in Bermuda under company number 54752, set out in this
document were approved by the Board of Directors on 24 June 2020
and were signed on its behalf by
Jonathan Davie
Chairman
Statement of Changes in Equity
For the period 21 June 2019 to 31 March 2020
Capital
Share redemption Retained
capital reserve earnings Total
2020 2020 2020 2020
Notes GBP000 GBP000 GBP000 GBP000
As at 21 June - - - -
2019
Issue of share capital
29 August 2019 15 1,200 - - 1,200
Transfer of assets from
Hansa Trust 16 - 330,819 - 330,819
Losses for the
period - - (52,840) (52,840)
Dividends 7 - (2,880) - (2,880)
Net assets at
31 March 2020 1,200 327,939 (52,840) 276,299
Cash Flow Statement
For the period 21 June 2019 to 31 March 2020
2020
Notes GBP000
Cash flows from operating activities
Losses before finance costs and taxation* (52,634)
Adjustments for:
Realised gains on investments 10 (644)
Unrealised losses on investments 10 51,609
Effect of foreign exchange rate changes 104
Increase in trade and other receivables 12 (2,503)
Increase in trade and other payables 14 534
Taxes paid 6 (205)
Purchase of non-current investments (17,059)
Sale of non-current investments 22,980
Net cash inflow from operating activities 2,182
Cash flows from financing activities
Interest paid on bank loans 5 (1)
Inter-Company Loan with Hansa Trust PLC 1,869
Dividends paid 7 (2,880)
Net cash outflow from financing activities (1,012)
Increase in cash and cash equivalents 1,170
Cash and cash equivalents at 21 June -
Effect of foreign exchange rate changes (104)
Cash and cash equivalents at end of period 13 1,066
*Includes dividends received of GBP1,042,000 and interest
received of GBP1,000.
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 later in this report. The principal activity of the company
is set out in the strategic report within this document.
Basis of preparation
The Financial Statements of the Company have been prepared in
accordance with International Financial Reporting Standards
("IFRS"). These comprise standards and interpretations approved by
the International Accounting Standards Board ("IASB"), together
with interpretations of the International Accounting Standards and
Standing Interpretations Committee approved by the International
Accounting Standards Committee ("IASC") that remain in effect, to
the extent that IFRS have been adopted by the European Union.
These Financial Statements are presented in Sterling because
that is the currency of the primary economic environment in which
the Company operates and its location of listing.
The Financial Statements have been prepared on an historical
cost and going concern basis in line with the assertion of the
Board, and also in line with the Board's analysis of the impact of
Covid-19 on the Company except for the valuation of investments.
The Financial Statements have also been prepared in accordance with
the AIC Statement of Recommended Practice ("SORP") for investment
trusts, issued by the AIC in October 2019, to the extent that the
SORP does not conflict with IFRS. The principal accounting policies
adopted are set out below.
Basis of non-consolidation
IFRS 10 stipulates that subsidiaries and associates of
Investment Entities are not consolidated but, rather stated at fair
value unless the conditions for certain exemptions from this
treatment are met. Hansa Investment Company Ltd meets all three
characteristics of an Investment Entity as described by IFRS 10.
The Company has one, 100% owned, subsidiary Hansa Trust PLC. The
Company became the 100% owner of Hansa Trust's shares as part of
the Scheme of Arrangement on 29 August 2019. Once the legal title
of the portfolio investments are transferred to the Company, it is
the intention for Hansa Trust to be dissolved.
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.
Non-current investments
As the Company's business is investing in financial assets, with
a view to profiting from their total return in the form of income
received and increases in fair value, investments are classified at
fair value through profit or loss on initial recognition in
accordance with IFRS 9. The Company manages and evaluates the
performance of these investments on a fair value basis, in
accordance with its investment strategy and information about the
investments is provided on this basis to the Board of
Directors.
Investments are recognised and derecognised on the trade date.
For assets whose shares are traded on an exchange fair value is
deemed to be bid market prices, or closing prices for SETS stocks
sourced from the London Stock Exchange. SETS is the London Stock
Exchange's electronic trading service, covering most of the market
including all FTSE 100 constituents and most liquid FTSE 250
constituents, along with some other securities.
Fund investments are stated at fair value through profit or loss
as determined by using the most recent available valuation. In some
cases, this will be by reference to the most recent valuation
statement supplied by the fund's manager. In other cases, values
may be available through the fund being listed on an exchange or
via pricing sources such as Bloomberg.
Private equity investments are stated at fair value through
profit or loss as determined by using various valuation techniques,
in accordance with the International Private Equity and Venture
Capital Valuation Guidelines. In the absence of a valuation at the
balance sheet date, additional procedures to determine the
reasonableness of the fair value estimate for inclusion in the
financial statements may be used. These could include direct
enquiries of the manager of the investment to understand, amongst
others, valuation process and techniques used, external experts
used in the valuation process and updated details of underlying
portfolio. In addition, the Company can obtain external independent
valuation data and compare this to historic valuation movements of
the asset. Further, recent arms-length market transactions between
knowledgeable and willing parties where available might also be
considered. The investment in the Company's subsidiary undertaking
is stated at fair value.
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.
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.
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. UK dividends, overseas dividends and Real Estate
Investment Trusts' ("REIT") income are all stated gross.
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.
Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the revenue column of the Income Statement
except as follows:
(i)
expenses which are incidental to the acquisition or disposal of
an investment are charged to the capital column of the Income
Statement; and
(ii)
expenses are charged to the capital reserves, via the capital
column of the Income Statement, where a connection with the
maintenance or enhancement of the value of the investments can be
demonstrated.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax, as well as withholding taxes incurred.
Bermuda does not impute a Corporate tax for revenue or capital
profits in the Company itself and, therefore, this will be GBPnil.
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.
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 period end are reported at the rate of exchange
prevailing at the period end. Any gain or losses 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 losses is of a capital or revenue nature
respectively.
Retained Earnings
Capital Reserves - Other
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; and
expenses charged to the capital column of the Income Statement
in accordance with the above accounting policies.
Capital Reserves - Investment Holding Gains/(Losses)
The following are credited or charged to this reserve via the
capital column of the Income Statement:
increases and decreases in the valuation of investments held at
the period end.
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.
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 31 March 2020. The most recent valuation
statement was received on 14 April 2020 stating the value of the
Company's holding as at 31 December 2019. The Company has
considered the impact of the rapid spread of Covid-19, the
associated financial downturn and its potential impact on asset
values. In the absence of a valuation for 31 March, 2020 from DV4,
the Company performed additional procedures to determine the
reasonableness of the fair value estimate for inclusion in the
financial statements, These included direct enquiries of the
Manager of DV4 to understand, amongst others, valuation process and
techniques used, external experts used in the valuation process and
updated details of underlying property portfolio. In addition, the
Company has obtained external independent valuation data and
compared the historic valuation movements of DV4 to that data.
Based on the information obtained and additional analysis performed
the Company is satisfied that DV4 is carried in these financial
statements at amount that represents its best estimate of fair
value at 31 March 2020.
Adoption of new and revised standards
The following amendments to standards effective this period,
being relevant and applicable to the Company, have been adopted,
although they have no impact on the Financial Statements:
IFRS 16 'Leases' specifies accounting for leases and removes the
distinction between operating and finance leases. This standard is
not applicable to the Company as it has no leases.
For the financial period under review, the Company has applied
the following interpretation:
IFRIC 23 'Uncertainty over Income Tax' provides guidance on
uncertain income tax treatments and specifies that an entity must
consider whether it is probable that the relevant tax authority
will accept each tax treatment or group of tax treatments, that it
plans to use in its income tax filing. Where deemed to be more than
probable, uncertain tax positions should be disclosed in the
financial statements of the company.
There is no material impact on the Company in relation to the
adoption of this standard.
Intercompany loan
The intercompany loan is recognised at cost, being the fair
value of the consideration receivable. The amounts falling due for
repayment within one year are included under current liabilities in
the Balance Sheet.
2 INCOME
Revenue
21 June
2019 to
31 March
2020
GBP000
Income from quoted investments
Dividends 1,363
Other income
Interest receivable on AAA rated money market funds 1
Total income 1,364
3 PORTFOLIO MANAGEMENT FEE
Revenue
21 June
2019 to
31 March
2020
GBP000
Portfolio management fee 1,441
Total management fee 1,441
Note: Details of the Portfolio Management Agreement are
disclosed in the Strategic Report - Service Providers, earlier on
in this document.
4 OTHER EXPENSES
Revenue
21 June
2019 to
31 March
2020
GBP000
Administration fees 82
Directors' remuneration 144
Auditor's remuneration for:
- audit of the Company's Period-End Report 55
Printing fees 15
Marketing 39
Registrar's fees 119
Banking charges 2
Secretarial services 85
Travel expenses 74
Legal fees - redomicile project 381
Broker fees 15
Stock Exchange listing fees 247
Safe custody fees 99
Other 131
1,488
5 FINANCE COSTS
Revenue
21 June
2019 to
31 March
2020
GBP000
Interest payable 1
1
6 TAXATION
Taxation on Ordinary Activities
Revenue Capital Total
21 June 21 June 21 June
2019 to 2019 to 2019 to
31 March 31 March 31 March
2020 2020 2020
GBP000 GBP000 GBP000
Irrecoverable foreign withholding
tax on dividends 205 - 205
205 - 205
7 DIVIDS PAID
21 June
2019 to
31 March
2020
GBP000
Amounts recognised as distributed to shareholders in the
period 21 June 2019 to 31 March 2020
are as follows:
First and Second interim dividend for 2020 (paid
29 November 2020): 1.6p 1,920
Third interim dividend for 2020 (paid 28 February
2020): 0.8p 960
2,880
Set out below are the total dividends paid and proposed in
respect of the current financial period. There is no revenue
available for distribution by way of dividend for the period and,
therefore, dividends have been paid from capital reserves,
specifically contributed surplus which is permitted by Bermudan
company law.
21 June
2019 to
31 March
2020
GBP000
First and second interim dividend for 2020 (paid
29 November 2019): 1.6p 1,920
Third interim dividend for 2020 (paid 28 February
2020): 0.8p 960
Fourth interim dividend for 2020 (payable 29 May
2020): 0.8p 960
3,840
The Board has announced four interim dividends, each of 0.8p per
Ordinary and 'A' non-voting Ordinary share, relating to the period
ended 31 March 2020. No final dividend is proposed for the period
ended 31 March 2020.
8 RETURN ON ORDINARY SHARES (EQUITY)
Revenue Capital Total
21 June 21 June 21 June
2019 to 2019 to 2019 to
31 March 31 March 31 March
2020 2020 2020
Returns per share (1.5)p (42.6)p (44.1)p
Returns
Revenue return per share is based on the revenue attributable to
equity shareholders of GBP(1,771,000).
Capital return per share is based on the capital losses
attributable to equity shareholders of GBP(51,069,000).
Total return per share is based on the combination of revenue
and capital returns attributable to equity shareholders, amounting
to net losses of (GBP52,840,000).
Both revenue and capital return are based on 40,000,000 Ordinary
shares and 80,000,000 'A' non-voting Ordinary shares, in issue
throughout the period.
9 INVESTMENTS IN SUBSIDIARY AT FAIR VALUE THROUGH PROFIT OR
LOSS
As at 31 March 2020, the Company owns 100% of the ordinary share
capital and voting rights of Hansa Trust PLC, formerly an
investment trust, registered and operating in England. The fair
value at 31 March 2020 was GBP3,179,000. As at 31 March 2020, Hansa
Trust PLC was no longer trading and was not beneficially entitled
to any investments except for an intercompany loan. The
intercompany loan was originally created as part of the Scheme of
Redomiciliation in August 2019 to reflect the transfer of the
beneficial title of the portfolio from Hansa Trust PLC to the
Company. Subsequently, Hansa Trust PLC has made three distributions
to the Company. In each case, these have been treated as a return
of capital by the Company. Therefore, the dividends received during
the period have been recognised by the reduction of the Investment
in Subsidiary in the Balance Sheet and a corresponding reduction in
the intercompany loan. The dividends each significantly reduced the
intercompany loan balance between Hansa Trust PLC and Hansa
Investment Company Ltd. There remains a relatively small
intercompany balance between the two entities. It is anticipated
that the remaining intercompany balance, along with the share
capital and other reserves of Hansa Trust PLC will be cancelled
when Hansa Trust PLC is, ultimately, put into liquidation.
10 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
2020
Listed Unquoted Total
GBP000 GBP000 GBP000
Movements in the period:
Purchases at cost 242,798 104,411 347,209
Sales - proceeds (17,279) (5,701) (22,980)
Losses on investments (42,116) (8,849) (50,965)
Valuation as at 31 March 2020 183,403 89,861 273,264
Cost 225,985 98,888 324,873
Investment holding losses (42,582) (9,027) (51,609)
183,403 89,861 273,264
2020
GBP000
Gains on sales 644
Movement in investment holding losses (51,609)
Losses on investments held at fair value through profit
or loss (50,965)
Transaction costs
During the period expenses were incurred in acquiring and
disposing of investments classified as fair value through profit or
loss. These have been expensed through capital and are included
within gains on investments in the Income Statement. The total
costs were as follows:
2020
GBP000
Purchases 15
Sales 15
30
11 SIGNIFICANT HOLDING
The Company's holdings of 10% or more of any class of shares in
investment companies and 20% or more of any class of shares in
non-investment companies as at 31 March 2020 are detailed
below:
Exc. Minority Interest
Country Total Profit
of Class % of Latest capital after
incorporation of class available and tax for
or registration capital held accounts reserves the period
Ocean Wilsons Holdings
Limited Bermuda Ordinary 26.5 31.12.19 $569,793,000 $46,852,000
Ocean Wilsons Holdings Limited is included as part of the
investment portfolio in accordance with IAS 28 - Investment in
Associates. Hansa Investment Company Limited received no dividend
in respect of its holding during the period.
12 TRADE AND OTHER RECEIVABLES
2020
GBP000
Prepayments and accrued income 83
Investments pending settlement 2,420
2,503
13 CASH AND CASH EQUIVALENTS
2020
GBP000
Cash at bank 1,066
1,066
14 TRADE AND OTHER PAYABLES
2020
GBP000
Inter Company Loan 3,179
Other creditors and accruals 534
3,713
15 CALLED UP SHARE CAPITAL
2020
GBP000
40,000,000 Ordinary shares of 1p 400
80,000,000 'A' non-voting Ordinary shares of 1p 800
1,200
The 'A' non-voting Ordinary shares do not entitle the holders to
receive notices or to vote, either in person or by proxy, at any
general meeting of the Company, but in all other respects rank pari
passu with the Ordinary shares of the Company.
16 CONTRIBUTED SURPLUS
2020
GBP000
Opening balance at 21 June 2019 -
Transfer of assets from Hansa Trust 330,819
Dividend paid (2,880)
Balance at 31 March 327,939
17 RETAINED EARNINGS
Reserves
Revenue Capital Capital Total
- Other - Investment retained
holding earnings
profits
2020 2020 2020 2020
GBP000 GBP000 GBP000 GBP000
Opening balance at - - - -
21 June 2019
(Loss)/Profit for
the period (1,771) 540 (51,609) (52,840)
Closing balance at
31 March 2020 (1,771) 540 (51,609) (52,840)
18 NET ASSET VALUE
2020
NAV per Ordinary and 'A' non-voting Ordinary share 230.2p
The NAV per Ordinary and 'A' non-voting Ordinary share is based
on the net assets attributable to equity shareholders of
GBP276,299,000 and on 40,000,000 Ordinary shares and 80,000,000 'A'
non-voting Ordinary shares in issue at 31 March 2020.
19 COMMITMENTS AND CONTINGENCIES
The Company has no outstanding commitments as at 31 March
2020.
20 FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
The Company's financial instruments comprise securities, cash
balances, debtors and creditors. These assets are classified in the
following measurement categories:
those to be measured subsequently at fair value through profit
or loss; and
those to be measured at amortised cost.
The financial assets held at amortised cost include trade and
other receivables, cash and cash equivalents.
Risk Objectives and Policies
The objective of the Company is to achieve growth of shareholder
value commensurate with the risks taken, bearing in mind that the
protection of long-term shareholder value is paramount. The policy
of the Board is to provide a framework within which the Portfolio
Manager can operate and deliver the objectives of the Company. In
pursuing its investment objective, the Company is exposed to a
variety of risks that could result in either a reduction in the
Company's net assets and/or a reduction of the profits available
for dividends.
These risks include those identified by the accounting standard
IFRS 7, being market risk (comprising currency risk, interest rate
risk and other price risk), liquidity risk and credit risk. The
Directors' approach to the management of these is set out below.
The Board, in conjunction with the Portfolio Manager and Company
Secretary, oversees the Company's risk management..
Risks Associated with Financial Instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect
the valuation of the investment portfolio. 1) the direct exposure
where an investment is denominated and paid for in a currency other
than Sterling; and 2) the indirect exposure where an investment has
substantial non-Sterling underlying investment and/or cash flows.
The Company does not normally hedge against foreign currency
movements affecting the value of the investment portfolio, but
takes account of this risk when making investment decisions. Some
of the fund investments into which the Company invests will, in
part or in whole, hedge some of their underlying currency risk, but
this will be known at the time of investment and will form part of
the investment decision. In those cases, the hedging will not
remove the exposure to the underlying country or market sector. The
Portfolio Manager monitors the effect of foreign currency
fluctuations through the pricing of the investments by the various
markets.
Direct No direct
foreign foreign
currency currency
risk risk Total
2020 2020 2020
GBP000 GBP000 GBP000
Investments 98,846 174,418 273,264
Other receivables including
prepayments 24 2,479 2,503
Cash at bank - 1,066 1,066
Current liabilities - (534) (534)
98,870 177,429 276,299
Note: Direct foreign currency risk includes direct exposure to
USD and Euro currencies.
Interest rate risk
Interest rate movements may affect the level of income
receivable on cash deposits and the interest payable on the
Company's variable rate borrowings.
The Company has banking facilities amounting to GBP30m which are
available for the Portfolio Manager to use in purchasing
investments; the costs of which are based on the prevailing LIBOR
rate, plus an agreed margin. The Company does not normally hedge
against interest rate movements affecting the value of the
investment portfolio, but takes account of this risk when an
investment is made utilising the facility. The level of banking
facilities used is monitored by both the Board and the Portfolio
Manager on a regular basis. The impact on the returns and net
assets of the Company for every 1% change in interest rates, based
on the amount drawn down at the period end under the facility,
would be GBPnil. The level of banking facilities utilised at 31
March 2020 was GBPnil.
Interest rate changes usually impact equity prices. The level
and direction of change in equity prices is subject to prevailing
local and world economic conditions as well as market sentiment,
all of which are very difficult to predict with any certainty. The
Company has floating rate financial assets, consisting of bank
balances and cash funds that have received average rates of
interest during the period of 0.0% on bank balances.
Cash flow No
interest interest
rate rate
risk risk Total
2020 2020 2020
GBP000 GBP000 GBP000
Investments - 273,264 273,264
Other receivables including
prepayments - 2,503 2,503
Cash at bank 1,066 - 1,066
Current liabilities - (534) (534)
1,066 275,233 276,299
Other price risk
By the nature of its activities, the Company's investments are
exposed to market price fluctuations. NAV is calculated and
reported daily to the London Stock Exchange. The Portfolio Manager
and the Board monitor the portfolio valuation on a regular basis
and consideration is given to hedging the portfolio against large
market movements. This has been particularly true in the final few
months of the period due to Covid-19 where market prices were
volatile and also in some cases fell significantly and over a short
period of time. The Board has included comment on Covid-19 in the
Strategic Report. The Board has also disclosed the price movements
of assets subsequent to the Balance Sheet date in Note 24 which, in
aggregate, showed significant increases.
The Company's investment in Ocean Wilsons is large both in
absolute terms, GBP60.8m as valued at 31 March 2020 and as a
proportion of the NAV, 22.0%. Shareholders should be aware that if
anything of a severe and untoward nature were to happen to this
company, it could result in a significant impact on the NAV and
share price. However, it should also be noted that the exposure of
Hansa Investment Company Limited to the currency, country and
market based risk exposure of Ocean Wilsons is, to an extent,
mitigated by the diverse nature of the two investments within Ocean
Wilsons. Wilson Sons, corresponding to 56.1% of Ocean Wilsons' NAV,
has a direct exposure to the Brazilian economy, whereas Ocean
Wilsons Investments is not exposed to Brazil and corresponds to the
other 43.9%. It is an investment the Board pays close attention to
and it should be pointed out that the risks associated with it are
very different from those of the other companies represented in the
portfolio. The Board itself regularly undertakes a thorough review
of its business and prospects and has determined that its future
holds a lot of promise. As a consequence the Board believes the
risk involved in the investment is worthwhile.
The performance of the portfolio as a whole is not designed to
correlate with that of any market index. Should the portfolio of
the Company, as detailed earlier on, rise or fall in value by 10%
from the period end valuation, the effect on the Company's profit
and equity would be an equal rise or fall of GBP27.6m.
Credit Risk
The Company only transacts with regulated institutions on normal
market terms, which are trade date plus one to three days in the
case of equities. Fund investment settlement periods will vary from
fund to fund and are defined by the individual managers. The levels
of amounts outstanding from brokers and fund managers are regularly
reviewed by the Portfolio Manager. The duration of credit risk
associated with the investment transactions is the period between
the date the transaction took place, the trade date, the date the
stock and cash were transferred and the settlement date. The level
of risk during the period is the difference between the value of
the original transaction and its replacement with a new
transaction. The amounts due to/(from) brokers at 31 March 2020 are
shown in Note 12 and Note 14 of the Financial Statements.
The Company's maximum exposure to credit risk on cash is GBP1.1m
and on cash funds is GBPnil. Surplus cash is on deposit with the
Depositary/Custodian.
Liquidity Risk
The liquidity risk to the Company is that it is unable to meet
its obligations as they fall due, as a result of a lack of
available cash and an inability to dispose of investments in a
timely manner. A substantial proportion of the Company's portfolio
is held in liquid quoted investments; however, there is a large
holding in Ocean Wilsons of 22.0%, unquoted equity investments of
3.4% and investments into open-ended investment funds with varying
liquidity terms of 53.4%.
The Portfolio Manager takes into consideration the liquidity of
each investment when purchasing and selling, in order to maximise
the returns to shareholders, by placing suitable transaction levels
into the market. Special consideration is given to investments
representing more than 5% of the investee company. A detailed list
of the investments, split by silo, held at 31 March 2020 is shown
earlier on in this document. This can be used broadly to ascertain
the levels of liquidity within the portfolio, although liquidity
will vary with each investment - particularly the funds.
Capital Management
The Company considers its capital to be its issued share capital
and reserves and whilst the Company has access to loan facilities
it is not considered or used as core capital, but primarily to meet
the cash timing requirements of opportunistic investment strategies
and thereby enhance shareholder returns. The Board regularly
monitors its share discount policy and the level of discounts and
whilst it has the option to repurchase shares, it considers the
best means of attaining a good rating for the shares is to
concentrate on good shareholder returns.
However, the Board believes the ability of the Company to
repurchase its own 'A' non-voting Ordinary shares in the market may
potentially enable it to benefit all equity shareholders of the
Company. The repurchase of 'A' non-voting Ordinary shares, at a
discount to the underlying NAV, would enhance the NAV per share of
the remaining equity shares and might also enable the Company to
address more effectively any imbalance between supply and demand
for the Company's 'A' non-voting Ordinary shares.
21 FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
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 assets or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability not based on
observable market data (unobservable inputs).
The financial assets and liabilities, measured at fair value, in
the statement of financial position, grouped into the fair value
hierarchy and valued in accordance with the accounting policies in
Note 1, are detailed below:
Level 1 Level 2 Level 3 Total
31 March 2020 GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 116,310 - - 116,310
Unquoted equities - - 9,276 9,276
Fund investments - 147,678 - 147,678
Investment In subsidiary - - 3,179 3,179
Net fair value 116,310 147,678 12,455 276,443
The Company's policy is to recognise transfers into and out of
the different fair value hierarchy levels at the date the event or
change in circumstances that caused the transfer occurred.
A reconciliation of fair value measurements in Level 3 is set
out in the following table:
2020
Equity
investments
GBP000
Opening Balance -
Transferred from Level 1 -
Purchases (Capital Drawdown) 9,276
Purchase of Hansa Trust PLC 332,019
Sales (Capital Distribution) (328,840)
Total gains or losses included in gains on investments
in the Income Statement:
- on assets sold -
- on assets held at period end -
Closing Balance 12,455
As at 31 March 2020, the investment in DV4 has been classified
as Level 3. The investment 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 31 March 2020. The most recent valuation
statement was received on 14 April 2020. The Company has considered
the impact of the rapid spread of Covid-19, the associated
financial downturn and its potential impact on asset values. In the
absence of a valuation for 31 March, 2020 from DV4, the Company
performed additional procedures to determine the reasonableness of
the fair value estimate for inclusion in the financial statements,
These included direct enquiries of the Manager of DV4 to
understand, amongst others, valuation process and techniques used,
external experts used in the valuation process and updated details
of underlying property portfolio. In addition, the Company has
obtained external independent valuation data and compared the
historic valuation movements of DV4 to that data. Based on the
information obtained and additional analysis performed the Company
is satisfied that DV4 is carried in these financial statements at
amount that represents its best estimate of fair value at March 31,
2020. If the value of the investment was to increase or decrease by
10%, while all other variables remained constant, the return and
net assets attributable to shareholders for the period ended 31
March 2020 would have increased or decreased by GBP928,000. The
Board considers 10% to be a potential movement between valuation
periods borne out by historic valuation trends. However, this does
not preclude the valuation moving a greater amount than 10% in the
future. The subsidiary has been valued taking into account the
latest assets and liabilities remaining In Hansa Trust PLC.
22 RELATED PARTIES & TRANSACTIONS WITH THE PORTFOLIO
MANAGER
William Salomon is a Director of the Company and Senior Partner
of the Company's Portfolio Manager. Details of the relationship
between the Company and Hansa Capital Partners LLP, including
amounts paid during the period and owing at 31 March 2020, are
disclosed in the Strategic Report - Shareholder Profile and
Engagement and in Note 3 of the Financial Statements. Details of
the relationship between the Company and the Directors, including
amounts paid during the period to 31 March 2020, are disclosed in
this document within the Strategic Report - The Board and also in
the Directors' Remuneration Report.
23 CONTROLLING PARTIES
At 31 March 2020 Victualia Limited Partnership and Nomolas Ltd
each held 25.9% of the issued Ordinary shares. Additional
information is disclosed earlier on in the Strategic Report -
Substantial Shareholders section.
24 POST BALANCE SHEET EVENTS
The Board notes that, as a result of the worldwide market
reaction to the Covid-19 pandemic during February and March 2020,
the portfolio experienced a swift and short-term reduction at that
time. Since the balance sheet date of 31 March 2020, the value of
the portfolio has increased markedly. As at the 19 June 2020, being
the most recent value available at the time of signing of this
Report, the total value of the Company is GBP312.0m. This is 12.9%
higher than at the 31 March 2020 balance sheet date, having also
paid out a GBP960k dividend in May 2020.
Introduction to the Pro-Forma Financial Statements
For the 12 months ended 31 March 2020
Note of explanation:
During the twelve month period ended 31 March 2020, the Scheme
to re-domicile the business of HICL's predecessor, Hansa Trust, via
a Scheme of Arrangement was brought to shareholders for their
consideration. At a series of shareholder votes on 29 July 2019,
the Scheme received strong support from shareholders which,
following Court approval, resulted in the transfer of the business
(all assets and liabilities) on 29 August 2019 from Hansa Trust to
HICL (HICL having been incorporated on 21 June 2019). At the same
time, the shares of Hansa Trust were de-listed and cancelled before
being reissued to HICL. HICL then issued new shares to the former
Hansa Trust shareholders with the same two share classes being
retained, but with five HICL shares being issued for every one
share of Hansa Trust that had been cancelled.
From the perspective of an ongoing shareholder, whilst there are
a number of legal, jurisdictional and Board changes as a result of
the Scheme, the key facets of the business remain unchanged. The
investment strategy and policy remain unchanged.
HICL was incorporated on 21 June 2019 for the sole purpose of
continuing the business of Hansa Trust. As a result, International
Accounting Standards require that the financial statements for HICL
present only the results of HICL from the date of incorporation (21
June 2019) to the Period-End (31 March 2020). The Board believes it
is more meaningful to present to shareholders the results of
operations of Hansa Trust and HICL on a pro-forma combined basis
for the 12 month period from 1 April 2019 to 31 March 2020.
Therefore, in addition to the required Interim Financial
Statements, the Board also presents a number of relevant pro-forma
statements that amalgamate Hansa Trust and HICL, on a pro-forma
basis, and are shown as "Hansa Investment Company Ltd Group". The
pro-forma financial statements seek to paint a fuller picture of
the performance of the business since 1 April 2019, regardless of
which legal entity that business sat in at a point in time.
Similarly, the Board presents the results of Hansa Trust for the 12
months to 31 March 2019 as relevant comparative periods.
Pro-Forma Income Statement (Unaudited) for the combined Hansa
Trust PLC and Hansa Investment Company Ltd Group
For the year ended 31 March 2020
Year ended
Year ended 31 March
31 March 2020 2019
Hansa
Hansa Investment
Trust Company
1 April 21 June
2019 2019
to 31 to 31 Combined
March March Group Hansa Trust
2020 2020 Total Total
GBP000 GBP000 GBP000 GBP000
(Losses)/gains on investments held at fair
value through profit or loss (7,004) (50,965) (57,969) 15,845
Exchange gains/(losses) on currency
balances 8 (104) (96) 37
Investment income 6,044 1,364 7,408 6,669
(952) (49,705) (50,657) 22,551
Portfolio management fees (1,000) (1,441) (2,441) (2,335)
Other expenses (1,378) (1,488) (2,866) (2,041)
(2,378) (2,929) (5,307) (4,376)
(Losses)/profit before finance
costs and taxation (3,330) (52,634) (55,964) 18,175
Finance costs - (1) (1) -
(Losses)/profit before taxation (3,330) (52,635) (55,965) 18,175
Taxation (81) (205) (286) (86)
(Losses)/profit for the year (3,411) (52,840) (56,251) 18,089
Return per Ordinary and 'A' non--voting
Ordinary share (2.8)p (44.1)p (46.9)p 15.1p
Pro-Forma Balance Sheet (Unaudited) for the combined Hansa Trust
PLC and Hansa Investment Company Ltd Group
as at 31 March 2020
Combined Hansa
Group Trust
31 March 31 March
2020 2019
GBP000 GBP000
Non-current assets
Investments held at fair value through profit
or loss 273,264 335,162
Investment in subsidiary at fair value through
profit or loss - 629
273,264 335,791
Current assets
Trade and other receivables 2,503 1,118
Cash and cash equivalents 1,066 2,474
3,569 3,592
Current liabilities
Trade and other payables (534) (2,033)
Net current assets 3,035 1,559
Net assets 276,299 337,350
Capital and reserves
Called up share capital 1,200 1,200
Capital redemption reserve - 300
Contributed surplus reserve 327,939 -
Retained earnings (52,840) 335,850
Total equity shareholders' funds 276,299 337,350
Net asset value per Ordinary and 'A' non-voting
Ordinary share 230.2p 281.1p
Pro-Forma Statement of Changes in Equity (Unaudited) for the
combined Hansa Trust PLC and Hansa Investment Company Ltd
For the year ended 31 March 2020
Capital Contributed
Share redemption surplus Retained
capital reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2019 1,200 300 - 335,850 337,350
Hansa Trust losses for year - - - (3,411) (3,411)
Dividends paid by Hansa Trust PLC - - - (1,920) (1,920)
Capital reorganisation as part of the
scheme - (300) 330,819 (330,519) -
Hansa Investment Company Ltd losses for
the year - - - (52,840) (52,840)
Dividends paid by Hansa Investment Company
Limited - - (2,880) - (2,880)
Net assets at 31 March 2020 1,200 - 327,939 (52,840) 276,299
Pro-Forma Statement of Changes in Equity (Unaudited, Hansa Trust
PLC only)
For the year ended 31 March 2019
Capital
Share redemption Retained
capital reserve earnings Total
GBP000 GBP000 GBP000 GBP000
As at 1 April 2018 1,200 300 321,601 323,101
Gains for the year - - 18,089 18,089
Dividends - - (3,840) (3,840)
As at 31 March 2019 1,200 300 335,850 337,350
Pro-Forma Cash Flow Statement (Unaudited) for the combined Hansa
Trust PLC and Hansa Investment Company Ltd
For the year ended 31 March 2020
Combined Hansa
Group Trust
31 March 31 March
2020 2019
GBP000 GBP000
Cash flows from operating activities
(Losses)/gains before finance costs and taxation (55,964) 18,175
Adjustments for:
Realised (gains) on investments (3,051) (718)
Unrealised losses/(gains) on investments 61,020 (15,127)
Effect of foreign exchange rate changes 96 (37)
Increase in trade and other receivables (1,385) (1,063)
(Decrease)/increase in trade and other payables (1,499) 1,026
Taxes paid (286) (86)
Purchase of non-current investments (29,984) (34,598)
Sale of non-current investments 34,542 37,603
Net cash inflow from operating activities 3,489 5,175
Cash flows from financing activities
Interest paid on bank loans (1) -
Dividends paid (4,800) (3,840)
Net cash outflow from financing activities (4,801) (3,840)
(Decrease)/increase in cash and cash equivalents (1,312) 1,335
Cash and cash equivalents at 1 April 2,474 1,102
Effect of foreign exchange rate changes (96) 37
Cash and cash equivalents at end of year 1,066 2,474
Notes to the Condensed Pro-Forma Financial Statements
(Unaudited)
1 ACCOUNTING POLICIES
(a) Basis of preparation
The Pro-Forma Financial Statements of the Company have been
prepared under the historical cost convention, except for the
measurement at fair value of investments, and primarily using the
principles of International Financial Reporting Standards ("IFRS")
as adopted by the European Union, with the following significant
departures:
Hansa Investment Company Ltd and, as of the implementation of
the Scheme on 29 August 2019, its 100% subsidiary Hansa Trust PLC
together are referred to as the "Group" or "Combined Group" for the
purposes of the Pro-Forma Financial Statements. Under IFRS 10
'Consolidated Financial Statements', from 29 August 2019 onwards,
Hansa Investment Company Limited ('HICL') meets the definition of
an investment entity and as such any subsidiaries, namely Hansa
Trust PLC, are accounted for at fair value through profit or loss
in accordance with IFRS 9 ' Financial Instruments'. These Pro-Forma
Financial Statements have been prepared assuming that any
subsidiaries are consolidated, rather than accounted for at fair
value. Prior to 29 August 2019, Hansa Trust was a standalone entity
- itself deemed to be an investment entity.
A consequence of the consolidation of subsidiaries is that these
Pro-Forma Financial Statements are Consolidated Financial
Statements and therefore contain comparative and historical
information which encompasses the whole Group. Practically,
comparative and historical information is derived from Hansa
Trust.
The Group has not presented Consolidated Income Statement in
accordance with the Guidance Issued by the Association of
Investment Companies with respect to the allocation between Income
and Capital. Income and Capital columns have been combined for each
consolidated entity to simplify the presentation of the statement
itself.
EPS / NAV per share for comparable numbers brought forward from
Hansa Trust have been restated to reflect the new number of Hansa
Investment Company Ltd shares in issue. EPS and NAV per share
throughout the Interim Report reflect the number of Hansa
Investment Company Ltd shares in issue.
The Directors have adopted the proposed departures as they
believe the results of the Pro-Forma Financial Statements better
enable shareholders to understand the elements of the value of the
Company at the year end as well as compare to prior years.
These Pro-Forma Financial Statements are presented in Sterling,
the currency of the primary economic environment in which the
Company operates.
2 INCOME
Hansa
Hansa Investment
Trust Company Hansa
1 April 21 June Trust
2019 to 2019 to Combined Year ended
31 March 31 March Group 31 March
2020 2020 Total 2019
GBP000 GBP000 GBP000 GBP000
Income from quoted investments
Dividends 6,040 1,363 7,403 6,662
Other income
Interest receivable on AAA rated
money market funds 4 1 5 7
Total income 6,044 1,364 7,408 6,669
3 PORTFOLIO MANAGEMENT FEE
Hansa
Hansa Investment
Trust Company Hansa
1 April 21 June Trust
2019 to 2019 to Combined Year ended
31 March 31 March Group 31 March
2020 2020 Total 2019
GBP000 GBP000 GBP000 GBP000
Portfolio management fee 1,000 1,441 2,441 2,335
Total management fee 1,000 1,441 2,441 2,335
4 OTHER EXPENSES
Hansa
Hansa Investment
Trust Company Hansa
1 April 21 June Trust
2019 to 2019 to Combined Year ended
31 March 31 March Group 31 March
2020 2020 Total 2019
GBP000 GBP000 GBP000 GBP000
Administration fees 57 82 139 135
AIFM 54 - 54 131
Directors' remuneration 58 144 202 141
Auditor's remuneration for:
- audit of the Company's Period-End
Report 44 55 99 48
Fees payable to the Auditor for
other services:
Printing fees 32 15 47 36
Marketing 64 39 103 102
Registrar's fees 12 119 131 58
Banking charges 62 2 64 152
Secretarial services 61 85 146 150
Travel expenses 14 74 88 27
Legal fees - redomicile project 734 381 1,115 -
Broker fees 19 15 34 42
Stock Exchange listing fees 36 247 283 13
Safe custody fees 49 99 148 118
Other 82 131 213 888
Total other expenses 1,378 1,488 2,866 2,041
5 DIVIDS PAID & DECLARED
(Unaudited)
Combined (Audited)
Group Hansa
Year Trust
ended Year ended
31 March 31 March
2020 2019
GBP000 GBP000
Second interim dividend for Hansa Trust 2019
(paid May 2019): 1.6p (2018: 1.6p) 1,920 1,920
First interim dividend for 2020 (paid November
2019): 0.8p (2019: 1.6p) 960 1,920
Second interim dividend for 2020 (paid November
2019): 0.8p 960 -
Third interim dividend for 2020 (paid February
2020):0.8p 960 -
Fourth interim dividend for 2020 (payable May
2020): 0.8p 960 -
5,760 3,840
6 RETURN PER SHARES
The returns stated below are based on 120,000,000 shares, being
the number of shares in issue at the end of the period for HICL,
with the comparable having been re-based to this number of shares
(Hansa Trust had 24,000,000 shares in issue) for comparison
purposes.
Hansa Trust
1 April 2019 HICL
to 21 June 2019
31 March to
2020 31 March 2020 Combined Group
Pence Pence Pence
GBP000 per share GBP000 per share GBP000 per share
Year ended 31 March 2020 (3,411) (2.8) (52,840) (44.1) (56,251) (46.9)
Year ended 31 March 2019 18,089 15.1 - - 18,089 15.1
7 FINANCIAL INFORMATION
The year-end pro-forma financial information was approved by a
committee of the Board of Directors on 23 June 2020.
8 NET ASSET VALUE PER SHARE
The NAV per share is based on the net assets attributable to
equity shareholders of GBP276,299,000 (31 March 2019:
GBP337,350,000) and on 120,000,000 shares, being the number of
shares in issue at the year-end for HICL.
9 COMMITMENTS AND CONTINGENCIES
The Company has no outstanding commitments as at 31 March 2020.
(Hansa Trust: 31 March 2019: GBPnil).
10 FAIR VALUE HIERARCHY
Fair Value Hierarchy
IFRS 13 'Fair Value Measurement' requires an entity to classify
fair value measurements, using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements. The
fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (ie
as prices) or indirectly (ie derived from prices); and
Level 3: inputs for the asset or liability not based on
observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value in
the Statement of Financial Position are grouped into the fair value
hierarchy, are detailed below:
31 March 2020 (Combined Group) Level Level Level Total
1 2 3 GBP000
GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 116,310 - - 116,310
Unquoted equities - - 9,276 9,276
Fund investments - 147,678 - 147,678
Net fair value 116,310 147,678 9,276 273,264
31 March 2019 (Hansa Trust) Level Level Level Total
1 2 3 GBP000
GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 171,501 - - 171,501
Unquoted equities - - 9,764 9,764
Fund investments 3,109 150,788 - 153,897
Investment in subsidiary - - 629 629
Net fair value 174,610 150,788 10,393 335,791
There have been no transfers during the year 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. For the purposes of these pro-forma
accounts, transfers of assets from Hansa Trust to HICL have not
been deemed to represent a sale/purchase:
(Unaudited) (Audited)
Combined Hansa
Group Trust
March March
2020 2019
Equity Equity
investments investments
GBP000 GBP000
Opening Balance 10,393 12,412
Transferred from Level 1: - -
Purchases (Capital Distribution) - -
Sales (Capital Distribution) (2,254) (2,432)
Total gains or losses included in gains on investments
in the Income Statement:
- on assets sold - 22
- on assets held at year end 1,137 391
Closing Balance 9,276 10,393
Notice of the Annual General Meeting
NOTICE IS HEREBY GIVEN that the annual general meeting of the
Members of the Company will be held at Clarendon House, 2 Church
Street, Hamilton, HM 11, Bermuda on 22 July 2020 at 1:15 p.m.
(Bermuda time) for the following purposes:
Agenda
To appoint a chairperson of the meeting.
To confirm notice.
To receive and consider the audited Financial Statements and the
Reports of the Directors and Auditor for the period ended 31 March
2020.
To re-elect Jonathan Davie (a biography and Board endorsement
can be found earlier on in the report) as a Director of the
Company.
To re-elect Richard Lightowler (a biography and Board
endorsement can be found earlier on in the report) as a Director of
the Company.
To re-elect Nadya Wells (a biography and Board endorsement can
be found earlier on in the report) as a Director of the
Company.
To re-elect William Salomon (a biography and Board endorsement
can be found earlier on in the report) as a Director of the
Company.
To re-elect Simona Heidempergher (a biography and Board
endorsement can be found earlier on in the report) as a Director of
the Company.
To approve the Directors' Remuneration Report.
To approve the Company's Dividend Policy as can be found on
earlier on in the Annual Report.
To appoint PricewaterhouseCoopers Ltd as Auditor of the Company
and to authorise the Directors to determine the remuneration of the
Auditor.
Approval to repurchase up to 14.99% of the 'A' non--voting
Ordinary shares of 1p each in the issued shares capital of the
Company (the "Shares").
THAT the Company be and hereby is unconditionally authorised to
make market purchases up to an aggregate of 11,992,000 shares at a
price (exclusive of expenses) which is:
a) not less than 1p per share; and
b)
not more than the higher of: i) 5% above the average of the
middle-market quotations (as derived from and calculated by
reference to the Daily Official List of the London Stock Exchange)
for 'A' non-voting Ordinary shares of 1p each in the five business
days immediately preceding the day on which the share is purchased;
and ii) the higher of the last independent trade and the then
current highest independent bid.
AND
THAT the approval conferred by this resolution shall expire on
the date of the next AGM (except in relation to the purchase of
shares, the contract for which was concluded before such date and
which might be executed wholly or partly after such date) unless
the authority is renewed or revoked at any other general meeting
prior to such time.
Dated: 24 June 2020
Shane Reynolds
For and on behalf of
Conyers Corporate Services (Bermuda) Limited
Secretary
Notes for Shareholders
1 Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001 (as amended), only those members registered in the
register of members of the Company 48 hours before the Annual
General Meeting (i.e. by close of business UK time on 17 July 2020)
(or if the Meeting is adjourned, in the register of members of the
Company 48 hours before the date and time of the adjourned meeting)
(the "Meeting") shall be entitled to attend or vote at the Meeting
in respect of the number of shares registered in their respective
names at that time. Changes to entries on the register of members
after that time will be disregarded in determining the rights of
any person to attend or vote at the Meeting.
2 Registered members of the Company may vote at the Meeting
(whether by show of hands or poll) in person or by proxy or
corporate representative. A member may appoint one or more persons
as his proxy to attend and vote at the Meeting on his behalf. A
proxy need not be a member. Where more than one proxy is appointed
the instrument of proxy must specify the number of shares each
proxy is entitled to vote.
3 The appointment of a proxy will not affect the right of a
member to attend and vote in person at the Meeting or adjourned
meeting. A member that is a corporation may appoint a
representative to attend and vote on its behalf at the Meeting by
delivering evidence of such appointment to the Company's registrar
no later than 48 hours before the time fixed for the Meeting (i.e.
by 9:15am UK time on 20 July 2020) or any adjourned meeting.
4 In order to be valid, the proxy appointment (together with any
power of attorney or other authority (if any) under which it is
signed, or a notarised certified copy of that authority) must be
returned by one of the following methods, in each case so as to
arrive no later than 9:15am UK time on 20 July 2020 or, in the case
of an adjourned meeting, not less than 48 hours before the time
appointed for holding such adjourned meeting (ignoring for these
purposes non-working days) or (in the case of a poll taken
otherwise than at or on the same day as the Meeting or adjourned
meeting) for the taking of the poll at which it is to be used:
a)
via www.signalshares.com by logging on and selecting the 'Proxy
Voting' link. If you have not previously registered for electronic
communications, you will first be asked to register as a new user,
for which you will require your investor code (IVC), (which can be
found on your share certificate), family name and postcode (if
resident in the UK);
b)
in hard copy form by post, by courier or by hand to the
company's registrars, Link Asset Services at 34 Beckenham Road,
Beckenham, Kent, BR3 4TU.
If you need help with voting online or need to request a proxy
form, please contact our Registrars, Link Asset Services, on 0371
664 0300. 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. We are open between
09:00 - 17:30, Monday to Friday excluding public holidays in
England and Wales. Alternatively, you can email Link at
enquiries@linkgroup.co.uk. via www.signalshares.com by logging on
and selecting the 'Proxy Voting' link. If you have not previously
registered for electronic communications, you will first be asked
to register as a new user, for which you will require your investor
code (IVC), which can be found on your share certificate, family
name and postcode (if resident in the UK).
Notes for Depositary Interest Holders
1 You will not receive a form of direction for the Annual
General Meeting in the post. Depositary Interests may be voted
through the CREST Proxy Voting Service in accordance with the
procedures set out in the CREST manual.
In order for a proxy appointment or instruction made using the
CREST service to be valid, the appropriate CREST message (a "CREST
Proxy Instruction") must be properly authenticated in accordance
with Euroclear UK & Ireland Limited's specifications and must
contain the information required for such instruction, as described
in the CREST Manual (available via www.euroclear.com/CREST). The
message, regardless of whether it constitutes the appointment of a
proxy or is an amendment to the instruction given to a previously
appointed proxy must, in order to be valid, be transmitted so as to
be received by the issuer's agent ID RA10 by 9:15am UK time on 20
July 2020. For this purpose, the time of receipt will be taken to
be the time (as determined by the time stamp applied to the message
by the CREST Application Host) from which the issuer's agent is
able to retrieve the message by enquiry to CREST, in the manner
prescribed by CREST. After this time any change of instructions to
proxies appointed through CREST should be communicated to the
appointee through other means. CREST members and, where applicable,
their CREST sponsors, or voting service providers should note that
Euroclear UK & Ireland Limited does not make available special
procedures in CREST for any particular message. Normal system
timings and limitations will, therefore, apply in relation to the
input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST
personal member, or sponsored member, or has appointed a voting
service provider, to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers
are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
2 In the case of Depositary Interest Holders, a form of
direction may be requested and completed in order to instruct Link
Market Services Trustees Limited, the Depositary, to vote on the
holder's behalf at the Meeting by proxy or, if the Meeting is
adjourned, at the adjourned meeting. Requests for a hard copy
should be sent to Link Asset Services at 34 Beckenham Road,
Beckenham, Kent, BR3 4TU (telephone number: 0871 664 0300 or 0371
664 0300).
3 To be effective, a valid form of direction (and any power of
attorney or other authority under which it is signed) must be
received electronically or delivered to Link Asset Services at 34
Beckenham Road, Beckenham, Kent, BR3 4TU by no later by 9:15am UK
time on 17 July 2020) or 72 hours before any adjourned Meeting.
4 The Depositary will appoint the Chairman of the meeting as its
proxy to cast your votes. The Chairman may also vote or abstain
from voting as he or she thinks fit on any other business
(including amendments to resolutions) which may properly come
before the meeting.
5 The 'Vote Withheld' option is provided to enable you to
abstain from voting on the resolutions. However, it should be noted
that a 'Vote Withheld' is not a vote in law and will not be counted
in the calculation of the proportion of the votes 'For' and
'Against' a resolution.
6 Depositary Interest holders wishing to attend the meeting
should contact the Depositary at Link Market Services Trustees
Limited, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU
or by email by using custodymgt@linkgroup.co.uk by no later than by
9:15am UK time on 17 July 2020.
All Holders
1 The quorum for the Annual General Meeting shall be two or more
shareholders present in person or by proxy. If within two hours
from the time appointed for the meeting a quorum is not present,
the meeting shall be adjourned to the next business day at the same
time and place or to such other time and place as the Directors may
determine, and if a quorum is not present at any such adjourned
meeting, the meeting shall be dissolved.
2 As of 24 June 2020 the Company's total number of shares in
issue is 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.
3 A copy of this notice and other information can be found at https://www.hansaicl.com/shareholder-information/financial-and-investment-reporting/year-2020.aspx#2020
Investor Information
The Company currently manages its affairs so as to be a
qualifying investment company for ISA purposes, for both the
Ordinary and 'A' non-voting Ordinary shares. It is the present
intention that the Company will conduct its affairs so as to
continue to qualify for ISA products. In addition, the Company
currently conducts its affairs so shares issued by Hansa Investment
Company Ltd can be recommended by independent financial advisers to
ordinary retail investors, in accordance with the Financial Conduct
Authority's ("FCA") rules in relation to non--mainstream investment
products and intends to continue to do so for the foreseeable
future. The shares are excluded from the FCA's restrictions which
apply to non--mainstream investment products, because they are
excluded securities defined in the FCA Handbook Glossary. Finally,
Hansa Investment Company is registered as a Reporting Financial
Institution with the US IRS for FATCA purposes.
Investor Disclosure
AIFMD
Hansa Investment Company's AIFMD Investor Disclosure document
can be found on its website. The document is a regulatory
requirement and summarises key features of the Company for
investors. It can be viewed at:
www.hansaicl.com/shareholder-information/regulatory-information.aspx
Packaged Retail and Insurance-based Investment Products
("PRIIPs")
The Company's AIFM, Hanseatic Asset Management LBG, is
responsible for applying the product governance rules defined under
the MiFID II legislation on behalf of Hansa Investment Company Ltd.
Therefore, the AIFM is deemed to be the 'Manufacturer' of Hansa
Investment Company's two share classes. Under MiFID II, the
Manufacturer must make available Key Information Documents ("KIDs")
for investors to review if they so wish ahead of any purchase of
the Company's shares. Links to these documents can also be found on
the Company's website for good measure:
www.hansaicl.com/shareholder-information/regulatory-information.aspx
Capital Structure
The Company has 40,000,000 Ordinary shares of 1p each and
80,000,000 'A' non--voting Ordinary shares of 1p each in issue. The
Ordinary shareholders are entitled to one vote per Ordinary share
held. The 'A' non--voting Ordinary shares do not entitle the
holders to vote or receive notice of meetings, but in all other
respects they have the same rights as the Company's Ordinary
shares.
Contact Details
Email: hiclenquiry@hansacap.com
Website: www.hansaicl.com
Company Secretary (and Company's Registered Office)
Conyers Corporate Services (Bermuda) Limited
Clarendon House, 2 Church Street
PO Box HM666, Hamilton HM CX
Bermuda
Phone: +1 441 279 5373
Website: www.conyers.com
Please contact the Portfolio Manager, as below, if you have any
queries concerning the Company's investments or performance.
Portfolio Manager
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hiclenquiry@hansacap.com
Website: www.hansagrp.com
The Company's website includes the following:
- Monthly Fact Sheets
- Stock Exchange Announcements
- Details of the Board Statements
- Annual and Interim Reports
- Share Price Data Reports
Please contact the Registrars, as below, if you have a query
about a certificated holding in the Company's shares.
Link Asset Services,
The Registry,
34 Beckenham Road,
Beckenham,
Kent BR3 4TU
If you do not have internet access you can call the Shareholder
Support Centre on 0371 664 0300. Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate.
We are open between 09:00 - 17:30, Monday to Friday excluding
public holidays in England and Wales.
Email: enquiries@linkgroup.co.uk
www.linkassetservices.com
Share Price Listings
The price of your shares can be found on our website and in the
Financial Times under the heading 'Investment Companies'.
In addition, share price information can be found under the
following:
ISIN Code
Ordinary shares BMG428941162
'A' non-voting Ordinary shares BMG428941089
SEDOL
Ordinary shares BKLFC18
'A' non-voting Ordinary shares BKLFC07
Reuters
Ordinary shares HAN.L
'A' non-voting Ordinary shares HANA.L
Bloomberg
Ordinary shares HAN LN
'A' non-voting Ordinary shares HANA LN
TIDM
Ordinary shares HAN
'A' non-voting Ordinary shares HANA
Legal Entity Identifier: 213800RS2PWJXSZQDF66
Useful Internet Addresses
Association of Investment Companies www.theaic.co.uk
London Stock Exchange www.londonstockexchange.com
TrustNet www.trustnet.com
Interactive Investor www.iii.co.uk
Morningstar www.morningstar.com
Edison www.edisongroup.com
Financial Calendar
Company year end 31 March
Annual Report sent to shareholders June
Annual General Meeting July
Announcement of Half Year results November
Interim Report sent to shareholders December
Interim dividend payments August, November, February & May
Company Information
Registered in Bermuda company number: 54752
BOARD OF DIRECTORS
Jonathan Davie ( Chairman )
Simona Heidempergher
Richard Lightowler
William Salomon
Nadya Wells
SECRETARY AND REGISTERED OFFICE
Conyers Corporate Services (Bermuda) Limited
Clarendon House
2 Church Street
PO Box HM666
Hamilton HM CX
Bermuda
PORTFOLIO MANAGER AND ADDITIONAL ADMINISTRATIVE SERVICES
PROVIDER
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
AUDITOR
PricewaterhouseCoopers Ltd
Washington House
4th Floor, 16 Church Street,
Hamilton HM11,
Bermuda
SOLICITORS
Dentons
1 Fleet Place
London EC4M 7WS
REGISTRAR
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH
CUSTODIAN
Banque Lombard Odier & Cie SA
11 Rue de la Corraterie
1204 Geneva
Switzerland
STOCKBROKER
Winterflood Investment Trusts
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
ADMINISTRATOR
Maitland Administration Services Limited
Hamilton Centre
Rodney Way
Chelmsford
Essex
CM1 3BY
ALTERNATIVE INVESTMENT FUND MANAGER
Hanseatic Asset Management LBG
Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1WD
Glossary of Terms
Association of Investment Companies ("AIC")
The Association of Investment Companies is the UK trade
association for closed-ended investment companies. It represented
Hansa Trust. 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 AIF.
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 KIDs.
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. As part of the calculation of
this measure, the Company will continue to use and quote results
from its predecessor, Hansa Trust PLC, as part of that reporting so
shareholders can see the longer-term performance of the
portfolio.
Gearing
Gearing refers to the level of borrowing related to equity
capital.
Hedging
Strategy used to reduce risk of loss from movements in interest
rates, equity markets, share prices or currency rates.
Issued Share Capital
Issued share capital is the total number of shares subscribed to
by the shareholders.
Key Performance Indicators ("KPIs")
A set of quantifiable measures that a company uses to gauge its
performance over time. These metrics are used to determine a
company's progress in achieving its strategic and operational goals
and also to compare a company's finances and performance against
other businesses within its industry. In the case of historic
information, the KPIs will be compared against data from Hansa
Trust PLC.
Market Capitalisation
The market value of a company's shares in issue. This figure is
found by taking the stock price and multiplying it by the total
number of shares outstanding.
Mid Price
The average of the Bid and Offer Prices of a particular traded
share.
Net Asset Value/NAV
The value of the total assets minus liabilities of the
company.
Net Asset Value Total Return
See Total Return.
Offer Price
The price at which you can buy shares determined by supply and
demand.
Ordinary Shares
Shares representing equity ownership in a company allowing
investors to receive dividends. Ordinary shareholders have the
pro--rata right to a company's residual profits. In other words,
they are entitled to receive dividends if any are available after
payments to financial lenders and dividends on any preferred shares
are paid. They are also entitled to their share of the residual
economic value of the company should the business unwind.
Hansa Investment Company Ltd has two classes of Ordinary share.
The Ordinary (40m shares) and the 'A' non-voting Ordinary shares
(80m shares). Both have the same financial interest in the
underlying assets of the Company and receive the same dividend, but
differ only in that only the former shares have voting rights,
whereas the latter do not. They trade separately on the London
Stock Exchange, nominally giving rise to different share prices at
any given time.
Premium
When the share price is higher than the NAV it is referred to as
trading at a premium. The premium is expressed as a percentage of
the NAV.
Packaged Retail and Insurance-based Investment Product
("PRIIP")
Packaged retail investment and insurance-based products
("PRIIPs") make up a broad category of financial assets that are
regularly provided to consumers in the European Union. The term
PRIIPs, created by the European Commission to regulate the
underlying market, is defined as any product manufactured by the
financial services industry, to provide investment opportunities to
retail investors, where the amount repayable is subject to
fluctuation because of exposure to reference values, or the
performance of underlying assets not directly purchased by the
retail investor.
Shareholders' Funds/Equity Shareholders' Funds
This value equates to the NAV of the Company. See NAV.
Spread
The difference between the Bid and Ask price.
Tradable Instrument Display Mnemonics ("TIDM")
A short, unique code used to identify UK-listed shares. The TIDM
code is unique to each class of share and to each company. It
allows the user to ensure they are referring to the right share.
Previously known as EPIC.
Total Return
When measuring performance, the actual rate of return of an
investment or a pool of investments over a given evaluation period.
Total return includes interest, capital gains, dividends and
distributions realised over a given period of time. In the case of
historic information, the Total Return will include data from Hansa
Trust PLC.
Total Return - Shareholder
The Total Return to a shareholder is a measure of the
performance of the Company's share price over time. It combines
share price appreciation/depreciation and dividends paid to show
the total return to the shareholder expressed as an annualised
percentage.
VIX Index
The VIX, or the CBOE Volatility Index, is a widely used measure
of the implied volatility of the stock market, based on S&P 500
index options. It is calculated and published by the Chicago Board
Options Exchange.
Hansa Investment Company Ltd
Clarendon House
2 Church Street
PO Box HM666
Hamilton HM CX
Bermuda
T : +44 (0) 207 647 5750
E : hiclenquiry@hansacap.com
Visit us at
www.hansaicl.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACSBUGDLCDDDGGS
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June 24, 2020 11:33 ET (15:33 GMT)
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