TIDMHAN TIDMHAN TIDMHANA
RNS Number : 3250I
Hansa Investment Company Limited
01 December 2022
Chairman's Report
Dear Shareholder
Shareholder returns
The past six months to 30 September 2022 have shown a decrease
in net asset value ("NAV") from 319.1p per share to 295.6p per
share. The discounts on both of our share classes have widened
during the last six months, from 37.8% to 38.4 % for the Ordinary
shares and from 39.5% to 41.3 % for the 'A' non-voting Ordinary
shares. This mirrors a trend seen across the whole UK Investment
Trust sector, as markets have reacted in a volatile manner to the
rapidly shifting economic outlook. More detail on these and the
longer-term performance can be found within our Portfolio Manager's
detailed review of markets and portfolio performance in his
Report.
Our Portfolio Manager, Alec Letchfield and his team at Hansa
Capital Partners LLP ("the Portfolio Manager"), continue to shape
the portfolio, with adjustments made in recognition of the changing
economic landscape; all within the context of our longer-term
investment horizon. Alec and his team have increased our exposure
to metals, mining and energy during the year-to-date within the
Thematic silo; asset classes which were out of favour until
recently, which have now come into sharp focus given energy
uncertainty and the environmental challenges facing the world. Alec
and his team have also allocated further capital to their
diversifying strategy during the last 12 months. This is to remove
an element of volatility and to provide the portfolio with a return
stream less correlated with equity markets. I note the diversifying
silo within the portfolio has produced a pleasing gain (in the
context of current markets) of 2.7% in sterling terms over the past
six months and 5.5% over the past 12 months. Alec and his team have
been successful in identifying a number of strong managers and
funds in this area with highlights noted in his Portfolio Manager's
Report. Their thoughtful and diversified approach has produced an
overall return on the managed portfolio of -4.7% in sterling terms
in a difficult and volatile environment. Core Regional and Thematic
strategies fell 6.3% and 8.2% respectively, compared to a 7.2% fall
in the global equity index.
Alec Letchfield and his team continue to monitor our investments
very carefully and retain a defensive element to the strategy until
more clarity appears about the outcomes of the present problems. He
has been particularly underweight in UK investments which has
assisted performance.
Ocean Wilsons Holdings Limited
Our strategic holding in Ocean Wilsons Holdings Limited ("Ocean
Wilsons", "OWHL") consists of two parts: an investment in the
Brazilian maritime and port operator Wilson Sons Limited ("Wilson
Sons"), equating to approximately 2/3 of the value of Ocean
Wilsons, as well as an investment portfolio making up the balance.
Wilson Sons continues to perform with stable financial returns in a
market segment where logistics and international trade remains
challenging. It is pleasing to see the performance of Wilson Sons,
which is assisted by the long- anticipated strengthening of the
Brazilian Real against the Pound. I note the Brazilian presidential
election has resulted in a very close result, returning Luiz Inácio
Lula da Silva ("Lula") as President of Brazil for a third term
albeit there were initial fears that the previous president, Jair
Bolsonaro, would not cede power. It is encouraging to note that
Jair Bolsonaro has now conceded the election by accepting the
transmission process and that Lula will be constrained by the make
up of Congress to pursue irresponsible fiscal measures.
The Ocean Wilsons investment portfolio has similarities to our
own portfolio including a selection of defensive assets. However,
it also has a significant element of private equity. Whilst the
portfolio has reduced in value from $313m at the end of April to
$297m at the end of June, this is in part due to dividend
payments.
Discount Management
Discounts across the investment trust spectrum have widened as
markets have become increasingly jittery. We have not been immune
despite the less volatile results. The discount remains a source of
frustration to the Board, but we continue to believe buy-backs are
not in the Company's long-term interest, as this would increase
ownership concentration to Ocean Wilsons, given that any buy-back
of shares would need to be funded from the Company's pool of liquid
assets. Instead, we believe transparent and clear communications on
the portfolio; that strategic investment activity will deliver
broader understanding and interest, expand the shareholder base,
improve liquidity, and eventually positively impact the discount.
To this end, we have embarked on a programme of refreshing
communications across all platforms, including the Company's
website, Annual and Half-Year Financial Reports and factsheets. We
hope these ongoing changes will be well received.
The Board continues to work with our marketing partner. The
initial focus is to refresh the Company's image including its
website, factsheets, Annual and Half-Year Reports. Those of you who
have followed our Company for a number of years will have noticed
the 'new look' of the Company's Half-Year Report. This will be
followed shortly by our new website. In future, our marketing
partner and our research broker will be considering how we can
further expand our shareholder base, making the Company better
known in the market, in particular within the active "self-select"
investor community.
Prospects
I mentioned in the most recent Annual Report the investment
challenges when there are so many moving parts in the financial
world.
Although the majority of economic forecasters suggest we may be
getting near the inflationary peak in this cycle, there seems to be
a notable dispersion of opinion as to how quickly a decline may
take place. The Federal Reserve, European Central Bank and Bank of
England all recognise they have been slow to react to this
inflationary cycle and seem determined to crush it now. It will be
interesting to measure the strength of their determination when the
inevitable pain creates political difficulties for incumbents. My
own view remains that recessions are inevitable in the US, UK and
Continental Europe and unless interest rates reach heights not
presently anticipated, a meaningful fall in inflation rates is
unlikely. Their depth should be cushioned by the continuing loose
monetary policy in Japan and inevitable easing of monetary policy
in China.
I mentioned in the Annual Report in June that equity markets
still had some way to fall. This has duly come to pass and it is
difficult to see a final bottoming out process until there is more
clarity on the depth of the forthcoming corporate earnings
recession, the peaking of inflation, the end of quantitative
tightening and a sense that the present conflict in Ukraine is
moving towards some sort of resolution.
The coming winter will sadly be very damaging for Europe, as
industry may be badly affected and all environmental plans
postponed due to the increase in coal and oil consumption. The
worst outcomes may be avoided by above average winter temperatures
and the consequential decline in seasonal energy consumption,
particularly gas, with the main storage facilities presently being
completely full.
Corporate governance
Senior Independent Director
I am pleased to report the Board has appointed Nadya Wells as
Hansa Investment Company's Senior Independent Director to assist
and give guidance to the Chairman.
ESG Matters
With ever-growing global concerns and developments surrounding
matters such has climate change, social inequalities and ethical
corporate strategy and governance, the Board believes there is a
communal duty for meaningful and effective action to be taken and
are committed to doing so.
It is the Board's belief that responsible investing and a
well-run sustainable business model aids in generating superior
long-term returns and our Portfolio Manager shares these beliefs.
As long-term investors, the Portfolio Manager has a natural desire
to be a responsible investor and good corporate citizen. It is
likely that such businesses and investors are likely to generate
superior long-term returns and, furthermore, consideration of such
issues is an important element to potential risks. The Portfolio
Manager does not operate an exclusionary policy, as it is not
believed that excluding whole sectors or countries is a
sustainable, or reasonable approach to its investment activities.
Each fund manager or company is assessed as an individual, taking
into account the sector and country within which it operates and
its direction of travel in ESG enhancements.
You will have seen over the last two years that the Portfolio
Manager has been developing its own Responsible Investing framework
and, more recently, working closely with the UN Principles for
Responsible Investing Initiative ("UNPRI") considering the
requirements of the investor initiative, in particular considering
its impact on a portfolio such as ours. If you are not familiar
with the initiative, the UNPRI encourages investors to use
responsible investment to enhance returns and better manage risks,
but does not operate for its own profit; it engages with global
policymakers, but is not associated with any government; and is
supported by, but not part of, the United Nations. It consists of
six principles that all signatories must agree with:-
1. Incorporate ESG issues into investment analysis and decision-making processes.
2. Be active owners and incorporate ESG issues into ownership policies and practices.
3. Seek appropriate disclosure on ESG issues by the entities invested in.
4. Promote acceptance and implementation of the Principles within the investment industry.
5. Work together to enhance effectiveness in implementing the Principles.
6. Each report on activities and progress towards implementing the Principles.
The Manager has kept the Board closely informed at each stage
and the Board has been supportive of its proposals. Therefore, I am
pleased to report that our Portfolio Manager is now a confirmed
signatory to the UNPRI initiative and I look forward to seeing how
this develops.
Shareholder presentation
Following the release of this Half-Year Report, we are planning
to hold a shareholder information presentation. Given the success
of the virtual meetings in recent years, we intend to keep holding
these events online to enable broad participation. More details
will be published on our website and via RNS.
Finally, may I wish you all seasonal good wishes and much good
health and prosperity for 2023.
Jonathan Davie
Chairman
1 December 2022
Half-Year Management Report
The Directors present their Report and Condensed Financial
Statements for the period to 30 September 2022.
The Board's objectives
The Board's primary objective is to achieve growth of
shareholders' value over the medium to long-term.
The Board
Your Board consists of the following persons, each of whom
brings certain individual and complementary skills and experience
to the Board's workings:
Jonathan Davie (Chairman of the Board and Management Engagement
Committee); Richard Lightowler (Chairman of the Audit Committee);
Simona Heidempergher (Chairman of the Remuneration Committee);
William Salomon; and Nadya Wells (Chairman of the Nomination
Committee and Senior Independent Director).
Individual profiles for each member of the Board can be found in
the Company's Annual Report each year and on our website.
Business Review for the period to 30 September 2022
The Business Review includes a discussion of important events
which occurred within the period to 30 September 2022 and is
covered in the Chairman's Report to the Shareholders and the
Portfolio Manager's Report.
Hansa Investment Company Limited ("HICL", "the Company")is a
Bermudan company formed in June 2019 to take on the business of
Hansa Trust Ltd ("Hansa Trust"). As a company, HICL has limited
financial history, only having taken on the business of Hansa Trust
in August 2019. Therefore, when discussing the medium and
longer-term financial performance of the Company and its portfolio,
the Board will continue to incorporate the financial performance
from Hansa Trust, as well as HICL where relevant. Hansa Trust was
liquidated in November 2021.
Key risks for the financial year to 31 March 2023
The key risks and uncertainties relating to the period ended 30
September 2022 and for the year ending 31 March 2023 are materially
the same as those reported in the Annual Report for the Company for
the year ended 31 March 2022. The Board, with the Portfolio
Manager, continues to focus on the likely future economic impacts
of the developing geopolitical tensions and inflationary pressures
currently shaping the global markets.
Going Concern basis of accounting for the period to 30 September
2022
The Directors consider it appropriate to adopt the going concern
basis of accounting in preparing these Half-Year Financial
Statements. The Directors do not know of any material uncertainties
to the Company's ability to continue to adopt this approach over a
period of at least 12 months from the date of approval of these
Financial Statements.
The Directors will include a Long-Term Viability Statement in
each Annual Report.
Related party transactions
During the period, Hansa Capital Partners LLP charged portfolio
management fees and company secretarial fees to the Company,
amounting to GBP1,481,000 excluding VAT (six months to 30 September
2021: GBP1,601,000; year to 31 March 2022: GBP3,177,000). Amounts
outstanding at 30 September 2022 were GBP231,000 (30 September
2021: GBP261,000; 31 March 2022: GBP236,000).
The Board's responsibilities
The Board is charged by the shareholders with responsibility for
oversight of the affairs of the Company. It involves the
stewardship of the Company's assets and liabilities and the pursuit
of growth of shareholder value. These responsibilities remain
unchanged from those detailed in the last Annual Report.
The Directors confirm to the best of their knowledge that:
The condensed set of Financial Statements contained within the
Half-Year Financial Report have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting'
and on a going concern basis.
This Half-Year Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure
and Transparency Rules.
The above Half-Year Management Report, including the Statement
of the Board's Responsibilities, was approved by the Board on 1
December 2022 and was signed on its behalf by:
Jonathan Davie
Chairman
1 December 2022
Portfolio Manager's Report
How high? How low? How bad?
Market backdrop
Having ebbed and flowed, the first half of the financial year
saw market bearishness reach a crescendo. Initially, in a classic
head-fake, investors started to believe the US Federal Reserve
would tone down some of its hawkish rhetoric on interest rates. In
the belief that rates were high enough to start bringing inflation
down, investors were increasingly of the view they could start to
think about interest rates falling again. With it we saw both a
rally in stock markets and a rotation back into some of the longer
duration names and out
of value.
The chair of the Federal Reserve, Jay Powell, had a different
view and, at the annual Jackson Hole symposium, quickly put
investors back into their box. Having only a short-while back
argued that inflation was transitory, he now views rate rises as
open-ended and doesn't even want to discuss
when and where they might pause until inflation is back to
target. This wasn't just rhetoric but also backed up by action.
Over the half the US increased rates by 2.75%, the ECB by 1.25% and
the Bank of England by 1.5%.
Reinforcing this stance, inflation proceeded to reach levels
last seen in the 70s/80s, hitting 8.3%, 9.1% and 9.9% in the US,
Europe and the UK respectively. Rather counter-intuitively,
however, many of the underlying constituents of inflation softened
during the period. Oil prices fell from $100/barrel to $79,
container shipping prices fell by 50% and many metal prices fell
over the period.
Rounding off this turbulent backdrop, geopolitics also remained
challenging. Confounding the belief that Russian success in Ukraine
was inevitable, the Ukrainian armed forces delivered a spectacular
counteroffensive. Russia, on its part, conducted several sham
referenda in an effort to legitimise the invasion. China was
relatively quiet ahead of its 20th Communist Party congress in
October, albeit President Xi remained steadfast in his efforts to
maintain a zero COVID policy. Perhaps the most surprising
geopolitical shock came from the UK. In what was a dream for the
pundits the new Prime Minister, Liz Truss, and Chancellor, Kwasi
Kwarteng, delivered an unorthodox mini-budget, increasing spending
and cutting taxes at a time when inflation was rampant and debt
levels high. Markets subsequently dealt the pair bloody noses by
forcing up gilt yields and crushing sterling, leading to an
embarrassing about-turn in policy and headlines such as 'Not so
Great Britain'! The fallout ultimately led to Truss dismissing
Kwarteng and then resigning herself. Subsequently Rishi Sunak was
elected to lead the Conservative party and hence became the new
Prime Minister. Hopefully he will prove to be a more stable pair of
hands.
Unsurprisingly investors were less than impressed by these
events, sending markets on a roller coaster ride over the half.
World equities fell 7.2%, US equities declined 6.7% and Europe lost
9.0% taking their performances over 12 months to -4.1%, -0.1% and
-9.0% respectively. Frontier markets were generally slightly
better, while emerging markets also struggled. Ex-Asia emerging
markets fell 6.2% for the half, LATAM declined by 4.4% while
frontier markets fell 4.8%.
Bonds were also weak, albeit again with significant variation
across the board. Global treasuries fell by 1.0% which, perhaps
surprisingly, was less than the high yield market which rose by
2.1%. Emerging market debt fell by 14.3% and convertibles by 0.7%.
Standouts amongst the group however were UK government bonds which
fell 19.3% in the half and 25.4% for index-linked bonds, as
sterling fell 15.0% against the dollar. So much for the defensive
characteristics of sovereign bonds!
Amongst the alternative asset classes, despite still being up
for the year, commodities were mixed over the half, with copper
down 15.1% and oil down by 6.4% (WTI). In contrast, hedge funds,
having been in the doldrums for many years, are enjoying life more
in the current environment with positive returns across several
different strategies.
Finally, the all-important US dollar continued to strengthen.
Through a blend of the Federal Reserve being ahead of many other
central banks in raising rates and removing liquidity and the
defensive nature of the dollar, investors have been retreating to
the dollar as a safe haven. On a Purchasing Power Parity basis the
dollar is now looking very expensive, which has important
implications for many other assets which are often valued in
dollars. Unfortunately, whilst currencies typically return to their
fair values over the long-term, they can remain mispriced for a
protracted period of time.
How high? How low? How bad?
There really can be no doubt now that we are in the midst of a
bear market. The key question however is how deep is the bear
market likely to be and over what period? This, we believe, is a
function of three key factors: How high do rates and inflation
rise? How low do economies fall? How bad does the geopolitical
situation become? These are not necessarily mutually exclusive
questions but intertwined in many cases and, depending on how they
pan out, will have important implications for the nature and
severity of the downturn.
1. How high do rates and inflation rise?
We would start by nuancing this question. Whilst inflation is
currently at nosebleed levels it is our belief that this will not
remain the case over the longer term. Undoubtedly there are some
circumstances that may lead to inflation being higher for longer
and we see some kind of repeat of the 1970s, but our expectation is
that inflation will start to fall over the coming months and we are
not facing a protracted period of high single digit/low
double-digit inflation. Instead our key concern is where do
inflation and interest rates end up in the medium to longer term
and what are the market implications of this?
There are two schools of thought here. The first, perhaps the
status quo perspective, is that with the Fed having pivoted from
viewing inflation as transitory and with Powell having a Volcker
moment, he will raise rates to whatever level is required to bring
inflation back to its 2% target level and ultimately return markets
to how they were previously, i.e. a return to when markets were
supported by copious amounts of liquidity, the Fed Put is
reinstated and long-duration stocks can continue to thrive again.
Indeed there are some who are starting to wonder if the outcome of
the Fed's renewed vigour in combating inflation is deflationary.
Inflation measures are typically backward looking and fail to
capture the fact that a number of important inflationary drivers
are already heading south. As highlighted earlier, commodity prices
have come back sharply over recent weeks, supply chains have eased
in a number of important areas and soon the higher rates and bond
yields will start to dampen the important housing market, all of
which are deflationary in nature. It is not inconceivable then that
having been late to appreciate inflation was more ingrained than
originally thought, the Fed is again behind the curve and will let
the inflationary pendulum swing too far in the other direction.
The alternative view however is that the new norm for inflation
and rates is higher than we have become used to in recent years
with the days of zero rates now past. As discussed in prior House
Views, underlying this shift are a variety of structural and
philosophical factors as to how best economies should be managed
and resources allocated. Globalisation, which for many years was
deemed as the optimal way to produce goods at ever lower prices and
which was instrumental in the rise of China and emerging markets
more generally, is now in reverse. Security of supply and a desire
to control one's own destiny rather than leave one's economy
exposed to weaknesses elsewhere in the supply chain are now seen as
more important than ever lower prices. Similarly, having lived in a
backdrop which favoured rising corporate profitability over labour
remuneration, this now seems to be in reverse. With unemployment
rates remaining historically low and many choosing to exit the
labour force post-COVID, we have started to see significant wage
increases and widespread strikes as trade unions flex their muscles
again after many years of inactivity. The net effect of all of this
is that inflation doesn't return to the sub-2% levels it has
experienced over recent years and instead the neutral rate for
inflation and interest rates is above 4%/5%. The key question of
course is just how high is this new neutral rate?
The implications for markets are likely to be very different
under these two scenarios and potentially profoundly so. The first
scenario of a return to 2% inflation and low rates is broadly a
positive one for world stock markets. Yes, there may well be a
meaningful recession and a corresponding impact on stock markets if
the Fed is overzealous in its efforts to return us back to a low
rate/low inflation world, but if successful this is probably a
price worth paying for the beneficial impact such an environment
has on global asset prices over the longer term.
The second scenario however, of sustainably higher inflation and
interest rates, is much harder to gauge and potentially has
dramatic ramifications for many asset prices. Your experienced
investment team has seen these scenarios before, navigating double
digit inflation and interest rates in the past and we see no reason
why economies and stock markets cannot ultimately cope with these
new levels. The challenge, however, is that many people in markets
haven't operated under such conditions and many areas of the
economy have adjusted such that they assumed the current backdrop
of zero rates and low volatility would last into perpetuity. Take
the housing market for example. It is perhaps of little surprise
that house prices have been so robust in many economies, when the
cost of servicing mortgages was next to zero in most cases. This
encouraged homeowners to take out ever higher mortgages, as they
leveraged up to buy bigger homes in the belief such actions boosted
their wealth with little risk. The prospect then of a variable rate
mortgage or a two-year fixed mortgage coming to maturity and
shifting from historically low levels to 6% plus will result in a
dramatic change in monthly mortgage payments. Coming at a time when
many households are already struggling with higher utility and fuel
bills this will likely have major consequences for spending
patterns and household wealth.
The excesses are, however, unlikely to be restricted to the
housing market. It seems likely many areas of the economy and
assets will have been boosted by this era of free money.
Cryptocurrencies are probably the posterchild for these excesses,
albeit we suspect that whilst there will be some notable casualties
they remain an asset class for mainly young investors and not a
source of wider contagion. Areas we would be more concerned about
would include private equity, which for years has ridden a wave of
abundant liquidity and low rates. Through leveraging up deals at
almost zero cost (and risk as the balance of power shifted from the
lender to the PE firm) PE firms have been able to gobble up assets,
make outsized returns and then often sell them onto one another at
the end of the process. With PE returns barely changed this year,
at a time when public sector returns have collapsed, one has to
wonder if this is the next shoe to drop and what are the wider
implications for associated areas of the market.
It is likely then that the use of ever lower rates and abundant
liquidity runs much deeper than commonly assumed and, for this
reason, if the neutral rate winds up higher than anticipated the
ramifications are likely to be more painful, as economies go cold
turkey and investors learn to live under this new backdrop. We will
come back to this subject in more detail in subsequent House
Views.
2. How low do economies fall?
To date it's been all about rates and inflation. Increasingly,
however, we see the narrative switching to the impact of the higher
rate environment on the broader economy and company
profitability.
So far the economic and corporate impact has been relatively
muted. Whilst the US did exhibit two consecutive quarters of mildly
negative economic growth, the National Bureau of Economic Research
deemed the US not to have entered recession based on a broader
basket of factors. Indeed certain important areas of the economy,
notably unemployment, remain remarkably resilient, highlighting the
strength of economies, especially that of the US.
Similarly, corporate sector earnings have again been robust this
year all things considered. Company earnings are forecast to grow
7.0% in 2022 with US corporate margins expected to be 13.3%. This
compares to 9.0% growth and 12.8% margins forecast at the beginning
of the year.
This however is, to a large degree, looking in the rear-view
mirror. With central banks having put up rates sharply already and
with the Fed seemingly prepared to sacrifice the economy in its
desire to maintain control over inflation, it seems an
inevitability that economies will start to slow as the year
progresses. The lead indicators would seem to agree with this view.
The US ISM New Orders Index went from being expansionary to
contractionary, falling from 53.8 to 47.1. Similarly, in China
export orders are weak and shipping rates between China and the US
have collapsed in recent months.
The key question again is not will economies fall, but rather
just how far will they fall in the months ahead? Unfortunately the
answer to this is very much dependent on just how exuberant central
bankers will be in their desire to stymie higher inflation. Whilst
only time will tell, fortunately there are a couple of mitigating
factors.
First, whilst we worry about the prospect of moving back to a
higher neutral position in interest rates and inflation, the US and
to a lesser extent European economies are in relatively robust
health going into the downturn. Having been badly burnt during the
Global Financial Crisis both regions set about rebuilding their
banking systems (albeit with the US being far more successful at
this than Europe) and personal balance sheets with rising savings
levels and deleveraging of the housing markets (but notably not the
UK housing market). With the banking, consumer and housing sectors
normally playing central roles within any downturn, it is therefore
helpful that they are starting from relatively robust positions
this time around all things considered.
The second point to consider is at what point do central bankers
come off the brake in their desire to dampen inflation. Ultimately,
whilst the Fed is currently laser focused on inflation, it should
not be forgotten that it has a dual mandate to maximise employment
as well as to control inflation. Indeed, whilst central bankers are
currently keen to demonstrate their inflation-busting credibility,
it seems likely that this will be tested if unemployment rises
sharply in the process; rising prices are not the key worry for
someone who no longer has a job. Combined with political pressure,
with the independence of central banks being somewhat diminished
over the past couple of years, it seems likely there will be a
point where the current Volker-like characteristics start to
waver.
Hence,whilst we see weakness in growth becoming the centre of
the conversation in the months ahead, we do see some mitigating
factors that will hopefully prevent a repeat of the Global
Financial Crisis. Certainly we see the all-important US economy as
being in more robust shape than many others in view of past efforts
to shore up the banking sector and consumer balance sheet and being
largely energy self-sufficient.
3. How bad does the geopolitical situation become?
Having for many years lived in a world of relative geopolitical
stability this is rapidly being turned on its head. The Russian
invasion of Ukraine and China's decision to adopt a different model
as to how it deals with COVID and a heavy-handed approach to the
regulation of the consumer internet and education sectors, are all
indicative of how the geopolitical landscape is evolving in a
different direction. Previously the view in the West was that
other, often non-capitalist, economies would gravitate towards this
over time. It was seen as only a matter of time before China,
Russia and emerging markets more generally morphed from their
current models to this new framework.
Recent events however have shown that this view was misguided.
China never intended to adopt the US model, but instead wanted
elements of the free-market approach but within a one-party,
centrally driven economy. Similarly Russia is embarking on a
process of attempting to turn back time on the disbandment of the
old Soviet Union in an effort to 'make Russia great again'. Rather
than unifying the world, the fissures between East and West have
become greater than ever and there is a growing divide with the US
global hegemony likely to become increasingly challenged as the
rise of China marches on.
Managing this from an investment perspective is challenging.
Under the old framework, leaders and central bankers could be
relied upon to act rationally according to the accepted rules of
play. Now though, decisions are being made that often go contrary
to this framework. National boundaries are no longer being
respected and the threat from nuclear weapons has reared its ugly
head again. Increasingly we need to add an additional risk premium
when considering investments into these less stabile regimes and
thought must be given to the worst-case scenario coming to fruition
and the implications this may have for economies and stock
markets.
Positioning portfolios
Investing in stock markets for much of the current cycle really
was very monotonal in style. An environment of low interest rates
both inflated risk assets such as equities, but also drove longer
duration stocks such as technology higher. Really all one had to do
was invest in technology companies and specifically the US stock
market given its dominance in this area.
The past year however has turned this all on its head. Higher
inflation and the resultant increase in interest rates has been the
catalyst for both a bear market in equities and bonds. Value has
surged at the expense of growth and commodities have come in from
the cold.
So what now? Well first one must retain a certain intellectual
flexibility as the current environment unfolds. In reality one can
never truly predict how central bankers will react to the current
economic backdrop, or the actions of unconventional leaders such as
Putin or Xi, and instead it will be necessary to adapt as the
economic outlook, the policy response and the geopolitical
situation develop.
Diversification and balance within a portfolio will be key.
Never has it been so important as now to hold a wide spread of
assets to help protect portfolios from the different permutations
of outcomes and some of the more dire geopolitical outcomes.
Holding a mixture of quality, value and growth seems appropriate as
we learn what the new neutral interest rate and inflation rates are
and the depth and length of the coming economic decline.
At this stage we see it as a little premature to dive back into
risk assets such as equities. Valuations are starting to look far
more interesting, with the US stock market back to its recent
historical average and Europe and emerging markets arguably looking
cheap by past standards. We worry in the near term however that
earnings are yet to adjust to the coming downturn and this winter
may well be challenging for Europe, as higher energy and utility
bills weigh on both consumers and corporates. For the time being we
continue to favour the US in light of its relative economic
robustness and being largely energy self-sufficient. Whilst it
wouldn't classically be the time to invest in emerging markets in
the face of a recession, dollar strength and declining corporate
profitability, we do wonder if the region is in practice in a more
robust position having not gorged themselves on the copious amounts
of free money like the West. Increasingly we are inclined to take a
contrarian view here. Equally Japan is looking very cheap with the
yen extremely oversold at current levels. A shift to a more
rationale monetary policy would likely lead to a sharp reversal in
Japan's fortunes.
Sovereign bonds are also beginning to look interesting again.
Clearly in a backdrop of rising inflation and higher rates, bonds
were deeply unattractive, especially in light of their low starting
yields. Now, however, with yields being higher and inflation
potentially peaking and, most importantly, with economic growth
coming under pressure, defensive assets such as government bonds
will likely become more attractive again. Investors should be
mindful however that governments need to maintain credibility in
their policy measures and debt management, as was illustrated by
the recent debacle in the UK, and we would still be wary of
corporate bonds with default levels still historically low and many
companies taking (excessive) advantage of the cheap funding.
Finally, absolute return hedge funds such as trend following,
systematic and macro funds are also now viable investments. For
years the combination of low interest rates (they couldn't earn a
decent return on their cash positions), low volatility and high
fees meant they delivered muted returns at best and certainly
looked poor when compared to risk assets such as equities. Now,
however, with interest rates higher, abundant volatility and
opportunity, they are looking a viable asset class again and add an
important diversifying element to portfolios at a time when
diversification is key.
Conclusion
In many ways what we are currently facing is a classic,
old-school bear market. Central bankers, as they normally do, let
economies run too hot, inflation jumped and now they are having to
ramp interest rates up and remove excess liquidity from markets. We
fully expect them to pivot too far in the opposite direction and a
recession to be the end result. The resultant bear markets are
typically meaningful, albeit usually not as severe or protracted as
structural bear markets such as we saw during the Global Financial
Crisis.
There are, however, a couple of nuances that make us pause. The
first is that it increasingly looks like we are seeing the end of
the zero-rate and inflation-less world we have lived in for many
years now. It's not a given, and it is possible that Jay Powell and
central bankers globally will do whatever it takes, regardless of
the impact on global economies, to put inflation back into its box.
However, with a number of the structural drivers behind the
zero-rate world now in reverse, the probability it is ending now is
meaningful. The second is that we have gone from a period of
relative geopolitical stability to one where geopolitics can no
longer be ignored when making investment decisions. Most notably
countries seem to be aligning into different groups both
economically and, in some cases, from a war footing.
It's not all doom and gloom however. Mitigating factors include
the fact that we are working our way through the process.
Valuations have adjusted for both equities and bonds and whilst we
might not quite be there just yet (especially as profitability
falls as growth slows), we are starting to see value in a number of
cases. Also, many of the important sectors of the global economy
are actually in relatively good health, primarily due to the pain
they went through during the Global Financial Crisis.
So often problems within these sectors shift the bear market
from cyclical to structural when they are in less robust health. In
particular, we would note the strength of the banking sectors, the
consumer in the US and the housing markets in both the US and
Europe.
Managing periods of regime change, as we appear to be going
through at present, is challenging. Predicting the actions of
central bankers, who will be key to the process, is fraught with
difficulty and the unintended consequences of years of free money
will be hard to predict with certainty, at least at the outset.
Almost certainly this will lead to more volatility in global assets
and the potential for meaningful drawdowns. Core to our response to
this new environment is greater diversification. No longer is it
right to be purely positioned towards growth and instead a balance
of value and growth is required, along with geographic
diversification and the use of hedge funds. We will start to run
our slide rule over bonds, having been bearish for some time now,
and we are fortunate that diversification runs central to the
Company's approach.
Portfolio Review and Activity
With market volatility continuing during the first half of the
financial year, your Company produced a return of -6.9% and a
-10.1% return over the last 12 months. Both returns are ahead of a
traditional 60:40 equities and bonds portfolio, which would have
returned -12.1% and -11.7% over the same periods, respectively.
Ocean Wilsons declined 14.2% during the half, whilst the rest of
the portfolio fell 4.7%. With significant sterling weakness during
the half, the MSCI ACWI NR Index declined 7.2% in sterling, leaving
it down 4.0% over 12 months. Bonds have suffered, as high inflation
and rising central bank rates have pushed yields higher and the
FTSE UK Gilts All Stocks TR Index was down 19.3% over the financial
year-to-date, taking its decline over the past 12 months to a steep
-23.3%. The UK CPI, meanwhile, rose another 5.7% this half and is
up 10.1% over the past 12 months. The Company's NAV per share fell
from 319.1p at the end of March to 295.6p at the end of September,
with 1.6p per share being paid out as a dividend during the
half.
Core and Thematic Funds
The Core Regional silo fell 6.3% in the first half of the
financial year, while the Thematic silo declined 8.2%, with both
results being comparable to the 7.2% fall of the global equity
index. Over the past 12 months the returns have been -13.5% for the
Core Regional silo and -14.3% for the Thematic silo.
There were strong returns for several of the holdings within the
Core Regional silo over the half, with many of the North American
holdings performing well on a relative basis. Findlay Park American
fell 2.0% this half, ahead of the US index, as the fund has shown
again its tendency to outperform in difficult markets. Among
Findlay Park's top contributors this half were CoStar, Amazon and
Keysight, which had all been added to early in the half and have
since reported solid earnings growth.
Pershing Square Holdings had a weaker half with a loss of 9.9%,
although its holdings in restaurant groups Chipotle Mexican and
Restaurant Brands (which owns leading brands including Burger King,
Tim Hortons and Popeyes) held up well as sales growth has been
returning post-COVID.
The two Japan funds, Indus Japan Long Only and Goodhart
Partners: Hanjo declined 2.8% and 3.4%, respectively, and over the
past 12 months are now down 17.5% and 16.5%. Within the Indus fund,
the largest contributors over the half included the pharmaceutical
and medical equipment company Daiichi Sankyo and the
electro-optical component supplier Hoya. The global developed funds
both had stronger halves. Egerton Long-Short Fund was up a strong
3.3% as it benefited from a long position in First Citizens
BancShares and from some short positions in materials and
information technology companies. BlackRock Strategic Equity Fund
fell 2.2%, partly as a result of currency moves, but also
benefiting from short positions in industrial cyclical and
defensive names, with the manager highlighting short positions in a
UK food delivery company and a CRM cloud company. As the half went
on the manager de-risked the short book by exiting positions in
profitless technology businesses, and by late August the fund was
running at a net exposure level of -7%.
The emerging and frontier market holdings have been more of a
mixed bag so far this financial year, although the NTAsian
Discovery continued its period of good performance, rising 6.4% to
be up a strong 11.4% over the last twelve months. The KLS Corinium
Emerging Markets fund declined 3.6% to be down 7.0% since it was
purchased last December while the iShares Core MSCI Emerging
Markets ETF was down 7.5%. The frontier market position in
BlackRock Frontiers Investment Trust gained 1.1% and is up 8.1%
over the past year.
Most of the holdings within the Thematic bucket made gains,
although the technology holding had a difficult start to the
financial year, with GAM Star Disruptive Growth being down 17.0%.
The positions in the energy and commodity sectors produced mixed
performance this half, with iShares MSCI World Energy ETF up 8.9%
while the iShares MSCI World Metals and Mining Producers ETF
declined 18.9%. Healthcare positions performed well, notably RA
Capital International Healthcare Fund that gained 16.0%, leaving it
down 12.6% for the past twelve months. The Polar Global Insurance
Fund, which was bought in May, also made gains, being up 6.3% since
purchase.
Diversifying Funds
The diversifying holdings have continued to do their job, which
is to dampen volatility and provide the portfolio with a return
stream that shows lower correlation to the equity market. During
the half, the Diversifying silo produced a strong gain of 2.7%,
taking its return for the past twelve months to 5.5%, in a period
when both equity and bond indices have suffered significant
declines.
The trend-following CTA funds have been among the strongest
performers recently, and the Schroder GAIA BlueTrend continued to
be so this half with a gain of 19.0% taking it to be up an
excellent 32.3% over the past twelve months. The GAM Systematic
Core Macro also had a good half, up 7.6%, takings its return to
6.7% over the past year. Global Event Partners has been solid this
year declining just 1.0% gain this half leaving it up 1.9% over the
past twelve months. It benefited during the period from a number of
mergers closing, and its position in the NortonLifeLock/Avast
merger contributed to performance as it was provisionally approved
by the UK regulators. Keynes Systematic Absolute Return Fund has
continued to be a strong performer, with its relative value
strategies contributing more than its directional strategies this
half. The Keynes fund rose 11.4% this half to leave it up 14.3%
over the past year.
Both macro trading funds continue to produce steady returns,
with MKP Opportunity being up 4.8% this half, while Hudson Bay was
up 1.6%. For the past year, the MKP fund has produced a strong
9.8%, while Hudson Bay has risen 1.6%.
There were strong returns from some of the diversifying holdings
in the fixed income space, although there were also some losses as
yields and credit spreads widened. Brevan Howard Absolute Return
Government Bond Fund delivered a pleasing 1.8% despite the
volatility in government bonds and BioPharma Credit made a strong
10.9%, helped by exposure to the strengthening US dollar. The
BioPharma Credit portfolio is 89% invested in senior secured loans,
of which 75% are floating rate which provides some protection
against rising yields. It was announced after the half-end that
Pfizer had completed its acquisition of GBT, which led to BioPharma
receiving $175m including $43m in accrued income, prepayment and
make-whole fees, realising an IRR on the investment of 27.6%.
During the half the Vanguard US Government Bond Index Fund fell
8.6%, leaving it down 13.7% for the past year. The other
significant decline was registered by Selwood Liquid Credit
Strategy which fell 14.8% and is down 16.3% for the last 12 months,
as credit default swaps continued to widen.
Global Equities
The portfolio returned -0.5% over the half, with the biggest
positive contributors being Interactive Brokers, EXOR and CVS
Health. The biggest detractors were CK Hutchison, Coats and Grupo
Catalana Occidente.
It was another volatile half for global equity markets as they
attempt to come to terms with meaningful interest rate rises for
the first time in many years. The extremely low rates of the past
decade have had many unintended consequences, but most relevant to
our direct equity holdings has been the misallocation of capital.
When the cost of capital drops close to zero companies find
worthwhile projects to invest in and investors are prone to
speculation, we are seeing the results of this with bubbles
deflating everywhere from Chinese property to NFTs.
However, where there is speculation there is often opportunity.
Historically when industries are heading toward the lows of the
cycle, investor interest diminishes, business investment declines,
firms consolidate and businesses exit either through choice or
bankruptcy. This decline in supply eventually leads to higher
returns for the survivors. The low interest rates we have seen have
not only caused bubbles but the reach for yield also led investors
to support companies that would normally have gone bankrupt, by
allowing them to refinance their debt at ever lower rates. This has
caused the capital cycle to become elongated, but we believe that
the end of "free money" will lead to capital destruction, thereby
leading to the survivors earning higher returns.
We believe the portfolio is well positioned as a significant
portion of our holdings are in this stage of their cycle. These are
mostly found in "old economy" companies investors have ignored for
years because they were not high growth tech companies. It
intuitively makes sense that if the market values the company below
its asset value, they believe any investment made will destroy
value. We believe the market is not factoring in the capital cycle
and the higher returns our companies will earn in the future. Our
positioning is demonstrated by the fact 39% of the portfolio
currently trades below book value and the whole portfolio trades on
1.1x book value.
The clearest examples of this are in the mining and energy
sectors, where years of underinvestment are finally showing up in
higher prices in the underlying commodities, benefiting our
holdings in Glencore and Subsea 7.
It is similar for our insurance holdings, where the past few
years have seen excess capital leave the reinsurance market where
Arch Capital operates, which has led to considerably better pricing
for those that remain.
Other holdings are in the earlier stages of the cycle, such as
Orion Engineered Carbons. The carbon black industry has been forced
to spend hundreds of millions to upgrade plants to comply with new
EPA guidelines which led to several facilities being permanently
shut down. This supply reduction has been exacerbated by the
invasion of Ukraine, as 40% of Europe's carbon black came from
Russia. We believe Orion will use this opportunity to lock in
long-term customer agreements, rather than gouge their customers on
price, which will strengthen the business for years to come. This
capacity to focus on the long-term gains rather than destroy
relationships for a short-term benefit is an attribute we look for
across all our companies and management teams.
The only addition was a small additional purchase of CTT
Correios de Portugal following a decline in the share price. A
portion of CK Hutchinson was sold to finance this.
Ocean Wilsons Holdings
The operating business continues to deliver resilient financial
results despite the difficult worldwide trade environment and
logistical bottlenecks. It is hoped that this challenging scenario
could show some signs of improvement in the latter half of the
year, depending on the resolution of port closures in China. Towage
revenues are increasing and in May the shipyard delivered WS
Centaurus, the most powerful tugboat in Brazil and the first of a
series of six, 80-ton bollard pull tugboats that will join the
fleet over the next two years. These tugboats benefit from
increased hydrodynamic efficiency, which allows a reduction of up
to 14% in greenhouse gases compared to previous technology. The
Ocean Wilsons Holdings' share price fell 14.2% for the first half
of the financial year. The share price represents a discount to the
look-through NAV of 55.5%, based on the market value of the Wilson
Sons' shares, together with the latest valuation of the investment
portfolio. The shares of Wilson Sons underwent a six-for-one share
split in May.
The investment portfolio shares many characteristics with the
portfolio held directly within HICL, with a preference for funds
with clearly-defined strategies run by managers with skin in the
game. The portfolio has declined in recent months as markets have
fallen, although by significantly less than broad equity indices.
The valuation declined to $296.9m at the end of June 2022, down
from $312.9m at the end of April 2022 and from $351.8m at the end
of December 2021. Dividends of $5m, in two equal tranches, have
been paid out from the portfolio since April 2022, with the first
payment in May and the second at the end of July. The portfolio's
private assets investments have contributed significantly to
performance in recent years and these have so far held up well
through the market falls, although a lag would be expected between
private and public assets. Meanwhile, the defensive part of the
portfolio continues to
be resilient.
The second quarter (calendar year) results for Wilson Sons
(released in August) showed revenues increasing, but earnings for
the first six months of the year were 2.2% lower than the prior
year, on account of higher costs. However, in US dollar terms the
earnings number was 4.0% higher than last year. Towage results
remained robust thanks to higher average revenue per manoeuvre as
the proportion of lower-priced containership calls fell. Container
terminal operating volumes continue to be impacted by the limited
availability of empty containers and worldwide logistics
bottlenecks, although cabotage volumes increased at both ports
during the quarter. Despite the pressures on volumes, revenues
remained resilient because of increased warehousing revenues,
partly because of longer dwell times for both imports and
exports.
Alec Letchfield
Hansa Capital Partners LLP
October 2022
The Portfolio
As at 30 September 2022
Fair value % of net
Investments GBP000 assets
Core regional funds
Findlay Park American Fund 28,148 7.9
iShares Core S&P 500 UCITS ETF 22,894 6.5
Select Equity Offshore Ltd 19,080 5.4
iShares Core MSCI Europe UCITS ETF 14,291 4.0
BlackRock Strategic Hedge Fund 13,615 3.8
Schroder ISF Asian Total Return 10,682 3.0
Pershing Square Holdings Ltd 8,858 2.5
Indus Japan Long-Only Fund 6,825 1.9
Egerton Long-Short Fund Ltd 6,740 1.9
Goodhart Partners: Hanjo Fund 6,223 1.8
KLS Corinium Emerging Markets Equity Fund 5,102 1.4
NTAsian Discovery Fund 4,257 1.2
iShares Core EM IMI UCITS ETF 3,988 1.1
BlackRock Frontiers Investment Trust PLC 3,418 1.0
154,121 43.5
Strategic
Wilson Sons (through our holding in Ocean Wilsons
Holdings Limited)1 44,697 12.6
Ocean Wilsons (Investments) Limited (through the
holding in Ocean Wilsons Holdings Limited)1 31,061 8.8
75,758 21.4
Global equities
Interactive Brokers Group Inc 4,128 1.2
Exor NV 3,156 0.9
Arch Capital Group Ltd 2,703 0.8
CVS Health Corp 2,649 0.7
Subsea 7 2,595 0.7
Orion Engineered Carbons SA 2,510 0.7
CK Hutchison 2,397 0.7
Dollar General 2,159 0.6
Grupo Catalana Occidente SA 2,134 0.6
Glencore PLC 1,721 0.5
Coats Group PLC 1,232 0.4
Viaset Inc 1,177 0.3
CTT Correios de Portugal 806 0.2
29,367 8.3
Diversifying
Global Event Partners Ltd 10,466 3.0
DV4 Ltd2 9,555 2.7
Hudson Bay International Fund Ltd 5,025 1.4
Schroder GAIA BlueTrend 3,517 1.0
MKP Opportunity Offshore Ltd 3,345 0.9
GAM Systematic Core Macro (Cayman) Fund 3,230 0.9
Keynes Systematic Absolute Return Fund 2,809 0.8
Apollo Total Return Fund 2,378 0.7
Prana Absolute Return Fund 2,122 0.6
Selwood AM - Liquid Credit Strategy 1,962 0.6
Brevan Howard Absolute Return Government Bond Fund 1,781 0.5
BioPharma Credit PLC 1,523 0.4
Vanguard US Government Bond Index Fund 1,458 0.4
Lazard Convertible Global 722 0.2
49,893 14.1
Thematic assets
GAM Star Fund PLC - Disruptive Growth 11,579 3.3
Polar Capital Global Insurance Fund 6,593 1.8
Impax Environmental Markets Fund 4,491 1.3
Worldwide Healthcare Trust PLC 3,226 0.9
RA Capital International Healthcare Fund 2,697 0.8
iShares MSCI World Energy Sector UCITS ETF 2,149 0.6
BB Biotech AG 2,032 0.6
iShares MSCI Global Markets & Mining Producers ETF 1,612 0.4
34,379 9.7
Total investments 343,518 96.9
Net current assets 11,187 3.2
Net assets 354,705 100.0
1 Hansa Investment Company Limited owns 9,352,770 shares in
Ocean Wilsons Holdings Limited ("OWHL"). The two subsidiaries of
OWHL, Wilson Sons and Ocean Wilsons (Investments) Limited ("OWIL"),
are shown separately above. The fair value of the Company's holding
in OWHL has been apportioned across the two subsidiaries in the
ratio of the latest reported NAV of OWIL, that being the NAV of
OWIL shown per the 30 June 2022 OWHL quarterly update, to the
market value of OWHL's holding in Wilson Sons, that being the bid
share price of Wilson Sons multiplied by the number of shares held
by OWHL at 30 September 2022.
2 DV4 Ltd is an unlisted Private Equity holding. As such, its
value is estimated as described in Note 1(k) to the Statutory
Financial Statements and is listed as a Level 3 Asset in note 20 of
the Statutory Financial Statements 31 March 2022. All other
valuations are either derived from information supplied by listed
sources, or from pricing information supplied by third party fund
managers.
Financial Statements
Income Statement
For the six months ended 30 September 2022
(Unaudited) (Unaudited)
Six months ended Six months ended (Audited)
30 September 30 September Year ended
2022 2021 31 March 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
(Losses)/gains on investments
held at fair value through
profit or loss 9 - (30,520) (30,520) - 29,472 29,472 - 17,065 17,065
Foreign exchange gains - 346 346 - 6 6 - 80 80
Investment income 2 6,003 - 6,003 5,157 - 5,157 5,904 - 5,904
6,003 (30,174) (24,171) 5,157 29,478 34,635 5,904 17,145 23,049
Portfolio management
fees 3 (1,406) - (1,406) (1,519) - (1,519) (3,010) - (3,010)
Other expenses 4 (659) - (659) (662) - (662) (1,227) - (1,227)
(2,065) - (2,065) (2,181) - (2,181) (4,237) - (4,237)
Income/(losses) before
finance costs 3,938 (30,174) (26,236) 2,976 29,478 32,454 1,667 17,145 18,812
Finance costs 5 (1) - (1) - - - - - -
Income/(losses) for the
period 3,937 (30,174) (26,237) 2,976 29,478 32,454 1,667 17,145 18,812
Return per Ordinary and
'A' non-voting
Ordinary share 7 3.3p (25.2)p (21.9)p 2.5p 24.5p 27.0p 1.4p 14.3p 15.7p
The Company does not have any income or expense not included in
the Profit for the period. Accordingly the "Income/(losses) for the
period" is also the "Total Comprehensive Income for the period", as
defined in IAS 1 (revised) and no separate Statement of
Comprehensive Income has been presented.
The total column of this Statement represents the Income
Statement, prepared in accordance with IAS 34. The supplementary
revenue and capital return columns are both prepared under guidance
published by the Association of Investment Companies.
All revenue and capital items in the above Statement derive from
continuing operations.
Balance Sheet
As at 30 September 2022
(Audited)
(Unaudited) (Unaudited) Year ended
30 September 30 September 31 March
2022 2021 2022
Note GBP000 GBP000 GBP000
Non-current assets
Investments held at fair value through
profit or loss 9 343,518 392,377 379,986
343,518 392,377 379,986
Current assets
Trade and other receivables 11 93 17 201
Cash and cash equivalents 12 11,406 6,450 3,043
11,499 6,467 3,244
Current liabilities
Trade and other payables 13 (312) (420) (368)
Net current assets 11,187 6,047 2,876
Net assets 354,705 398,424 382,862
Capital and reserves
Called up share capital 14 1,200 1,200 1,200
Contributed surplus 15 323,799 325,719 324,759
Retained earnings 16 29,706 71,505 56,903
Total equity shareholders' funds 354,705 398,424 382,862
Net asset value per Ordinary and 'A' non-voting
Ordinary share 17 295.6p 332.0p 319.1p
Statement of Changes in Equity
Contributed
Share surplus Retained
For the six months ended 30 September capital reserve earnings Total
2022 (unaudited) Note GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2022 1,200 324,759 56,903 382,862
Losses for the period - - (26,237) (26,237)
Dividends 6 - (960) (960) (1,920)
Net assets at 30 September 2022 1,200 323,799 29,706 354,705
Contributed
Share surplus Retained
For the six months ended 30 September capital reserve earnings Total
2021 (unaudited) Note GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2021 1,200 326,019 40,671 367,890
Profit for the period - - 32,454 32,454
Dividends 7 - (300) (1,620) (1,920)
Net assets at 30 September 2021 1,200 325,719 71,505 398,424
Contributed
Share surplus Retained
For the year ended 31 March 2022 capital reserve earnings Total
(audited) Note GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2021 1,200 326,019 40,671 367,890
Profit for the year - - 18,812 18,812
Dividends 6 - (1,260) (2,580) (3,840)
Net assets at 31 March 2022 1,200 324,759 56,903 382,862
Cash Flow Statement
For the six months ended 30 September 2022
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 September 30 September 31 March
2022 2021 2022
Note GBP000 GBP000 GBP000
Cash flows from operating activities
(Loss)/profit before finance costs (26,236) 32,454 18,812
Adjustments for:
Realised gains on investments 9 (1,646) (1,601) (5,440)
Unrealised losses/(gains) on investments 9 32,166 (27,871) (11,625)
Foreign exchange (346) (6) (80)
Decrease/(increase) in trade and other
receivables 11 108 160 (24)
(Decrease)/increase in trade and other
payables 13 (56) 32 (20)
Purchase of non-current investments (49,695) (3,894) (30,840)
Sale of non-current investments 55,643 6,257 33,187
Net cash inflow from operating activities 9,938 5,531 3,970
Cash flows from financing activities
Interest paid on bank loans (1) - -
Dividends paid 6 (1,920) (1,920) (3,840)
Net cash outflow from financing activities (1,921) (1,920) (3,840)
Increase in cash and cash equivalents 8,017 3,611 130
Cash and cash equivalents at start of period 3,043 2,833 2,833
Foreign exchange 346 6 80
Cash and cash equivalents at end of period 12 11,406 6,450 3,043
Notes to the Financial Statements
1 Accounting policies
(a) Basis of preparation
The Financial Statements of the Company have been prepared in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
with International Accounting Standard 34 ("IAS 34"), 'Interim
Financial Reporting', as adopted by the European Union ("EU"). The
Half-Year Financial Statements should be read in conjunction with
the Company's Annual Report for the year ended 31 March 2022, which
have been prepared in accordance with International Financial
Reporting Standards ("IFRS") adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the EU. IFRS means standards and
interpretations issued (or adopted) by the International Accounting
Standards Board (IASB) (they comprise: IFRS, International
Accounting Standards ("IAS") and Interpretations developed by the
IFRS Interpretations Committee or the former Standing
Interpretations Committee ("SIC")) or IFRS that have been adopted
in the relevant jurisdiction.
These Financial Statements are presented in sterling because
that is the currency of the primary economic environment in which
the Company operates.
The Financial Statements have been prepared on an historical
cost and going concern basis and also in line with the Board's
analysis of the impact of COVID-19 on the Company except for the
valuation of investments. The Financial Statements have also been
prepared in accordance with the AIC Statement of Recommended
Practice ("SORP") for investment trusts, issued by the AIC in July
2022, to the extent that the SORP does not conflict with IFRS. The
principal accounting policies adopted are set out below.
(b) Basis of non-consolidation
IFRS 10 stipulates that subsidiaries and associates of
Investment Entities are not consolidated but, rather, stated at
fair value unless the conditions for certain exemptions from this
treatment are met. Hansa Investment Company Limited meets all three
characteristics of an Investment Entity as described by IFRS 10.
The Company had one, 100% owned, subsidiary, Hansa Trust Ltd. The
Company became the 100% owner of Hansa Trust's shares as part of
the Scheme of Arrangement on 29 August 2019. On 9 November 2021,
Hansa Trust Ltd was dissolved and removed from the Register of
Companies held at UK Companies House.
(c) Presentation of Income Statement
In order to better reflect the activities of an investment
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Income Statement
between items of a revenue and capital nature, has been presented
alongside the Income Statement.
(d) Non-current investments
As the Company's business is investing in financial assets, with
a view to profiting from their total return in the form of income
received and increases in fair value, investments are classified at
fair value through profit or loss on initial recognition in
accordance with IFRS 9. The Company manages and evaluates the
performance of these investments on a fair value basis, in
accordance with its investment strategy and information about the
investments is provided on this basis to the Board of
Directors.
Investments are recognised and de-recognised on the trade date.
For listed investments fair value is deemed to be bid market
prices, or closing prices for stocks sourced from a regulated
exchange such as the London Stock Exchange and Euronext.
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 or price estimate supplied by the fund's manager. In
other cases, values may be available through the fund being listed
on an exchange or via pricing sources such as Bloomberg.
Private equity Investments are stated at fair value through
profit or loss as determined by using various valuation techniques,
in accordance with the International Private Equity and Venture
Capital Valuation Guidelines. In the absence of a valuation at the
balance sheet date, additional procedures to determine the
reasonableness of the fair value estimate for inclusion in the
Financial Statements may be used. These could include direct
enquiries of the manager of the investment to understand, amongst
others, the valuation process and techniques used, external experts
used in the valuation process and updated details of underlying
portfolio. In addition, the Company can obtain external independent
valuation data and compare this to historic valuation movements of
the asset. Further, recent arms-length market transactions between
knowledgeable and willing parties where available might also be
considered.
Unrealised gains and losses, arising from changes in fair value,
are included in net profit or loss for the period as a capital item
in the Income Statement and are ultimately recognised in the
Capital Reserves.
(e) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, short-term
deposits and cash funds with an original maturity of three months
or less and are subject to an insignificant risk of changes in
capital value.
(f) Investment Income and return of capital
Dividends receivable on equity shares are recognised on the
ex-dividend date. Where no ex-dividend date is quoted, dividends
are recognised when the Company's right to receive payment is
established. Dividends and Real Estate Investment Trusts' ("REIT")
income are all stated net of withholding tax. In many cases,
Bermudan companies cannot recover foreign incurred taxes withheld
on dividends and capital transactions. As a result, any such taxes
incurred will be charged as an expense and included here.
When an investee company returns capital to the Company, the
amount received is treated as a reduction in the book cost of that
investment and is classified as sale proceeds.
(g) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the revenue column of the Income Statement
except expenses which are incidental to the acquisition or disposal
of an investment, which are included in gains on investments held
at fair value through profit or loss in the Income Statement.
(h) Taxation
Under current Bermudan law, the Company is not required to pay
taxes in Bermuda on either income or capital gains. The Company has
received an undertaking from the Bermuda government exempting it
from all local income, withholding and capital gains taxes being
imposed and will be exempted from such taxes until 31 March
2035.
(i) Foreign Currencies
Transactions denominated in foreign currencies are recorded in
the local currency, at the actual exchange rates as at the date of
the transaction. Assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at the rate of
exchange prevailing at the balance sheet date. Any gain or loss
arising from a change in exchange rates, subsequent to the date of
the transaction, is included as an exchange gain or loss in the
capital or revenue column of the Income Statement, depending on
whether the gain or loss is of a capital or revenue nature
respectively.
(j) Retained Earnings
Contributed surplus
The following are credited or charged to this reserve via the
capital column of the Income Statement:
gains and losses on the disposal of investments;
exchange differences of a capital nature;
expenses charged to the capital column of the Income Statement
in accordance with the above accounting policies; and
increases and decreases in the valuation of investments held at
the balance sheet date.
Revenue Reserves
The following are credited or charged to this reserve via the
revenue column of the Income Statement:
net revenue recognised in the revenue column of the Income
Statement.
(k) Significant Judgements and Estimates
The key significant estimate to report, concerns the Company's
valuation of its holding in DV4 Ltd. DV4 is valued using the most
recent estimated NAV as advised to the Company by DV4, adjusted for
any further drawdowns, distributions or redemptions between the
valuation date and 30 September 2022. The most recent valuation
statement was received on 16 September 2022 stating the value of
the Company's holding as at 31 March 2022. In the absence of a
valuation for 30 September 2022 from DV4, the Company performed
additional procedures to determine the reasonableness of the fair
value estimate for inclusion in the Financial Statements. Direct
enquiries of the manager of DV4 were made in July 2022 to
understand, amongst others, valuation process and techniques used,
external experts used in the valuation process and updated details
of underlying property portfolio. It has been confirmed by DV4's
manager that the valuation procedures discussed in July 2022 are
still the same used now. In addition, the Company has compared the
historic valuation movements of DV4 to the FTSE350 Real Estate
Index. Based on the information obtained and additional analysis
performed the Company is satisfied that DV4 is carried in these
Financial Statements at an amount that represents its best estimate
of fair value at 30 September 2022. It is believed the value of DV4
as at 30 September 2022 will not be materially different, but this
valuation is based on historic valuations by DV4, does not have a
readily available third party comparator and, as such, is an
estimate. There are no significant judgements.
(l) Operating Segments
The Company considers it has one operating segment for the
purposes of IFRS8.
(m) Capital Loss
The loss for period to 30 September 2022 of GBP30.52m is a
general loss due to market conditions, rather than relating to the
specific impairment of one or more assets.
2 Income
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 September 30 September 31 March
2022 2021 2022
GBP000 GBP000 GBP000
Income from quoted investments
Dividends 6,003 5,157 5,904
Total income 6,003 5,157 5,904
3 Dividends paid
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 September 30 September 31 March
2022 2021 2022
GBP000 GBP000 GBP000
Fourth interim dividend for 2022 (paid 27
May 2022): 0.8p (2021: 0.8p) 960 960 960
First interim dividend for 2023 (paid 26
August 2022): 0.8p (2022: 0.8p) 960 960 960
Second Interim dividend for 2022 (paid 26
November 2021): 0.8p - - 960
Third Interim dividend for 2022 (paid 28
February 2022): 0.8p - - 960
Total income 1,920 1,920 3,840
Where there has been no revenue available for distribution by
way of dividend for the year, dividends have been paid from
contributed surplus which is permitted by Bermudan company law.
Note: The second interim dividend payable for the period ended
31 March 2023 was announced on 11 October 2022. The payment
totalling 0.8p per share (GBP0.96m) was paid on 25 November
2022.
4 Return per shares
The returns stated below are based on 120,000,000 shares, being
the weighted average number of shares in issue during the
period.
Revenue Capital Total
Pence Pence Pence
GBP000 per share GBP000 per share GBP000 per share
Six months ended 30 September
2022 (Unaudited) 3,937 3.3p (30,174) (25.2p) (26,237) (21.9p)
Six months ended 30 September
2021 (Unaudited) 2,976 2.5p 29,478 24.5p 32,454 27.0p
Year ended 31 March 2022 (Audited) 1,667 1.4p 17,145 14.3p 18,812 15.7p
5 Financial information
The financial information for the six months ended 30 September
2022 was approved by a committee of the Board of Directors on
1 December 2022.
6 Net asset value per share
The NAV per share is based on the net assets attributable to
equity shareholders of GBP354,705,000 (30 September 2021:
GBP398,424,000; 31 March 2022 GBP382,862,000) and on 120,000,000
shares being the number of shares in issue at the period ends.
7 Commitments and contingencies
The Company has no outstanding commitments as at 30 September
2022 (30 September 2021: GBPnil; 31 March 2022: GBPnil).
8 Principal risks and uncertainties
The principal financial and related risks faced by the Company
fall into the following broad categories - External and Internal.
External risks to shareholders and to their returns are those that
can severely influence the investment environment within which the
Company operates: including government policies, taxation, economic
recession, declining corporate profitability, rising inflation and
interest rates and excessive stock market speculation. Internal and
operational risks to shareholders and to their returns are:
portfolio (stock and sector selection and concentration), balance
sheet (gearing) and/or administrative mismanagement.
A review of the current period and the outlook for the Company
can be found in the Chairman's Report and in the Portfolio
Manager's Review.
Information on each of these areas is given in the Strategic
Report within the Annual Report for the year ended 31 March 2022.
In the view of the Board these principal risks and uncertainties
are applicable to the remaining six months of the financial year as
they were to the six months under review.
9 Fair value hierarchy
IFRS 13 'Fair Value Measurement' requires an entity to classify
fair value measurements, using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements. The
fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability not based on
observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value in
the Balance Sheet are grouped into the fair value hierarchy, as
detailed below:
Level 1 Level 2 Level 3 Total
30 September 2022 (unaudited) GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 138,909 - - 138,909
Unquoted equities - 2,122 9,555 11,677
Fund investments 36,799 156,133 - 192,932
Fair Value 175,708 158,255 9,555 343,518
Level 1 Level 2 Level 3 Total
30 September 2021 (unaudited) GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 144,579 - - 144,579
Unquoted equities - - 8,870 8,870
Fund investments 14,537 224,391 - 238,928
Fair Value 159,116 224,391 8,870 392,377
Level 1 Level 2 Level 3 Total
31 March 2022 (audited) GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 136,771 - - 136,771
Unquoted equities - - 8,917 8,917
Fund investments 27,328 206,970 - 234,298
Fair Value 164,099 206,970 8,917 379,986
There have been no transfers during the period between
levels.
The Company's policy is to recognise transfers into and out of
the different fair value hierarchy levels at the date of the event
or change in circumstances that caused the transfer to occur.
A reconciliation of fair value measurements in Level 3 is set
out in the following table:
(Unaudited) (Unaudited) (Audited)
30 September 30 September 31 March
2022 2021 2022
equity equity equity
investments investments investments
GBP000 GBP000 GBP000
Opening Balance 8,917 11,234 11,234
Liquidation of Hansa Trust Ltd* - (3,179) (3,179)
Capital Distribution - - (648)
Total Gains included in gains on investments
in the Income Statement:
on assets held at period end 638 815 1,510
Closing Balance 9,555 8,870 8,917
*The Intercompany loan was repaid as part of the Strike-Off
process. In the prior year-end the remaining value of Hansa Trust
Ltd was transferred to HICL via a capital reduction process.
As at 30 September 2022, the investment in DV4 Ltd has been
classified as Level 3. The investments in DV4 has been valued using
the most recent estimated NAV as advised to the Company by DV4,
adjusted for any further drawdowns, distributions or redemptions
between the valuation date and 30 September 2022. The most recent
valuation statement was received on 16 September 2022, with an
estimated NAV based on the unaudited capital statement of DV4 as at
31 March 2022. If the value of the unquoted Level 3 equity
investments were to increase or decrease by 10%, while all other
variables had remained constant, the return and net assets
attributable to shareholders for the period ended 30 September 2022
would have increased or decreased by GBP956,000 respectively.
Investor Information
Company information
The Company currently manages its affairs so as to be a
qualifying investment company for ISA purposes, for both the
Ordinary and 'A' non-voting Ordinary shares. It is the present
intention that the Company will conduct its affairs so as to
continue to qualify for ISA products. In addition, the Company
currently conducts its affairs so shares issued by Hansa Investment
Company Limited can be recommended by independent financial
advisers to ordinary retail investors, in accordance with the
Financial Conduct Authority's ("FCA") rules in relation to
non-mainstream investment products and intends to continue to do so
for the foreseeable future. The shares are excluded from the FCA's
restrictions which apply to non-mainstream investment products,
because they are excluded securities as defined in the FCA Handbook
Glossary. Finally, Hansa Investment Company Limited is registered
as a Reporting Financial Institution with the US IRS for FATCA
purposes.
Capital structure
The Company has 40,000,000 Ordinary shares of 1p each and
80,000,000 'A' non-voting Ordinary shares of 1p each in issue. The
Ordinary shareholders are entitled to one vote per Ordinary share
held. The 'A' non-voting Ordinary shares do not entitle the holders
to vote or receive notice of meetings, but in all other respects
they have the same rights as the Company's Ordinary shares.
Secretary and registered office
Conyers Corporate Services (Bermuda) Limited
Clarendon House
2 Church Street PO Box HM666
Hamilton HM CX Bermuda
BOARD OF DIRECTORS
Jonathan Davie (Chairman)
Simona Heidempergher
Richard Lightowler
William Salomon
Nadya Wells
Investor disclosure
AIFMD
Hansa Investment Company Limited's AIFMD Investor Disclosure
document can be found on its website. The document is a regulatory
requirement and summarises key features of the Company for
investors.
Packaged Retail and Insurance -- based Investment Products
("PRIIPs")
The Company's AIFM, Hanseatic Asset Management LBG, is
responsible for applying the product governance rules defined under
the MiFID II legislation on behalf of Hansa Investment Company
Limited. Therefore, the AIFM is deemed to be the 'Manufacturer' of
Hansa Investment Company's two share classes. Under MiFID II, the
Manufacturer must make available Key Information Documents ("KIDs")
for investors to review if they so wish ahead of any purchase of
the Company's shares.
Links to these documents can be found on the Company's website:
www.hansaicl.com.
Service providers
Independent Auditor
PricewaterhouseCoopers LTD
Solicitors - Bermuda
Conyers Dill & Pearman Limited
Solicitors - UK
Dentons UK and Middle East LLP
Custodian
Banque Lombard Odier & Cie SA
Stockbroker
Winterflood Investment Trusts
Administrator
Maitland Administration Services Limited
Alternative Investment Fund Manager
Hanseatic Asset Management LBG
Financial calendar
Company year end
31 March
Annual Report sent to shareholders
June
Annual General Meeting
July/August
Announcement of half-year results
November
Half-year Report sent to shareholders
December
Interim dividend payments
August, November, February and May
Share price listings
The price of your shares can be found on our website. In
addition, share price information for Ordinary shares / 'A'
non-voting Ordinary shares can be found via the following
codes:
ISIN
BMG428941162 / BMG428941089
SEDOL
BKLFC18 / BKLFC07
Reuters
HAN.L / HANA.L
Bloomberg
HAN LN / HANA LN
TIDM
HAN / HANA
Legal Entity Identifier
213800RS2PWJXS2QDF66
Further information about Hansa Investment Company Limited,
including monthly fact sheets, stock exchange announcements and
shareholder presentations, can be found on the Company's website:
www.hansaicl.com
Please contact the Portfolio Manager, as below, if you have any
queries concerning the Company's investments or performance.
Portfolio Manager and additional administrative services
provider
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hiclenquiry@hansacap.com
Website: www.hansagrp.com
Please contact the Registrars, as below, if you have a query
about a certificated holding in the Company's shares.
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH
Email: enquiries@linkgroup.co.uk
www.linkassetservices.com
If you do not have internet access you can call the Shareholder
Support Centre on +44 (0) 371 664 0300. Calls are charged at the
standard geographic rate and will vary by provider. Calls outside
the UK will be charged at the applicable international rate.
The Registrars are open between 09:00 - 17:30, Monday to Friday
excluding public holidays in England and Wales.
Register for updates
To receive the latest news and views on the Company, please
register at https://www.hansaicl.com
Glossary of Terms
Association of Investment Companies ("AIC")
The Association of Investment Companies is the UK trade
association for closed-ended investment companies
(www.theaic.co.uk). Despite the Company not being UK domiciled, the
Company is UK listed and operates in most ways in a similar manner
to a UK Investment Trust. Therefore, the Company follows the AIC
Code of Corporate Governance and the Board considers that the AIC's
guidance on issues facing the industry remains very relevant to the
operations of the Company.
Alternative Investment Fund Managers Directive
("AIFMD")
The AIFMD is a regulatory framework for alternative investment
fund managers ("AIFMs"), including managers of hedge funds, private
equity firms and investment trusts. Its scope is broad and, with a
few exceptions, covers the management, administration and marketing
of alternative investment funds ("AIFs"). Its focus is on
regulating the AIFM rather than the AIFs.
Annual Dividend / Dividend
The amount paid by the Company to shareholders in dividends
(cash or otherwise) relating to a specific financial year of the
Company. The Company's dividend policy is to announce its expected
level of dividend payment at the start of each financial year.
Barring unforeseen circumstances, the Company then expects to make
four interim dividend payments each year - at the end of August,
November and February during that financial year and at the end of
May following the end of the financial year.
Bid Price
The price at which you can sell shares determined by supply
and demand.
Capital Structure
The stocks and shares that make up a company's capital i.e. the
amount of ordinary and preference shares, debentures and unsecured
loan stock etc. which are in issue.
Closed -- ended
A company with a fixed number of shares in issue.
Depositary/Custodian
A financial institution acting as a holder of securities for
safekeeping.
Discount
When the share price is lower than the NAV, it is referred to as
trading at a discount. The discount is expressed as a percentage of
the NAV.
Expense Ratio
An expense ratio is determined through an annual calculation,
where the operating expenses are divided by the average NAV. Note
there is also a description of an additional PRIIPs KID Ongoing
Charges Ratio explained in the 31 March 2022
Annual Report.
Five Year Rolling NAV Return (per annum)
The rate at which, compounded for five years, will equal the
five year NAV total return to end March, assuming dividends are
always reinvested at pay date.
Five Year NAV and Share Price Total Return
Rebased from 0% at the start of the five year period, this is
the rate at which the Company's NAV and share prices would have
returned at any period from that starting point, assuming dividends
are always reinvested at pay date. The Company will continue to
quote results from its predecessor, Hansa Trust Ltd,
as part of that reporting so shareholders can see the
longer-term performance of the portfolio.
Gearing
Gearing refers to the level of borrowing related to equity
capital.
Hedging
Strategy used to reduce risk of loss from movements in interest
rates, equity markets, share prices or currency rates.
Issued Share Capital
Issued share capital is the total number of shares subscribed to
by the shareholders.
Key Information Document ("KID")
This is a document of a form stipulated under the PRIIPs
Regulations. It provides basic, pre-contractual, information about
the Company and its share classes in a simple and accessible
manner. It is not marketing material. The UK regulatory authorities
have introduced legislation from 1 January 2023 to amend some of
the disclosures in the KID for UK shareholders. The Company's AIFM
will be producing both UK KIDs and European KIDs going forward.
Key Performance Indicators ("KPIs")
A set of quantifiable measures a company uses to gauge its
performance over time. These metrics are used to determine a
company's progress in achieving its strategic and operational goals
and also to compare a company's finances and performance against
other businesses within its industry. In the case of historic
information, the KPIs will be compared against data of both the
Company and, prior to the Company's formation, from Hansa Trust
Ltd.
Market Capitalisation
The market value of a company's shares in issue. This figure is
found by taking the stock price and multiplying it by the total
number of shares outstanding.
Mid Price
The average of the Bid and Offer Prices of a particular
traded share.
Net Asset Value ("NAV")
The value of the total assets minus liabilities of a
company.
Net Asset Value Total Return
See Total Return.
Offer Price
The price at which you can buy shares determined by supply
and demand.
Ordinary Shares
Shares representing equity ownership in a company allowing
investors to receive dividends. Ordinary shareholders have the
pro-rata right to a company's residual profits. In other words,
they are entitled to receive dividends if any are available after
payments to financial lenders and dividends on any preferred shares
are paid. They are also entitled to their share of the residual
economic value of the company should the business unwind.
Hansa Investment Company Limited has two classes of Ordinary
shares - the Ordinary shares (40 million shares) and the 'A'
non-voting Ordinary shares (80 million shares). Both have the same
financial interest in the underlying assets of the Company and
receive the same dividend per share, but differ only in that only
the former shares have voting rights, whereas the latter do not.
They trade separately on the London Stock Exchange, nominally
giving rise to different share prices at any given time.
Premium
When the share price is higher than the NAV it is referred to as
trading at a premium. The premium is expressed as a percentage of
the NAV.
Packaged Retail and Insurance -- based Investment Product
("PRIIP")
Packaged retail investment and insurance-based products
("PRIIPs") make up a broad category of financial assets that are
regularly provided to consumers in the European Union. The term
PRIIPs, created by the European Commission to regulate the
underlying market, is defined as any product manufactured by the
financial services industry, to provide investment opportunities to
retail investors, where the amount repayable is subject to
fluctuation because of exposure to reference values, or the
performance of underlying assets not directly purchased by the
retail investor. See also Key Information Document ("KID").
Shareholders' Funds/Equity Shareholders' Funds
This value equates to the NAV of the Company. See NAV.
Spread
The difference between the Bid and Ask price.
Tradable Instrument Display Mnemonics ("TIDM")
A short, unique code used to identify UK-listed shares. The TIDM
code is unique to each class of share and to each company. It
allows the user to ensure they are referring to the right share.
Previously known as EPIC.
Total Return
When measuring performance, the actual rate of return of an
investment or a pool of investments over a given evaluation period.
Total return includes interest, capital gains, dividends and
distributions realised over a given period of time.
Total Return - Shareholder
The Total Return to a shareholder is a measure of the
performance of the company's share price over time. It combines
share price appreciation/depreciation and dividends paid to show
the total return to the shareholder expressed as an annualised
percentage. In the case of historic information, the Total Return
will include data against data of both the Company and, prior to
the Company's formation, from Hansa Trust Ltd.
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END
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