at points of market distress

Transcription

1 HANSA HARBOUR FUND Chairman s Statement HANSA, conserving capital at points of market distress Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration Half Yearly Report For the six months ended

2 COMPANY REGISTRATION AND NUMBER: The Company is registered in Guernsey under company number

3 2 Chairman s Statement 3 Alternative Investment Fund Managers Directive 4 Fund s Policies and Structure 5 Manager s Report 8 Portfolio Statement 9 Financial Statements 9 Statement of Financial Position 10 Statement of Comprehensive Income 10 Statement of Changes in Participating Redeemable Preference Shareholders Equity of the Fund 11 Cash Flow Statement of the Fund 12 Notes to the Financial Statements 20 Management and Administration Chairman s Statement Alternative Investment Fund Managers Directive Returns Amounts due to Shareholders* $59,367,652 $59,080,115 Price per share $99.42 $ % Performance Benchmark # 2.1% 1.5%^ *Amounts due to Shareholders reflect the Net Asset Value of Hansa Harbour Fund ( the Fund ) and includes those amounts due to Participating Redeemable Preference Shareholders. See Statement of Financial Position and Notes 7 and 8 to the accounts. # The Benchmark Return is a 60:40 composite of US CPI Urban Consumers NSA (Non Seasonally Adjusted) and Eurozone CPI plus 2% per annum, the full description of which may be found in the Offering Memorandum. ^Return for the period 5 August, being the launch date of the Fund, to. SHARE PRICE PERFORMANCE SINCE LAUNCH () Launch 31-Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun-17 Fund's Policies and Structure Manager s Report Portfolio Statement Financial Statement PORTFOLIO PERFORMANCE Performance Year to date Launch Date (5 August ) to Share Price Performance* 0.5% (1.0%) Performance Benchmark 2.1% 1.5% Barclays Global Treasury TR 4.5% (8.8%) Barclays 3 Month USD Libor Cash 0.6% 0.4% Management and Administration *Note: Performance is based on a net price to price movement. Hansa Harbour Fund Half Year Report 1

4 Chairman s Statement Chairman s Statement The Hansa Harbour Fund ( the Fund ) successfully launched on 5th August. During the period under review the Fund share price increased by $0.45 to $99.42, an increase of 0.45%. Over the same period the Fund s benchmark increased by 2.1%. The Directors are not proposing to declare a dividend. After the unexpected geopolitical events of (most notably the Brexit vote and the election of President Trump), has been relatively benign in the geopolitical arena, with the electorates in both the Netherlands and France voting against populism and favouring centrist candidates over their far right opponents. Against a backdrop of a maturing business cycle and uncertain geopolitical environment, the Investment Manager continues to position the portfolio to preserve capital whilst maintaining a low correlation to other asset classes, particularly equities, in accordance with the Fund s investment objective. In the report that follows, the Investment Manager provides a detailed narrative on the performance of the portfolio during the period. I thank shareholders for their support of the Fund as the Board pursues its long term strategy of capital preservation and low correlation alongside the Investment Manager. Stephen Jones Chairman 2 Hansa Harbour Fund Half Year Report

5 Alternative Investment Fund Managers Directive Alternative Investment Fund Managers Directive Chairman s Statement Alternative Investment Fund Managers Directive In accordance with the Alternative Investment Fund Managers Directive (the Directive ), the Manager in its capacity as Alternative Investment Fund Manager ( AIFM ) is required to disclose specific information in relation to the following aspects of the Fund s management. LEVERAGE AND BORROWING Leverage is defined as any method by which the Fund increases its exposure through borrowing or the use of derivatives. Exposure is defined in two ways, the Gross method and the Commitment method, the AIFM ensures that the Fund, in line with the investment policies outlined in the Offering Memorandum, does not exceed maximum exposures under both methods. Gross method exposure is calculated as the sum of all positions of the Fund (both positive and negative), that is, all eligible assets, liabilities and derivatives, including derivatives held for risk reduction purposes. Commitment method exposure is also calculated as the sum of all positions of the Fund (both positive and negative), but after netting off derivative and security positions as specified by the Directive. For the Gross method, the following has been excluded: The value of any cash and cash equivalents which are highly liquid investments held in the base currency of the Alternative Investment Fund that are readily convertible to a known amount of cash, and that is subject to an insignificant risk of changes in value; Cash borrowings that remain in cash and cash equivalent as defined above and where the amounts of that payable are known should be excluded from the calculation. LIQUIDITY In order to manage the liquidity of the Fund, the AIFM is not obliged to redeem more than 10% of the total shares in issue of the Fund on any dealing day and any redemption requests in excess of this will be satisfied on a pro rata basis. This policy has been applied consistently throughout the review period and as a result the AIFM has not introduced any new arrangements for managing the Fund s liquidity. RISK MANAGEMENT POLICY NOTE Please refer to Note 18, Financial Instruments, in the Notes to the Financial Statements on pages 17 to 19, where the current risk profile of the Fund and the risk management systems employed by the AIFM to manage those risks, are set out. REMUNERATION In line with the requirements of the Directive, the AIFM is subject to a remuneration policy which is consistent with the principles outlined in the European Securities and Markets Authority guidelines on sound remuneration policies under the Directive. The remuneration policies are designed to ensure that any relevant conflicts of interest can be managed appropriately at all times and that the remuneration of its staff is in line with the risk policies and objectives of the alternative investment funds it manages. The Fund does not directly employ any staff members. Fund's Policies and Structure Manager s Report Portfolio Statement Financial Statement Management and Administration The total amount of leverage calculated as at is as follows: Gross method: 0.95:1 Commitment method: 0.98:1 Hansa Harbour Fund Half Year Report 3

6 Fund s Policies and Structure Fund s Policies and Structure INVESTMENT POLICY AND BENCHMARKS The investment objective of the Fund is to both help preserve capital at points of market distress and to have a generally lower correlation with other asset classes, especially equities. The Fund invests in a wide range of assets and their derivatives such that it meets its investment objectives of preserving capital and investment in assets with lower correlations. Typically this is through investment in funds or by direct investments. DISTRIBUTION POLICY The Fund distributes substantially all of its net income (if any) by way of an annual dividend. Unless requested by Shareholders, dividends will be reinvested and applied in acquiring additional Shares at prices prevailing on the next Dealing Date after the due date for the payment of dividends has been announced. The Fund did not declare or pay a distribution in respect to the period ended ( : Nil). CAPITAL STRUCTURE At the Fund had 597, ( : 596,932.08) 0.10 Participating Redeemable Preference Shares in issue. Participating Redeemable Preference Shares carry the right to receive distributions out of the income of the Fund in such amounts and at such times that the Directors shall determine, and to receive a distribution on a return of capital of the assets of the Fund on a winding up, in proportion to the number of Shares held. 4 Hansa Harbour Fund Half Year Report

7 Manager s Report Manager s Report PORTFOLIO COMMENTARY The portfolio s return was about flat during the second quarter, with a small gain of 0.1% bringing it to be up 1.1% for the first half of the year. Since inception on 5 August the portfolio has returned 0.8%, which is just behind cash (+1.0%), strongly ahead of the global bond index (-5.2%) but behind the Performance Benchmark (2% in excess of a 60:40 composite of US and Eurozone CPI inflation rates), which is up 4.0% over the same period. There were some mixed performances among the portfolio s holdings over the last quarter. Many of the funds produced muted, but positive, returns of less than 1%. These were roughly balanced by two funds producing stronger positive returns and four holdings which registered falls over the period. The strongest two performers were the same funds as the previous quarter, with Global Event Partners and Keynes Dynamic Beta Strategy Fund rising by 4.6% and 2.2%, respectively, which brought their returns for the first six months of the year to 9.3% and 5.1%. Global Event Partners, a BlackRock event-driven fund, did well through the quarter as several of the mergers in which it is positioned received positive news as they moved through their regulatory review processes. Significant contributors included the ChemChina / Syngenta merger, which received regulatory approval in China, and the Qualcomm / NXP Semiconductors merger, which cleared its US regulatory review. The Keynes Dynamic Beta Strategy Fund produced good returns, especially at the start of the last quarter, with the majority of its returns coming from the dynamic beta models it runs rather than the relative value models. During a period when most equity markets rose, it was to be expected that most of its winners were positions in equity markets. Two new funds were bought during the last quarter, and both produced small gains for the short periods they were held. The Pareturn Gladwyne Absolute Credit Fund invests in European credit opportunities with a bias towards stressed and overlooked securities. By targeting a low exposure to the market it aims to display low correlation to both fixed income and equity indices. The portfolio initiated positions in both the fund s sterling and Euro share classes, with the intention of rolling them into the US dollar share class which is due to launch shortly, which will match the base currency of the portfolio. The two share classes were up an average of 0.5% during the period they have been held. The other new fund, CZ Absolute Alpha, is a market neutral fund investing in UK equities, and it has returned 0.7% during the short time the portfolio has owned it. BNY Mellon Absolute Return Bond Fund and MKP Opportunity fell slightly over the quarter, with falls of 0.4% and 1.4%, respectively. However, greater losses were sustained by Argentière, which declined by 3.2%, and Schroder GAIA BlueTrend, which declined by 5.2%. The latter s fall mostly occurred during June as markets responded to comments from central banks which were perceived to set the narrative for interest rate tightening in the future. As a result, bonds from major developed economies sold off as yields rose, and the Fund s exposure to this space detracted from returns. There were other losses in currencies and agricultural commodities, and small positive contributions from equities and energy commodities. Chairman s Statement Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration Hansa Harbour Fund Half Year Report 5

8 Manager s Report Continued INVESTMENT PORTFOLIO PERFORMANCE as at Asset Allocation Portfolio weight as at % Time Weighted Return For the six months ended % Index Returns* (i) % Macro Trading Funds (0.8) CTAs 14.1 (1.9) (2.8) Volatility Funds 4.7 (4.1) 2.8 Equity Long/Short (0.0) Event-Driven Funds Other Diversifying Hedge Funds Global Bonds Global High Yield Cash/Liquidity Funds (i) Appropriate industry-recognised indices used for comparison purposes. This is how the underlying assets contributed to the overall performance of the portfolio. Contribution % Performance For the six months ended % Gain/(Loss) $m Global Event Partners Keynes Dynamic Beta Strategy Fund Hudson Bay International Fund Field Street Offshore Fund Cantab CCP Core Macro Fund BNY Mellon Absolute Return Bond Fund SSgA USD Liquidity Fund CZ Absolute Alpha UCITS Fund Pareturn Gladwyne Absolute Credit (EUR) Pareturn Gladwyne Absolute Credit (GBP) MKP Opportunity Offshore Fund (0.2) (1.5) (0.1) Argentière Fund (0.3) (4.1) (0.2) Schroder GAIA BlueTrend (0.5) (6.7) (0.3) TOTAL Hansa Harbour Fund Half Year Report

9 Chairman s Statement Alternative Investment Fund Managers Directive DEALING FREQUENCY at * Quarterly 23.8% Monthly 22.4% Weekly 14.7% Daily 39.1% *Frequency at which underlying investments trade. Does not include notice periods, lock in periods or settlement terms for the underlying investments. PORTFOLIO ACTIVITY PURCHASES There were purchases totalling $13.4m during the period: $m BNY Mellon Absolute Return Bond Fund 5.0 Pareturn Gladwyne Absolute Credit (GBP) 2.4 Pareturn Gladwyne Absolute Credit (EUR) 2.4 CZ Absolute Alpha UCITS Fund 3.6 TOTAL 13.4 BNY Mellon Absolute Return Bond Fund increase of existing position. Pareturn Gladwyne Absolute Credit UCITS (GBP and EUR share classes) European credit opportunities fund with a bias towards stressed and overlooked securities, and with a low market exposure. CZ Absolute Alpha UCITS Fund market neutral fund investing in UK equities. SALES There were sales totalling $15.0m during the period: Proceeds $m Profit/ (Loss) $m IRR % SSgA USD Liquidity Fund BNY Mellon Absolute Return Bond Fund Argentière Fund 1.4 (0.1) (9.2) TOTAL 15.0 (0.1) SSgA USD Liquidity Fund reduction of existing position to fund other purchases. BNY Mellon Absolute Return Bond Fund reduction of existing position to fund other purchases. Argentière Fund reduction of existing position to fund other purchases. Fund's Policies and Structure Manager s Report Portfolio Statement Financial Statement Management and Administration Hanseatic Asset Management LBG August Hansa Harbour Fund Half Year Report 7

10 Portfolio Statement as at Portfolio Statement Nominal Holding Market Value BNY Mellon Absolute Return Bond Fund 64, ,273, MKP Opportunity Offshore Fund 23, ,202, Field Street Offshore Fund 3, ,069, Hudson Bay International Fund 5, ,058, Global Event Partners 4, ,270, Keynes Dynamic Beta Strategy Fund 47, ,815, Cantab CCP Core Macro Fund 3, ,471, Schroder GAIA Bluetrend 49, ,894, CZ Absolute Alpha UCITS Fund 3, ,626, Argentière Fund 2, ,816, Top 10 Investments 51,499, Pareturn Gladwyne Absolute Credit (EUR) 12, ,456, Pareturn Gladwyne Absolute Credit (GBP) 12, ,391, Top 12 Investments 56,347, SSgA USD Liquidity Fund* 13, , Total available for sale investments 56,496, Other net assets 2,871, Total net assets 59,367, *Liquidity Fund used for cash management purposes and therefore not forming part of the Fund s strategic portfolio. % of Fund 8 Hansa Harbour Fund Half Year Report

11 FINANCIAL STATEMENTS Statement of Financial Position as at Financial Statements Statement of Financial Position Notes Non-Current assets Available-for-sale Investments 3 56,496,633 57,455,749 Current assets Other receivables 4 1,419,209 2,146 Cash and cash equivalents 5 1,555,984 1,716,812 Total Current assets 2,975,193 1,718,958 Total Assets 59,471,826 59,174,707 Current liabilities Other payables and accruals 6 (104,174) (94,592) Total Current liabilities (104,174) (94,592) Net Assets 59,367,652 59,080,115 Net assets attributable to Participating Redeemable Preference Shareholders 8 59,367,652 59,080,115 Number of Shares 597, , Net asset value per Participating Redeemable Preference Share* *The difference between the published net asset value per share of $99.45 ( : $99.01) and the net asset value per share per the Financial Statements is due to two factors. Firstly, the treatment of the formation costs incurred and included for valuation purposes, but written off in the first period in the Financial Statements and secondly, due to the use of Mid market prices of investments for valuation and trading purposes compared to Bid market prices used in the Financial Statements in accordance with International Financial Reporting Standards and IA SORP; please refer to Note 12 for further details on formation costs. Chairman s Statement Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration The accompanying notes on pages 12 to 19 form an integral part of these financial statements Hansa Harbour Fund Half Year Report 9

12 FINANCIAL STATEMENTS Statement of Comprehensive Income For the six months ended Notes Dividend and interest income 1,076 1,304 Net movement on foreign exchange 48,858 (1,064) Total revenue 49, Expenditure Administration expenses 35,970 34,821 Administrator s fees 10 20,879 15,992 Auditors remuneration 7,629 10,528 Custodian fees 11 8,855 6,899 Directors fees 9,469 7,650 Formation costs 12 22,480 Management fee , ,654 Operating expenses 377, ,024 Net loss (328,045) (321,784) Other comprehensive income Net movement in the fair value of available-for-sale investments ,857 (155,631) Total comprehensive gain/(loss) 268,812 (477,415) Total comprehensive gain/(loss) per Participating Redeemable Preference Share basic and diluted (0.87) All activities derive from continuing operations. Statement of Comprehensive Income Statement of Changes in Participating Redeemable Preference Shareholders Equity of the Fund For the six months ended Notes Share capital Share premium Retained earnings Capital reserves Available for sale reserves Total equity 4 August Net loss for the period (320,720) (1,064) (321,784) Proceeds of Participating Redeemable Preference Shares issued 7 5,969 59,551,561 59,557,530 Payments for Participating Redeemable Preference Shares redeemed 7 Other comprehensive income (155,631) (155,631) 8 5,969 59,551,561 (320,720) (1,064) (155,631) 59,080,115 Net loss for the period (376,903) 48,858 (328,045) Proceeds of Participating Redeemable Preference Shares issued ,132 19,134 Payments for Participating Redeemable Preference Shares redeemed 7 (409) (409) Other comprehensive income 596, , ,562 59,570,693 (697,623) 47, ,226 59,367,652 The accompanying notes on pages 12 to 19 form an integral part of these financial statements 10 Hansa Harbour Fund Half Year Report

13 Cash Flow Statement of the Fund For the six months ended Cash flows from operating activities Net gain/(loss) 268,812 (477,415) Adjustments for: Net movement in the fair value of available-for-sale investments (596,857) 155,631 Realised (gain)/loss on foreign exchange (52,649) 388 Unrealised loss on foreign exchange 3, Operating cash flows before movements in working capital (376,903) (320,720) Increase in other receivables (1,417,063) (2,146) Increase in other payables 9,582 94,592 Net cash used in operating activities (1,784,384) (228,274) Cash flows from investing activities Payment for purchases of available-for-sale investments (13,452,415) (57,611,380) Proceeds from sale of available-for-sale investments 15,008,388 Net cash generated from (used in) investing activities 1,555,973 (57,611,380) Cash flows from financing activities Proceeds from issue of shares 19,134 59,557,530 Amounts paid on redemption of shares (409) Net cash generated from financing activities 18,725 59,557,530 Net (decrease)/increase in cash and cash equivalents (209,686) 1,717,876 Effect of foreign exchange rate changes 48,858 (1,064) Cash and cash equivalents at beginning of period 1,716,812 Cash and cash equivalents at end of the period 1,555,984 1,716,812 Cash and cash equivalents made up of: Cash at bank 1,555,984 1,716,812 Chairman s Statement Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration The accompanying notes on pages 12 to 19 form an integral part of these financial statements Hansa Harbour Fund Half Year Report 11

14 FINANCIAL STATEMENTS Notes to the Financial Statements 1. GENERAL INFORMATION Hansa Fund PCC Limited (the Company ) was incorporated as a protected cell company in Guernsey on 4 August The Company has two open-ended Cells: Hansa Global Equity Fund and Hansa Harbour Fund. These financial statements only show the results for the Hansa Harbour Fund, also referred to as the Fund. The Fund seeks to both help preserve capital at points of market distress and to have a generally lower correlation with other asset classes, especially equities. The address of the Company s registered office is Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 2HT, Channel Islands. The Fund has no employees. The functional and presentational currency of the Fund is the United States Dollar ( ). 2. ACCOUNTING POLICIES a. Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The financial information for the period ended has been prepared in accordance with IAS 34 Interim Financial Reporting. The interim financial information should be read in conjunction with the annual financial statements for the year ended that were prepared in accordance with IFRS. The financial statements have been prepared under the historical cost basis, except for the revaluation of fair value through profit or loss investments, and in accordance with IFRS. Although the Company is not within the scope of the Statement of Recommended Practice for financial statements of Authorised Funds issued by the Investment Association (the IA SORP ), consideration has been given to its recommendations in the preparation of the Company s financial statements, to the extent that it does not conflict with IFRS. b. Going concern The financial statements have been prepared on a going concern basis. The Directors believe that this basis is appropriate as the Fund has significant net assets, minimal creditors, is not dependent on any external finance or support from other group companies and is expected to continue to operate profitably for the foreseeable future. c. Standards and Interpretations New and amended standards adopted by the Fund There were no standards, amendments or interpretations which were effective for the financial period beginning on 1 January that were material to the Fund. New standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are not yet effective for annual periods beginning after 1 January, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Fund, except the following: IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through Other Comprehensive Income ( OCI ) and fair value through P&L. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018, as endorsed by the EU. Early adoption is permitted. The Fund is assessing the impact of IFRS9. 12 Hansa Harbour Fund Half Year Report

15 Chairman s Statement 2. ACCOUNTING POLICIES (CONTINUED) d. Business and geographical segments The Fund is operated as one segment by the Board of Directors (which is considered to be the chief operating decision maker). e. Financial instruments Financial instruments carried on the Statement of Financial Position include available-for-sale investments, other receivables, cash and cash equivalents, and other payables and accruals. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. Disclosures about financial instruments to which the Fund is a party are provided in Note 18. f. Available-for-sale investments Available-for-sale investments are non-derivative financial assets that are either designated in this category or not classified in any of the other categories, identified by IAS39. Available-for-sale investments are initially recognised at cost, which is the fair value of the consideration given. The available-for-sale investments are subsequently re-measured at fair value based upon the most up to date NAV published by the fund administrator for mutual funds, investment companies or other similar vehicles or collective investment schemes. The fair value of these investments is based on bid prices quoted at the Statement of Financial Position date. Gains and losses arising from changes in the fair value of these securities are recognised as Other Comprehensive Income in the Non-distributable reserve as they arise. All purchases and sales of investments and trading securities that require delivery within the time frame established by regulation or market convention ( regular way purchases and sales) are recognised at trade date, which is the date on which the Fund commits to purchase or sell the asset. In cases which are not within the time frame established by regulation or market convention, such transactions are recognised on settlement date. Any change in fair value of the asset to be received is recognised between the trade date and settlement date. g. Receivables Receivables are carried at anticipated realisable value. Anticipated realisable value is the amount that the Fund expects to receive less impairment. h. Cash and cash equivalents Cash and cash equivalents comprise only bank balances. The carrying value of these assets approximates to their fair value. i. Share capital Participating Redeemable Preference Shares in issue are redeemable at the shareholder s option (see note 7), are designated liabilities in the Statement of Financial Position and are recorded at the contracted settlement amount. Any distributions on the Participating Redeemable Preference Shares are recognised as finance costs in the Statement of Comprehensive Income. j. Net asset value per Participating Redeemable Preference Share The net asset value per Participating Redeemable Preference Share is calculated by dividing the net assets attributable to Participating Redeemable Preference Shareholders included in the Statement of Financial Position by the number of Participating Redeemable Preference Shares in issue at the period end. Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration k. Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translated into at exchange rates in effect at the date of the financial statements. Realised and unrealised gains and losses on foreign currency transactions are charged or credited to the Statement of Comprehensive Income as foreign currency gains and losses. The cost of investments, and income and expenditure are translated into based on exchange rates on the date of the transaction. l. Revenue recognition Interest and dividend income comprises dividend income and interest on bank deposits and is recognised on an accruals basis. Hansa Harbour Fund Half Year Report 13

16 FINANCIAL STATEMENTS Notes to the Financial Statements 2. ACCOUNTING POLICIES (CONTINUED) m. Related parties Related parties are individuals and entities where the individuals or entities have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. n. Use of estimates and judgements The preparation of the financial statements in conformity with applicable accounting standards and applicable statute law requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates with the most significant effects on the carrying amounts of the assets and liabilities in the financial statements are outlined below: Valuation of Available-for-sale Investments: Mutual funds, investment companies or other similar vehicles or collective investment schemes are valued based on the NAV per share as determined by the underlying fund administrators. 3. AVAILABLE-FOR-SALE INVESTMENTS Investments 56,496,633 57,455, OTHER RECEIVABLES Securities sold receivable 1,408,388 Prepaid Directors fees 9,822 Other prepaid expenses and accruals 999 2,146 1,419,209 2, CASH AND CASH EQUIVALENTS Cash at bank 1,555,984 1,716,812 Cash and cash equivalents comprise bank balances only. The carrying value of these assets approximates their fair value. 6. OTHER PAYABLES AND ACCRUALS Administrator s fee 3,438 3,589 Auditors remuneration 15,738 10,150 Custodian s fee 1,466 1,507 Directors fees 7,495 Management fee 48,853 50,241 Printing and stationary 21,869 9,311 Sundry creditors and accruals 10,916 8,385 Website development and maintenance 1,894 3, ,174 94, Hansa Harbour Fund Half Year Report

17 Chairman s Statement 7. SHARES AND SHARE CAPITAL a) Authorised Unlimited Unclassified Shares of 0.01 each At a general meeting Participating Redeemable Preference Shares carry limited voting rights. Participating Redeemable Preference Shares carry the right to receive a distribution out of the income of the Fund in such amounts and at such times that the Directors shall determine, and to receive a distribution on a return of capital of the assets of the Fund on a winding up, in proportion to the number of Shares held. b) Issued Participating Redeemable Preference Shares In issue at the start of the period 596, Issued during the period , Redeemed during the period (4.10) In issue at the end of the period 597, , Share Capital Participating Redeemable Preference Shares In issue at the start of the period 5,969 Issued during the period 2 5,969 Redeemed during the period (409) In issue at the end of the period 5,562 5,969 Share Premium Participating Redeemable Preference Shares Balance at the start of the period 59,551,561 On shares issued during the period 19,132 59,551,561 On shares redeemed during the period Balance at the end of the period 59,570,693 59,551, NET ASSETS ATTRIBUTABLE TO HOLDERS OF PARTICIPATING REDEEMABLE PREFERENCE SHARES Share capital 5,562 5,969 Share premium 59,570,693 59,551,561 Retained income (697,623) (320,720) Capital reserves 47,794 (1,064) Available for sale reserve 441,226 (155,631) 59,367,652 59,080,115 Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration Share premium Amount subscribed for share capital in excess of nominal value. Available for sale reserve Gains/losses arising on financial assets classified as available for sale. Retained income All other net gains and losses and transactions not recognised elsewhere. Hansa Harbour Fund Half Year Report 15

18 FINANCIAL STATEMENTS Notes to the Financial Statements 8. NET ASSETS ATTRIBUTABLE TO HOLDERS OF PARTICIPATING REDEEMABLE PREFERENCE SHARES (CONTINUED) Capital reserves Transactions that are capital in nature and not recognised as available for sale. These include movements on foreign exchange and fee rebates. 9. NET ASSET VALUE PER PARTICIPATING REDEEMABLE PREFERENCE SHARE The net asset value per share of ( : 98.97) is based on the net assets attributable to participating redeemable preference shareholders at the period end of 59,367,652 ( : 59,080,115) and on 597, ( : 596, ) Participating Redeemable Preference Shares, being the number of Participating Redeemable Preference Shares in issue at the period end. 10. ADMINISTRATOR S FEES The Administrator is entitled to an annual fee based on the Net Asset Value of the Company payable as follows: 0 200,000, ,000, % per annum 0.06% per annum Such fees are calculated and payable monthly and subject to an annual minimum fee of 100,000 ( : 100,000), and are payable in equal monthly instalments in arrears. The Administrator s fees are apportioned between the Fund and Hansa Global Equity Fund pro rata to their Net Asset Values. 11. CUSTODIAN FEES The Custodian is entitled to an annual fee payable by the Fund which is not expected to exceed 0.03% of the Net Asset Value. Such fee is calculated and payable monthly and is subject to an annual minimum fee of 15,000 ( : 15,000), payable in equal monthly instalments in arrears. The Custodian is also entitled to receive transaction fees, as well as reimbursement for the fees of any sub-custodians. 12. FORMATION COSTS The costs and expenses of forming the Fund amounted to $22,480 and were treated as fully expensed on the date on which they occurred being during the period ended. These formation costs are being amortised over three years in the calculation of the published NAV and share price as set out in the Offering Memorandum. This has resulted in a difference between the net asset value per share in the financial statements and the published net asset value per share. 13. MANAGEMENT FEES The Manager receives a monthly fee from the Fund calculated at an annual rate equal to 1.00% of the Net Asset Value of the Fund, payable monthly in arrears. The Manager is also entitled to an annual performance fee. The performance fee is equal to 10% of the amount by which the Fund outperforms its Benchmark Return in any accounting year, subject to first having made good any under performance on an individual investor basis. The Benchmark Return is a 60:40 composite of US CPI Urban Consumers NSA (Non Seasonally Adjusted) and Eurozone CPI plus 2% per annum, the full description of which may be found in the Offering Memorandum. Any performance fee only becomes payable at the end of an annual accounting period, and as such in the current period the Manager is not entitled to a performance fee ( : $ Nil). 14. NET MOVEMENT IN THE FAIR VALUE OF AVAILABLE-FOR-SALE INVESTMENTS Realised gains on disposal of available-for-sale investments 676,684 Unrealised losses on available-for-sale investments (79,827) (155,631) 596,857 (155,631) 15. EARNINGS PER PARTICIPATING REDEEMABLE PREFERENCE SHARE The earnings per share is based on a profit of 268,812 ( : loss of 477,415) on ordinary activities and a weighted average of 597, ( : 549, ) shares in issue. There is no difference between the basic and diluted earnings per share calculations. 16 Hansa Harbour Fund Half Year Report

19 Chairman s Statement 16. TAXATION The Fund has been granted exempt status and therefore has no liability to Guernsey tax. With effect from 1 January 2010, Guernsey restructured its tax regime, and the standard rate of income tax for companies moved to 0%. However, the Fund will continue to apply for a tax exempt status by paying the 1,200 annual Exempt Company fee. The Fund was granted reporting fund status by HM Revenue & Customs with effect from 1 January, subject to it continuing to comply with the reporting fund regulations. The Directors conduct the affairs of the Fund with a view to ensure that the appropriate conditions for reporting fund status will continue to be met. 17. RELATED PARTY TRANSACTIONS The Directors are regarded as related parties. Total Directors fees paid during the period amounted to 9,469 ( : 7,650). At prepaid Directors fees amounted to 9,822 ( : Nil). These fees are all considered to be arm s length transactions. 18. FINANCIAL INSTRUMENTS Fair values The carrying amounts of investments, other receivables, cash and cash equivalents and other payables approximate their fair values. Management of Capital The Fund manages its capital to ensure that it is able to continue as a going concern. The capital structure of the Fund consists of cash and cash equivalents and equity attributable to equity holders comprising issued capital, reserves and retained earnings as stated in the Statement of Changes in Participating Redeemable Preference Shareholders Equity of the Fund on page 10 and in note 8. During the period and at the period end the Fund did not have any third party debt balances. Investment and trading activities The objective of the Fund is to both help preserve capital at points of market distress and to have a generally lower correlation with other asset classes, especially equities. The policy of the Board is to provide a framework within which the Manager can operate and deliver the objectives of the Fund. The Fund s investing activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The most important types of financial risk to which the Fund is exposed are market price risk and currency risk. Credit risk Credit risk is the risk that an issuer or counterparty may be unable or unwilling to meet commitments it has entered into with the Fund. The Fund s principal assets are bank balances and cash and investments as set out in the Statement of Financial Position which represents the Fund s maximum exposure to credit risk in relation to the financial assets. The credit risk on bank balances is limited because the counterparties are banks with credit ratings of A2 to BBB assigned by Standard and Poor s rating agency. The ratings indicate that the banks have adequate capacity to meet their financial commitments. All transactions in listed securities are settled upon delivery using approved brokers. The risk of default is considered minimal as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligations. Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration The Fund s maximum exposure to credit risk is the carrying value of the assets on the Statement of Financial Position. Market price risk Market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market. The Fund s exposure to market price risk is comprised mainly of movements in the value of the Fund s investments. Price sensitivity At, if the market prices of the securities had been 10% higher with all other variables held constant, the net assets attributable to holders of Participating Redeemable Preference Shares would have been 65,017,315 ( : 64,825,690), arising due to the increase in the fair value of available-for-sale investments by 5,649,663 ( : 5,745,575). Hansa Harbour Fund Half Year Report 17

20 FINANCIAL STATEMENTS Notes to the Financial Statements 18. FINANCIAL INSTRUMENTS (CONTINUED) Liquidity risk Liquidity risk is the risk that the Fund cannot meet its liabilities as they fall due. The Fund s primary source of liquidity consists of cash and cash equivalents and available-for-sale investments. The Fund s liabilities are short-term in nature and are payable in the normal operating cycle. As at, the Fund s exposure to liquidity risk was as follows: Less than 1 month 1 to 3 months 3 months to 1 year More than 1 year Non-Current Assets Available-for-sale investments 24,607,669 17,743,339 14,145,625 56,496,633 Current Assets Other receivables 1,419,209 1,419,209 Cash and cash equivalents 1,555,984 1,555,984 27,582,862 17,743,339 14,145,625 59,471,826 Current Liabilities Other payables and accruals 104, , , ,174 As at, the Fund s exposure to liquidity risk was as follows: Less than 1 month 1 to 3 months 3 months to 1 period More than 1 period Non-Current Assets Available-for-sale investments 24,708,147 17,608,662 15,138,940 57,455,749 Current Assets Other receivables 2,146 2,146 Cash and cash equivalents 1,716,812 1,716,812 26,427,105 17,608,662 15,138,940 59,174,707 Current Liabilities Other payables and accruals 94,592 94,592 94,592 94,592 Total Total Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Fund may from time to time hold certain financial assets and liabilities denominated in currencies other than, the functional currency of the Fund. The Fund would therefore be exposed to currency risk, as the value of those financial instruments will fluctuate due to changes in exchange rates. Exchange rate exposures are reviewed by the Manager and the Board. The carrying amount of the Fund s foreign currency (net) exposure at the reporting date is as follows: GBP 2,391,965 EUR 2,456,709 Currency sensitivity The following table details the Fund s sensitivity to a 10% weakening of the reporting currency against each of the relevant foreign exchange currencies. This analysis assumes that all other variables, in particular interest rates remain constant. 18 Hansa Harbour Fund Half Year Report

21 Chairman s Statement 18. FINANCIAL INSTRUMENTS (CONTINUED) Increase/(decrease) in net assets attributable to holders of Participating Redeemable Preference Shares: GBP 239,197 EUR 245, FAIR VALUE MEASUREMENT IFRS 13 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under IFRS 13 are as follows: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment of management, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment by the Fund. The Fund considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The following table presents the Fund s financial assets and liabilities by level within the valuation hierarchy as of. Level 1 Level 2 Level 3 Financial assets Available-for-sale investments 56,496,633 56,496,633 The following table presents the Fund s financial assets and liabilities by level within the valuation hierarchy as of. Level 1 Level 2 Level 3 Financial assets Available-for-sale investments 57,455,749 57, Total Total Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration The Fund invests in investment funds which are not quoted in active markets and may be subject to restrictions on redemptions such as lock-up periods, redemption gates and side pockets. Investments in these investment funds are valued based on the NAV per share as determined by the underlying fund administrators. Investments in funds that the Fund would be able to redeem at NAV as at the measurement date have been classified as Level 2 investments. There were no transfers between levels during the period. There were no changes to valuation techniques during the period. 20. ULTIMATE CONTROLLING PARTY The Directors do not consider the Fund to have an ultimate controlling party. Hansa Harbour Fund Half Year Report 19

22 Management and Administration Management and Administration DIRECTORS Stephen Jones (Chairman) Wayne Bulpitt C.B.E. William Hamilton-Turner Douglas Mackay (Alternate Director) MANAGER Hanseatic Asset Management LBG 1st Floor, Tudor House Le Bordage St Peter Port Guernsey GY1 1DB Telephone: +44(0) ADMINISTRATOR, SECRETARY AND REGISTRAR JTC Fund Solutions (Guernsey) Limited Ground Floor Dorey Court Admiral Park St. Peter Port Guernsey GY1 2HT Telephone: +44(0) CUSTODIAN AND BANKER Butterfield Bank (Guernsey) Limited Regency Court Glategny Esplanade St. Peter Port Guernsey GY1 3AP Telephone: +44(0) REGISTERED OFFICE Ground Floor Dorey Court Admiral Park St. Peter Port Guernsey GY1 2HT INVESTMENT ADVISER Hansa Capital Partners LLP 50 Curzon Street London W1J 7UW Telephone: +44(0) AUDITOR RSM Channel Islands (Audit) Limited PO Box Esplanade St. Helier Jersey JE4 9RJ Telephone: +44(0) LEGAL ADVISER Walkers (Guernsey) LLP New Street St. Peter Port Guernsey GY12PF Company Registration Number: Hansa Harbour Fund Half Year Report

23 Notes Chairman s Statement Alternative Investment Fund's Policies and Fund Managers Directive Structure Manager s Report Portfolio Statement Financial Statement Management and Administration Hansa Harbour Fund Half Year Report 21

24 HANSA HARBOUR FUND Hansa Harbour Fund Dorey Court Admiral Park St. Peter Port Guernsey GY1 2HT T : (0) F : (0) E : admin@hamlbg.com Visit us at