Hearts and Minds Investments Limited

Hearts and Minds Investments Limited (ticker: HM1) is an Australian Listed Investment Company (LIC) listed on the Australian Stock Exchange with the ticker code HM1. HM1 specialises in global equities and offers investors a unique opportunity. It combines the objective of providing a concentrated equities portfolio of the highest conviction ideas from leading fund managers with a philanthropic mission of supporting Australian medical research institutes.

Since its listing on November 14, 2018, HM1 has been serving investors with a distinctive approach to investing in global equities.

Hearts and Minds Investments Limited (HM1) has been operating for approximately five years since its listing in 2018. During this period, it has implemented its innovative approach to investing in global equities. As of now, HM1 has a market capitalisation of approximately $500 million, reflecting its position in the LIC landscape.

Investors considering HM1 can benefit from its unique investment strategy and the knowledge that their investment also supports Australian medical research institutes.

When assessing Hearts and Minds Investments Limited (HM1) as an investment option, several key metrics should be considered:

• Long Term Performance: analyse HM1's performance and whether it aligns with its objective of providing a concentrated equities portfolio of high-conviction ideas from leading fund managers. Assess how it tracks against its benchmark, the MSCI World Index (AUD), to gauge its ability to deliver returns.
• Dividend Reliability: Examine HM1's dividend track record, as reflected in its net dividend yield of 6.70% and gross dividend yield of 9.50%. Stability in dividend payments can be important for income-focused investors.
• Philanthropic Impact: Consider the impact of your investment on Australian medical research institutes, as HM1 donates 1.5% of its Net Tangible Assets (NTA) each year to support this cause. Understand how your investment contributes to this philanthropic mission.
• Fees: Evaluate the cost of investing in HM1 by reviewing its Management Expense Ratio (MER), which is calculated at 1.70% in the most recent financial year. Note that HM1 does not charge performance fees.

A Listed Investment Company (LIC) is one type of investment fund structure (i.e. shareholder funds pooled together and invested together, either actively by a manager, or passively). Other types of investment funds include Exchange Traded Funds (ETFs) (which can be both actively managed or passive), Listed Investment Trusts, or Managed Funds.

The different structures have their own positives and negatives, which are dependent on the goals of the investor and their own individual investment structure.

Some of the benefits of the LIC structure (the structure of HM1) include:

• It's a closed-end investment vehicle: Meaning the manager has a fixed pool of capital to invest with a long-term mindset, and doesn't have the risk of fast redemptions by investors in a time of market panic.
• They can smoothen out income to the investors: Which can be beneficial for both tax efficiency and emotional mindset, due to being able to retain profits over time (as compared to the trust structure, which must distribute income and crystallized capital gains to the investor in that financial year).
• The income will most likely be in the form of fully franked dividends: Which is an attractive form for Australian retirees due to the franking system in Australia. Since LICs are companies themselves and pay tax in Australia on profits, they receive franking credits paid on the tax they pay, in addition to the franking credits they receive from their investment portfolio. Well-managed LICs ensure their franking credit reserves are sufficient to pay future fully franked dividends (see 'franking reserves' chart above).