Hansa Investment Co Hansa Invest-HANA - Annual Financial Report
14/06/2024 17:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240614:nRSN5774Sa&default-theme=true
RNS Number : 5774S Hansa Investment Company Limited 14 June 2024
Hansa Investment Company Limited
Annual Report: Year ended 31 March 2024
Chairman's report
Dear Shareholder
Shareholder Returns
It is very pleasing to report an increase of 14.6% over the year in the value
of Hansa Investment Company Limited's ("Hansa", "the Company", HICL)
investment portfolio. Our Portfolio Manager, Alec Letchfield and his team at
Hansa Capital Partners LLP (HCP, "Hansa Capital Partners", "PM", "the
Manager") have performed well in a very challenging market. Additionally,
after a period of underperformance, it is very gratifying to report an
increase of 55.3% in the value of our holding in Ocean Wilsons Holdings
Limited (OWHL, "Ocean Wilsons"). Overall, the net asset value increased from
305.8p to 378.8p as at 31 March 2024, generating a 23.9% increase in the
portfolio. The shareholders also received dividends totalling 3.2p per share
during the period, implying a total NAV return of 25.1% for the year.
The Ordinary share price has increased from 174.0p to 210.0p, whilst the 'A'
Ordinary shares increased from 170.5p to 204.0p. Regrettably the discount on
the Ordinary shares increased from 43.1% to 44.6% and the 'A' Ordinary shares
increased from 44.2% to 46.1%.
More details about our results and performance can be found further on and
also in our Portfolio Manager's detailed review of markets and portfolio
performance in his Report.
Strategy
As memories of near-zero inflation and interest rates recede, the debate in
markets has moved to where the natural rate of interest settles, with markets
anticipating it to be approximately 2.5%, whilst leading economists such as
Larry Summers lean towards the number being 4.5%. I prefer the latter view as
if inflation gets back to 2% then a real rate of 2.5% is not unusual or
unreasonable, particularly with the backdrop of voracious and increasing
government debt requirements in all parts of the world.
Alec Letchfield and his team at Hansa Capital Partners, supported by the Board
continue to look for opportunities to broaden and diversify the portfolio.
This has been most notable with an increasing investment in Japan. Our
commitment to Private Markets continues to grow as planned, with our strategy
to continue to commit approximately £10m each year to this sector.
As a consequence of our recent rolling commitment to an annual investment in
Private Equity and Venture Capital opportunities, the Board has decided to
include this as one of the four key investment categories. Consequently, the
Core and Thematic categories have been combined.
Ocean Wilsons Holdings Limited
As you will recall Ocean Wilsons announced on 12 June 2023 that it was
undertaking a strategic review involving its investment in Wilson Sons and
that all strategic options were being considered. A further announcement on 15
November 2023 confirmed that a number of indicative non-binding offers had
been received, but the process remains ongoing. Recent results have been very
encouraging, with an excellent performance by both Wilson Sons and the
investment portfolio, which is continuing to demonstrate strong resilience.
The Board awaits further updates, as I am sure do all other shareholders. It
needs to be borne in mind that as stated by Ocean Wilsons, there can be no
certainty as to the outcome of its deliberations and decisions.
Your Board remains vigilant on this very important matter for all our
shareholders and continues to review and update potential strategic options.
Prospects
Stock markets have had a particularly good run in the second half of our
financial year. Pleasingly, this has continued into May.
Whilst I have been correct on interest rates being higher for longer than the
market participants anticipated and the oil price remaining firm, I have
completely underestimated the continuing high levels of liquidity in markets,
the sudden arrival of AI and the reasonably dovish comments from the Fed about
progress towards their 2% inflation target.
As has been pointed out by some leading financial commentators, the relentless
increase in outstanding US debt will probably become a serious problem at some
point. This, of course, does not only apply to the US. What is particularly
troubling is the fact there seems no determination to take any action on this.
If anything, the opposite is true, with increasing amounts of debt being
issued to bribe voters and special interest groups. I can only assume this
will continue to reduce, to some degree, the speed of the decline in inflation
and interest rates. It will be interesting to see if Chairman Powell starts to
make any comments on this issue.
The recent increase in the price of gold is begging the question of whether it
is signalling problems ahead, or just catching up with global events of both
an economic and political nature. The ominous increase in the price of oil
together with events in Ukraine and the Middle East will need to be monitored
carefully.
On a more positive note, it is encouraging to find Europe getting through the
recent winter with little stress on gas prices or its supply. In fact, stocks
of gas seem to indicate a lowering of demand next year due to present storage
reserves.
Discount Management
The Board is disappointed and frustrated that the discount has widened during
a period of good investment performance. Our present policy of not intervening
to try to reduce the discount will remain in place until we have learned about
the outcome of Ocean Wilsons deliberations on the options open to Wilson Sons.
At that time the Board will carry out a thorough review of its present
discount management policies.
Dividends
The Board has decided to continue with its existing dividend policy of paying
quarterly interim payments of 0.8p per share, being an annual total of 3.2p
per share. The present plan will continue until such time as the dividend is
fully covered by net revenue. It will then increase in line with any
improvement in the net revenue of the Company. Currently the income generated
by the portfolio is insufficient to meet this dividend commitment, with the
shortfall being made up by drawing from Hansa's reserves. In principle, the
Board does not believe it to be in the Company's best interests to use capital
as a source from which to pay dividends. As I mentioned in my Half-Year
Report, our dividend policy will be reviewed after the Ocean Wilsons board
have completed their deliberations on the strategic options open to the
holding in Wilson Sons Limited.
Company Bye-laws
As you may recall, one of the resolutions passed at Hansa's Annual General
Meeting on 27 July 2023 was to ensure that all shareholders, if so requested,
supply information relating to their tax residency. We have engaged
Computershare to work with Hansa's management team to try to find and engage
shareholders who have not yet responded to requests for information. I am
pleased to report that some progress is being made on this issue, although
much work remains to be done. I will keep shareholders updated on progress.
Shareholder Event
As you may recall, we held an event at the Mayfair Hotel in London on 27
September 2023. The presentation was live streamed via our website for those
who could not attend in person.
It is our intention to hold a similar meeting on 25 September 2024 which will
include presentations from myself, William Salomon and Alec Letchfield and the
opportunity for attendees, whether in person or online, to ask questions.
ESG Matters
The Board remains responsible for the Company's ESG policy. In 2020, the Board
adopted our Manager's Responsible Investing Policy. HCP continues to develop
and refine its policy in line with the evolving nature of ESG's integration
within financial services. As previously reported in 2022, the Hanseatic
Group, of which our Manager is a part, became signatories to the UN PRI, a
UN-supported network of investors works to promote sustainable investment. I
am pleased to be able to report that they have recently received a positive
response to their first annual submission.
Key Performance Indicators (KPIs)
The Board has completed its annual review of our investment KPIs and decided
to maintain our previous investment stance. However, I should like to direct
you further on where we have added further colour to our decision to review
investment performance versus a range of KPIs as opposed to a single
benchmark.
Board composition
Nadya Wells has chosen not to stand for re-election as a Director of the
Company at the AGM as a result of additional professional commitments that she
intends to take on. The Board is starting the process of identifying a
director to join the Board in Nadya's place.
Following Nadya's decision to not stand for re-election, with effect from 14
June 2024, the Board has appointed Simona Heidempergher to chair the
Nomination Committee in addition to her continuing role as Chair of the
Remuneration Committee.
I should like to take this opportunity to thank Nadya for her excellent and
valuable contributions to the business of the Company and the Board over the
period since the Company was formed in 2019 and the whole Board wishes her
well in her future roles.
Annual General Meeting (AGM) and Amendment to Bye-laws
At the end of these Financial Statements, you will find a notice regarding our
upcoming AGM, to be held on 2 August 2024 in Bermuda. Within the notice you
will find several resolutions that are presented annually. Additionally, you
will note a further resolution to adopt new Bye-laws, which is to effect two
changes to the Company Bye-laws.
First, in line with developments in market and industry practice and to enable
the Company to promote efficient, cost effective and modern methods of
engagement with shareholders, the Company is proposing an update to Bye-law 19
which allows the Board to determine how dividends are paid to Members in the
most efficient manner.
The Board intends to stop paying cash dividends by cheque and move toward
payment of all dividends to Members by inter-bank transfer and electronic
means.
Secondly, as you may recall, one of the resolutions passed at the Company's
AGM on 27 July 2023 was to ensure that all shareholders, if so requested,
supply information relating to their tax residency. To assist the existing
process, the Company is proposing an update to Bye-law 83, Globally tax
authorities and government agencies require financial institutions, including
investment companies, to collect and report certain tax information in
relation to their shareholders. In principle, this should only affect a very
small number of our shareholders who are personally on our share register.
Failure by those shareholders to supply the required information, will cause
the Company to submit incomplete returns, with the consequent risk of
penalties or censure by the authorities. This proposed update to Bye-law 83 is
intended to encourage action from those few shareholders who fail to provide
the information required by withholding the payment of dividends to any
non-responding shareholders, until such time as the required information is
received, so as to enable the Company to satisfy its reporting requirements.
We have also engaged Computershare to work with us to try to find and engage
shareholders who have not yet responded to requests for information. I am
pleased to report that some progress is being made on this issue, although
much work remains to be done. I will keep shareholders updated on progress.
Please see further down for more detail on the proposed changes and the more
detailed reasoning behind the proposals.
I should like to thank my fellow Board members, as well as Alec Letchfield and
his team at Hansa Capital Partners, for their dedicated hard work during this
past year. We appreciate the support of our shareholders, for whom we are all
constantly seeking to deliver value over the longer-term. I believe the
Company is in a very good position to do this, whatever the markets and global
economies may have in store for us in the future.
Jonathan Davie
Chairman
14 June 2024
Long-term performance
Ten year company performance statistics
As at 31 March Shareholders' Funds Net Asset Value per share - Annual Ordinary 'A' Ordinary Ordinary 'A' Ordinary
Ordinary and
'A' Ordinary dividends
2024 £454.6m 378.8p 3.2p 210.0p 204.0p 44.6% 46.1%
2023 £367.0m 305.8p 3.2p 174.0p 170.5p 43.1% 44.2%
2022 £382.9m 319.1p 3.2p 198.5p 193.0p 37.8% 39.5%
2021 £367.9m 306.6p 3.2p 198.0p 198.5p 35.4% 35.3%
2020 £276.3m 230.2p 3.2p 130.9p 135.5p 43.1% 41.2%
2019 £337.3m 281.1p 3.2p 195.5p 195.0p 30.5% 30.6%
2018 £323.1m 269.3p 3.2p 198.5p 195.5p 26.3% 27.4%
2017 £307.5m 256.3p 3.2p 173.3p 169.6p 32.4% 33.8%
2016 £255.6m 213.0p 3.2p 146.0p 145.1p 31.5% 31.9%
2015 £273.3m 227.8p 3.2p 172.0p 165.5p 24.5% 27.3%
2014 £287.4m 239.5p 3.2p 175.9p 175.5p 26.6% 26.7%
The table includes information relating to HICL and historic information
relating to Hansa Trust. The years ended 2020-2024 notes HICL information. The
historic year ends 2014-2019 all relate to Hansa Trust. So that data is
consistent and comparable, the historic data in columns "Net Asset Value per
Share", "Annual Dividends" and "Share Price (Mid)" have been restated to
reflect that, as part of the redomicile of the business of Hansa Trust to HICL
in August 2019, HICL issued five times as many shares in each share class of
HICL as there were in Hansa Trust.
The Company's KPIs can be found further on in the report.
To 31 March 2024 1 year 3 years 5 years 10 years
Total Return (%)
Ordinary shares 22.7% 11.4% 17.4% 43.1%
'A' non‑voting Ordinary shares 21.8% 8.0% 14.4% 39.7%
NAV 25.1% 27.4% 42.6% 79.0%
Portfolio Manager's report
Key questions for the year ahead.
Market review
Every year stock markets have their notable features, whether it is bull
markets, the occasional crash or bubbles forming. The last financial year was
no exception, but what was of particular note was the degree to which it
confounded broker forecasts. As we sit here reviewing the various broker
predictions for last year, we struggle to remember a year when commentators
got it so wrong on so many fronts.
Directionally, with very few exceptions, almost all commentators expected
muted markets and many thought further falls were on the cards. Following on
from the challenging 2023 financial year, inflation was forecast to remain
sticky and high, necessitating that interest rates remain elevated if
structurally higher inflation was to be avoided. This in turn was seen by many
as creating a no-win situation, whereby a recession was seen as an almost
inevitable side effect of the higher rates.
The outcome was very different from this. Most notably, inflation came
rattling back. In the US, inflation in March 2023 was at 5.0% and rapidly fell
back to 3.1% by the end of November, before slightly increasing to 3.5% in
March 2024. Europe saw inflation fall even more dramatically, from 6.9% to
2.4% during the financial year, with some regional variations such as Germany
where the inflation rate took longer to decline. The UK was the laggard but
even here inflation declined to 3.2% by March 2024 and even beat Rishi Sunak's
target levels which looked optimistic only a few months back.
Similarly, growth levels have confounded the bears with economies mostly
avoiding even modest recessions. Most notably, despite the much higher
interest rates, the US economy has remained remarkably robust. Buoyed by both
a consumer who is still willing to spend and a corporate sector that seems to
be largely unaffected by the higher borrowing costs, growth stayed in the
black. Other economies were a little more mixed, with Germany for example
dipping into mild recession, but overall the outcome was much better than
forecast by most. Whether this means we have avoided recession completely, or
merely delayed it, is up for debate.
An area where forecasters were proved right was interest rates remaining
higher for longer but, even here, it was for the wrong reasons. Central
bankers were initially behind the curve as the sharp rise in inflation in 2022
caught them somewhat by surprise. They then pivoted to become inflation hawks
and shot up rates, quicker and higher than many anticipated, in an effort to
control the inflationary pressure. Although inflation then started falling
sharply as price rises, firstly of goods and then of services, dropped away,
central bankers continued in their higher for longer rhetoric, while investors
started anticipating multiple rate cuts in 2024. Now, when inflation has
slightly increased again in the US and investors have dramatically reduced
their rate cut expectations, the Fed has switched to become modestly dovish,
still predicting it will soon be cutting rates.
At the country level, the forecasters' track record was little better. The
consensus coming into the last financial year was for emerging markets, Japan
and Europe, to outperform the US. Partially, this was a reflection of emerging
markets being seen as having been more prudent in their fiscal and monetary
policies, both during and after COVID, and with many exiting the tightening
phase of their monetary cycles last year, whereas developed markets were
earlier in their cycles. With the valuation gap between the US and the rest of
the world also extreme, largely due to the preponderance of technology
companies within the US stock market, almost all commentators were underweight
in the US and overweight in the other regions.
Yet again the US confounded the bears. In what is almost certainly one of the
largest, if not the largest, money losing trades of recent times, the desire
to forecast the demise of the US was once again proved to be wrong. As we
always say, you bet against the US at your own peril! Rising by 26.2% in the
year, the US market helped drag the wider stock market up by 20.5% by virtue
of it now accounting for a lofty 63.7% of the World Index. Underlying this
performance were five US mega-cap technology names - Microsoft, Alphabet,
Amazon, NVIDIA and Meta - with the group surging by 80.7% over the year as AI
fever grabbed investors' imaginations. Outside of these names however the
story was less good, with the rest of the S&P 500 rising by just 16.1%.
This concentration created a challenging backdrop for many active managers
with most being not only underweight in the wider US market but also
underweight in the mega-cap five names, due to their high valuations and for
risk management reasons with managers unwilling to have such a large
proportion of their funds invested in such a small number of names.
Outside the US the picture was mixed. The emerging markets could only manage a
5.8% rise, but this was largely a reflection of the poor performance of China
which faces challenges on a multitude of fronts. Not only has it failed to
deliver the post-COVID rebound many had hoped for, but China has also become
embroiled in a wider East versus West struggle. It wasn't all one-way traffic
within the emerging markets, however, with countries such as India and Brazil
producing excellent returns. Japan was also notably strong. Despite seeing
numerous false dawns, the current revival appears to be more persistent with
numerous measures being put into place by the government and genuine change
happening in the corporate sector.
An area where there was little consensus was the outlook for bonds. On the one
hand, some believed yields being back at levels where they offered a real
alternative to equities, combined with the prospect of slowing growth, created
a better backdrop for bonds (albeit one which was better for government bonds
and shorter dated investment grade debt, than for high yield bonds where
spreads remained extremely tight). On the other, a number of commentators
argued we were entering a more protracted bear market in bonds that would take
many years to play out with the spectre that this might become disorderly due
to the high debt taken on in many areas of the economy. The year-end outcome
of global government bonds falling by 3.9% suggested a rather poor backdrop,
although global high yield bonds rose by 8.7%. The journey, however, was
anything but muted with the asset class seeing wild swings depending on which
camp held sway as the year progressed.
In contrast to the excitement seen in bonds, alternative investments were more
muted over the past year. Private Equity (PE), which was one of the bright
spots in the 2023 financial year bear market, was more muted in the 2024
financial year. Whilst the final year numbers are yet to fully come through,
the returns to the end of December 2023 were a rise of 4.1%. This relative
underperformance versus public markets is unsurprising with the sector
typically lagging public market performance by six to nine months. Hopefully
this represents the full extent of the underperformance. However, we do note
one or two worrying signs in the form of PE firms being built on a model of
cheap debt and a number of managers engaging in activities such as
continuation funds, which smells a little like the can being kicked down the
road.
Key questions for the year ahead
Despite our scepticism on broker forecasts, it doesn't mean we disregard them
entirely. Instead, we believe markets are faced with just a handful of
important drivers and questions at any one time. Understanding what these
drivers are and where the consensus stands on them is key to constructing
portfolios. Often there are a number of likely outcomes and our aim is to
create all-weather portfolios that can thrive in these different scenarios.
Hence, as we enter the 2025 financial year, we view the following as being key
to the success of markets in the year ahead:
1. Has the battle against inflation been won and are
we returning to a low inflation environment?
2. Is a recession inevitable in the next year?
3. Is it too early to buy bonds?
4. Contrasting Asian fortunes - Japan versus China.
5. What are the tail risks in the year ahead?
1. Has the battle against inflation been won and are we returning to a low
inflation environment?
As discussed previously, 2023 was notable for the extent to which inflation
fell back from the extremes of 2022. The headline forecasts are, however,
still above central bank targets raising the question as to whether it is only
a matter of time before this final inflation is eradicated, or if the low
hanging fruit has been had and this last element of inflation will prove to be
stickier and ultimately necessitate central bankers to remain hawkish for
longer.
Initially, the consensus was that COVID had caused a reset in the world
inflationary order and a number of the factors that had caused persistent
deflation over the past 10 years, such as globalisation and the power of the
corporate sector over the labour force, were coming to an end. Hence, whilst
the base effect from the supernormal inflation of 2022 meant that inflation
appeared to be dropping sharply, inflation is now structurally higher.
There is, however, an alternative view to which we are becoming increasingly
sympathetic. For much of the post- COVID period commentators have been trying
to overlay conventional economic cycle analysis in what is, in practice, a
completely unique backdrop. This played out in the form of revenge buying, as
consumers exited COVID lockdowns with supply unable to meet demand. We then
had service sector and wage inflation as certain sectors were hit by labour
shortages due to people retiring early or making lifestyle choices favouring
their quality of life over work. Increasingly, however, these factors are
proving to be temporary and we are seeing a return to pre-COVID norms. On the
goods side, demand has fallen away and supply has caught up (and in some
places overtaken demand). On the service side, which initially looked to be
stickier, we are seeing signs that important components of service inflation,
such as shelter costs and wage inflation, are normalising. Hence, whilst the
jury remains out, we are increasingly optimistic that inflation is not
structurally very high, albeit we equally do not see markets moving back to a
deflationary backdrop anytime soon. This could prove positive for interest
rates, markets and long duration assets in general.
2. Is a recession inevitable in the next year?
One would think that if we are seeing the last remnants of COVID passing their
way through the system, with inflation beaten and rate cuts on the cards, this
would remove the threat of recession. Unfortunately, the reality is not quite
as simple. The challenge with inflation and rates is that inflation is
backward looking, whereas rates are instruments that impact economies in the
future. It would appear that central bankers would rather err on the side of
caution and ensure inflation is completely eradicated from the system, before
they risk loosening monetary policy and avoid running the risk that they need
to pivot by moving too early. No central banker wants to be remembered as the
one who caused deep, entrenched, long-term inflation and would rather keep
rates higher for longer even if this catalysed a recession.
Our hope, and view, is that the data continues to indicate that the
inflationary battle is won and central bankers will stay true to their word of
being driven by the data. Encouragingly more recent comments from the Federal
Reserve governors have been saying just this with even more hawkish members,
such as Governor Waller, sounding more dovish in their comments. Reinforcing
this position is the prospect of a US election. Despite claims of
independence, central bankers are increasingly driven by political pressure,
and the pressure on them to shore up the economy in an election year will be
powerful. Hence, we would argue that without a significant policy misstep, a
recession should be avoided, and, at worst, any recession will be a soft one.
3. Is it too early to buy bonds?
Interlinked with the outlook for interest rates and inflation is the outlook
for bonds. Depending on which side wins through, bonds will rise or fall
accordingly. If inflation does in fact remain persistent, necessitating that
rates have to go higher and potentially catalysing a recession in the process,
this will likely weigh heavily on bond prices in 2024. Conversely, if the
disinflation we saw in 2023 continues bringing forward the prospect of rate
cuts, then the rally we saw in the latter part of the year is likely to
continue.
Regardless of which scenario plays out, the rise in yields seen over the past
18 months has seen bonds shift from a position of having deeply unattractive
risk/reward characteristics, with zero yields, zero inflation and zero rates
making them extremely vulnerable to any disappointment, to one where they now
have historically more normal yields with positive real yields and for the
first time in many years providing a genuine alternative to equities. Whilst
we would avoid high yield bonds, given their sensitivity to recession, and
with spreads not offering a sufficient margin of safety, we do think that
short and mid duration bonds can be bought and, if held to maturity, should
provide attractive returns.
4. Contrasting Asian fortunes - Japan versus China
One of the most notable features of the past 12 months has been the starkly
diverging fortunes of China and Japan. As highlighted above, China faced
challenges within its important real estate sector, from geopolitical pressure
and from a sluggish post-COVID rebound, whereas Japan was enjoying the
benefits of government measures encouraging corporates to become more
competitive and, to some degree, its economy benefiting at the expense of
China.
The key question for the year ahead is whether to expect more of the same or
if a contrarian view is the way forward? Typically, we would tend to favour
the contrarian view. Japan has a long history of grabbing failure from the
jaws of success as efforts to change eventually peter out, often due to
political instability and institutional inertia. This time around though we
are feeling more optimistic. Politically, Japan is looking unusually stable at
the governmental level (although political manoeuvring is always going on
within the Liberal Democratic Party) and, even without this stability, there
is cross-party acceptance that Japan has to be more ambitious in its actions
if it is to compensate for the structural challenges it faces. With an aging
population and the Chinese powerhouse breathing down its neck, Japan
increasingly recognises radical action is needed and productivity growth is a
necessity if it is not to slide into oblivion. This recognition, combined with
Japan's starting point of low valuations and deeply inefficient balance
sheets, creates huge opportunities for investors, especially given the
herd-like mentality of corporate Japan - if one does it, others tend to follow
to avoid losing face.
Clearly, this change in direction is not without risks. Time and again, Japan
has failed to deliver and even if it is successful, we would expect it to be a
slow and rather tortuous journey but, even so, we remain significantly
overweight in Japanese equities at this juncture.
Conversely, China's history has been one of substantial structural gains
interspersed by the occasional missteps which have typically represented
excellent buying opportunities. Whether it was Tiananmen Square in 1989, when
China faced significant sanctions from the developed world, or the aftershocks
of the Asian crisis in the early 2000s, these in fact represented excellent
entry points.
Why then would we not view the current situation in China as being another
opportunity to buy? Well, it possibly does represent a tactical buying
opportunity, but our main concern at this juncture is that we see several
significant binary risks. Following his coronation as president for life, Xi
Jinping has shown his hand on two counts. One, he is an unashamed communist
leader who will unilaterally move the goal posts in the pursuit of his goals.
Whether it is the overnight regulation of the education sector or installing
government officials into the big Chinese tech companies, this changing
backdrop makes investing very difficult. Two, the growing wedge between the
East and the West is creating a potentially significant risk to stock prices.
In particular we would highlight the situation with Taiwan. Whilst one would
hope that the fate of Russia following its invasion of Ukraine would put Xi
off from forcibly taking control of Taiwan, the unification of Taiwan and
China is Xi's ultimate aspiration and the one thing you can say about Xi is
that he always follows through on his word. How the West and the US would
react to such a move is open to debate, but one would not want to be a holder
of Chinese assets at that point. Whilst we do not think China will invade
Taiwan imminently, it represents a binary risk that we feel is not well
compensated at this point.
A couple of years back we had pondered whether we should be adding a
structural position in China, reflecting its growing economic power and
importance on the world stage. Ultimately, we decided not to as we saw the
negatives discussed above starting to evolve. Instead, we remain content to
leave it to our specialist Asian managers to invest in China on a tactical
basis as they see fit and not to view the current situation as a time to add a
structural stake to our portfolios.
5. What are the tail risks in the year ahead?
As long-term investors, tail risks always remain at the forefront of our
minds, as it is often these that catalyse more extreme pullbacks in stock
markets. Worryingly the current environment looks especially vulnerable to
such risks. Structural shifts, as we are seeing at present, often place
considerable stress on those areas of the market that have been built on the
continuation of the status quo.
Top of the list is the step change in rates and bond yields. As we have
discussed in the past, a number of sectors built their business models on
rates remaining low, gorging themselves on free money and boosting their
returns in the process. Commercial real estate and private equity are
particularly notable on this front. Both sectors took on more and more debt
and saw their fund sizes ramp up on the back of the often-illusory high
returns they generated. Already, the speed with which yields have risen has
placed pressure on a number of players. Commercial real estate has been at the
forefront of this with the funding issues coming at a time when the demand for
real estate has dropped sharply, due to the trend towards working from home
post-COVID. PE has been more immune, but it is possible that a slower-motion
crash may be in motion. Currently the PE firms have been kicking the can down
the road, by slowing their realisations and avoiding taking any losses through
the use of structures such as continuation funds. Ultimately, they are
gambling markets will normalise and they will have avoided the need to sell at
more distressed levels. Time will tell.
This slow-motion crash may also be the key story for other sectors in the year
ahead. The next couple of years will be a much more active period for the
rollover of debt and it will be interesting to see which companies and sectors
have been swimming naked. At this point we're not overly worried about the
broader corporate sector, with companies typically managing themselves more
prudently post the financial crisis, with lower levels of debt and generally
longer maturity profiles, but it will be an area to watch closely, especially
if economies dip into recession.
Perhaps more worrying is the debt that has been accumulated in the government
sector. Crises rarely strike the same area twice and, whereas corporates were
the main victims in the Global Financial Crisis (GFC), government debt is
looking more vulnerable this time around. Typically, governments, in
particular developed market governments, are seen as possessing more prudent
finances and often have the luxury that they are perceived as the safest form
of debt and hence are able to fund their debt come whatever. Government debt
levels have, however, been rising sharply over recent years and dangerously so
in many cases. Having spent their way out of the GFC, governments then
embarked on a second round of major spending to dampen the impact of COVID.
This pushed borrowing up to precariously high levels and could result in a
disorderly sell-off if confidence is lost. We have seen a mini version of this
already with the Truss/Kwarteng debacle in late 2022, resulting in a collapse
in gilt prices on the back of imprudent policy measures.
Despite the challenges faced in the UK, it is in practice a sideshow with the
real danger lying in the US. US debt levels have risen significantly in recent
years, rising from $10 trillion in 2000 to $33 trillion in 2023, at a time
when funding costs are becoming more expensive and the demand for US bonds is
diminishing. Importantly, both China and Japan, who have historically been
important marginal buyers of US government bonds, are increasingly looking
elsewhere. Japan is likely to start investing more into domestic bonds on the
back of higher yields, as it moves away from its Yield Curve Control measures,
while China is trying to wean itself off buying US Treasuries to reduce its
dependence on the US market, in light of the sanctions the West put on Russia
post its invasion of Ukraine.
At this stage we have a watching brief on the situation and do not anticipate
an imminent collapse in the US government bond market. Partly this reflects
the lack of options for global investors, with the US bond markets remaining
the only real viable option to absorb global liquidity, but also the US has
the luxury of being able to print money to ultimately fund this debt.
Nonetheless, we will be monitoring the situation closely and we hope that debt
is ultimately reduced to lower and more sustainable levels and doesn't become
a source of global market volatility.
The other tail risk we watch closely is geopolitical. For many years we have
had relative geopolitical harmony with the US hegemony creating a favourable
backdrop for global stock markets and with the US's influence encouraging the
adoption of capitalist models based on the rule of law, with the desire to do
business being at the heart of the US mantra. Increasingly, however, the
combination of the rising power of the East with the unholy undemocratic
alliance between China, Russia and India, and to some extent the US stepping
back from its role as the global policeman, is creating a less stable and more
volatile global backdrop. Already we have seen this with Russia's invasion of
Ukraine and now the conflict in the Middle East. Dictators and undemocratic
actors around the world are increasingly seeing the model established by the
East as a real alternative to the one pushed forward by the US and the West
for several decades.
Unfortunately, we fear future years will see geopolitics becoming an even
greater problem and whilst one would have hoped that the events in Ukraine and
the Middle East would have solidified the world against tyranny, they have in
fact polarised the world into competing factions. Hence, whilst we have
typically ignored geopolitical risk in the past, often viewing it as an entry
point into markets, we are increasingly having to factor these risks into our
investment rationales, which is particularly challenging given the binary
nature of the outcomes.
Conclusion
Almost invariably the drivers of stock market returns can be distilled down to
two or three key factors. The last financial year was all about inflation,
with few market participants predicting the extent to which it would pullback
which set-off a domino effect of missed growth targets, interest rates
remaining high and surprisingly strong equity markets.
Inflation is also likely to play an important role in the year ahead, with the
focus now on whether inflation can be brought back to central bank targets,
freeing up central bankers to start cutting rates and avoiding a hard landing.
Previously we had been more in the camp that the low hanging fruit had been
had with this last slice of inflation proving more challenging to remove,
creating scope for disappointment as rates stay higher for longer. More
recently, however, we had become more sympathetic to this rump inflation also
dropping out as important inflationary components such as shelter inflation
and wages become less problematic. Recent data has indicated that inflation
has ticked back up in early 2024 leading to the possibility of delays in
global rate cuts which may well disappoint markets, who seemed to think
inflation had been beaten. We are still of the view that inflation is on the
downward trajectory, even if the journey is not as linear as markets had hoped
it would be, although there is a risk that central banks will cut too much,
too fast due to political pressure.
This backdrop should create a reasonable environment for global stock markets
with falling inflation, peak rates and a soft landing good for both equities
and bonds. Volatility is however likely to remain a feature. The inflationary
journey will in all probability be a mixed one and certainly not linear. As
alluded to above, there is the real risk of policy misstep by central banks
who are not as independent as many believe them to be. Similarly, we do not
think we are returning to the backdrop we saw in the 2010s. As we have
discussed in the past, we view this period as being something of an anomaly
and think it unlikely we will return to an environment dominated by low
volatility, deflation and zero rates any time soon. Hence, whilst remaining
broadly pro-risk as we enter the 2025 financial year, we have introduced more
balance into portfolios both at the country level, including a meaningful
overweight to Japan, but also across asset classes with bonds becoming a
genuine alternative to equities. We have also blended styles through owning
value and growth rather than the rather unidirectional portfolios we ran over
the last cycle. We remain vigilant and think active management will be even
more important for the period ahead.
Portfolio Review and Activity
Global equity markets performed very strongly over the course of the financial
year, with the MSCI ACWI NR Index (GBP) rising 20.6%. Bonds struggled, with
the FTSE UK Gilts All Stocks TR Index flat over the year, with investors
pushing back their forecasts for interest rate cuts as inflation fell more
slowly than some had hoped. The UK CPI rose 3.2% over the year.
The portfolio performed very well during the year with the Company's NAV total
return outperforming the global market, with a gain of 25.1%. As well as being
ahead of all three KPIs, this return is also strongly ahead of the performance
of a traditional 60:40 equities and bonds portfolio (up 12.0% over the
financial year).
The Company's position in Ocean Wilsons was a strong contributor during the
financial year, with a return of 64.8%.
The Company's net asset value per share rose from 305.0p at the end of March
2023 to 378.6p at the end of March 2024; with 3.2p per share having been paid
out in dividends during that time.
Core and Thematic Funds
The Core Regional and Thematic silo returned 19.2% for the financial year.
The Company's North American holdings were amongst the strongest performers
largely keeping up with the regional index. Pershing Square Holdings delivered
a return of 46.4% over the financial year. The manager's decision to initiate
a position in Alphabet in early 2023 proved to be an excellent one with the
company strongly contributing to performance throughout the year. A position
in Chipotle Mexican Grill also increased significantly in value following very
strong results, which showed traffic growth accelerating and successful new
product launches. The company continues to grow its restaurant count at 10% a
year in North America and is now increasing investment in its international
expansion. Findlay Park American gained 28.9%, while Select Equity increased
by 23.4%, with Select slightly lagging due to its lower exposure to large cap
technology stocks. Beutel Goodman US Value did well considering its value bias
with a return over the last year of 17.2%.
In Japan, two new positions, Arcus Japan and Alma Eikoh Japan Large Cap, were
added in November and they have since performed well with returns of 15.4% and
11.2%, respectively, since purchase. Arcus' largest holding, IHI Corp,
performed very strongly in February and March 2024 as investors forecasted the
company would post record operating profits for the year ahead. The company
had suffered with an issue in its aero engines division that has now largely
been contained, which led to a large operating loss in the year ending March
2024. For Alma, Mitsubishi Heavy Industries was a strong performer benefiting
from the thematic drivers of increasing defence expenditure and the energy
transition. The Japanese government has been investing heavily to improve
their defensive capabilities in the face of a more assertive China following
decades of relative calm. Indus Japan gained 9.8% over the year, while Simplex
Value Up has been more muted, up 4.5%, as its small/mid-cap bias and benchmark
agnostic strategy meant it benefited less from the broad market upswell.
Within our emerging and frontier market holdings, BlackRock Frontier
Investment Trust continued its strong run with a return over the last 12
months of 19.5%, compared to the MSCI FM Index which gained 11.5%. Much of the
trust's financial services exposure performed well, with Bank of Georgia
seeing a significant increase in its share price following its acquisition of
Armenian bank Ameriabank, which allowed the company to access the fast-growing
Armenian market. The manager also added to its position in Bank Central Asia
in Indonesia given its relatively stronger funding franchise, though
performance has been volatile since. E-commerce company Kaspi performed well
after announcing net profit numbers that were up 60% from the previous year,
with strong growth in all areas of the business. In the last quarter we sold
KLS Corinium Emerging Markets Equity following poor performance and a rapid
decline in assets under management and added Redwheel Next Generation Emerging
Markets Equity, which we feel is better placed to succeed going forward.
Schroder Asian Total Return benefited from its significant underweight to
China throughout the year, gaining 8.7% over the whole year, while the MSCI AC
Asia Pacific ex Japan Index was up just 5.3% over the last 12 months. Aside
from the structural underweight to China, the manager's holdings in the
semiconductor producers, TSMC and Samsung Electronics, performed strongly as
they benefited from the surge in interest in AI. These were the fund's largest
two holdings accounting for c.18% of the fund at the end of March 2024.
NTAsian Discovery delivered an annual return of 7.7%.
There were some exceptional performances in the thematic holdings, with RA
Capital International Healthcare gaining 42.7%. The fund has seen several of
its portfolio companies being acquired over the last six months. Icosavax was
acquired by AstraZeneca at slightly above the IPO price, representing a gain
of over 160% over the last year. Carmot Therapeutics was acquired by Roche for
$2.7bn upfront reflecting a 3.5x uplift from the company's last valuation,
with an additional $400m if certain milestones are met. The company has a
series of promising treatments for type 2 diabetes and obesity, areas which
have seen a surge in investor interest over the last year. Worldwide
Healthcare Trust made a return of 8.3% over 12 months, while BB Biotech was
down 6.9% over the year.
Both technology funds had strong years with Polar Capital Global Technology
gaining 26.8% and GAM Star Disruptive Growth increasing 33.7%. The Polar fund
has leant into AI with a significant amount of its holdings positioned to
directly benefit from the increased investor interest in the area. Its top 10
holdings include five of the Magnificent Seven (NVIDIA, Microsoft, Meta,
Alphabet and Apple) with Amazon also being a large position for much of the
last year. The fund is also significantly overweight semiconductors with
Advanced Micro Devices, TSMC and Samsung Electronics all in the portfolio
(alongside NVIDIA) over the course of the year. GAM is slightly different with
the manager being more cautious on AI with a smaller weighting to
semiconductors and more investments in small and mid-cap technology companies.
Polar Capital Global Insurance has also performed well, gaining 21.3% over the
year. Pricing in the insurance market continues to be strong with many
companies producing significantly higher profits off the back of it.
Diversifying Funds
The diversifying holdings are intended to provide an alternative source of
returns, whilst dampening volatility and displaying low beta to the equity
market. It is pleasing that they have contributed positively over the
longer-term, especially when compared to the strongly negative returns from
bonds in that period. The Diversifying silo returned 5.3% over the year, while
the FTSE All Stocks Gilts Index was flat. Over three years, the diversifying
silo has returned 13.0%, far ahead of the 20.6% loss of the Gilts Index.
Some of the portfolio's alternative hedge funds have performed especially
strongly. Prana Absolute Return made an impressive 17.2% over the year. The
fund is an equity market neutral long/short fund specialising in investing in
the financials and business services sectors. The strategy focuses on trying
to hit singles rather than home runs, meaning that no one particular trade was
a big winner for the fund, but more the team got the general direction of
travel of the market correct. Some long positioning in the insurance industry
contributed positively with some banking positions benefiting from higher
interest rates as well. The two trend-following CTA funds, GAM Systematic Core
Macro and Schroder GAIA BlueTrend, also performed strongly over the year with
returns of 7.6% and 13.6%, respectively. BlueTrend has benefited from being
more trend focused while the GAM strategy, which has a value model alongside
its trend model, has not been quite as strong although it has still performed
well.
Nephila Iron Catastrophe Fund, a specialist strategy investing in catastrophe
bonds and other insurance-related securities, also continued to perform well
and is now up 24.2% since purchase in May 2023. We believe these strong
returns reflect the extremely strong pricing environment in the space and will
have been boosted by the relatively low US hurricane activity during the 2023
season. Pricing continues to look attractive for the 2024 season, remaining at
similar levels to the previous year, with only a limited amount of new capital
entering the market. The macro trading fund Hudson Bay rose 5.6% over the
year. The fund has performed well during the period we have held it, but we
took the decision to reduce its position size at the end of the year after the
manager changed the liquidity terms and increased the amount of costs charged
to investors as fund expenses. MKP Opportunity Fund made a small loss over the
year, being down 0.2%.
The portfolio's diversifying fixed income holdings mostly managed to deliver
positive performance over the year, despite gilts being flat over that period.
Selwood Liquid Credit Strategy was the strongest, gaining 14.5%. The fund
sells credit default swaps to investors looking for protection against
potential defaults of investment grade debt. Demand has remained robust as
rising rates have made some investors nervous about whether companies will be
able to refinance their debt piles. Apollo Total Return also performed well,
being up 8.4% over the year. BioPharma Credit had a poor first six months but
was stronger in the latter part of the year and delivered a return of 1.6%
over 12 months. The company had a difficult period in mid-2023 when a loan to
LumiraDx looked in danger of default. However, the manager took a very active
role in the situation and forced the company to sell itself to Roche in
January 2024, in a deal which will return the majority of the manager's
invested capital. The market reacted positively to this development, making up
the earlier losses and vindicating the protection the manager wrote into their
loan agreement which allowed them to force the sale.
Private Equity
As we look to add an element of private equity exposure to the portfolio, we
made four commitments during the financial year. These were to BPEA EQT
Mid-Market Growth Partnership, Triton 6, TrueBridge Capital Partners Fund VIII
and TrueBridge Direct Fund III. These now sit alongside prior commitments to
TA XV, Khosla Ventures VIII, GGV Discovery IV-US and GGV Discovery IV-Asia.
All are Limited Partnership vehicles that will draw down capital over several
years as the managers identify investment opportunities. We feel we are
putting together a very high-quality group of funds in the private equity
arena that will add differentiated exposures to the portfolio. It can take
several years to build a private equity portfolio and it is important not to
rush to reach a target allocation and overcommit. While private equity markets
have been more sedate over the last year, we anticipate activity picking up
during the year ahead and we will continue to be prudent about which funds we
commit to. Such investing requires a long-term mindset that we think sits well
with the portfolio's structure.
Global Equities (direct)
The portfolio rose 14.7% over the past year, with the biggest contributors
being Interactive Brokers, Subsea 7 and Bergman & Beving. The biggest
detractors were CK Hutchison, Orion and Dollar General.
It's been an exciting journey over the past seven years as we transitioned the
portfolio from UK equities to a global equity portfolio. During this time,
we've achieved an annualized return of 10%.
Last year, our portfolio exceeded expectations, achieving a remarkable 20%
earnings growth, surpassing our initial projection of 10%. Despite this
exceptional performance, we think the intrinsic values should grow by 10% in
the next year, in line with consensus analyst forecasts.
What's truly compelling is the potential for further performance improvement.
Despite the impressive growth, our businesses continue to be undervalued,
trading at just 70% of our growing intrinsic value. Our portfolio's current
P/E ratio of 10.9x 2024 earnings may appear conservative compared to the
market's 18x, but the quality of our businesses remains underappreciated.
Should the market recognise this quality and revalue our holdings, we're
positioned to compound at even higher rates.
GCO embodies the qualities we prize in our investments: a high-quality
business with sustainable growth, led by a management team that's both aligned
and accomplished. Yet, despite these remarkable attributes, GCO remains
underappreciated, affording us the opportunity to own it with a significant
margin of safety.
Let's delve into the pillars of our investment thesis:
Quality: With a rich 160-year history, GCO stands as a stalwart in the
insurance industry, offering credit insurance alongside traditional homeowner
and auto coverage. Despite the perceived risk in credit insurance, GCO's
disciplined underwriting practices and the market's oligopolistic nature have
ensured consistent profitability and high margins.
Growth: Over the past two decades, GCO has delivered impressive growth,
boasting a 15.6% CAGR in book value per share, far outpacing global peers.
With a promising outlook for continued growth, fuelled by its excess capital
of €1.3 bn for strategic acquisitions, GCO is primed to sustain its
trajectory of double-digit growth in book value and EPS.
Management: The Serra family's majority ownership spanning over 75 years
underscores their prudent stewardship of GCO. Their conservative management
style, characterised by a long-term horizon and strategic capital allocation,
resonates with our investment philosophy. Instead of chasing short-term gains,
they prioritise value creation through counter-cyclical capital deployment and
astute acquisitions.
Valuation: Despite its sterling fundamentals, GCO's valuation remains
compelling. While our initial investment in 2020 was made at 9.5x P/E and 0.8x
book value, GCO's current trading multiples of 7x P/E and 0.8x book represent
an even wider discount to historical and peer averages. The valuation
remaining low has worked to our advantage as we were able to add to our
holding at attractive prices. Despite the stubbornly low valuation the shares
have returned 80% since our investment, as GCO has produced robust earnings
growth and dividends. We estimate the business's intrinsic value at €54 per
share today, with the potential to reach €92 in the next 4-5 years if they
maintain their low teens ROE, offering us an enhanced margin of safety at the
current price of €35.
In summary, GCO epitomises the type of investment opportunity we actively
seek-combining quality, growth, sound management and attractive valuation-a
recipe for sustainable long-term value creation.
Overall, we remain optimistic about the future prospects of our portfolio and
are excited about the opportunities that lie ahead. We look forward to
continuing our journey of delivering strong returns for our investors, while
carefully managing risk and maintaining our focus on long-term value creation.
During the year as well as initiating a position in Eurowag, we added to our
positions in Bergman & Beving, Subsea 7, Interactive Brokers, GCO,
Glencore and CTT, reduced our positions in EXOR, CK Hutchison and Arch and
sold our positions in ViaSat, CVS and Dollar General.
Ocean Wilsons Holdings
As the largest integrated provider of port and maritime logistics in Brazil,
the Ocean Wilsons subsidiary, Wilson Sons, has a strong competitive position.
It is the leading provider of towage services in Brazil with the largest and
most modern fleet, as well as operating major container terminals in the north
and south of the country: Salvador and Rio Grande. The company is benefiting
from the continuing recovery in global trade, as well as a rebounding demand
for its offshore energy-linked services, which should provide the basis for
improved performance of the firm's assets.
Wilson Sons operational results have shown strong growth across the business
during 2023 and the fourth quarter results (released in March 2024) reflected
this. There was strong revenue growth over the course of the year (10.6%
higher than the prior year), driven by excellent towage results, operational
growth in container terminals and a strong recovery in offshore energy-linked
services. Results in the towage division were particularly strong, with higher
volumes and an increase in average revenue per manoeuvre, combined with the
launch of two new tugboats. In the container terminal division, operational
growth has been mainly driven by a surge in volume at the Rio Grande terminal
(+21.9%). The number of vessel turnarounds in the offshore support bases were
37.6% higher than the previous year, thanks to markedly higher demand for the
company's offshore energy-linked services.
The investment portfolio shares many characteristics with the portfolio held
directly within Hansa Investment Company, with a preference for funds with
clearly defined strategies run by managers with skin in the game. The
portfolio delivered a return of 10.1% for the 2023 calendar year, with
particularly strong performance coming from its core regional exposures later
in the year. The most recent valuation for the investment portfolio was
$310.9m as at the end of December 2023. Performance has been helped by
thematic exposures to the technology and insurance sectors. Several of the
technology holdings have benefited significantly from the surge in investor
interest in AI, while the insurance industry has seen elevated pricing
continue into 2024. Some of the largest private equity positions include
venture capital funds of funds managed by Stepstone, US buyout and growth
funds managed by KKR and TA Associates and a financials-focused fund managed
by Reverence Capital. Dividends totalling $9.1m, in four tranches, were paid
to the parent company from the portfolio throughout the year. The board of
Ocean Wilsons Holdings has proposed increasing the annual dividend payment to
shareholders from 70p to 85p per share from 14 June 2024.
Following its 12 June 2023 announcement regarding the strategic review of the
OWHL's investment in Wilson Sons, the board of OWHL updated investors on 15
November 2023 to state they have engaged Banco BTG Pactual S.A. as an advisor.
The board also confirmed they have received a number of indicative non-binding
offers. The board has previously stated that the review will consider all
potential strategic options and there can be no certainty as to its outcome.
We will report on any further developments as they are made known.
Alec Letchfield
Chief Investment Officer
March 2024
The portfolio
As at 31 March 2024
Investments Fair value % of net
£000 assets
Core Regional Funds / Thematic Assets
Findlay Park American Fund 31,578 6.9
iShares Core S&P 500 UCITS EFT 27,202 6.0
Select Equity Offshore Ltd 22,690 5.0
Blackrock European Hedge 17,387 3.8
Pershing Square Holdings Ltd 13,482 3.0
Schroder ISF Asian Total Return 11,516 2.5
Polar Capital Global Technology 10,056 2.2
BA Beutel Goodman US Value Fund 9,338 2.1
iShares Core MSCI Europe UCITS ETF 9,331 2.1
Schroder ISF Global Recovery 8,817 1.9
Polar Capital Insurance Fund 8,349 1.9
Indus Japan Long-Only Fund 7,878 1.7
Armistice Capital Offshore Fund Ltd 6,592 1.5
Simplex Value UP Master Fund 5,735 1.3
GAM Star Fund PLC - Disruptive Growth 5,502 1.2
Redwheel Next Generation 4,855 1.0
iShares Core EM IMI UCITS ETF 4,408 0.9
NTAsian Discovery Fund 4,385 1.0
BlackRock Frontiers Investment Trust PLC 4,051 0.9
RA Capital International Healthcare Fund 3,769 0.8
Impax Environmental Markets Fund 3,662 0.8
Ishares MSCI World Energy Sector UCITS ETF 3,250 0.7
Ishares MSCI Global Markets & Mining Prods ETF 1,751 0.4
Arcus Japan 1,731 0.4
BB Biotech AG 1,699 0.4
Alma Capital 1,668 0.4
230,682 50.8
Strategic
Ocean Wilsons Holdings Limited(1) 130,004 28.6
Wilson Sons 96,263 21.2
Ocean Wilsons (Investments) Limited 33,741 7.4
130,004 28.6
Diversifying
Global Event Partners Ltd 8,269 1.8
DV4 Ltd(2) 7,697 1.7
Hudson Bay International Fund Ltd 4,061 0.9
Selwood AM - Liquid Credit Strategy 3,889 0.9
GAM Systematic Core Macro (Cayman) Fund 3,361 0.6
MKP Opportunity Offshore Ltd 3,328 0.7
Schroder GAIA BlueTrend 3,277 0.7
Nephila Iron Catastrophe Fund Ltd 3,141 0.7
Apollo Total Return Fund 2,618 0.6
Keynes Systematic Absolute Return Fund 2,542 0.6
Prana Absolute Return Fund 2,178 0.5
BH Absolute Return Government Bond 1,820 0.4
Vanguard US Govt Bond Index Fund 1,492 0.3
BioPharma Credit PLC 1,259 0.3
Lazard Convertible Global 717 0.2
49,649 10.9
Global Equities (direct)
Interactive Brokers Group Inc 6,365 1.4
Grupo Catalana Occidente SA 4,691 1.0
Subsea 7 4,598 1.0
Orion Engineered Carbons SA 3,902 0.9
Arch Capital Group Ltd 3,896 0.9
Exor NV 3,302 0.7
Bergman & Beving 3,104 0.7
Coats Group PLC 2,778 0.6
Glencore PLC 1,719 0.4
CK Hutchison 1,630 0.4
CTT-Correios de Portugal 1,553 0.3
Eurowag 938 0.2
38,476 8.5
Private Assets
Khosla Ventures VIII 135 0.0
BPEA Equity Mid-Market Growth Partnership 99 0.0
Truebridge Direct VIII 80 0.0
Truebridge Capital VIII 28 0.0
342 0.0
Total investments 449,153 98.8
Net current liabilities (421) (0.1)
Net current assets 5,815 1.3
Net assets 454,547 100.0
(1) Hansa Investment Company Ltd owns 9,352,770 shares in Ocean Wilsons
Holdings Limited (OWHL). In order to better reflect Hansa Investment Company's
exposure to different market silos, the two subsidiaries of OWHL, Wilson Sons
and Ocean Wilsons (Investments) 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 31 December 2023 OWHL Financial
Statements, to the market value of OWHL's holding in Wilson Sons, that being
the bid share price of Wilson Sons multiplied by the number of shares held by
OWHL at 31 March 2024.
(2) The holdings within the private assets silo, as well as DV4 Ltd are
unlisted Private Equity holdings. As such, their value is estimated as a Level
3 Asset in note 19. All other valuations are either derived from information
supplied by listed sources, or from pricing information supplied by third
party fund managers.
Strategic Review
Investment objective, strategy and performance
Investment objective policy
The Company objective is to grow the net assets of the Company over the medium
to long-term by investing in a diversified and multi-strategy portfolio.
The Company seeks to achieve its investment objective by investing in
third-party funds, global equities and other international financial
securities. The Company may invest in quoted and unquoted securities.
The Company currently holds a strategic position in the share capital of OWHL.
The Company will not make further investments into OWHL.
The Company has no set maximum or minimum exposures to any asset class,
geography or sector and will seek to achieve an appropriate spread of risk by
investing in a diversified global portfolio of securities and other assets.
Investment strategy
The Portfolio Manager, engaged by and acting on behalf of the Company, seeks
to build a multi-strategy portfolio by selecting investments across four key
investment categories, in addition to the strategic investment in OWHL:
Core / Thematic - investments, typically through third-party funds, selected
by the Portfolio Manager to provide appropriate regional and thematic
exposures.
Thematic - investments, typically through third-party funds, that reflect key
investment themes the Portfolio Manager believes will generate excess returns.
Diversifying Assets - investments, typically through third‑party funds and
directly, that create asset diversification within the portfolio.
Global Equities (direct) - a diversified portfolio of global equities
identified by the Portfolio Manager as having long-term growth potential.
Although the Company has no set maximum or minimum exposures to any asset
class, geography or sector, the Board establishes set guidelines which the
Portfolio Manager adheres to. These can be adjusted by the Board. While the
proportion of the portfolio represented by each of these categories will vary
over time, the Board establishes parameters for the Portfolio Manager, based
on its view of the global investment environment. The Board has set the
following guidelines for each category as a percentage of the portfolio
(including the strategic investment in OWHL):
Core / Thematic: 0-75%
Diversifying Assets: 0-40%
Global Equities: 0-40%
Private Assets: 0-15%
The Portfolio Manager has a strong focus on identifying investments with
excellent fundamentals, taking a long-term approach to investing, good
alignment and not seeking to replicate a benchmark. These investments range
from those sectors benefiting from structurally higher growth, such as
technology, to assets which the Company believes stand on unwarranted
discounts to their intrinsic value.
During the year, further commitments to limited partnerships have been made as
part of the build-out of a private equity programme. This follows the prior
year's agreement between the Portfolio Manager and the Board to add an
allocation to Private Equity and Venture Capital to the Portfolio. This is
expected to be a multi-year programme, which will develop access to
investments that are not available in public markets. The long-term nature of
private equity aligns well with the long-term investment horizon of the
Company, and the Board believes this new exposure will be seen as very
attractive by existing and potential future shareholders.
Borrowing limits
The Board considers whether returns may be enhanced if the Company introduces
leverage at appropriate times. The Company has an unsecured lending facility
through its Custodian, Banque Lombard Odier & Cie SA ("Lombard Odier"), in
the amount of £30m, subject to there being sufficient value and diversity
within the portfolio to meet the lender's borrowing requirements. The
Portfolio Manager is able to utilise this facility as required up to the upper
limit available. No amounts have been drawn from this facility during the
year.
Investment monitoring and key performance indicators (KPIs)
We recognise that measuring the performance of portfolios is essential to both
determining if they are meeting their return targets and the risks taken in
achieving these returns. However, we also passionately believe that the
benchmarks and/or comparators against which portfolios are measured should be
appropriate for achieving the end objectives, with poorly chosen benchmarks
often encouraging short-term actions which more often than not are damaging to
meeting the longer-term aspirations.
It is for this reason that we believe it right to adopt a handful of KPIs
rather than a single benchmark. As long-term multi-asset class investors we
are seeking to both preserve and grow the real spending power of our capital
over time through the dynamic selection of different countries, assets and
sectors. No one benchmark captures this approach and, indeed, the adoption
of a single benchmark may result in the fund deviating from its longer-term
goals in the pursuit of short-term returns.
Instead, the Board believes that considering the portfolio performance against
the following KPIs will provide a more informed understanding of the
performance of the portfolio and if it is meeting its longer-term objectives:
Objective KPI Indices used
Safe return UK Government bonds FTSE Gilts All Stocks TR Index
Growing the real spending power of money through time Achieve returns that are higher than inflation UK CPI
Long-term capital growth Equity market performance MSCI All Country World Index (both market cap weighted and equally weighted to
remove the distorting effect of the Magnificent 7)
The Board regularly, and at least quarterly, reviews the returns and the
performance of the Company with the Portfolio Manager, including an analysis
using the KPIs.
Additionally, whilst not specifically a KPI, the cost of managing the Company
is monitored against the NAV (the ratio between costs and the NAV is also
known as the 'ongoing charges percentage per annum ratio'); and the
discount/premium the shares sell at in relation to the NAV are likewise
monitored.
The Board of Directors monitors the returns made in absolute and relative
terms against the KPIs established. The comparisons are made over 1, 3, 5
and 10 year time horizons.
i) Shareholders and company - total returns
To 31 March 2024 1 year 3 years 5 years 10 years
Share price total return
Ordinary shares 22.7% 11.4% 17.4% 43.1%
'A' non voting Ordinary shares 21.8% 8.0% 14.4% 39.7%
Portfolio NAV 25.1% 27.4% 42.6% 79.0%
ii) Discount/premium
A comparison is made between the (discount)/premium of the Company's two
classes of shares and of the AIC average.
To 31 March 2024 1 year 3 years 5 years 10 years
average
average
average
average
Share price total return
Ordinary shares (41.4%) (38.4%) (36.9%) (31.9%)
'A' non voting Ordinary shares (42.9%) (39.4%) (37.3%) (33.2%)
AIC (%) (12.1%) (8.7%) (7.6%) (5.4%)
Note: AIC only produces an AIC average for one year.
Whilst there are investment trusts that exhibit one or more similarities to
the Company, the Board does not consider the Company to have any direct peers.
iii) Key performance indicators
The following are the KPIs the Board uses to assess the returns of elements of
the portfolio and of the Company as a whole.
To 31 March 2024 1 year 3 years 5 years 10 years
NAV Total Return 25.1% 27.4% 42.6% 79.0%
NAV Total Return (Ex OWHL) 14.0% 10.6% 37.0% 71.8%
FTSE UK Gilts All Stocks TR Index 0.0% -20.6% -17.5% 7.8%
UK CPI Inflation 3.2% 21.6% 24.3% 33.4%
MSCI ACWI NR (GBP) 20.6% 33.8% 73.9% 203.3%
iv) Expense ratios
To 31 March 2024 1 year 3 years 5 years 10 years
Ongoing annual charges (%) 1.0 1.1 1.1 1.1
To comply with the Packaged Retail and Insurance-based Investment Products
Regulation (PRIIP), the Company has issued a PRIIPs Key Information Document
(KID) for each of its two share classes. In the PRIIP, KID regulations are
very prescriptive as to how costs are calculated and presented. In particular,
in addition to the costs of the Company itself noted above, the PRIIP
calculation also incorporates the costs of the directly held fund investment
vehicles themselves, but not those for directly held equities. Based upon the
financial results for the year to 31 March 2023, the PRIIP KID cost ratio is
1.78% per annum.
Shareholder profile
Capital structure
The Company has 40,000,000 Ordinary shares of 1p (1/3 of the total capital)
and 80,000,000 'A' non-voting Ordinary shares of 1p (2/3 of the total capital)
each in issue. The Ordinary shareholders are entitled to one vote per Ordinary
share held. The 'A' non-voting Ordinary shares do not entitle the holders to
vote or receive notice of meetings, but in all other respects they have the
same rights as the Company's Ordinary shares. See also Note 13 in the Notes to
the Financial Statements.
Shareholder profile
The Company's shares owned at 31 March 2024 are as follows:
Ordinary shares 'A' non‑voting ordinary shares
Institutional and wealth managers 16,326,624 40.82% 72,605,306 90.76%
Directors 11,220,745 28.05% 3,817,123 4.77%
Private individuals 12,423,589 31.06% 3,348,753 4.19%
Other 29,042 0.07% 228,818 0.29%
40,000,000 80,000,000
Substantial shareholders
As at 31 March 2024, the Directors were aware of the following interests in
the Ordinary shares of the Company, which exceeded 3% of the voting issued
share capital of that class.
No. of voting shares % of voting shares
Nomolas Ltd 10,347,125 25.87%
Victualia Limited Partnership 10,347,125 25.87%
Sky Hill Limited 1,730,000 4.33%
These holdings are correct as of 31 March 2024 and have not changed as at the
signing date of these Financial Statements.
Hansa Investment Company traces its origins back to 1912 when the Alto Paranà
Development Company was launched to develop forestry in Brazil. Having become
an investment trust company in the late-1940s, the Company became closely
associated with the Salomon Family, initially through Sir Walter Salomon,
whose family trusts became substantial shareholders. The late-1950s also saw
the acquisition of a significant shareholding of Ocean Wilsons Holdings
Limited through the issuance of the 'A' non-voting Ordinary shares by the
Company's predecessor, Hansa Trust. Over the following decades, the Salomon
family helped to build the publicly-owned and independently run investment
company we know today, with its focus on delivering reliable long-term asset
growth for shareholders.
The wider Salomon family remain significant investors in the Company. William
Salomon, Sir Walter's son, a director of HICL and Senior Partner of the
Company's Portfolio Manager, is interested in 10,347,125 of the shares held by
Victualia Limited Partnership, representing 25.9% of the voting share capital.
In addition, William Salomon has further interests in the Company's shares;
the total interest is detailed in the Directors' Interests section. Other
members of the wider Salomon family, who are also descendants of Sir Walter,
are interested in a further 12m shares in the Company.
Restrictions associated within the share classes
The giving of powers to issue or buy back the Company's shares requires an
appropriate resolution to be passed by shareholders. Proposals for the renewal
of the Board's powers to buy back shares are set out in the Notice of the
Annual General Meeting.
There are: no restrictions concerning the transfer of securities in the
Company; no agreements between holders of securities regarding their transfer
known to the Company; and no agreements between the Company and its Directors
concerning compensation for loss of office. Notwithstanding the foregoing, the
Company can require any holder of the Ordinary voting shares to transfer some
or all of its shares (or otherwise refuse to register any transfer of shares)
to avoid the Company, if the Company were a company which was resident for tax
purposes in the UK, being regarded as a "close company" as defined in s.414 of
the UK Income and Corporation Taxes Act 1988, to another person whose holding
of such shares, in the sole and conclusive determination of the Board, would
not cause the Company to be a close company. Additionally, the Company's
Bye‑Laws provide for the voting rights of Ordinary shares to be
automatically reallocated to other shareholders to prevent the Company
becoming a close company.
As at 14 June 2024, the date of signing of the Annual Financial Statements,
there have been no disclosures to the Company of changes of interests under
DTR 5.
Board and management shareholdings
Directors' Interests
The interests of Directors and their connected parties in the Company at 31
March 2024 are shown below:
Ordinary shares 'A' non‑voting ordinary shares Nature of
of 1p each of 1p each interest
W Salomon 11,169,345 27.92% 3,587,123 4.48% Beneficial
J Davie 45,000 0.11% 230,000 0.29% Beneficial
S Heidempergher 6,400 0.02% - - Beneficial
Total 11,220,745 28.05% 3,817,123 4.77%
As at 14 June 2024, the date of signing the Annual Financial Statements, there
were no changes to report to the Directors' holdings.
William Salomon is the senior partner of Hansa Capital Partners LLP. Fees
payable to Hansa Capital Partners LLP amounted to £3,065,129 (including
Portfolio Management and Additional Administrative Services Provider (AASP)
functions). The fees outstanding at the year end amounted to £285,000. During
the year, no rights to subscribe for the shares of the Company were granted
to, or exercised by Directors, their spouses or infant children.
Portfolio Manager's interests
As at 14 June 2024, the date of signing of this Annual Report, the management
and staff of the wider Portfolio Manager's group (Hanseatic Asset Management
LBG, an Investment Manager and AIFM located and regulated in Guernsey),
excluding the holding of William Salomon, shown above, were interested in
circa 10.3m shares in the Company - a mixture of Ordinary and 'A' non-voting
Ordinary shares.
Stakeholder engagement
Requirements of Section 172 UK Companies Act
As required by the AIC Code, the Board describes below how it has met the
requirements of Section 172 of the UK Companies Act, as applicable to the
Company. This includes an explanation of how the Board has sought to promote
the Company for the benefit of its members, how it has taken into account the
likely long-term consequences of decisions and how it fosters relationships
with stakeholders. The Company is an investment company with an appointed
Portfolio Manager. As a result, it has no direct employees or customers. The
Board has identified the Company's shareholders, its Portfolio Manager (as
well as the Additional Administrative Services Provider, "AASP"), its other
key service providers as its key stakeholders.
Stakeholder Interaction
Shareholders The shareholder base is a mixture of private investors, wealth managers and
asset managers across both classes of the Company's shares. The Board monitors
changes in the shareholder base at its Board meetings. The Company
communicates through the publication of Annual and Half-Year Financial
Statements, through detailed quarterly and monthly factsheets, as well as
through the Company's website. The Company also holds periodic shareholder
presentations incorporating presentations by the Board and key service
providers to keep shareholders informed.
The Board seeks to understand the opinions of a wide variety of shareholders.
The Company maintains a dedicated email address for shareholders to contact
the Board (HICLenquiry@hansacap.com) and shareholder correspondence and
feedback is a regular item of discussion at Board meetings.
The Company continues to meet shareholders and other interested parties
facilitated by its broker, as well as through direct contact. The Portfolio
Manager also runs an outreach programme in conjunction with an investor
relations specialist.
Investors are also kept informed through paid-for editorial pieces and
discussion with media organisations. The Board uses online shareholder
presentations to enable shareholders to meet with the Board and Portfolio
Manager. Whilst the Board believes there is still a place for face-to-face
shareholder updates, the strong attendance at the online events encourages the
Board that these online events will remain a feature of the Company's
shareholder outreach. The next shareholder event is planned for 25 September
2024 as a hybrid online and physical meeting.
Portfolio Manager and AASP The Board's main working relationship is with the staff of HCP as the
Portfolio Manager and the AASP. HCP is responsible for the Company's portfolio
management (including asset allocation, stock and sector selection in
accordance with guidelines established by the Board). It is also responsible
for administrative and operational functions including day-to-day oversight of
the other key service providers (Administrators, Custodians, Registrar and
Company Secretarial). Successful management of shareholders' assets by the
Portfolio Manager is crucial to enable the Company to deliver its investment
strategy and meet its objective. The AASP also assists with the preparation of
the Annual and Half-Year Financial Statements as well as Factsheets and
website updates. The Board works closely with the AASP to approve disclosures
made via these publications.
Other key service providers Key service providers are the Company's Administrator (Apex Fund
Administration Services (UK) Ltd), Custodian (Lombard Odier) and Registrar
(Computershare Investor Services (Bermuda) Limited). Whilst the Board looks to
the Portfolio Manager and the AASP to keep a day-to-day oversight of these
providers, they are contracted directly to the Company. As such, the Board
retains ultimate responsibility for their roles. The AASP reports regularly on
operational matters. The Board seeks to visit each provider at least annually
for a face-to-face meeting to discuss service levels, operations and future
developments.
Main areas of engagement
Key area Topic Engagement and outcomes
Investment strategy and ESG matters The Investment Strategy incorporates appropriate ESG considerations. For The Board has engaged with the Portfolio Manager and encouraged them to
clarity, the Company does not purport to be a "Green" fund. However, through develop a responsible investment policy. The Board notes that the Hanseatic
its ESG disclosures and reporting the actions of its Portfolio Manager, it Group, of which the Portfolio Manager is a member, is a signatory to the
seeks to give clarity to the processes around assessing the Environmental, UNPRI. The Board wholeheartedly supports this policy. See further on in the
Social and/or Governance aspects to its investment decisions and ongoing report for further information.
monitoring.
Discount management and share buybacks It is a great frustration to the Board that the discount has not tightened The Board is mindful of, and regularly considers, the share price compared to
over the past year. It is also noted that there has been general widening of the NAV and related discount. The Board is of the view that providing
investment trust spreads due to market volatility and declining retail transparency and clarity to investors, as well as promoting demand for the
participation in the markets. Company's shares, should create a positive impact on the discount for the
medium to longer-term. To this end, the Board has redeveloped the Company's
website, its Annual and Half-Year Financial Statements and its factsheets and
quarterly reviews. The Board continues to develop the Company's branding and
communications strategy with shareholders and potential shareholders alike.
The aim is to enhance and broaden the understanding of the Company, with the
ultimate objective of widening the shareholder base and deepening the market
for shares.
The primary objective of the Company is to generate a good economic return
over the medium to long-term and create a compelling investment proposition
for private investors, enabling them to gain access to investments not readily
available. This in due course should increase demand for the Company's shares.
Each investment company must consider its own particular circumstances and
objectives in assessing what is in the best interests at any particular point
in time for the company and its shareholders. Your Board continues to focus on
the construction of a portfolio to create long-term value and it is in the
light of this that it decided to build an allocation to Private Equity. The
Board has considered a share buy-back policy but does not consider this would
have a significant effect on the discount, at which the shares trade. In the
opinion of the Board:
it reduces the number of shares outstanding and therefore the liquidity of the
shares in the marketplace; reduced liquidity may, in fact, cause a rise in the
discount;
it means a liquid investment portfolio needs to be maintained, compromising
the ability to have a portfolio of special situations; the maintenance of the
long-term investment policy and its portfolio takes precedence over the
short‑term discount policy; and
the holding in OWHL would represent an even
greater percentage of the portfolio and buying back shares would raise the
relative exposure to Brazil, which the Board does not wish to do, giving
preference to the return generation potential and benefits of diversification
generated by the investment portfolio.
Capital structure The Company has two separate share classes, both of which are traded on the The current position of Ordinary and 'A' Ordinary share classes remains
LSE. The Ordinary shareholders are entitled to one vote per Ordinary share unchanged as the majority of Ordinary shareholders have informed the Board
held. The 'A' non-voting Ordinary shares do not entitle the holders to vote or they do not wish to alter the present structure at the present time.
receive notice of meetings, but in all other respects they have the same
rights as the Company's Ordinary shares. Consideration has been given to
whether the two share classes could be merged in some way.
Dividends The Board continues to support maintaining the dividend at 3.2p until it is The portfolio held by the Company is currently constructed for long-term
fully covered by net income. At that time it plans to increase it in line with capital appreciation rather than income generation. As a result, the income
any increase in the net income of the Company. generated by the portfolio is insufficient to meet this dividend commitment
and the shortfall is made up from the Company's reserves. In principle, your
Board does not believe it to be in the Company's best interests to use capital
as a source from which to pay dividends.
Maintaining levels of service from service providers The Company does not have direct employees. Rather, its operations are The independent members of the Board annually review the performance of the
conducted by several key service providers. The Company enters into Portfolio Manager. Additionally, the day-to-day performance of other key
service-level agreements with each provider. The Board oversees these services service providers (Administrator, Custodian and Registrar) are monitored by
to ensure best practice is followed and that the Company is receiving a the AASP on behalf of the Board. In addition, there is an annual review of
comprehensive service and value for money. service providers' annual Controls Audit Reports. Members of the Board also
visit each key service provider annually to review performance and understand
any changes in their businesses.
Notice period for general meetings
The Company's Bye‑Laws permit that the Company's general meetings (other
than AGMs) may be held on 14 days' notice.
Annual General Meeting
The Company's Notice of Annual General Meeting is included in this Report.
Authority to repurchase 'A' non-voting Ordinary shares
A resolution will be proposed at the forthcoming AGM, seeking shareholder
approval for the renewal of the authority for the Company to repurchase its
own 'A' non-voting Ordinary shares. The Board believes the ability of the
Company to repurchase its own 'A' non-voting Ordinary shares in the market
could potentially benefit all equity shareholders of the Company in the
long-term.
The Company's Bye-laws are drafted in such a way that the Company may from
time to time purchase and cancel its own shares. However, the Company requires
that shareholders' approval to repurchase shares be sought. At the AGM the
Company will therefore seek the authority to purchase up to 11,992,000 'A'
non-voting Ordinary shares (representing 14.99% of the Company's issued 'A'
non-voting Ordinary share capital, the maximum permitted under the FCA Listing
Rules), at a price not less than 1p per share (the nominal value of each
share) and not more than 5% above the average of the middle‑market
quotations for the five business days preceding the day of purchase or, where
a series of transactions have taken place the higher of the last independent
trade and current highest independent bid on the trading venue where the
purchase(s) will be carried out. The authority being sought, the full text of
which can be found in the Notice of Meeting, will last until the date of the
next AGM.
The Company is seeking authority to use its realised capital reserve to allow
repurchase of shares in the market. The decision as to whether the Company
repurchases any shares will be at the absolute discretion of the Board. Any
shares purchased will be cancelled.
The Directors consider that all the resolutions to be proposed at the
forthcoming AGM, as set out in the Notice of AGM, are in the best interests of
shareholders as a whole and unanimously recommend all shareholders to vote in
favour. Guidance on how to vote at the AGM can be found in the notes to the
Notice of AGM.
If the Board considers a significant proportion of votes have been cast
against a resolution at the AGM, the Company will explain, when announcing the
results of voting, what action it intends to take to understand the reasons
behind the results of the vote.
Bye-laws
The Company seeks shareholder approval to amend its Bye-laws. The resolution
will be proposed as a special resolution. The proposed amendments are being
introduced in the Bye-laws primarily to:
provide the Company with a more modern, efficient and cost-effective approach
to paying dividends to shareholders; and
encourage action from the very small number of shareholders who fail to
provide information required by the Company to enable it to meet its reporting
obligations under the Foreign Account Tax Compliance Act (FATCA), the Common
Reporting Standard (CRS) or any similar law or regulation.
In more detail, the key proposed changes are as follows:
a) Method of Payment of Dividends - Bye-law 19
Bye-law 19 has been updated to provide the Company with discretion to
prescribe the manner in which dividends and other monies are paid. Currently
the Company pays dividends by cheque or electronic payment. The use of cheques
has reduced in recent years, while development of new payment methods (that
offer greater efficiency, improved security of payments and reduced costs) has
steadily increased. There has therefore been a move by companies across the
market to re-evaluate their dividend payment processes and allow their Boards
to determine the most efficient manner to pay dividends to shareholders,
including that it is in the best interests of members for payments to be made
exclusively by inter-bank transfer or other electronic means approved by the
Board. The updates to Bye-law 19 will provide the Company with the same
discretions, and the ability to apply different methods of payments or
different combinations of methods to different shareholders or groups of
shareholders.
Where payment of the dividend or other monies cannot be made by the Company to
a Member in the method prescribed by the Board using the information that
member has provided, or the member has not provided the Company with the
required information, account or address details necessary in order for the
Company to make the payment, a new Bye-law 19.3 has been included to provide
that such dividend or other monies will be treated as unclaimed until the
Member can provide the required details to the Company.
b) Withholding payment of dividends from shareholders
who refuse to provide FATCA or CRS information to the Company - Bye-law 83.
The FATCA rules which require certain non-US financial institutions to report
information about shareholders and other "account holders" are underpinned by
a special US withholding tax, which applies to both the income and gross
proceeds of sale derived from US investments. To avoid the withholding tax, a
financial institution must comply with its FATCA due diligence and reporting
obligations, whether imposed under a direct agreement between the financial
institution and the IRS, or under the domestic law of the jurisdiction in
which the financial institution is established. In addition, the financial
institution may be subject to financial penalties under its domestic law if it
fails to comply with the relevant due diligence and reporting obligations. In
order to meet its reporting obligations under FATCA, the Common Reporting
Standard, or any similar law or regulation, the Company must collect and
provide certain information on its shareholders. Where the Company's
shareholders fail to provide the required information ("Non-Responders"), the
Company's reporting is deficient, and the Company may be subject to negative
intervention from the authorities in Bermuda, including finding itself subject
to financial penalties. There are a small number of shareholders who do not
respond to requests for information. In order to resolve this, the Company's
Bye-laws were updated in 2023 to put in place a mechanism (under Bye-law 83)
to obtain the required information or remove the Non-Responders from the
Company's register of members.
As a further effort by the Company to encourage Non-Responders to provide the
required information, the Company has proposed updates to Bye-law 83.3 to
allow the Company to withhold payment of dividends to Non-Responders until
they provide the required FATCA/CRS information to the Company. To the extent
exercised, this withholding sanction will only be implemented after efforts by
the Company to first obtain the necessary information from the Non-Responder.
Please also see set out in the AGM Notice a summary of the two proposed
amendments to the Bye-laws.
Principal risks
The Company has risk management processes in place which enables the Board to
identify, assess and manage the principal risks faced by the Company.
Consistent with the AIC Code and UK Corporate Governance Code, these risks are
considered to have the potential to threaten the Company's business model,
future performance/returns, solvency, liquidity, reputation, or regulatory
status. An integral part of this process is the maintenance and ongoing
evaluation of the Company's Risk Assessment & Controls (RAC) Matrix, which
identifies both the risks and associated controls operating within the Company
and relevant third-party service providers. To ensure emerging risks are
assessed on an ongoing basis, the Board reviews the RAC Matrix at each Board
meeting, considering HICL's current and future anticipated risk environment.
The Board also receives updates at each meeting from the Portfolio Manager and
the AASP on operational risk matters. Additionally, as part of the risk
management processes, the Company also annually reviews the Custodian,
Administrator and Registrar assurance reports of their internal controls (e.g.
AAF 01/06, AAF 01/20, ISAE 3402). The impact of any exceptions are considered
by the Board.
Consideration of the Company's principal risks and uncertainties, is made in
the context of the Company's stated objective of generating superior, but
sustainable, long‑term growth in shareholder value. The main risk being that
over the long-term (determined as greater than five years), shareholders do
not make a return from investing in the Company. The Company's closed‑ended
fund structure is also considered to be in alignment with its stated
objective, especially within extremely volatile market conditions. This is due
to the portfolio not having to be managed and maintained to manage potential
significant redemptions or short-term liquidity needs as open-ended funds
would. Additionally, the closed-ended structure can take advantage of less
liquid market opportunities as part of its portfolio holdings.
The principal risks and uncertainties identified and associated controls in
place to manage these risks are described below:
Principal risks - external Controls to mitigate risks
Market risk - long-term company share performance The Board:
Market risk includes interest rate, currency, equity, credit, inflation, has appointed an appropriate PM whose performance for the Company is reviewed
concentration, liquidity and macro geopolitical risks. and challenged on a quarterly basis;
has set investment guidelines and restrictions, which are reported against by
the PM on a monthly basis;
operates an asset allocation model, which is regularly reviewed and discussed
with the PM; and
monitors and discusses portfolio construct and performance quarterly.
Performance risk, share price, liquidity and discount monitoring The Board:
Low market trading volumes of Company shares and the discount to the NAV regularly reviews the share price, discount level and portfolio performance;
becoming inherent in the share price.
maintains periodic oversight on shareholder-base;
actively seeks feedback both directly from shareholders and indirectly through
the Company's Broker or specific outreach programmes involving the Portfolio
Manager;
has the ability to buy-back non-voting shares of the Company; and
initiates strategies to reduce discount over the medium term.
Tax, accounting, legal and The Board:
regulatory risks obtains regular updates and advice from relevant professional advisers;
Adverse outcomes resulting from legislative changes to tax, legal and maintains oversight and receives regular reporting on the legislative and
regulatory requirements. Adverse outcomes from not meeting ESG expectations. regulatory changes, which impact HICL, as monitored by the PM;
maintains the Company's membership with the Association of Investment
Companies;
has adopted the PM's responsible investing policy;
has set explicit expectations on the integration of ESG considerations within
the investment process;
continues to develop ESG disclosures in compliance with reporting regulations;
and
receives documented confirmation of the PM's adherence to relevant regulatory
requirements and emerging sanction risks.
Reputational risk The Company:
Negative behaviours, publications or market sentiment impacting the reputation requires the annual selection of Board members, all of whom must have a
of the Company. commitment to governance;
has direct oversight of PM;
communicates with investors and the public in a clear and transparent manner;
and
has set pre-approval procedures for accuracy and reliability of such
information.
Principal risks - INTERNAL Controls to mitigate risks
Operational risk Pre-approval processes are in place prior to the publication of any financial
information.
Risks associated with process, system and control failures including those
associated with the Company's third-party service providers. Identification and certification of key controls by AASP compliance team.
Due diligence is undertaken prior to appointing all service providers. Regular
performance reviews of third-party providers are made and, where relevant, the
Operational areas considered includes Liquidity, Safeguarding of Assets and Company annually requests independent service provider assurance reports on
Reliability of Financial Reporting. the operating effectiveness of their internal controls.
An overdraft facility provides a contingency for any short-term liquidity
shortfall. A pre-approval payment process is in place as part of an overall
cash management process.
An independent Custodian is appointed to safeguard the Company's assets. This
Custodian is bound by regulatory and legal contractual obligations and
liabilities. Regular reconciliations are undertaken to ensure accuracy of
records.
Gearing/balance sheet risk A maximum limit on the overdraft facility is in place.
Risk of over-gearing the balance sheet and creating financial stress on the Any increase in overdraft or credit facility requires Board pre-approval.
Company.
Insurance
The Company through its Bye-laws has indemnified its Directors and Officers to
the fullest extent permissible by law. During the year the Company also
purchased and maintained liability insurance for its Directors and Officers.
Going concern
The Company's business activities, together with the factors likely to affect
its future development, performance and position, including its financial
position, are set out in the Chairman's Statement and the Portfolio Manager's
Report within this Annual Report.
After due consideration of the Balance Sheet, estimated liabilities for the 12
months following the signing of this Report and having made appropriate
enquiries, the Directors have concluded the Company is a going concern and has
adequate resources to continue in operational existence for at least 12
months. Assets of the Company consist of securities, the majority of which are
traded on recognised stock exchanges, or open‑ended funds run by established
managers. The Financial Statements are prepared on a going concern basis.
Longer-term viability statement
In addition to the Statement of Going Concern, the Directors are also required
to make a statement concerning the longer‑term viability of the Company. The
Directors consider 12 months to be a relatively short time frame when
considering performance and look to the longer‑term for both the performance
and risks associated with the Company. The Directors consider a period of five
years to be a more representative period, which aligns with the Portfolio
Manager's longer-term horizon. This period is sufficiently long to manage
short-term market volatility and allow longer-term performance to work
through. The Board continually monitors the Investment Strategy and Investment
Guidelines issued to the Portfolio Manager and directs the Portfolio Manager
to target long-term capital preservation. Further, whilst the Board has
sanctioned the use of gearing, the facility available to the Portfolio Manager
is relatively small compared to the NAV of the Company. Finally, a number of
the more significant costs in each financial year are contracted to be
calculated on the basis of the underlying NAV of the Company. As such, in a
period of negative portfolio performance, the cost base should also fall.
Barring unforeseen circumstances and taking account of the Company's current
position, the principal risks, the longer-term strategy for the portfolio,
including a diversified and liquid asset base and the lack of gearing, the
Directors confirm they have a reasonable expectation that the Company will
continue to operate and meet its liabilities as they fall due for the next
five years.
Governance
The Board of Directors
The Directors who served the Company during the year to 31 March 2024 are:
Jonathan Davie
Chairman
Jonathan became Chairman of Hansa Investment Company in June 2019. He was a
director of Hansa Trust from January 2013 until its liquidation in November
2021. He is also a partner of First Avenue Partners, an alternatives advisory
boutique.
Jonathan qualified as a Chartered Accountant and then joined George M. Hill
and Co. and became an authorised dealer on the London Stock Exchange. The firm
was acquired by Wedd Durlacher Mordaunt and Co. where Jonathan became a
partner in 1975. He was the senior dealing partner of the firm on its
acquisition by Barclays Bank to form BZW in 1986.
Jonathan developed BZW's Fixed Income business prior to becoming chief
executive of the Global Equities Business in 1991. In 1996 he became deputy
chairman of BZW and then vice chairman of Credit Suisse First Boston (CSFB) in
1998 on their acquisition of most of BZW's businesses. He focused on the
development of CSFB's Middle Eastern business. He retired from CSFB in
February 2007.
Simona Heidempergher
Remuneration Committee Chair
Simona became a Director of the Company in June 2019. Simona has extensive
experience as an executive and non-executive director in a range of companies,
including listed companies, investment funds and research organisations,
across multiple jurisdictions.
For the past 21 years, she has been a director of Merifin Capital, an
established European privately owned investment company. Prior to this she had
roles as VP Investments at CDB Web tech, a listed investment vehicle, and as
research associate at Heidrick & Struggles, a leading executive-level
search and leadership consultancy firm and as project coordinator at
Ambrosetti Group, an Italian consulting company. Currently, Simona is the
chair of the board of directors of the Stramongate Group, a Luxembourg public
company, director of The European Smaller Companies Trust, a Janus Henderson
Asset Management Investment Trust listed on the London Stock Exchange and
director of Industrie Saleri Italo S.p.A. an Italian private company in the
automotive supplier sector.
Following Nadya Wells' decision to not stand for re-election, with effect from
14 June 2024, the Board has appointed Simona Heidempergher to chair the
Nomination Committee in addition to her continuing role as Chair of the
Remuneration Committee.
Richard Lightowler
Audit Committee Chairman
Richard became a Director of the Company in June 2019. Richard has 26 years'
experience in public accounting being partner of KPMG in Bermuda for 20 years.
He was head of the KPMG Insurance Group in Bermuda for 15 years, a member of
the firm's Global Insurance Leadership Team and Global Lead Partner for a
number of large international insurance groups listed on the New York and
London Stock Exchanges.
Richard has significant regulatory experience, previously advising the Bermuda
Monetary Authority and working with clients regulated by the PRA, FRC and FCA,
as well as other international regulators. He also has extensive experience in
risk and corporate governance and significant transaction experience. Richard
is based in Bermuda. Richard also holds non-executive directorships with Aspen
Insurance Holdings, Geneva Re, Oakley Capital Investments and Phoenix Re
Limited.
William Salomon
William became a Director of the Company in June 2019. He was a Director of
Hansa Trust from 1999 until its liquidation in November 2021. He has a
significant, long standing, investment in the Company.
William's experience in investments and finance is important to the Board in
developing and monitoring investments in special investment themes and in the
Company's strategic investment through Ocean Wilsons Holdings Limited in
Wilson Sons.
William is the senior partner of Hansa Capital Partners LLP, the Portfolio
Manager and Additional Administrative Services Provider, deputy chairman of
Ocean Wilsons Holdings Limited and a director of its Brazilian listed
subsidiary Wilson Sons Holdings Brasil S.A.. William was formerly the vice
chairman of Close Asset Management Limited and chairman of the merchant bank
Rea Brothers PLC.
Nadya Wells
Nominations Committee Chair and Senior Independent Director
Nadya became a Director of the Company in June 2019. Nadya has 29 years'
experience in emerging and frontier markets as a long-term investor and
corporate governance specialist. She spent 13 years as portfolio manager with
the Capital Group investing in Global Emerging Markets and prior to those five
years with INVESCO Asset Management Limited, investing in public and private
equity managing a closed ended fund. She started her career in management
consultancy with Ernst & Young.
She holds a non-executive directorship at Baring Emerging EMEA Opportunities
plc where she is senior independent director. Nadya is an independent
non-executive director on the boards of various Luxembourg SICAVs managed by
large global asset managers. She also works in academia conducting research
and consulting in the public and private sector on financing in Global Health.
She holds an MBA from INSEAD, France.
You will note from the Chairman's Report that Nadya has chosen not to stand
for re-election as a Director of the Company at the AGM as a result of
additional professional commitments that she intends to take on. The Board is
starting the process of identifying a director to join the Board in Nadya's
place. Nadya will remain as a Director until the Company's AGM.
Board members are selected based on their individual and complementary skills
and experience and their ability to commit sufficient time to drive the
Company's success. All Directors will retire at each AGM and offer themselves
for consideration for re‑election.
The Board recommends the re‑appointment of each of the four Directors who
have put themselves forward, based on their continuing contribution to the
Company and its shareholders. The service contracts between the Company and
each of the Directors do not allow for any compensation payment in the event
of loss of office.
Organisation and objectives
This section explains how the Board has organised the Company and seeks to
deliver its objectives.
Board committees and roles
The Directors consider that, in order to fulfil their responsibilities as the
Directors of the Company, they should all be members of every sub-committee
where possible. Where a Director cannot be a member of a committee, they
should attend the meetings unless a conflict exists and it would be
inappropriate for them to be present.
Audit Committee
Richard Lightowler is the Chairman of the Audit Committee. The Audit Committee
consists of all independent Directors of the Board. The Audit Committee exists
to assist the Board in the financial and narrative reporting of information
relating to the Company, the review of the Internal Controls and Risk
Management systems, the oversight of the Company's annual audit and assessment
of the independence, performance and quality of Company's external auditor
PricewaterhouseCoopers Ltd. The Committee meets at least twice a year - timed
to review the Annual and Half-Year Financial Statements prior to their
approval and release.
The AIC Code of Corporate Governance ("the AIC Code") indicates that all
independent Directors can be members of the Audit Committee including, if
agreed by the Board, the Chairman of the Board. The Board is of the opinion
that, particularly as the Company has relatively few Directors, shareholders
benefit from the views of all Directors. Therefore, Jonathan Davie, as
Chairman of the Company, is also a member of this Committee. The Board further
acknowledges that the AIC Code states all Committee members should be
independent. Therefore, William Salomon is not a member of the Committee
although attends as a non-member. The Committee reports its recommendations to
the Board for final approval.
The Audit Committee Report can be found further ahead in the report.
Nomination Committee
The Committee was chaired by Nadya Wells throughout the Company's financial
year. All independent members of the Board are members of the Nomination
Committee. William Salomon attends the Committee but is not a member.
The Committee reviews the structure, size and composition (including the
skills, knowledge and experience) of the Board and makes recommendations to
the Board with regard to any changes, as necessary. It also considers
succession planning of directors, taking into account tenure and performance
of board members as well as challenges and opportunities facing the Company,
and what skills and expertise are, therefore, needed on the Board in the
future. If a skills-gap or pending vacancy is identified, the Committee is
responsible for identifying and nominating candidates to fill Board vacancies
as and when they arise.
Following Nadya's decision to not stand for re-election, with effect from 14
June 2024, the Board has appointed Simona Heidempergher to chair the
Nomination Committee, in addition to her continuing role as Chair of the
Remuneration Committee.
The Nomination Committee Report can be found further ahead in the report.
Management Engagement Committee
The Committee is chaired by Jonathan Davie. All independent members of the
Board are members of the Management Engagement Committee. The Committee has
two primary roles. Firstly, to review the functional and operational
performance of the Portfolio Manager with the Company's investment policy.
Secondly, to review annually the performance of any other key service
providers to the Company.
The level of management fees, level of service provided and the performance of
the Portfolio Manager are reviewed on a regular basis to ensure these remain
competitive and in the best interests of shareholders. The Board, after the
annual recommendation of this Committee, considers whether the engagement of
the Portfolio Manager is in the best interests of the shareholders. The
Committee members also carry out periodic visits to the key service providers,
as well as seeking feedback on the performance of other service providers from
the Portfolio Manager in its capacity as Additional Administrative Service
Provider.
The Committee reports its recommendations to the Board for final approval.
Remuneration Committee
The Committee is chaired by Simona Heidempergher. All independent members of
the Board are members of the Remuneration Committee. William Salomon attends
the Committee but is not a member. The Committee is responsible for the broad
policy for the remuneration of the Company's Chairman and non-executive
Directors pursuant to the Company's Bye-laws. The Committee takes into account
all factors which it deems necessary. When setting the remuneration policy for
Directors, the Committee reviews remuneration trends across the wider
industry, including the use of external independent surveys, and considers the
ongoing appropriateness and relevance of the remuneration policy. The level of
directors' fees should be set at a level which attracts and retains high
calibre candidates. Fees are monitored against external benchmarks taking
specific note of each Director's duties, time commitments to properly fulfil
all obligations and duties and also relative to other comparable companies in
comparable jurisdictions. No Director sets their own individual remuneration.
The Committee reports its recommendations to the Board for final approval.
The Directors' Remuneration Report can be found further ahead in the report.
Long-term impact of decisions - ESG matters
In the natural positive progression of HCP's commitment to further integrating
ESG and climate relevant considerations within its investment process, the
Hanseatic Group, of which HCP is a member, has become a signatory of the
United Nations supported Principles for Responsible Investment (UNPRI).
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.
The Board is responsible for the Company's ESG policy. In 2020, the Board
adopted the Portfolio Manager's Responsible Investment Policy, which is
applied to all Company investments in funds and companies, in both public and
private markets. In line with the evolving nature of ESG's integration within
financial services, the PM continues to review and develop their policy of
responsible investing within their investment process. This involves ensuring
environmental, social and governance factors are integrated throughout the
investment management process, including within the due diligence,
decision-making and investment monitoring processes.
As long-term investors, HCP has a natural desire to be a responsible investor
and a good corporate citizen. HCP's approach begins by communicating its
expectations to fund and company investments that they should take ESG issues
seriously, clearly report on them, be responsible owners and to continuously
show positive indicators of aspiring to do the right thing.
HCP does not operate an exclusionary policy, as excluding whole sectors or
countries is not 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 they operate and their
direction of travel in ESG enhancements.
HCP seeks to ensure that all investee managers and companies are thinking
longer term and that they are also thinking about their longer-term impacts
across the spectrum of their business. This certainly includes the negatives -
such as understanding how companies are lowering their carbon emissions,
ensuring they are not using forced or child labour in their supply chains,
taking care not to deplete natural resources, or be involved in deforestation.
But it also includes the positive impacts, for example, knowing if a company
is taking advantage of the opportunities it may have from climate change by
developing greener energies, recycling used clothing, or designing
biodegradable fabrics. HCP's involvement with the managers and companies is
ongoing and pushes them to manage the risks and take advantage of the
opportunities in a tailored and considered manner. A manner that reaps
longer-term benefits for the Company, as well as the environment and the
greater society.
Following the first UNPRI submission by the Hanseatic Group, made in 2023, we
are pleased to report that they received very positive feedback on both their
policies and approach adopted.
Fund investments
HCP seeks to invest in funds who are responsible owners of their investee
companies, have specific consideration as to how their investee companies
manage their ESG responsibilities and seek to engage with those company
boards, if they are failing in their duties. Where a manager is not living up
to these standards, HCP will first seek to engage the management team and
encourage improvement. If the managers engagement is weak, or if the
communicated concerns are not sufficiently addressed and their positive
commitment to do so is not apparent, HCP's ultimate action would be to reduce
the current investment, exit, or not invest in the first place. Whilst HCP
does not seek to exclude fund managers that invest in sectors such as energy
or countries such as China, it would, however, expect such managers to
properly articulate how they operate in such areas and manage the potential
ESG considerations. HCP's investment philosophy favours those fund managers
who are typically long-term in their approach and seeks to invest in
high-quality, well-managed companies that are often higher-returning. As a
result, although we do not set limits, there is a natural bias away from these
companies and sectors that score less well on ESG metrics.
Company investments
When considering direct equity investments HCP seeks to ensure that company
management teams are responsible custodians of their businesses, report
clearly on ESG metrics and seek to improve on those areas in which they are
lagging.
Taskforce on Climate-Related Financial Disclosures
As a closed-ended investment company, HICL is exempt from the annual reporting
requirement to publish statements in line with the Taskforce on
Climate-Related Disclosures' (TCFD) framework of recommendations and
recommended disclosures. However, considering the Board and the PM's approach
to responsible investing and the Company's core investment objective to
generate superior, but sustainable, medium to long-term growth in shareholder
value, we have elected to provide relevant information on our approach to the
TCFD recommendations.
Governance
Strong corporate governance practices are intrinsic to how the Board operates.
The Board oversees a long-term and sustainable approach to business strategy
of the Company. This in part is done by adopting a Responsible Investment
Policy, which aims to integrate sustainability, climate-related risks and
opportunities, social responsibility and strong governance into the Company's
investment process. This is consistent with HCP's approach to its ESG
assessment of fund managers and company investments.
Risk Management
Climate-related risks within the Company's investments are identified,
assessed and managed by HCP as the Portfolio Manager. As part of the portfolio
risk management and monitoring process, HCP combines long-term and
purpose-driven engagement with underlying fund managers and companies, active
voting and setting a clear escalation framework. This approach aims to
identify and address climate‑related issues and minimise systemic risks that
may impact the assets within the portfolio. Engagement can take several forms,
including regular and ad hoc meetings with management, formal written
correspondence, or the Portfolio Manager participating in relevant shareholder
votes for current investments.
Strategy
The Company's strategic objective is to grow its net assets over the medium to
long-term by investing in a diversified and multi-strategy portfolio. In line
with this objective, the Board are responsible for pursuing the growth of
shareholder value. Responsible investment and the integration of ESG risks and
opportunities within the investment process is aligned with the Company's
values and heritage. HCP becoming a signatory to UNPRI is part of our overall
strategy.
Metrics and targets
In relation to the Portfolio Manager's investment process, a more holistic
approach is taken by assessing an investment by their intent and direction of
travel, rather than purely by specific targeted metrics. The ESG assessment of
a fund manager or company will involve HCP developing a view by utilising
their published ESG reporting, the information received through the due
diligence and engagement processes and other external research. The Company
has no material information to report in relation to metrics and targets.
Ocean Wilsons Holdings Limited
OWHL has two investments - Ocean Wilsons Investments Ltd, an investment
portfolio and a holding in Wilson Sons Holdings Brasil S.A., a Brazilian
maritime business. From an ESG standpoint, our Portfolio Manager is also the
investment advisor to the Ocean Wilsons Investments' portfolio. The Board
understands that our Portfolio Manager is engaging with Ocean Wilsons
Investments' board on their Responsible Investing Policy. As a Board we
receive periodic updates from Wilson Sons, an operating business with several
thousand employees, regarding their business including issues relevant to ESG
considerations. Wilsons Sons is listed on the Novo Mercado ("New Market") B3
listed segment and is a member of the Carbon Disclosure Project which, in
partnership with companies and governments, aims to build a truly sustainable
economy, by measuring and understanding the environmental impact. In 2022,
Wilson Sons achieved a grade B performance in the climate change questionnaire
for the maritime transportation segment. This was an improvement from the
grade C performance achieved in 2021, making Wilson Sons in line with 44% of
companies in the maritime sector that publicly disclose their data to CDP.
Wilson Sons continues to be proud of their focused approach to health &
safety, staff wellbeing and the preservation of the environment and
communities they operate in. This continued focus was awarded through the
"Great Place to Work" certification, which is a standard of excellence for
work environments, and have been ranked in the top quintile of the S&P
Global 2022 Corporate Sustainability Assessment. As in many heavy industries,
there is a focus on safety and improving working practices to minimise staff
injuries. To this end, Wilson Sons has a non-negotiable commitment to ensuring
the health and safety conditions of all employees, customers and third parties
at their facilities. Their commitment to maintaining an increasingly safe
working environment is reflected by their continuous trend of reduction in
lost-time injuries, which in 2022 was reduced to a frequency rate of 0.50
incidents per one million hours worked. This rate exceeds the world-class
benchmark. Additionally, the reduction of Greenhouse Gas emissions remains a
focus for Wilson Sons, who achieved a 5% reduction in their total emissions in
2022, achieved through the adoption of state-of-the-art technologies, such as
replacing diesel equipment with electrically powered alternatives at their
container ports. Additionally, the company has maintained its commitment to
proactively publish its Greenhouse Gas Emissions Inventory (GHG) in the public
emissions registry, a platform managed by the Brazilian GHG Protocol
Programme. In 2022, Wilson Sons maintained their gold seal by the programme.
Further information can be seen in their Sustainability Report, published on
their website www.wilsonsons.com.br/en.
Carbon offset and charitable support
Each year, there are a number of flights for individual Directors to attend
Board meetings in Bermuda. Therefore, the Board has elected to offset the
carbon impact of its travel on behalf of the business though a relationship
with Greenfleet Australia (www.greenfleet.com.au). This year, circa 163 tonnes
of carbon dioxide has been offset. Greenfleet Australia runs a tree planting
offset programme.
Additionally, during the year the Board looked for an environmental cause to
sponsor that has direct relevance to Bermuda, our country of domicile. Given
its island status, Bermudians are more aware than most of the marine
environment. Marine life is under threat from climate change, acidification of
the sea, pollution and invasive species. But these threats are compounded by
overfishing, which strips the ocean of life, and so reduces its capacity to
produce oxygen, absorb carbon dioxide and regulate the climate. It's estimated
that almost 94% of commercial fish stocks are fully or overexploited and 90%
of large, predatory fish are gone. Overfishing therefore represents a major
threat for the food security of millions and could have devastating
consequences for Earth's climate if these ecosystems fail. Amongst many worthy
organisations, we discovered the Blue Marine Foundation, an environmental
charity dedicated to restoring the ocean to health by addressing overfishing
and supporting marine conservation projects. The ocean is the world's largest
carbon sink: by combating overfishing and the associated impact on the wider
marine environment, Blue Marine aims to help life in the ocean perform its
vital function of stabilising the Earth's climate. By partnering with Blue
Marine, the Company supports their work around the world ultimately benefiting
us all and, in particular, maritime communities like Bermuda. The Company has
committed to a charitable gift of £10,000 per annum towards Blue Marine's
work.
Streamlined Energy and Carbon Reporting (SECR) and Greenhouse Gas Emissions
(GGE)
The Company has no direct greenhouse gas emissions to report from the
day-to-day operations of its business. However, as noted above, the attendance
of Directors at Board meetings in Bermuda means travel related carbon
emissions which are "Scope 3 Indirect Emissions" for the purposes of the SECR.
The Board has further estimated the emissions associated with the flights to
be in the region of 237 tonnes of CO2 in any 'normal' year.
Social, Community, Human Rights, Employee Responsibilities Policy
The Company does not have any employees. The Company has no direct social,
community or human rights impact. Its principal responsibility to shareholders
is to ensure the investment portfolio is properly invested and managed.
Service providers
Service Provider Policy
The Company has no employees and operates through third party service
providers. The Board has contractually delegated to external organisations the
management of the investment portfolio, the custodial services which include
safeguarding of the assets and the day-to-day accounting and company
secretarial requirements. Each of these contracts is only entered into after
proper consideration of the quality and cost of services, which are regularly
reviewed and monitored.
The key service provider relationship to the Company is Hansa Capital Partners
as the Portfolio Manager and Additional Administrative Services Provider
(AASP) to the Company.
The Board carries out the following activities as part of its oversight of
third party service providers:
Monitors performance, costs and commitment to a successfully implemented
controls environment
The Board, at its regular meetings, reviews reports prepared by both the
Portfolio Manager and the Administrator, which enable it to monitor the
performance and costs of the third-party suppliers to the Company. The
Additional Administrative Services Provider has an ongoing dialogue with each
provider to monitor their processes and systems and, in addition, members of
the Board meet with key providers at least annually to discuss performance.
Monitors Portfolio Manager performance
The Board reviews reports prepared by the Portfolio Manager at its regular
meetings, which enables it to monitor the investment performance, risks and
returns. The Portfolio Manager attends each Board meeting where there is an
active dialogue on performance, process, risks and opportunities and
governance matters.
The Board identifies key controls and regularly monitors them through
compliance reports on control effectiveness.
Determines investment strategy, guidelines and restrictions
The Board determines the investment strategy in conjunction with the Portfolio
Manager. The strategy is monitored regularly with adjustments made as
required.
The Board issues formal investment guidelines and restrictions; compliance
with these is reported by the Portfolio Manager's compliance officer quarterly
and is also monitored independently by the Administrator.
Determines gearing levels and capital preservation through the use of hedging
instruments
The Board, taking account of advice from the Portfolio Manager, determines the
maximum level of borrowings the Company will undertake. The Company will not
invest in derivatives for speculative gain, but may use derivatives for
efficient portfolio management and hedging purposes.
The providers
Portfolio Manager & Additional Administrative Services Provider
Hansa Capital Partners LLP is the Portfolio Manager for the Company. It is
responsible for all assets in the portfolio, other than the Company's
investment in OWHL. The Board is in regular contact with the investment
management team at HCP which is led by Alec Letchfield. Additionally, Alec
Letchfield is invited to quarterly meetings of the Board to formally present
portfolio updates and discuss market trends. The Portfolio Manager's detailed
review of the year can be found further ahead in the report.
HCP charges a portfolio management fee at an annual rate of 1% of the net
assets of the Company (after any borrowings) and after deducting the value of
the investment in OWHL, on which no fee is payable. The Portfolio Manager has
charged £2,917,937 for the year ended 31 March 2024 (year ended 31 March
2023: £2,824,000). Hanseatic Asset Management LBG, a company connected to
Hansa Capital Partners and which is also the AIFM, separately charges an
investment management fee to the investment subsidiary of OWHL.
The terms of the Portfolio Management Agreement permit either party to
terminate the agreement by giving to the other not less than 12 months'
notice, or such shorter period as is mutually acceptable. There is no
agreement between the Company and the Portfolio Manager concerning
compensation in respect to the termination of the agreement. In its annual
assessment of the Portfolio Manager, the Board concluded that, because of the
skills and experience of the management team it is in the best interest of
shareholders that the Portfolio Manager remains in place under the present
terms. Details of the fees paid to the Portfolio Manager can be found in Note
3 to the Financial Statements.
HCP also acts as the AASP to the Company. This role ensures a number of the
day-to-day processes for the Company are carried out, as well as providing
oversight of, and a liaison between, a number of the Company's service
providers and the Company itself. HCP is paid £115,000 per annum for this
service (year ended 31 March 2023: £115,000).
Auditor
The Company's independent Auditor is PricewaterhouseCoopers Ltd, a Bermudan
registered firm. Auditor independence rules restrict the amount and type of
non-audit related work that can be performed by a company's Auditor. Any
non-audit related work must be pre-approved by the Board. PwC did not provide
any non-audit services in the year.
Company Secretary
The Company has engaged Conyers Corporate Services (Bermuda) Limited
("Conyers") as its Company Secretary. During the year to 31 March 2024,
Conyers has charged £44,156 (year ended 31 March 2023: £38,275).
Alternative Investment Fund Manager
As a Bermudan resident, the Company is defined as a UK Alternative Investment
Fund (AIF) under the UK Alternative Investment Fund Manager's Directive (UK
AIFMD). As such, the Company and the AIFM are subject to a more limited set of
UK AIFMD requirements, which are largely in relation to marketing the
Company's shares into the UK. The Company appointed Hanseatic Asset Management
LBG, with effect from 29 August 2019, to act as its AIFM, with
responsibilities for the Portfolio Management and Risk Management functions.
The AIFM has delegated the provision of Portfolio Management services to Hansa
Capital Partners LLP but remains responsible for the Risk Management function.
The AIFM does not charge a direct fee for its services, although it does
recharge any third-party fees incurred.
Administrator
The Company has engaged Apex Fund Administration Services (UK) Ltd as its
Administrator. The Administrator has charged £152,722 for the year ended 31
March 2024 (year ended 31 March 2023: £149,722).
Custodian
The Company has engaged Banque Lombard Odier & Cie SA as the Company's
Custodian. During the year to 31 March 2024, Lombard Odier charged £182,717
for the custodial service (year ended 31 March 2023: £180,335).
Registrar
During the year, the Company's Registrar was transferred from Link Market
Services (Guernsey) Limited) to Computershare Investor Services (Bermuda)
Limited ("Computershare"). The total Registrar charges were £134,083 for the
year ended 31 March 2024 (year ended 31 March 2023: £91,728).
Report of the Directors
The Directors have chosen to report on some items within the body of the
Strategic or Governance Reports, while others remain within the Report of the
Directors.
Items included within Strategic or Governance reports
The following items are listed within the Strategic or Governance Reports:
Statement of the existence of qualifying indemnity provisions for Directors.
· Dividend policy and payments made during the year.
· Names of Directors, at any time in the year and the Directors'
details and attendance at Company meetings.
· Streamlined Energy & Carbon Reporting and Greenhouse Gas
Emissions.
· Stakeholder Engagement - while the Company has no employees,
suppliers or customers, the Directors give regular consideration to the need
to foster the Company's business relationships with its stakeholders, in
particular with shareholders and service providers. The effect of this
consideration upon the principal decisions taken by the Company during the
financial year is set out in further detail in the Strategic Report.
Items reported within the Directors' Report
Disclosure to the Auditor of Relevant Audit Information
The Directors confirm that, so far as they are aware, having made such
enquiries and having taken such steps as they consider they reasonably ought,
they have provided the Auditor with all the information necessary for it to be
able to prepare its Report. In doing so each Director has made themself aware
of any information relevant to the audit and established that the Company's
Auditor is aware of that information. The Directors are not aware of any
information relevant to the audit of which the Company's Auditor is unaware.
Board composition and diversity
The Board recognises and is supportive of the new FCA Listing Rules (LR
9.8.6(9)) which aim to improve transparency on the diversity of company boards
and executive management teams and was implemented for accounting periods
starting on or after 1 April 2022. Accordingly, boards of UK incorporated
companies are required to report annually on whether the specific three FCA
targets have been met, and if they have not been met, the reasons why. These
three targets are:
(i) at least 40% of the individuals on its board of
directors are women;
(ii) at least one of the following senior positions (Chair
CEO, Senior Independent Director, CFO) on its board of directors is held by a
woman; and
(iii) at least one individual on its board of directors is
from a minority ethnic background;
The tables below set out the gender and ethnic diversity composition of the
Board as at 31 March 2024. The Board is pleased to report it is compliant with
each of the three FCA targets as at 31 March 2024. Two of the five Directors
are women (40%), one of whom holds the senior position of SID, and one of the
five Directors is from a minority ethnic background. As reported elsewhere in
this Annual Report, Nadya Wells has chosen not to stand for re-election at the
Company's forthcoming AGM. She remains a Director of the Company at the time
of signing of this Annual Report. The Board is starting the process of
identifying a director to join the Board in Nadya's place and will update
Shareholders in its next Annual Report regarding ongoing board diversity
against the Listing Rule targets.
As per LR 9.8.6(10), numerical data is disclosed in the tables below, which
shows the Company's compliance with these three FCA targets.
Gender Diversity Number of Percentage Number of
Board of the senior
members Board positions
on the
Board(1)
Men 3 60% 2
Women 2 40% 1
Other - - -
Not specified/prefer not to say - - -
Ethnic Diversity Number of Percentage Number of
Board of the senior
members Board positions
on the
Board(1)
White British or other White (including minority-white groups) 4 80% 2
Mixed/Multiple Ethnic Groups 1 20% 1
Asian/Asian British - - -
Black/African/Caribbean/Black British - - -
Other ethnic group, including Arab - - -
Not specified/ prefer not to say - - -
1 Note, the format and information supplied in the above tables are as
prescribed by the FCA's Listing Rules. HICL is a Bermudan incorporated,
externally managed closed-ended investment company. As such, HICL does not
have any employees or appoint executive board positions. Accordingly, the
senior board positions which the Company defines as applicable are Chairman
and Audit Committee Chairman.
This data was provided by the individual Directors, at the request of the
Committee, asking them to indicate how the Company should categorise their
ethnic background for the purposes of the FCA requirements of Board
diversity.
Capital Structure
The Company's Capital Structure is described in the "Shareholder Profile and
Engagement" section.
Corporate Governance Report
The Corporate Governance Report, including the Financial Risk Management
Review of the Company, is included in this Report.
Approval of the Directors
The Directors consider the Annual Report and Financial Statements, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy. Further details demonstrating the Company's
performance, business model and strategy have been included within the
Strategic Report.
For and on behalf of the Board
Jonathan Davie
Chairman
14 June 2024
Corporate Governance Report
Corporate Governance Code
Internal Controls
The UK Corporate Governance Code ("UK Code"), requires the directors of UK
listed companies to review the effectiveness of the company's risk management
and system of internal controls on an annual basis. The Board is committed to
sound corporate governance, robust risk management processes and effective
systems of internal controls. The Board reviews and considers the
effectiveness of internal controls regularly and review exception reporting at
least quarterly. The Directors, through the procedures outlined below, keep
the system of risk management and internal controls under review.
The Board recognises its ultimate responsibility for the Company's system of
risk management and internal controls and for monitoring their effectiveness.
In order to perform this responsibility the Board receives regular reports on
all aspects of risk management and internal control from the Company's service
providers (including financial, operational and compliance controls, risk
management and relationships with other service providers); the Board will
instigate necessary action in response to any significant failings or
weaknesses identified by these reports.
Financial Reporting
The Board has a responsibility to present a fair, balanced and understandable
assessment of annual, half‑year and other price sensitive public reports and
reports to regulators, as well as to provide information required to be
presented by statutory requirements. To ensure this responsibility is
fulfilled, all such reports are reviewed and approved by the Board prior to
their issue.
The Board confirms there have been no specific events since 31 March 2024, of
which the Board is aware, which would have a material impact on the Company.
Compliance with the provisions of the UK Corporate Governance Code
The Board of Hansa Investment Company has considered the Principles and
Provisions of the AIC Code. The AIC Code addresses the Principles and
Provisions set out in the UK Code, as well as setting out additional
Provisions on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principles and Provisions of
the AIC Code, which has been endorsed by the FRC in the UK, provides more
relevant information to shareholders.
The Company has complied with the Principles and Provisions of the AIC Code.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes
an explanation of how the AIC Code adapts the Principles and Provisions set
out in the UK Code to make them relevant for investment companies.
Association of Investment Companies Code
The AIC Code has 17 principles. The Company sets out below how it has complied
with the Principles and Provisions:
Board Leadership and Purpose
A. A successful company is led by an effective board,
whose role is to promote the long-term sustainable success of the company,
generating value for shareholders and contributing to wider society.
The Board is formed of five Directors with a
complementary mix of skills and experience to lead the Company. Two Directors
served on the board of the Company's predecessor, Hansa Trust, whilst three
Directors were appointed at the formation of HICL. All have significant and
relevant experience. All Directors are focused on generating long‑term value
for shareholders and there is significant share ownership in the Company's
shares amongst the Directors. The Board engages at least quarterly with its
Portfolio Manager challenging performance, process, risk, cost and strategy.
B. The board should establish the company's purpose,
values and strategy, and satisfy itself that these and its culture are
aligned. All directors must act with integrity, lead by example and promote
the desired culture.
The Board believes that the Company's purpose,
values and strategy are clear: to create long‑term growth of shareholder
value. The Board fosters a culture that is open to new ideas and is able to
influence its service providers through effective challenge and regular robust
review of performance. The Board sets the standard for openness and
professionalism that the Company's key service providers follow. In
particular, there is regular interaction between the Board and the Company's
Portfolio Manager and also the AASP for day to day liaison with other service
providers.
C. The board should ensure that the necessary
resources are in place for the company to meet its objectives and measure
performance against them. The board should also establish a framework of
prudent and effective controls, which enable risk to be assessed and managed.
The Board, through the work of its Committees
and regular Board meetings ensures regular measurement against the Company's
objectives. The adequacy and effectiveness of internal controls is considered
at each Board meeting.
D. In order for the company to meet its
responsibilities to shareholders and stakeholders, the board should ensure
effective engagement with, and encourage participation from, these parties.
The Board considers its stakeholders to be its
shareholders and its key service providers. The Board is committed to
transparent reporting in all its communications. It actively engages with
shareholders via an annual general meeting, periodic shareholder
presentations, the next of which will be held on 25 September 2024, quarterly
factsheets, website communication and with feedback also received through
outreach programmes by the Company's broker and Portfolio Manager, as well as
direct one-to-one correspondence. The Board engages with other key service
providers through the operations of its AASP on a day to day basis, as well as
via at least one annual meeting with each to ensure accountability and
value-added performance.
Principle E is omitted by the AIC Code.
Division of Responsibilities
F. The chair leads the board and is responsible for
its overall effectiveness in directing the company. They should demonstrate
objective judgement throughout their tenure and promote a culture of openness
and debate. In addition, the chair facilitates constructive board relations
and the effective contribution of all non-executive directors, and ensures
that directors receive accurate, timely and clear information.
The Chairman is Jonathan Davie. The Chairman
promotes and encourages active participation from all Directors at Board
meetings. Further, whilst adhering to membership guidelines, sub‑committees
also seek to include as many Directors as possible to ensure a broad range of
views. All Directors receive regular monthly and quarterly information
prepared by the Portfolio Manager and Administrator, as well as portfolio
performance presentations from the Portfolio Manager.
G. The board should consist of an appropriate
combination of directors (and, in particular, independent non-executive
directors) such that no one individual or small group of individuals dominates
the board's decision making.
The Board consists of five Directors. All have
a financial background but each also brings individual specialisms and
experience that are complimentary. Their biographies are noted earlier on in
the Report. Four Directors are deemed independent. The fifth, William Salomon,
is the Senior Partner of the Company's Portfolio Manager and, therefore, is
deemed non-independent. All Directors are actively involved in decisions and
committees unless conflicts exist which preclude this. Accordingly, Mr Salomon
does not participate in the evaluation of the performance of the Portfolio
Manager due to his role as senior partner of that firm. Nor does he
participate in decisions regarding the Company's largest asset (by value)
OWHL, due to him being a director of that company. Finally, Mr Salomon is not
a member of the Audit, Nominations or Remuneration Committees due to his
non-independent status, although he does attend meetings of those Committees.
The culture of open and honest communication and forthright discussion means
no individual or small group dominate decision making.
H. Non-executive directors should have sufficient time
to meet their board responsibilities. They should provide constructive
challenge, strategic guidance, offer specialist advice and hold third party
service providers to account.
The Directors confirm they have sufficient time
to meet their responsibilities. Directors consult with the Company before
accepting other appointments, to confirm capacity to do so and that no
conflict exists. In considering appointments and potential conflicts of
interests the Board considers the available time each Director has to commit
to the Company. A formal calendar exists for the Board meetings and
sub-committees. Ad-hoc meetings may be arranged without advance materials for
time-sensitive matters. The Portfolio Manager and AASP report to scheduled
Board meetings, giving the Directors the opportunity to challenge performance,
raise issues and offer guidance.
I. The board, supported by the company secretary,
should ensure that it has the policies, processes, information, time and
resources it needs in order to function effectively and efficiently.
The Company Secretary and AASP support the
Board in identifying and monitoring all governance matters. Additionally,
Directors are able to consult external professional advisors to assist them in
the performance of their duties as and when required. Board reporting and
materials are refined on an ongoing basis.
Composition, succession and evaluation
J. Appointments to the board should be subject to a
formal, rigorous and transparent procedure, and an effective succession plan
should be maintained. Both appointments and succession plans should be based
on merit and objective criteria and, within this context, should promote
diversity of gender, social and ethnic backgrounds, cognitive and personal
strengths.
The Board has appointed a Nominations Committee
chaired by an independent director. The Nominations Committee conducts a
formal due diligence process on all appointments and considers annually the
continued suitability and performance of directors. The Company believes a
diverse Board brings many benefits and, as such, there is no restriction
placed on Board membership. Inclusivity, diversity, variety of experience and
personal strengths are all incorporated in the decision making for director
selection and succession planning.
K. The board and its committees should have a
combination of skills, experience and knowledge. Consideration should be given
to the length of service of the board as a whole and membership regularly
refreshed.
The Directors have a broad range of backgrounds
including investment management, finance and banking as well as operational
experience. Biographies of all Directors are shown earlier on in the Report.
Each director retires and is subject to re-election at the AGM. The decision
to propose directors for Nomination at the AGM is made by the Nomination
Committee. The Nominations Committee is tasked with maintaining a broad range
of skills and experiences at times of succession.
L. Annual evaluation of the board should consider its
composition, diversity and how effectively members work together to achieve
objectives. Individual evaluation should demonstrate whether each director
continues to contribute effectively.
The Nominations Committee is responsible for
the ongoing consideration of Board composition and to identify any skills gap,
now or in the future. The Nomination Committee considers Board effectiveness
annually.
Audit, risk and internal control
M. The board should establish formal and transparent
policies and procedures to ensure the independence and effectiveness of
external audit functions and satisfy itself on the integrity of financial and
narrative statements.
The Board has specifically delegated the
appointment and monitoring of the Company's external Auditor to its Audit
Committee. The Company's Auditor was formally appointed in November 2019. The
tender process was led by the Chairman of the Audit Committee. The Audit
Committee considers the independence and effectiveness of the external Auditor
at least annually. The Company's Auditor does not provide other services to
the Company. The Company rigorously follows policy and procedure to ensure
effectiveness of the external audit and integrity of financial reporting.
Refer also to the Audit Committee Report.
N. The board should present a fair, balanced and
understandable assessment of the company's position and prospects.
The Board considers and approves all relevant
shareholder communications. The Annual and Half-Year Reports are reviewed by
the Board to ensure they present a fair and balanced view including commentary
on going concern and long-term viability. The Audit Committee considers the
fairness of the Financial Statements before recommending them to the Board for
approval.
The Annual and Half-Year Reports provide fair,
balanced and understandable commentary on the Company's performance and
prospects.
O. The board should establish procedures to manage risk,
oversee the internal control framework, and determine the nature and extent of
the principal risks the company is willing to take in order to achieve its
long-term strategic objectives.
Principal risks are identified by the Board and
risk appetite established against these risks. Day to day risk management is
undertaken by the Portfolio Manager and AASP within the parameters established
by the Board. The Board meets with the Portfolio Manager at each scheduled
Board meeting where there is opportunity to discuss particular aspects of the
portfolio and associated risks. Operational risk and compliance reporting are
also regularly discussed by the Board. Emerging risks are monitored and
incorporated into the risk appetite framework as they arise.
Remuneration
P. Remuneration policies and practices should be
designed to support strategy and promote long-term sustainable success.
The remuneration of Directors is overseen by
the Remuneration Committee, chaired by Simona Heidempergher. The Directors
each receive a fixed annual fee and do not receive any additional element
based on performance of the Company. Additionally, Directors offer themselves
annually for re-election at the Company's AGM.
Q. A formal and transparent procedure for developing
policy on remuneration should be established. No director should be involved
in deciding their own remuneration outcome.
The Directors' Remuneration Report notes that
each Director is paid a fixed fee representative of their roles and additional
responsibilities on the Board. This fee level is reviewed by the Remuneration
Committee annually considering performance, time commitments and market
conditions. Recommendations are made to the Board for approval. Further detail
is provided in the Remuneration Committee Report.
R. Directors should exercise independent judgement and
discretion when authorising remuneration outcomes, taking account of company
and individual performance, and wider circumstances.
Performance, individual contribution and market
conditions are all considered when setting directors' fees.
Compliance with The Financial Conduct Authority Listing Rules
The Directors are responsible for ensuring that:
Adequate accounting records are kept, that are sufficient to show and explain
the Company's transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure that the
Financial Statements are consistent with the relevant requirements under the
UK Companies Act 2006.
The assets of the Company are safeguarded; and for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Report of the Directors and other information included in the Annual
Report is prepared in accordance with both Company Law in Bermuda and, where
required, the UK. The Directors are also responsible for ensuring the Annual
Report includes information required by the Listing Rules of the FCA.
The Company has effective internal control systems, designed to ensure that
adequate accounting records are maintained; and that financial information on
which the business decisions are made, which is issued for publication, is
reliable. Such a system of internal control can provide only reasonable, but
not absolute, assurance against material misstatement or loss.
The Company Financial Statements for each
financial year are prepared in accordance with International Financial
Reporting Standards (IFRS). IFRS means standards and interpretations issued
(or adopted) by the International Accounting Standards Board (IASB). The
Directors must not approve the Financial Statements unless they are satisfied
they give a true and fair view of the state of affairs and profit or loss of
the Company for that period.
In preparing these Financial Statements, the Directors are required to:
· select suitable accounting policies and apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether they have been prepared in accordance with
International Financial Reporting Standards; and
· prepare the Financial Statements on the going concern basis,
unless it is inappropriate to presume the Company will continue in business.
Under the FCA Listing Rules and the UK Code, the Board is responsible for:
· disclosing how it has applied the principles and complied with
the provisions of the AIC Code and, thereby, the UK Code, or where not, to
explain the reasons for divergence.
· reviewing the effectiveness of the Company's systems of risk
management and internal controls.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website:
www.HansaICL.com. Visitors to the website need to be aware that legislation
governing the preparation and dissemination of the Financial Statements may
differ from legislation in their own jurisdictions.
Responsibility statement
The Directors confirm that:
The Financial Statements are prepared in accordance with applicable
international accounting standards and present fairly, in all material
respects, the financial position of Hansa Investment Company.
The Strategic Report, including the Chairman's Statement and the Report of the
Directors includes a fair review of the development and performance of the
business and the position of the Company, together with a description of the
principal risks and uncertainties it faces.
The Directors consider the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable. Further commentary demonstrating
the Company's performance, business model and strategy has been included
within the Annual Report.
For and on behalf of the Board
Jonathan Davie
14 June 2024
Audit Committee Report
The Audit Committee comprises solely independent Directors, as required by the
AIC Code and endorsed by the FRC. It is chaired by Richard Lightowler. Given
the size of the Board and the range of experience they bring, all
non-committee Directors are invited to attend the Audit Committee meetings.
However, only the independent member Directors are able to vote.
Recommendations of the Audit Committee are brought before the whole Board for
discussion and ratification.
The Audit Committee ensures fair, balanced and understandable reporting of
Company results.
The principal roles of the Audit Committee are to ensure that:
· the integrity of financial reporting within the Annual and
Half-Year Reports taken as a whole are fair, balanced and understandable and
provide information necessary for shareholders to assess the Company's
performance, business model and strategy;
· the independence, objectivity and effectiveness of the external
Auditor is maintained and monitored. The Committee also reviews the external
Auditor performance in terms of quality and value;
· the financial reporting internal controls system of the Company
are adequate and effective.
Financial Reporting and Internal Controls
In discharging its duties and, in particular, matters relating to the approval
of the Annual Report, Half-Year Report and the review of the Company's
internal controls, the Committee considers reports and presentations made by
the Company's Auditor, Administrator, Company Secretary, Additional
Administrative Services Provider (including those of its Compliance Officer)
and Legal Advisers.
In its review of the Financial Statements, the Committee pays particular
attention to the ownership of assets, the valuations of the portfolio and
recognition of income. In this regard we receive regular reporting from the
Portfolio Manager and AASP, including reports on the effectiveness of internal
controls in these areas. In addition, the Committee discusses with, and
receives reports from, the Auditor on the nature and scope of work performed
on valuation and ownership of assets and on income recognition.
The Company's Custodian confirms title of all assets in its custody. In its
consideration of valuations, the Committee notes that 76% of the Investment
Portfolio by value is held in assets that are either traded or listed on an
exchange or are cash. Further, of the remaining 24% unquoted fund investments,
the majority primarily hold traded securities. Valuations for these funds are
supplied by third party managers. The Audit Committee recognises that 52% of
the total portfolio assets are Level 1 and 45% are Level 2 securities. Given
the significant level of externally valued assets, the Committee is satisfied
with the valuation process. There is very limited management judgement in
determining valuations. The Company holds approximately £8m (1.7%) in private
assets carried at valuations determined by the investment manager. The Audit
Committee considers the work done by the Portfolio manager, including
obtaining audited NAVs and the work of the external Auditor in its assessment
of fair values reported. Revenue recognition does not involve significant
judgement or the use of estimates.
The Audit Committee also considers the potential need for an internal audit
function on an annual basis, recognising the FRC guidance on proportionality.
The Audit Committee considers internal compliance testing at the Administrator
and Portfolio Manager to be sufficiently independent and robust to negate the
need for a standalone internal audit function.
No material control weaknesses or incidents of potential fraud were
identified. The Company's service providers implement clear whistleblowing,
anti-bribery and corruption policies. The Company received direct reporting
from service providers on internal controls and audit reports on their
internal controls.
The Committee is authorised by the Board to investigate any activity within
its terms of reference, to seek any information it requires from any officer
or service provider to the Company, to obtain outside legal or other
independent professional advice and to secure the attendance of third parties
with relevant experience and expertise if it considers this necessary.
The Chairman of the Audit Committee formally reports to the Board following
each Audit Committee meeting and on other occasions as requested by the Board.
The Audit Committee confirmed to the Board that the Annual Report, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
Audit: Independence and quality
The Audit Committee considers the external Auditor's independence,
objectivity, scope of work engagement team experience, compliance with
relevant ethical and professional standards and overall quality of service
through a process of feedback from the Company advisors, including the AASP,
the Portfolio Manager and direct discussion with the Auditor. The Committee
also meets with the Auditor in an executive session at least annually. The
current audit partner is Scott Watson‑Brown who has led the audit since the
Company's inception in June 2019 and the appointment of PricewaterhouseCoopers
Ltd as its Auditor.
Auditors' remuneration and terms of engagement are approved by the Audit
Committee. Any non-audit services must be pre-approved by the Audit Committee
to ensure objectivity and independence of the audit is not compromised. No
non‑audit services are provided by PricewaterhouseCoopers Ltd to the
Company. Further information on fees paid to the Auditor is contained in
"Other Expenses" within Note 4 of the Financial Statements.
Company Auditor
The Company's independent Auditor is PricewaterhouseCoopers Ltd, a Bermudan
registered firm ("PwC Bermuda"). PwC Bermuda has audited the Company since our
incorporation in 2019. Their audit has been supported by
PricewaterhouseCoopers LLP of the UK ("PwC UK"). To improve the efficiency of
the audit, the Directors recommend the appointment of PwC UK as the Company's
Auditor for the year ended 31 March 2025. PwC Bermuda will continue to provide
support to PwC UK. The Audit Committee and Board remain very satisfied with
quality of work by the external auditors. This change in roles is being made
for efficiency purposes only.
For and on behalf of the Audit Committee.
Richard Lightowler
Audit Committee Chairman
14 June 2024
Directors' Remuneration Report
Annual statement
The Company has five non-executive Directors. The Board has appointed a
Remuneration Committee. The Chairman of this Committee is Simona
Heidempergher. All independent members of the Board are members of the
Remuneration Committee. William Salomon attends the Committee but is not a
member.
Each Director was initially appointed during June 2019 following the creation
of the Company. Each Director presents themselves for annual re-election at
the Company's AGM.
Policy on Directors' remuneration
The Board's policy is that the remuneration of non-executive Directors should
be a fixed-fee only. This fee should reflect the experience of each director,
time commitment required to fulfil the role, market conditions, financial and
reputational risks undertaken and additional responsibilities. The
remuneration does not include a performance related element and Directors do
not receive bonuses, share options, pensions or long-term incentive schemes.
The aggregate remuneration of the Board will be kept within the limits set out
in the Company's Bye-laws, as amended from time to time.
In assessing current and future levels of director compensation, the
Remuneration Committee seeks external comparative information, such as the use
of independent external surveys. This includes the fees paid by other similar
companies (both industry and jurisdiction), seeking input from recruitment
specialists familiar with the external market, assessing the time commitment
for each of the Directors in their appointed roles and considering the
responsibilities their roles bring. The increasing demands being placed on all
NEDs by shareholders, regulators and markets are also factored.
The fees for the non-executive Directors are within the limits (maximum total
fee of $600,000) as set out in the Company's Bye-laws. The maximum is set as a
USD amount. The equivalent is £474,985 if translated at the applicable rate
on 31 March 2024.
The Remuneration Committee has reviewed the Directors' salaries against
available comparables during the year. The Committee concluded that Directors'
salaries were to remain unchanged during the financial year to 31 March 2024
and to increase by an inflationary amount from 1 April 2024. The new total
salary is $415,000.
Directors' service contracts
It is the Board's policy that every Director has a service contract. None of
the service contracts is for a fixed term. The terms of appointment provide
that a Director shall retire and be subject to re-election at the first AGM
after appointment. The Board has decided each Director will retire annually at
the AGM and seek re-election as appropriate. The terms also provide that
either party may give three months' notice. In certain circumstances a
Director may be removed without notice and compensation will not be due on
leaving office. There are no agreements between the Company and its Directors
concerning compensation for loss of office.
Policy for notice periods
The current Directors' service contracts stipulate three months' written
notice to be given by either the Director or the Company to terminate the
services of a Director. The Board consider this is sufficient notice to ensure
an orderly hand over between the parties.
Shareholders' views on remuneration policy
The formal views of unconnected shareholders have not been sought in the
preparation of this policy.
Employees
The Company does not have any employees, only non‑executive Directors.
Annual report on remuneration
Directors' Emoluments (Audited)
The Company does not have any employees, only non‑executive Directors who
receive only a basic fee, plus repayment of expenses incurred in the course of
performing their duties. Therefore, the use of the detailed remuneration
table, as prescribed in the legislation, is not appropriate here. A condensed
table showing the information relevant to the Directors' remuneration is shown
in its place.
The Directors who received fees during the year received the following
emoluments in the form of fees. For clarity, these amounts are quoted in the
currency as per their service contract. The Director's remuneration is set in
USD, as is common for most Bermudan companies. The following table notes the
Directors current annual fee as at 31 March 2024. It also notes their fee, in
USD, for the current and prior financial years. The equivalent Sterling fees
are shown as converted at the relevant pay date of each fee:
2024 2024 2023 2023
fee fee fee fee
$000 £000 $000 £000
Jonathan Davie (Chairman) 100 79 85 72
Simona Heidempergher 80 64 65 55
Richard Lightowler 90 71 75 63
William Salomon(3) 25 20 25 21
Nadya Wells 80 63 65 55
375 298 315 266
The Company also pays the expenses of the Directors to attend the Board
meetings. Directors' travel costs incurred during the year were £126,000
(2023: £141,000).
Statement of shareholder voting
Votes in respect of the resolution to approve the Directors' Remuneration
Report at the Company's AGM in August 2023 were cast as follows:
No. of % of
shares votes
voted cast
Votes cast in favour 21,435,454 98.13
Votes cast against 409,169 1.87
Total votes cast 21,844,623 100.00
Votes withheld 0
Directors' interests (audited)
Directors must seek permission from the Chairman before trading in shares,
taking note of any Closed Periods. Other than that, there are no specific
rules on Directors' shareholdings.
The interests of Directors and their connected parties in the Company at 31
March 2024 are shown below:
Ordinary shares 'A' non‑voting ordinary shares Nature of
of 1p each of 1p each interest
2024 2023 2024 2023
Jonathan Davie 45,000 45,000 230,000 230,000 Beneficial
William Salomon 11,169,345 11,169,345 3,587,123 3,508,723 Beneficial
Simona Heidempergher 6,400 6,400 - - Beneficial
As at 14 June 2024, the date of signing of these Annual Financial Statements,
there were no changes to report to the Directors' holdings.
William Salomon is the senior partner of Hansa Capital Partners LLP. Fees
payable to Hansa Capital Partners LLP amounted to £3,065,129 (including
Portfolio Management and AASP functions). The fees outstanding at the year end
amounted to £285,000. During the year, no rights to subscribe for the shares
of the Company were granted to, or exercised by Directors, their spouses or
infant children.
Directors' attendance
The Directors meet as a Board on a quarterly basis and at other times as
necessary and the table below sets out the number of operational meetings and
the attendance at them by each Director.
Board(1) Strategy Audit Remuneration Committee Nomination Management Engagement
Committee
Committee(3)
Day Committee
Number of Meetings 9 2 2 2 1 -
Jonathan Davie 9 2 2 2 1 -
Simona Heidempergher 8 2 2 2 1 -
Richard Lightowler 9 2 2 2 1 -
William Salomon(2) 5 2 2 2 1 -
Nadya Wells 7 2 2 2 1 -
(1) "Board" includes full meetings of the Board, of which there were five held
during the year, as well as periodic 'other' meetings and Board calls to
consider and approve operational requirements for the Company, such as
quarterly dividends. These 'other' meetings are arranged as and when required
and require the meeting to be quorate but not necessarily attended by all
Directors.
(2) William Salomon is deemed to not be independent. Therefore, he attends as
an observer of the Audit and Remuneration Committees but is not a committee
member. Further, he attends the Management Engagement Committee when the
majority of Service Providers are discussed but exempts himself when the
performance of the Portfolio Manager is discussed due to his position as its
Senior Partner.
(3) The Management Engagement Committee column is shows no meetings within the
Financial Year. This is because the meetings were held in Bermuda in February
2023 and April 2024 - thus missing our financial year ended 31 March 2024.
On behalf of the Board, I confirm that the above Report on Directors'
Remuneration summarises, as applicable, for the year ended 31 March 2024:
(a) the major decisions on Directors' remuneration;
(b) any substantial changes relating to Directors' remuneration made during
the year; and
(c) the context in which those changes occurred and decisions have been
taken.
An Ordinary resolution for the approval of this Report will be put to
shareholders at the forthcoming AGM.
For and on behalf of the Board
Simona Heidempergher
Chairman of the Remuneration Committee
14 June 2024
Nominations Committee Report
The Committee was chaired by Nadya Wells throughout the financial year. All
independent members of the Board are members of the Nomination Committee.
William Salomon attends the Committee but is not a member.
Role
The Committee reviews the structure, size and composition (including the
skills, knowledge and experience) of the Board and makes recommendations to
the Board with regard to any changes, as necessary. It also considers
succession planning of directors, taking into account tenure and performance
of board members as well as challenges and opportunities facing the Company,
and what skills and expertise are, therefore, needed on the Board in the
future. If a skills-gap or pending vacancy is identified, the Committee is
responsible for identifying and nominating candidates to fill Board vacancies
as and when they arise.
Appointments are made after consideration of the skills and experience needed
by the Board and against objective criteria in accordance with the AIC Code.
The Board considers it is of paramount importance to shareholders that, after
consideration of the skills and experience needed by the Board, candidates are
chosen on the basis of their contribution to the Company's needs and that
there should be no discrimination in the choice of Directors for any reason.
The Nominations Committee pays due regard to the final rules published by the
Financial Conduct Authority in April 2022 in respect of diversity and
inclusion on company boards and executive management. The Company believes a
diverse Board brings many benefits and, as such, there is no restriction
placed on Board membership. Selection and appointment will continue to be
based on merit and against a skills matrix to ensure the overall composition
of the Board has an appropriate balance of knowledge and experience, whilst
remaining cognisant of the relevant geographic and diversity considerations.
The Board has determined that all Directors will retire and offer themselves
for re-election each year at the AGM and this policy includes any Directors
appointed during the year. The Committee reports its recommendations to the
Board for final approval.
Activities during the year
The Nomination Committee met twice during the year. The Committee has
developed a Skills Matrix to summarise the knowledge, skills, experience and
overall competence of each Director. This included anonymised feedback from
the other Board members as well as feedback from each individual Director
themselves. The Skills Matrix considers a wide range of relevant factors when
assessing individual and collective competence including knowledge, skills,
experience, diversity, geographic considerations, other time and business
commitments, as well as their overall performance and contribution during the
period in relation to their specific role. Following its review, and in line
with the small size, structure and nature of the Company, the Committee
concluded that each Director continued to contribute as required, and the
Board continued to operate effectively.
Following the annual review of Board Skills, the Nomination Committee was
supportive of re-appointing the Directors to the Board within the 2024 AGM.
However, Nadya Wells has chosen not to stand for re-election at the
forthcoming AGM due to additional professional commitments. Consequently, as
of 14 June 2024, Nadya's responsibility as Chair of the Nominations Committee
has passed to Simona Heidempergher.
Succession planning
The current Directors were all originally appointed in June 2019. Following
Nadya's decision, the Board is in the process of identifying a director to
join in Nadya's place. As part of the Skills Matrix utilised to evaluate Board
composition, the Board notes the number of years each Director has served and
their expected date of retirement. While the Board does not consider the
length of tenure to have a direct negative correlation to the Directors
performance and contribution, the Nomination Committee remains cognisant of
the AIC recommendations and therefore still considers this element as part of
its overall succession planning.
For and on behalf of the Board
Simona Heidempergher
Chairman of the Nomination Committee
14 June 2024
Financial Statements
Independent auditor's report
To the Board of Directors and Shareholders of Hansa Investment Company Limited
Report on the audit of the financial statements
Our opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Hansa Investment Company Limited (the
Company) as at 31 March 2024, and its financial performance and its cash flows
for the year then ended in accordance with IFRS Accounting Standards.
What we have audited
The Company's financial statements comprise:
· the balance sheet as at 31 March 2024;
· the income statement for the year then ended;
· the statement of changes in equity for the year then ended;
· the cash flow statement for the year then ended; and
· the notes to the financial statements, comprising material
accounting policy information and other explanatory information.
Certain required disclosures have been presented elsewhere in the Annual
Report, rather than in the notes to the financial statements. These are
cross-referenced from the financial statements and are identified as audited.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(ISAs). Our responsibilities under those standards are further described in
the Auditor's responsibilities for the audit of the financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the International Code of
Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants
(IESBA Code) and the ethical requirements of the Chartered Professional
Accountants of Bermuda Rules of Professional Conduct (CPA Bermuda Rules) that
are relevant to our audit of the financial statements in Bermuda. We have
fulfilled our other ethical responsibilities in accordance with the IESBA Code
and the ethical requirements of the CPA Bermuda Rules.
Our audit approach
Overview
Overall materiality: £4,545,000 based on approximately 1% of net assets.
In addition to determining materiality, amongst other factors, the following
were assessed in designing our audit:
the risk of material misstatement in the financial statements
significant accounting estimates
the risk of management override of internal controls
Valuation and existence of investments
Accuracy, occurrence and completeness of investment income
Audit scope
As part of designing our audit, the risks of material misstatement in the
financial statements were assessed and materiality determined. In particular,
consideration was given to where management made subjective judgements; for
example, in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in
all of our audits, the risk of management override of internal controls was
addressed, including, among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to
fraud.
The scope of our audit was tailored in order to perform sufficient work to
enable us to provide an opinion on the financial statements as a whole, taking
into account the structure of the Company, the accounting processes and
controls, and the industry in which the Company operates.
Materiality
The scope of our audit was influenced by our application of materiality. An
audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement. Misstatements may arise due to
fraud or error. They are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
Based on our professional judgement, certain quantitative thresholds for
materiality were determined, including the overall materiality for the
financial statements as a whole as set out in the table below. These, together
with qualitative considerations, helped to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the
effect of misstatements, both individually and in aggregate, on the financial
statements as a whole.
Overall materiality £4,545,000
How we determined it Approximates 1% of net assets
Rationale for the materiality benchmark applied The benchmark was applied as a generally accepted audit practice for
investment company audits.
We agreed with the Audit Committee that we would report to them misstatements
identified during our audit above £227,000, as well as misstatements below
that amount that, in our view, warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Key AUDIT MATTER How our audit addressed the key audit matter
Valuation and existence of investments Our approach to addressing the matter involved the following procedures,
amongst others:
Refer to notes 1(c) Non-current investments and 8 Investments held at fair
value through profit or loss to the financial statements for disclosures of Listed equity investments:
related accounting policies and balances.
Tested the existence of the listed investment portfolio by agreeing the
The investment portfolio as at 31 March 2024 is comprised of listed equity holdings for investments to an independent custodian confirmation.
investments valued at £325 million (72%) and unquoted investments valued at
£124 million (28%). Tested the valuation of the listed investments by agreeing the prices used in
the valuation to independent third-party sources.
We focused on the valuation and existence of listed and unquoted investments
because the investment portfolio represents the principal element of net asset Unquoted investments:
value as disclosed in the Company's balance sheet.
Understood and evaluated the controls around the pricing of unquoted
investments including the final approval of the valuation by the Manager and
the Board of Directors.
Obtained direct confirmation of the existence of investments held and the
price from each fund administrator.
Recalculated 100% of the unquoted portfolio's fair value as at year end and
compared to management's valuation.
Obtained an understanding of the underlying methodology applied to each
unquoted investment through review of their most recently available audited
financial statements to evaluate whether it was based on fair value.
Based on the procedures detailed above, we did not identify any misstatements
which required reporting to those charged with governance.
Accuracy, occurrence and completeness of investment income Our approach to addressing the matter involved the following procedures,
amongst others:
Refer to notes 1(e) Investment income and return of capital and 2 Investment
income to the financial statements for disclosures of related accounting Assessed the accounting policy for investment income recognition for
policies and balances. compliance with accounting standards and the AIC SORP and performed testing to
evaluate whether income had been accounted for in accordance with this stated
Investment income consists of dividend income of £7.8 million. accounting policy.
We focused on the accuracy, occurrence and completeness of investment income Tested the accuracy of dividend receipts by agreeing the dividend rates from
recognition as incomplete or inaccurate income could have a material impact on investments to independent market data.
the Company's net asset value and dividend cover.
Tested investment holdings, on a sample basis, that all related dividends
We also focused on the accounting policy for income recognition along with its declared in the market had been recorded.
allocation and presentation in the income statement as set out in the
requirements of The Association of Investment Companies Statement of Tested occurrence by confirming that all dividends recorded in the period had
Recommended Practice (the "AIC SORP") as incorrect application could indicate been declared in the market by investment holdings.
a misstatement in income recognition.
Tested the allocation and presentation of investment income between the
revenue and capital return columns of the income statement in line with the
requirements set out in the AIC SORP by assessing management's judgement of
the nature, facts and circumstances in determining the classification of the
distribution.
Based on the procedures detailed above we did not identify any misstatements
which required reporting to those charged with governance.
Other information
Management is responsible for the other information. The other information
comprises the Annual Report (but does not include the financial statements and
our auditor's report thereon).
Our opinion on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information identified above and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
UK Corporate Governance Code
We have nothing to report in respect of our responsibility to report when the
Directors' statement relating to the Company's compliance with the Code does
not properly disclose a departure from a relevant provision of the Code
specified, under the Listing Rules of the FCA, for review by the auditors.
Responsibilities of management and those charged with governance for the
financial statements
Management is responsible for the preparation and fair presentation of the
financial statements in accordance with IFRS Accounting Standards and for such
internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing
the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's
financial reporting process.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
· Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control.
· Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
management.
· Conclude on the appropriateness of management's use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause the Company
to cease to continue as a going concern.
· Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's
report is Scott Watson-Brown.
PricewaterhouseCoopers Ltd.
Chartered Professional Accountants
Hamilton, Bermuda
14 June 2024
Income Statement
For the year ended 31 March 2024
Year ended Year ended
31 March
31 March
2024
2023
Note Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains/(losses) on investments held at fair value through profit or loss 8 - 88,760 88,760 - (14,924) (14,924)
Foreign Exchange (losses)/gains - (492) (492) - 327 327
Income
Investment income 2 7,780 - 7,780 6,892 - 6,892
7,780 88,268 96,048 6,892 (14,597) (7,705)
Portfolio management fees 3 (2,950) - (2,950) (2,824) - (2,824)
Other expenses 4 (1,676) - (1,676) (1,527) - (1,527)
(4,626) - (4,626) (4,351) - (4,351)
Income/(losses) before finance costs 3,154 88,268 91,422 2,541 (14,597) (12,056)
Finance costs 5 - - - (1) - (1)
Income/(losses) for the year 3,154 88,268 91,422 2,540 (14,597) (12,057)
Return per Ordinary and 'A' non-voting Ordinary share 7 2.6p 73.6p 76.2p 2.1p (12.2)p (10.1)p
The Company does not have any income or expense not included in the above
Statement. Accordingly, the "Income/(losses) for the Year" is also the "Total
Comprehensive Income/(expense) for the Year", 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 IFRS Accounting Standards ("IFRS").
All revenue and capital items in the above Statement derive from continuing
operations.
The accompanying notes found further on are an integral part of this
Statement.
Balance Sheet
As at 31 March 2024
Note 31 March 31 March
2024
2023
£000 £000
Non-current assets
Investments held at fair value through profit or loss 8 449,153 353,262
449,153 353,262
Current assets
Trade and other receivables 10 1,463 128
Cash and cash equivalents 11 4,352 13,987
5,815 14,115
Current liabilities
Trade and other payables 12 (421) (412)
Net current assets 5,394 13,703
Net assets 454,547 366,965
Capital and reserves
Called up share capital 13 1,200 1,200
Contributed surplus 14 322,839 323,799
Retained earnings 15 130,508 41,966
Total shareholders' funds 454,547 366,965
Net asset value per Ordinary and 'A' non-voting Ordinary share 16 378.8p 305.8p
The Financial Statements of Hansa Investment Company Limited, registered in
Bermuda under company number 54752, were approved by the Board of Directors on
14 June 2024 and were signed on its behalf by
Jonathan Davie
Chairman
The accompanying notes found further on are an integral part of this
Statement.
Statement of Changes in Equity
For the year ended 31 March 2023 Note Share Contributed Retained Total
capital surplus earnings £000
reserve
£000
£000
£000
Equity at 1 April 2022 1,200 324,759 56,903 382,862
Loss for the year - - (12,057) (12,057)
Dividends 6 - (960) (2,880) (3,840)
Equity at 31 March 2023 1,200 323,799 41,966 366,965
The accompanying notes found further on are an integral part of this
Statement.
Cash Flow Statement
For the year ended 31 March 2024
Note Year ended Year ended
31 March 31 March
2024 2023
£000 £000
Cash flows from operating activities
Income / (loss)* 91,422 (12,056)
Adjustments for:
Realised gains on investments 8 (6,228) (5,571)
Unrealised (gains)/losses on investments 8 (82,532) 20,495
Foreign exchange 492 (327)
(Increase)/decrease in trade and other receivables 10 (1,335) 73
Increase in trade and other payables 12 9 44
Purchase of non-current investments (69,313) (78,568)
Sale of non-current investments 62,182 90,368
Net cash (outflow)/inflow from operating activities (5,303) 14,458
Cash flows from financing activities
Interest paid on bank loans - (1)
Dividends paid 6 (3,840) (3,840)
Drawdown/(repayment) of loans - -
Net cash outflow from financing activities (3,840) (3,841)
(Decrease)/increase in cash and cash equivalents (9,143) 10,617
Cash and cash equivalents at start of financial year 13,987 3,043
Effect of foreign exchange rate changes (492) 327
Cash and cash equivalents at end of year 11 4,352 13,987
*Includes dividends received of £7,602,000 (2023: £6,810,000) and interest
received of nil (2023: £nil).
The accompanying notes are an integral part of this Statement.
Notes to the Financial Statements
1 Material accounting policy information
Hansa Investment Company Limited is a company limited by shares,
registered and domiciled in Bermuda with its registered office shown on
further on. The principal activity of the Company is an investment vehicle.
(a) Basis of preparation
The Financial Statements of the Company have been prepared in
accordance with IFRS Accounting Standards ("IFRS"). IFRS means standards and
interpretations issued (or adopted) by the International Accounting Standards
Board (they comprise: International Reporting Standards, International
Accounting Standards (IAS) and Interpretations developed by the IFRS
Interpretations Committee or the former Standing Interpretations Committee
(SIC)).
These Financial Statements are presented in sterling because that
is the currency of the primary economic environment in which the Company
operates. The Financial Statements have been prepared on a going concern basis
under the historic cost convention, modified by financial assets held at fair
value through profit or loss with the assertion of the Board can be found
earlier in the report. The Financial Statements have also been prepared in
accordance with the AIC Statement of Recommended Practice (SORP) for
investment trusts, issued by the AIC in July 2022, to the extent that the SORP
does not conflict with IFRS. The material accounting policy information
adopted is set out below.
(b) Presentation of Income Statement
In order to better reflect the activities of an investment company
and in accordance with guidance issued by the AIC, supplementary information
which analyses the Income Statement between items of a revenue and capital
nature, has been presented alongside the Income Statement.
(c) Non-current investments
As the Company's business is investing in financial assets, with a
view to profiting from their total return in the form of income received and
increases in fair value, investments are classified at fair value through
profit in accordance with IFRS 9. The Company manages and evaluates the
performance of these investments on a fair value basis, in accordance with its
investment strategy and information about the investments is provided on this
basis to the Board of Directors.
Investments are recognised and de-recognised on the trade date. For
listed investments fair value is deemed to be bid market prices, or closing
prices for SETS stocks sourced from the London Stock Exchange. SETS is the
London Stock Exchange's electronic trading service, covering most of the
market including all FTSE 100 constituents and most liquid FTSE 250
constituents, along with some other securities.
Fund investments are stated at fair value through profit or loss as
determined by using the most recent available valuation which is considered to
be fair value at the Balance Sheet date. In some cases, this will be by
reference to the most recent valuation statement supplied by the fund's
manager. In other cases, values may be available through the fund being listed
on an exchange or via pricing sources such as Bloomberg.
Private equity investments are stated at fair value through profit
or loss in accordance with the International Private Equity and Venture
Capital Valuation Guidelines. Private equity investments are carried at the
fair value as reported by the Private Equity Fund Manager (PEFM). In the
absence of a valuation by the PEFM at the balance sheet date, additional
procedures to determine the reasonableness of the fair value estimate for
inclusion in the Financial Statements are performed. These may include direct
enquiries of the PEFM of the investment to understand, amongst others,
valuation process and techniques used, external experts used in the valuation
process and updated details of the underlying portfolio. In addition, the
Company can obtain external independent valuation data and benchmarks to
validate fair value estimates. Further, recent arms-length market transactions
between knowledgeable and willing parties where available might also be
considered. Subsequent to the balance sheet date, the Administrator, will
review subsequent valuations released by the Private Equity fund to look for
consistency with the estimations made as described above.
Unrealised gains and losses, arising from changes in fair value,
are included in net profit or loss for the period as a capital item in the
Income Statement and are ultimately recognised in the Capital Reserves.
(d) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, short-term
deposits and cash funds with an original maturity of three months or less and
are subject to an insignificant risk of changes in capital value.
(e) Investment Income and return of capital
Dividends receivable on equity shares are recognised on the
ex-dividend date. Where no ex-dividend date is quoted, dividends are
recognised when the Company's right to receive payment is established.
Dividends and Real Estate Investment Trusts' (REIT) income are all stated net
of withholding tax. In many cases, Bermudan companies cannot recover foreign
incurred taxes withheld on dividends and capital transactions. As a result,
any such taxes incurred will be charged as an expense and included here.
When an investee company returns capital to the Company, the amount
received is treated as a reduction in the book cost of that investment and is
classified as sale proceeds.
(f) Expenses
All expenses are accounted for on an accruals basis. Expenses are
charged through the revenue column of the Income Statement except expenses
which are incidental to the acquisition or disposal of an investment which are
charged to the capital column of the Income
Statement.
(g) Taxation
Under Bermuda law, to the extent the Company remains out of scope
of the Corporate Income Tax Act 2023 (the "CIT Act"), the Company is not
required to pay taxes in Bermuda on either income or capital gains.
Bermuda enacted the CIT Act on 27 December 2023. Entities subject
to tax under the CIT Act are the Bermuda constituent entities of
multi-national groups. A multi-national group is defined under the CIT Act as
a group with entities in more than one jurisdiction with consolidated revenues
of at least EUR750mm for two out of the four previous fiscal years. If Bermuda
constituent entities of a multi-national group are subject to tax under the
CIT Act, such tax is charged at a rate of 15 per cent of the net taxable
income of such constituent entities as determined in accordance with and
subject to the adjustments set out in the CIT Act (including in respect of
foreign tax credits applicable to the Bermuda constituent entities).
Consolidated revenues of the Company's group are less than EUR750mm
in each previous fiscal year. On this basis, the Company is not, and neither
is it expected to be, in scope of the CIT Act regime.
(h) Foreign Currencies
Transactions denominated in foreign currencies are recorded in the
local currency, at the actual exchange rates as at the date of the
transaction. Assets and liabilities denominated in foreign currencies at the
balance sheet date are reported at the rate of exchange prevailing at the
balance sheet date. Any gains or losses arising from a change in exchange
rates, subsequent to the date of the transaction, are included as exchange
gains or losses in the capital or revenue column of the Income Statement,
depending on whether the gains or losses are of a capital or revenue nature
respectively.
(i) Retained Earnings
Contributed Surplus
The following are credited or charged to this reserve via the
capital column of the Income Statement:
gains and losses on the disposal of investments;
exchange differences of a capital nature;
expenses charged to the capital column of the Income Statement in accordance
with the above accounting policies; and
increases and decreases in the valuation of investments held at the balance
sheet date.
Revenue Reserves
The following are credited or charged to this reserve via the
revenue column of the Income Statement:
net revenue recognised in the revenue column of the Income Statement.
Under Bermuda Company Law, Retained Earnings and Contributed
Surplus Reserve are both distributable.
(j) Significant Judgements and Estimates
The key significant estimate to report, concerns the Company's
valuation of its holding in DV4 Ltd. DV4 is valued using the most recent
estimated NAV as advised to the Company by DV4, adjusted for any further
drawdowns, distributions or redemptions between the valuation date and 31
March 2024. The most recent valuation statement was received on 21 February
2024 stating the value of the Company's holding as at 31 December 2023. In the
absence of a valuation for 31 March 2024 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 2020 to understand, amongst others, valuation
process and techniques used, external experts used in the valuation process
and updated details of underlying property portfolio. It has been confirmed
with DV4's manager that the valuation procedures discussed in July 2020 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 31 March 2024. It is believed
the value of DV4 as at 31 March 2024 will not be materially different, but
this valuation is based on historic valuations by DV4, does not have a readily
available third party comparator and, as such, is an estimate. There are no
significant judgements.
(k) Adoption of new and revised standards
At the date of authorisation of these Financial Statements there
were no standards and amendments to the standards, which have not been applied
in these Financial Statements.
In the current financial period the Company has applied the
following amendments to standards:
Amendments to IAS1 'Classification of liabilities as current or non-current'
(effective for accounting periods beginning on or after 1 January 2023).
IFRS 17, 'Insurance contracts' (effective for accounting periods beginning on
or after 1 January 2023).
Amendments to IAS 8 'Definition of Accounting Estimates' (effective for
accounting periods on or after 1 January 2023).
Amendments to IAS 1 and IFRS Practice Statement 2 'Disclosure of Accounting
Policies' (effective for accounting periods on or after 1 January 2023).
Amendments to IAS 12 'Deferred Tax related to Assets and Liabilities arising
from a Single Transaction' (effective for accounting periods on or after 1
January 2023).
There is no material impact on the Financial Statements or the
amounts reported from the adoption of these amendments to the standards.
Relevant International Accounting Standards that have yet to be
adopted:
IAS 1 - Classification of liabilities as current or non-current
(effective 1 January 2024). The IASB has amended IAS 1 Presentation of
Financial Statements to clarify its requirement for the presentation of
liabilities depending on the rights that exist at the end of the reporting
period. The amendment requires liabilities to be classified as non-current if
the entity has a substantive right to defer settlement for at least 12 months
at the end of the reporting period. The amendment no longer refers to
unconditional rights.
IAS 1 - Non-current liabilities with covenants (effective 1 January
2024). The IASB has amended IAS 1 Presentation of Financial Statements to
introduce additional disclosures for liabilities with covenants within 12
months of the reporting period. The additional disclosures include the nature
of covenants, when the entity is required to comply with covenants, the
carrying amount of related liabilities and circumstances that may indicate
that the entity will have difficulty complying with the covenants.
(l) Operating Segments
The Company considers it has one operating segment for the purposes
of IFRS 8.
2 Investment income
Revenue Revenue
Year ended
Year ended
31 March 31 March
2024 2023
£000 £000
Income from quoted investments
Dividends 7,780 6,892
Total income 7,780 6,892
Note: Of the dividend income received during the financial year, £5.3m was
received from the Company's Strategic Holding in OWHL by way of a dividend
received on 15 June 2023. The remainder was received from holdings within the
Global Equity (direct) & Core Regional silos.
3 Portfolio management fee
Revenue Revenue
Year ended
Year ended
31 March 31 March
2024 2023
£000 £000
Portfolio management fee 2,950 2,824
Total management fee 2,950 2,824
As disclosed earlier in the report, the portfolio management fee is charged at
an annual rate of 1% of the net assets of the Company (after any borrowings),
after deducting the value of the investment in OWHL, on which no fee is
payable.
4 Other expenses
Revenue Revenue
Year ended
Year ended
31 March 31 March
2024 2023
£000 £000
Administration fees 154 150
Directors' remuneration 298 262
Auditor's remuneration for audit of the Company's Annual Financial Statements 92 68
Printing fees 57 36
Directors' liability insurance 67 67
Marketing 75 140
Registrar's fees 80 93
Banking charges 19 38
Secretarial services 159 153
Travel expenses 126 217
Broker fees 32 25
Stock Exchange listing fees 42 50
Safe custody fees 184 180
Management fee rebate from GAM (13) (28)
Other 304 76
Total other expenses 1,676 1,527
5 Finance costs
Revenue Revenue
Year ended
Year ended
31 March 31 March
2024 2023
£000 £000
Interest payable - 1
Total finance costs - 1
As disclosed earlier in the report, the Company has an unsecured lending
facility through its Custodian, Banque Lombard Odier & Cie SA ("Lombard
Odier"), in the amount of £30m, subject to there being sufficient value and
diversity within the portfolio to meet the lender's borrowing requirements.
The facility is used periodically for short-term transactional funding
requirements. As a result, the cost incurred in finance fees are not
necessarily consistent between financial years.
6 Dividends paid
Year ended Year ended
31 March 31 March
2024 2023
£000 £000
Amounts recognised as distributed to shareholders in the year are as follows:
Fourth interim dividend for 2023 (paid 26 May 2023): 0.8p (2022: 0.8p) 960 960
First interim dividend for 2024 (paid 25 August 2023): 0.8p (2023: 0.8p) 960 960
Second Interim dividend for 2024 (paid 24 November 2023): 0.8p (2023: 0.8p) 960 960
Third Interim dividend for 2024 (paid 23 February 2024): 0.8p (2023:0.8p) 960 960
Total dividends paid 3,840 3,840
Set out below are the total dividends paid and proposed in respect of the
current financial year. Where there has been no revenue available for
distribution by way of dividend for the year, dividends have been paid from
capital reserves, specifically contributed surplus which is permitted by
Bermudan company law.
Year ended Year ended
31 March 31 March
2024 2023
£000 £000
First interim dividend for 2024 (paid 25 August 2023): 0.8p (2023: 0.8p) 960 960
Second Interim dividend for 2024 (paid 24 November 2023): 0.8p (2023: 0.8p) 960 960
Third Interim dividend for 2024 (paid 23 February 2024): 0.8p (2023:0.8p) 960 960
Fourth interim dividend for 2023 (payable 31 May 2024):0.8p 2023 (0.8p) 960 960
Total dividends paid & proposed 3,840 3,840
The Board has announced four interim dividends, each of 0.8p per Ordinary and
'A' non-voting Ordinary share, relating to the year ended 31 March 2024. No
final dividend is proposed for the year ended 31 March
2024.
.
7 Return on ordinary shares (equity)
Revenue Capital Total Revenue Capital Total
year ended year ended year ended year ended year ended year ended
31 March 31 March 31 March 31 March 31 March 31 March
2024 2024 2024 2023 2023 2023
Returns per share 2.6p 73.6p 76.2p 2.1p (12.2)p (10.1)p
Returns
Revenue return per share is based on the revenue attributable to equity
shareholders of £3,154,000 (2023: £2,540,000).
Capital return per share is based on the capital profit attributable to equity
shareholders of £88,268,000 (2023: loss of £14,597,000).
Total return per share is based on a combination of revenue and capital
returns attributable to equity shareholders, amounting to net profit of
£91,422,000 (2023: loss of £12,057,000).
Both revenue and capital return are based on 40,000,000 Ordinary shares and
80,000,000 'A' non-voting Ordinary shares, in issue throughout the year.
8 Investments held at fair value through profit or loss
Listed Unquoted 2024 2023
£000 £000 Total Total
£000 £000
Cost at 1 April 242,560 76,138 318,698 324,927
Investment holding gains at 1 April 21,400 13,164 34,564 55,059
Valuation as at 1 April 263,960 89,302 353,262 379,986
Movements in the year:
Purchases at cost 53,016 16,297 69,313 78,568
Sales - proceeds (71,652) 9,470 (62,182) (90,368)
Movement in investment holding Gains/(losses) 79,412 9,348 88,760 (14,924)
Valuation as at 31 March 324,736 124,417 449,153 353,262
Cost as at 31 March 230,152 101,905 332,057 318,698
Investment holding gains 94,584 22,512 117,096 34,564
Valuation as at 31 March 324,736 124,417 449,153 353,262
2024 2023
£000 £000
Gains on sales 6,228 5,571
Movement in investment holding gains/(losses) 82,532 (20,495)
Gains/(losses) on investments held at fair value through profit or loss 88,760 (14,924)
Transaction costs
During the year expenses were incurred in acquiring and disposing of
investments classified as fair value through profit or loss.
These have been expensed through capital and are included within gains on
investments in the Income Statement. The total costs were as follows:
2024 2023
£000 £000
Purchases 13 38
Sales 11 18
24 56
9 Significant holdings
The Company's holdings of 10% or more of any class of shares in investment
companies and 20% or more of any class of shares in non-investment companies
as at 31 March 2024 are detailed below:
Exc. Minority Interest
Country of incorporation or Class of Capital % Latest Total Profit after tax for the period
registration
of class
available accounts
capital and reserves
$000
held
$000
Ocean Wilsons Holdings Limited Bermuda Ordinary 26.5 31.12.2023 601,504 67,048
Ocean Wilsons Holdings Limited is included as part of the investment portfolio
in accordance with IAS 28 - Investment in Associates.
10 Trade and other receivables
The Company applies the IFRS 9 simplified approach to measuring expected
credit losses, which uses a lifetime expected loss allowance for all trade
receivables and contract assets.
2024 2023
£000 £000
Amounts due from brokers 1,353 -
Prepayments and accrued income 110 128
1,463 128
11 Cash and cash equivalents
2024 2023
£000 £000
Cash at bank 348 13,987
Cash funds 4,004 -
4,352 13,987
12 Trade and other payables
2024 2023
£000 £000
Other creditors and accruals 421 412
421 412
13 Called up share capital
2024 2023
£000 £000
40,000,000 Ordinary shares of 1p 400 400
80,000,000 'A' non-voting Ordinary shares of 1p 800 800
1,200 1,200
The 'A' non-voting Ordinary shares do not entitle the holders to receive
notices or to vote, either in person or by proxy, at any general meeting of
the Company, but in all other respects rank pari passu with the Ordinary
shares of the
Company.
14 Contributed surplus
2024 2023
£000 £000
Opening balance at 1 April 323,799 324,759
Dividend paid (960) (960)
Closing balance at 31 March 322,839 323,799
15 Retained earnings
Revenue Capital - other Capital - investment holding Reserves Revenue Capital - other Capital - investment holding Reserves
2024 2024 profit 2023 2023 profit
£000 £000 2024 £000 £000 2023
£000 Total £000 Total
retained earnings retained earnings
2024 2023
£000 £000
Opening balance at 1 April (2,364) 9,766 34,564 41,966 (2,024) 3,868 55,059 56,903
Profit/(loss) for the year 3,154 5,736 82,533 91,422 2,540 5,898 (20,495) (12,057)
Dividend paid (2,880) - - (2,880) (2,880) - - (2,880)
Closing balance at 31 March (2,090) 15,502 117,097 130,508 (2,364) 9,766 34,564 41,966
16 Net asset value
2024 2023
£000 £000
NAV per Ordinary and 'A' non-voting Ordinary share 378.8p 305.8p
The NAV per Ordinary and 'A' non-voting Ordinary share is based on the net
assets attributable to equity shareholders of £454,547,000 (2023:
£366,965,000) and on 40,000,000 Ordinary shares (2023: 40,000,000) and
80,000,000 'A' non-voting Ordinary shares (2023: 80,000,000) in issue at 31
March 2024.
17 Commitments and contingencies
The Company has the following outstanding commitments as at 31 March 2024
(2023: £2.0m):
Outstanding commitment in local currency GBP
BPEA EQT Mid-Market Growth Partnership 1,774,644 1,404,879
GGV Discovery IV - Asia 600,000 474,984
GGV Discovery IV - US 600,000 474,984
Khosla Ventures VIII 1,020,000 807,473
TA Associates XV 3,600,000 2,849,905
Triton VI 1,740,000 1,487,561
TrueBridge Direct Fund III 183,000 144,870
TrueBridge Capital Partners Fund VIII 864,000 683,977
10,381,644 8,328,633
18 Financial instruments and associated risks
The Company's financial instruments comprise securities, cash balances,
debtors and creditors. These assets are classified in the following
measurement categories:
· those to be measured subsequently at fair value through profit or
loss; and
· those to be measured at amortised cost.
The financial assets held at amortised cost include trade and other
receivables, cash and cash equivalents.
Risk Objectives and Policies
The objective of the Company is to achieve growth of shareholder value
commensurate with the risks taken, bearing in mind that the protection of
long-term shareholder value is paramount. The policy of the Board is to
provide a framework within which the Portfolio Manager can operate and deliver
the objectives of the Company. In pursuing its investment objective, the
Company is exposed to a variety of risks that could result in either a
reduction in the Company's net assets and/or a reduction of the profits
available for dividends.
These risks include those identified by the accounting standard IFRS 7, being
market risk (comprising currency risk, interest rate risk and other price
risk), liquidity risk and credit risk. The Directors' approach to the
management of these is set out below. The Board, in conjunction with the
Portfolio Manager and Company Secretary, oversees the Company's risk
management.
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect the valuation
of the investment portfolio. 1) the direct exposure where an investment is
denominated and paid for in a currency other than Sterling; and 2) the
indirect exposure where an investment has substantial non-Sterling underlying
investment and/or cash flows. The Company does not normally hedge against
foreign currency movements affecting the value of the investment portfolio,
but takes account of this risk when making investment decisions. Some of the
fund investments into which the Company invests will, in part or in whole,
hedge some of their underlying currency risk, but this will be known at the
time of investment and will form part of the investment decision. In those
cases, the hedging will not remove the exposure to the underlying country or
market sector. The Portfolio Manager monitors the effect of foreign currency
fluctuations through the pricing of the investments by the various markets.
Direct No direct Total Direct No direct Total
foreign foreign 2024 foreign foreign 2023
currency risk currency risk £000 currency risk currency risk £000
2024 2024 2023 2023
£000 £000 £000 £000
Investments 135,145 314,008 449,153 115,139 238,123 353,262
Other receivables including prepayments 34 1,319 1,353 72 56 128
Cash at bank - 4,352 4,352 - 13,987 13,987
Current liabilities (15) (406) (421) - (412) (412)
135,164 319,273 454,437 115,211 251,754 366,965
Note: Direct foreign currency risk includes direct exposure to USD and Euro
currencies.
Foreign currency sensitivity
The following table illustrates the sensitivity of the profit/loss for the
year and the shareholders' funds in regard to the Company's financial assets
and financial liabilities. It assumes a 10% depreciation of Sterling against
foreign currencies at 31 March 2024 and 31 March 2023. These percentages have
been determined based on the average market volatility in exchange rates in
the previous 12 months. The sensitivity analysis is based on the Company's
monetary foreign currency financial instruments held at each balance sheet
date.
If sterling had weakened by 10% against the currencies shown, this would have US$ Euro Other US$ Euro Other
had the following effect on the Company:
2024 2024 2024 2023 2023 2023
£000 £000 £000 £000 £000 £000
Income statement - profit/(loss) 687 20 22 918 (328) (204)
Equity shareholders funds 10,670 955 1,891 9,228 692 1,601
11,357 975 1,913 10,146 364 1,397
Note: Other includes exposure to foreign currencies excluding US dollar and
Euro.
A 10% strengthening of Sterling against the above currencies would result in
an equal and opposite effect on the above amounts.
Interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits and the interest payable on the Company's variable rate borrowings.
The Company has banking facilities amounting to £30m (2023: £30m) which are
available for the Portfolio Manager to use in purchasing investments; the
costs of which are based on the prevailing LIBOR rate, plus an agreed margin.
The Company does not normally hedge against interest rate movements affecting
the value of the investment portfolio, but takes account of this risk when an
investment is made utilising the facility. The level of banking facilities
used is monitored by both the Board and the Portfolio Manager on a regular
basis. The impact on the returns and net assets of the Company for every 1%
change in interest rates, based on the amount drawn down at the Year-End under
the facility, would be £nil (2023: £nil). The level of banking facilities
utilised at 31 March 2024 was £nil (2023: £1,000).
Interest rate changes usually impact equity prices. The level and direction of
change in equity prices is subject to prevailing local and world economic
conditions as well as market sentiment, all of which are very difficult to
predict with any certainty. The Company has floating rate financial assets,
consisting of bank balances and cash funds that have received average rates of
interest during the year of 0% on bank balances.
Cash flow No Total Cash flow No Total
interest interest 2024 interest interest 2023
rate risk rate risk £000 rate risk rate risk £000
2024 2024 2023 2023
£000 £000 £000 £000
Investments - 449,153 449,153 - 353,262 353,262
Other receivables including prepayments - 1,463 1,463 - 128 128
Cash at bank 4,352 - 4,352 13,987 - 13,987
Current liabilities - (421) (421) - (412) (412)
4,352 450,195 454,547 13,987 352,978 366,965
Other price risk
By the nature of its activities, the Company's investments are exposed to
market price fluctuations. NAV is calculated and reported daily to the London
Stock Exchange. The Portfolio Manager and the Board monitor the portfolio
valuation on a regular basis and consideration is given to hedging the
portfolio against large market movements.
The Company's investment in Ocean Wilsons is large both in absolute terms,
£96.5m as valued at 31 March 2024 (2023: £83.7m) and as a proportion of the
NAV, 21.2% (2023: 22.8%). Shareholders should be aware that if anything of a
severe and untoward nature were to happen to this company, it could result in
a significant impact on the NAV and share price. However, it should also be
noted that the exposure of Hansa Investment Company Limited to the currency,
country and market- based risk exposure of Ocean Wilsons is, to an extent,
mitigated by the diverse nature of the two investments within Ocean Wilsons.
Wilson Sons, corresponding to 61.6% of Ocean Wilsons' NAV, has a direct
exposure to the Brazilian economy, whereas Ocean Wilsons Investments has a
diverse Investment portfolio and corresponds to the other 38.4%. It is an
investment the Board pays close attention to and it should be pointed out that
the risks associated with it are very different from those of the other
companies represented in the portfolio. The Board itself regularly undertakes
a thorough review of its business and prospects and has determined that its
future holds a lot of promise. As a consequence, the Board believes the risk
involved in the investment is worthwhile.
The performance of the portfolio as a whole is not designed to correlate with
that of any market index. Should the portfolio of the Company, as detailed
earlier in the report, rise or fall in value by 10% from the year end
valuation, the effect on the Company's profit and equity would be an equal
rise or fall of £44.9m (2023: £35.3m).
Credit risk
The Company only transacts with regulated institutions on normal market terms,
which are trade date plus one to three days in the case of equities. Fund
investment settlement periods will vary from fund to fund and are defined by
the individual managers. The levels of amounts outstanding from brokers and
fund managers are regularly reviewed by the Portfolio Manager. The duration of
credit risk associated with the investment transactions is the period between
the date the transaction took place, the trade date, the date the stock and
cash were transferred and the settlement date. The level of risk during the
period is the difference between the value of the original transaction and its
replacement with a new transaction. The amounts due to/(from) brokers at 31
March 2024 are shown in Note 10 and Note 12.
The Company's maximum exposure to credit risk on cash is £4.4m (2023:
£14.0m) and on cash funds is £nil (2023: £nil). Surplus cash is on deposit
with the Depositary/Custodian.
Liquidity risk
The liquidity risk to the Company is that it is unable to meet its obligations
as they fall due, as a result of a lack of available cash and an inability to
dispose of investments in a timely manner. A substantial proportion of the
Company's portfolio is held in liquid quoted investments; however, there is a
large, Strategic, holding in Ocean Wilsons of 21.2% (2023: 22.8%), unquoted
equity investments of 2.6% (2023: 2.6%) and investments into open-ended
investment funds with varying liquidity terms of 58.6% (2023: 58.6%).
The Portfolio Manager takes into consideration the liquidity of each
investment when purchasing and selling, in order to maximise the returns to
shareholders, by placing suitable transaction levels into the market. Special
consideration is given to investments representing more than 5% of the
investee company. A detailed list of the investments, split by silo, held at
31 March 2024 is shown on earlier on in the report. This can be used broadly
to ascertain the levels of liquidity within the portfolio, although liquidity
will vary with each investment - particularly the funds.
Capital management
The Company considers its capital to be its issued share capital and reserves
and whilst the Company has access to loan facilities it is not considered or
used as core capital, but primarily to meet the cash timing requirements of
opportunistic investment strategies and thereby enhance shareholder returns.
The Board regularly monitors its share discount policy and the level of
discounts and whilst it has the option to repurchase shares, it considers the
best means of attaining a good rating for the shares is to concentrate on good
shareholder returns.
However, the Board believes the ability of the Company to repurchase its own
'A' non-voting Ordinary shares in the market may potentially enable it to
benefit all equity shareholders of the Company. The repurchase of 'A'
non-voting Ordinary shares, at a discount to the underlying NAV, would enhance
the NAV per share of the remaining equity shares and might also enable the
Company to address more effectively any imbalance between supply and demand
for the Company's 'A' non-voting Ordinary shares.
19 Fair value hierarchy and financial liabilities
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 Statement
of Financial Position, grouped into the fair value hierarchy and valued in
accordance with the accounting policies in Note 1, are detailed below:
Year ended 31 March 2024 Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
Financial assets at fair value through profit or loss
Quoted equities 192,221 - - 192,221
Unquoted equities - - 8,040 8,040
Fund investments 42,692 206,200 - 248,892
Fair Value 234,913 206,200 8,040 449,153
Year ended 31 March 2023 Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
Financial assets at fair value through profit or loss
Quoted equities 136,942 - - 136,942
Unquoted equities - - 9,132 9,132
Fund investments 37,826 169,362 - 207,188
Investment in subsidiary - - - -
Fair Value 174,768 169,362 9,132 353,262
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:
31 March 31 March
2024 2023
equity equity
investments investments
£000 £000
Opening Balance 9,132 8,917
Transferred from Level 1 - -
Purchases 367 -
Sales (Capital Distribution) (402) -
Total (losses)/gains included in gains/(losses) on investments in the Income
Statement:
on assets sold - -
on assets held at year end (1,057) 215
Closing Balance 8,040 9,132
As at 31 March 2024, the investment in DV4 has been classified as Level 3.
This is because the investment has been valued using the most recent estimated
NAV as advised to the Company by DV4, adjusted for any further drawdowns,
distributions or redemptions between the valuation date and 31 March 2024. The
most recent valuation statement was received on 21 February 2024 and relates
to the DV4 portfolio at 31 December 2023. Additionally, the underlying assets
of DV4 are all Real Estate in nature and, as such, there is not a readily
comparable market of identical assets for valuation purposes. In the absence
of a valuation for 31 March 2024 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 2020 to understand, amongst others, valuation process and
techniques used, external experts used in the valuation process and updated
details of underlying property portfolio. In addition, the Company has
obtained external independent valuation data and compared the historic
valuation movements of DV4 to that data. It has been confirmed with DV4's
manager that the valuation procedures discussed in July 2020 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 31 March 2024. It is believed the value of DV4 as at
31 March 2024 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. If the value of the investment was to
increase or decrease by 10%, while all other variables remained constant, the
return and net assets attributable to shareholders for the year ended 31 March
2024 would have increased or decreased by £770,000 (2023: £913,000). The
Board considers 10% to be a potential movement between valuation periods borne
out by historic valuation trends. However, this does not preclude the
valuation moving a greater amount than 10% in the future.
20 Related parties and transactions with the portfolio manager
William Salomon is a Director of the Company and Senior Partner of the
Company's Portfolio Manager. Details of the relationship between the Company
and Hansa Capital Partners LLP, including amounts paid during the year and
owing at 31 March 2024, are disclosed in the Governance Section - Service
Providers, and in Note 3 of the Financial Statements Details of the
relationship between the Company and the Directors, including amounts paid
during the period to 31 March 2024, are disclosed in the Governance Section -
The Board, and also in the Directors' Remuneration Report.
21 Controlling parties
At 31 March 2024 Victualia Limited Partnership and Nomolas Ltd each held 25.9%
of the issued Ordinary shares. Additional information is disclosed in the
Strategic Review - Substantial Shareholders.
22 Post balance sheet events
There are no significant events that have occurred after the end of the
reporting year to the date of this Report which require disclosure.
Additional Information
Notice of the Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Members of the
Company will be held at the Hamilton Princess Hotel, 76 Pitts Bay Rd, Pembroke
HM 08, Bermuda on Friday 2 August 2024 at 9:00 a.m. (Bermuda time) for the
following purposes:
Agenda
· To appoint a chairperson of the meeting.
· To confirm notice.
Resolutions
1. To receive and consider the audited Financial Statements and the Reports
of the Directors and Auditor for the year ended 31 March 2024.
2. To re-elect Jonathan Davie (a biography and Board endorsement can be
found earlier on in the report) as a Director of the Company.
3. To re-elect Richard Lightowler (a biography and Board endorsement can be
found earlier on in the report) as a Director of the Company.
4. To re-elect William Salomon (a biography and Board endorsement can be
found earlier on in the report) as a Director of the Company.
5. To re-elect Simona Heidempergher (a biography and Board endorsement can
be found earlier on in the report) as a Director of the Company.
6. To approve the Directors' Remuneration Report.
7. To approve the Directors' Remuneration Policy and authorise the Board to
determine the remuneration of the Directors.
8. To approve the Company's Dividend Policy as can be found earlier on in
the Annual Report.
9. To appoint PricewaterhouseCoopers LLP as Auditor of the Company and to
authorise the Directors to determine the remuneration of the Auditor.
10. Approval to repurchase up to 14.99% of the 'A'
non‑voting Ordinary shares of 1p each in the issued shares capital of the
Company (the "Shares").
THAT the Company be and hereby is unconditionally authorised to make market
purchases up to an aggregate of 11,992,000 shares at a price (exclusive of
expenses) which is:
· not less than 1p per share; and
· not more than the higher of: i) 5% above the average of the
middle-market quotations (as derived from and calculated by reference to the
Daily Official List of the London Stock Exchange) for 'A' non-voting Ordinary
shares of 1p each in the five business days immediately preceding the day on
which the share is purchased; and ii) the higher of the last independent trade
and the then current highest independent bid.
AND
THAT the approval conferred by this resolution shall expire on the date of the
next AGM (except in relation to the purchase of shares, the contract for which
was concluded before such date and which might be executed wholly or partly
after such date) unless the authority is renewed or revoked at any other
general meeting prior to such time.
11. Special Resolution
That the amended Bye-laws produced to the
meeting by the Chair be adopted as the Bye-laws of the Company in substitution
for, and to the exclusion of, the Company's existing Bye-laws.
Summary of proposed amendments to the Bye-laws
Set out below is a summary of the principal amendments which will be made to
the Company's existing Bye-laws through the adoption of the amended Bye-laws
proposed at the AGM if approved by shareholders.
This summary is intended only to highlight the principal amendments which are
likely to be of interest to shareholders. It is not intended to be
comprehensive and cannot be relied upon to identify all amendments or issues
which may be of interest to all shareholders. This summary is not a substitute
for reviewing the full terms of the amended Bye-laws which will be available
for inspection at the Company's registered office, and also at the registered
office of Hansa Capital Partners LLP being 50 Curzon Street, London, England,
W1J 7UW, in each case from the date of the AGM Notice until the close of the
AGM. The amended Bye-laws will also be available for inspection at the venue
of the AGM from 15 minutes before and during the AGM and on the Company
website
https://www.hansaicl.com/shareholder-information/regulatory-information.aspx19
Method of Payment
This Bye-law has been updated in line with wider market developments to
provide the Company with discretion to prescribe the manner in which dividends
and other monies are paid, including (in the best interests of members and to
take advantage of greater efficiency, improved security of payments and
reduced costs) for payments to be made exclusively by inter-bank transfer or
other electronic means approved by the Board.
83.3 - Obligations to provide information to the Company
This Bye-law has been updated to allow the Company to withhold payment of
dividends to any shareholder that fails to provide requested FATCA/CRS
information to the Company within the period set out in Bye-law 83.1; being 30
days. This withholding sanction will only be implemented after efforts by the
Company to first obtain the necessary information from the non-responding
shareholder. The withholding of payment of dividends is intended to be a
further mechanism to encourage non-responding shareholders to provide the
required information.
For and on behalf of Conyers Corporate Services (Bermuda) Limited
Vida Kam
Secretary
14 June 2024
Notes for Shareholders
1 Pursuant to Regulation 41 of the Uncertificated
Securities Regulations 2001 (as amended), only those members registered in the
register of members of the Company 48 hours before the Annual General Meeting
(i.e. by close of business UK time on 31 July 2024) (or if the Meeting is
adjourned, in the register of members of the Company 48 hours before the date
and time of the adjourned meeting) (the "Meeting") shall be entitled to attend
or vote at the Meeting in respect of the number of shares registered in their
respective names at that time. Changes to entries on the register of members
after that time will be disregarded in determining the rights of any person to
attend or vote at the Meeting.
2 Registered members of the Company may vote at the
Meeting (whether by show of hands or poll) in person or by proxy or corporate
representative. A member may appoint one or more persons as his proxy to
attend and vote at the Meeting on his behalf. A proxy need not be a member.
Where more than one proxy is appointed the instrument of proxy must specify
the number of shares each proxy is entitled to vote.
3 The appointment of a proxy will not affect the
right of a member to attend and vote in person at the Meeting or adjourned
meeting. A member that is a corporation may appoint a representative to attend
and vote on its behalf at the Meeting by delivering evidence of such
appointment to the Company's registrar no later than 48 hours before the time
fixed for the Meeting (i.e. by 1:00pm UK time on 31 July 2024) or any
adjourned meeting.
4 In order to be valid, the proxy appointment
(together with any power of attorney or other authority (if any) under which
it is signed, or a notarised certified copy of that authority) must be
returned by one of the following methods, in each case so as to arrive no
later than 1:00pm UK time on 31 July 2024 or, in the case of an adjourned
meeting, not less than 48 hours before the time appointed for holding such
adjourned meeting (ignoring for these purposes non-working days) or (in the
case of a poll taken otherwise than at or on the same day as the Meeting or
adjourned meeting) for the taking of the poll at which it is to be used: via
www.investorcentre.co.uk/eproxy by using the details on your Form of Proxy; or
in hard copy form by post, by courier or by
hand to the Company's Registrars, Computershare Investor Services (Bermuda)
Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99 6ZY.
If you need help with voting online or need to
request a proxy form, please contact our Registrars, Computershare Investor
Services (Bermuda) Limited on +44 (0370) 702 0000. 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. They are open between 09:00 -
17:30, Monday to Friday excluding public holidays in England and Wales.
Alternatively, Computershare at WebCorres@computershare.co.uk.
Notes for Depositary Interest Holders
1 You will not receive a form of direction for the
Annual General Meeting in the post. Depositary interests may be voted through
the CREST Proxy Voting Service in accordance with the procedures set out in
the CREST manual.
In order for a proxy appointment or instruction
made using the CREST service to be valid, the appropriate CREST message (a
"CREST Proxy Instruction") must be properly authenticated in accordance with
Euroclear UK & Ireland Limited's specifications and must contain the
information required for such instruction, as described in the CREST Manual
(available via www.euroclear.com/CREST). The message, regardless of whether it
constitutes the appointment of a proxy or is an amendment to the instruction
given to a previously appointed proxy must, in order to be valid, be
transmitted so as to be received by the issuer's agent ID 3RA50 by 1:00pm UK
time on 30 July 2024. For this purpose, the time of receipt will be taken to
be the time (as determined by the time stamp applied to the message by the
CREST Application Host) from which the issuer's agent is able to retrieve the
message by enquiry to CREST, in the manner prescribed by CREST. After this
time any change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means. CREST members and, where
applicable, their CREST sponsors, or voting service providers should note that
Euroclear UK & Ireland Limited does not make available special procedures
in CREST for any particular message. Normal system timings and limitations
will, therefore, apply in relation to the input of CREST Proxy Instructions.
It is the responsibility of the CREST member concerned to take (or, if the
CREST member is a CREST personal member, or sponsored member, or has appointed
a voting service provider, to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a
message is transmitted by means of the CREST system by any particular time. In
this connection, CREST members and, where applicable, their CREST sponsors or
voting system providers are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
2 In the case of Depositary Interest Holders, a form
of direction may be requested and completed in order to instruct Computershare
Company Nominees Limited, the Depositary, to vote on the holder's behalf at
the Meeting by proxy or, if the Meeting is adjourned, at the adjourned
meeting. Requests for a hard copy should be sent to Computershare Investor
Services (Bermuda) Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99.
3 To be effective, a valid form of direction (and any
power of attorney or other authority under which it is signed) must be
received electronically or delivered to Computershare Investor Services
(Bermuda) Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99 by no
later by 1:00pm UK time on 30 July 2024 or 72 hours before any adjourned
Meeting.
4 The Depositary will appoint the Chairman of the
meeting as its proxy to cast your votes. The Chairman may also vote or abstain
from voting as he or she thinks fit on any other business (including
amendments to resolutions) which may properly come before the meeting.
5 The 'Vote Withheld' option is provided to enable
you to abstain from voting on the resolutions. However, it should be noted
that a 'Vote Withheld' is not a vote in law and will not be counted in the
calculation of the proportion of the votes 'For' and 'Against' a resolution.
6 Depositary Interest holders wishing to attend the
meeting should contact the Depositary at Computershare Investor Services
(Bermuda) Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99 or by
emailing UKALLDITeam2@computershare.co.uk by no later than by 1:00pm UK time
on 30 July 2024.
All holders
1 The quorum for the Annual General Meeting shall be
two or more shareholders present in person or by proxy. If within two hours
from the time appointed for the meeting a quorum is not present, the meeting
shall be adjourned to the next business day at the same time and place or to
such other time and place as the Directors may determine, and if a quorum is
not present at any such adjourned meeting, the meeting shall be dissolved.
2 As of 14 June 2024 the Company's total number of
shares in issue is 40,000,000 Ordinary shares of 1p each and 80,000,000 'A'
non-voting Ordinary shares of 1p each in issue. The Ordinary shareholders are
entitled to one vote per Ordinary share held. The 'A' non-voting Ordinary
shares do not entitle the holders to vote or receive notice of meetings, but
in all other respects they have the same rights as the Company's Ordinary
shares.
3 A copy of this notice and other information can be
found at
https://www.hansaicl.com/shareholder-information/financial-and-investment-reporting/year-2024.aspx#2024
Investor information
Further information about Hansa Investment Company Limited, including monthly
fact sheets, Stock Exchange announcements and shareholder presentations, can
be found on the Company's website: www.hansaicl.com
Please contact the Portfolio Manager, as below, if you have any queries
concerning the Company's investments or performance.
Portfolio Manager and additional administrative services provider
Hansa Capital Partners LLP
50 Curzon Street
London
W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hiclenquiry@hansacap.com
Website: www.hansagrp.com
Please contact the Registrars, as below, if you have a query about a
certificated holding in the Company's shares.
Registrar
Computershare Investor Services (Bermuda) Limited
c/o 13 Castle Street
St Helier
Jersey
JE1 1ES
Telephone: +44 (0) 370 707 4040
Email: info@computershare.co.je
Website: www.computershare.com/je (http://www.computershare.com/je)
If you have a query, you can call our Shareholder helpline on +44 (0) 370 707
4040. Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the applicable
international rate. Lines are open between 08:30 - 17:30, Monday to Friday
excluding public holidays in England and Wales.
Register for updates
To receive the latest news and views on the Company, please register at
www.hansaicl.com
Company information
The Company currently manages its affairs so as to be a qualifying investment
company for ISA purposes, for both the Ordinary and 'A' non-voting Ordinary
shares. It is the present intention that the Company will conduct its affairs
so as to continue to qualify for ISA products. In addition, the Company
currently conducts its affairs so shares issued by Hansa Investment Company
Limited can be recommended by independent financial advisers to ordinary
retail investors, in accordance with the Financial Conduct Authority's (FCA)
rules in relation to non-mainstream investment products and intends to
continue to do so for the foreseeable future. The shares are excluded from the
FCA's restrictions which apply to non-mainstream investment products, because
they are excluded securities as defined in the FCA Handbook Glossary. Finally,
Hansa Investment Company Limited is registered as a Reporting Financial
Institution with the US IRS for FATCA purposes.
Capital structure
The Company has 40,000,000 Ordinary shares of 1p each and 80,000,000 'A'
non-voting Ordinary shares of 1p each in issue. The Ordinary shareholders are
entitled to one vote per Ordinary share held. The 'A' non-voting Ordinary
shares do not entitle the holders to vote or receive notice of meetings, but
in all other respects they have the same rights as the Company's Ordinary
shares.
Secretary and registered office
Conyers Corporate Services (Bermuda) Limited
Clarendon House
2 Church Street PO Box HM666
Hamilton HM CX Bermuda
Investor disclosure
AIFMD
Hansa Investment Company Limited's AIFMD Investor Disclosure document can be
found on its website. The document is a regulatory requirement and summarises
key features of the Company for investors.
Packaged Retail and Insurance‑based Investment Products (PRIIPs)
The Company's AIFM, Hanseatic Asset Management LBG, is responsible for
applying the product governance rules defined under the MiFID II legislation
on behalf of Hansa Investment Company Limited. Therefore, the AIFM is deemed
to be the 'Manufacturer' of Hansa Investment Company's two share classes.
Under MiFID II, the Manufacturer must make available Key Information Documents
(KIDs) for investors to review if they so wish ahead of any purchase of the
Company's shares.
Links to these documents can be found on the Company's website:
www.hansaicl.com.
Service providers
Independent Auditor
PricewaterhouseCoopers Ltd
Solicitors - Bermuda
Conyers Dill & Pearman Limited
Solicitors - UK
Dentons UK and Middle East LLP
Custodian
Banque Lombard Odier & Cie SA
Stockbroker
Winterflood Investment Trusts
Administrator
Apex Fund Administration Services (UK) Ltd
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
Glossary of terms
Association of Investment Companies (AIC)
The Association of Investment Companies is the UK trade association for
closed-ended investment companies (www.theaic.co.uk). Despite the Company not
being UK domiciled, the Company is UK listed and operates in most ways in a
similar manner to a UK Investment Trust. Therefore, the Company follows the
AIC Code of Corporate Governance and the Board considers that the AIC's
guidance on issues facing the industry remains very relevant to the operations
of the Company.
Alternative Investment Fund Managers Directive
(AIFMD)
The AIFMD is a regulatory framework for alternative investment fund managers
(AIFMs), including managers of hedge funds, private equity firms and
investment trusts. Its scope is broad and, with a few exceptions, covers the
management, administration and marketing of alternative investment funds
(AIFs). Its focus is on regulating the AIFM rather than the AIFs.
Annual Dividend / Dividend
The amount paid by the Company to shareholders in dividends (cash or
otherwise) relating to a specific financial year of the Company. The Company's
dividend policy is to announce its expected level of dividend payment at the
start of each financial year. Barring unforeseen circumstances, the Company
then expects to make four interim dividend payments each year - at the end of
August, November and February during that financial year and at the end of May
following the end of the financial year.
Bid Price
The price at which you can sell shares determined by supply
and demand.
Capital Structure
The stocks and shares that make up a company's capital i.e. the amount of
ordinary and preference shares, debentures and unsecured loan stock etc. which
are in issue.
Closed‑ended
A company with a fixed number of shares in issue.
Depositary/Custodian
A financial institution acting as a holder of securities for safekeeping.
Discount
When the share price is lower than the NAV, it is referred to as trading at a
discount. The discount is expressed as a percentage of the NAV.
Expense Ratio
An expense ratio is determined through an annual calculation, where the
operating expenses are divided by the average NAV. Note there is also a
description of an additional PRIIPs KID Ongoing Charges Ratio explained in the
Annual Report.
Five Year Rolling NAV Return (per annum)
The rate at which, compounded for five years, will equal the five year NAV
total return to end March, assuming dividends are always reinvested at pay
date.
Five Year NAV and Share Price Total Return
Rebased from 0% at the start of the five year period, this is the rate at
which the Company's NAV and share prices would have returned at any period
from that starting point, assuming dividends are always reinvested at pay
date. The Company will continue to quote results from its predecessor, Hansa
Trust Ltd,as part of that reporting so shareholders can see the longer-term
performance of the portfolio.
Gearing
Gearing refers to the level of borrowing related to equity capital.
Hedging
Strategy used to reduce risk of loss from movements in interest rates, equity
markets, share prices or currency rates.
Issued Share Capital
Issued share capital is the total number of shares subscribed to by the
shareholders.
Key Information Document (KID)
This is a document of a form stipulated under the PRIIPs Regulations. It
provides basic, pre-contractual, information about the Company and its share
classes in a simple and accessible manner. It is not marketing material. The
UK regulatory authorities have introduced legislation from 1 January 2023 to
amend some of the disclosures in the KID for UK shareholders. The Company's
AIFM will be producing both UK KIDs and European KIDs going forward.
Key Performance Indicators (KPIs)
A set of quantifiable measures a company uses to gauge its performance over
time. These metrics are used to determine a company's progress in achieving
its strategic and operational goals and also to compare a company's finances
and performance against other businesses within its industry. In the case of
historic information, the KPIs will be compared against data of both the
Company and, prior to the Company's formation, from Hansa Trust Ltd.
Market Capitalisation
The market value of a company's shares in issue. This figure is found by
taking the stock price and multiplying it by the total number of shares
outstanding.
Mid Price
The average of the Bid and Offer Prices of a particular
traded share.
Net Asset Value (NAV)
The value of the total assets minus liabilities of a company.
Net Asset Value Total Return
See Total Return.
Offer Price
The price at which you can buy shares determined by supply
and demand.
Ordinary Shares
Shares representing equity ownership in a company allowing investors to
receive dividends. Ordinary shareholders have the pro-rata right to a
company's residual profits. In other words, they are entitled to receive
dividends if any are available after payments to financial lenders and
dividends on any preferred shares are paid. They are also entitled to their
share of the residual economic value of the company should the business
unwind.
Hansa Investment Company Limited has two classes of Ordinary shares - the
Ordinary shares (40 million shares) and the 'A' non-voting Ordinary shares (80
million shares). Both have the same financial interest in the underlying
assets of the Company and receive the same dividend per share, but differ only
in that only the former shares have voting rights, whereas the latter do not.
They trade separately on the London Stock Exchange, nominally giving rise to
different share prices at any given time.
Premium
When the share price is higher than the NAV it is referred to as trading at a
premium. The premium is expressed as a percentage of the NAV.
Packaged Retail and Insurance‑based Investment Product (PRIIP)
Packaged retail investment and insurance-based products (PRIIPs) make up a
broad category of financial assets that are regularly provided to consumers in
the European Union. The term PRIIPs, created by the European Commission to
regulate the underlying market, is defined as any product manufactured by the
financial services industry, to provide investment opportunities to retail
investors, where the amount repayable is subject to fluctuation because of
exposure to reference values, or the performance of underlying assets not
directly purchased by the retail investor. See also Key Information Document
(KID).
Shareholders' Funds/Equity Shareholders' Funds
This value equates to the NAV of the Company. See NAV.
Spread
The difference between the Bid and Ask price.
Tradable Instrument Display Mnemonics (TIDM)
A short, unique code used to identify UK-listed shares. The TIDM code is
unique to each class of share and to each company. It allows the user to
ensure they are referring to the right share. Previously known as EPIC.
Total Return
When measuring performance, the actual rate of return of an investment or a
pool of investments over a given evaluation period. Total return includes
interest, capital gains, dividends and distributions realised over a given
period of time.
Total Return - Shareholder
The Total Return to a shareholder is a measure of the performance of the
company's share price over time. It combines share price
appreciation/depreciation and dividends paid to show the total return to the
shareholder expressed as an annualised percentage. In the case of historic
information, the Total Return will include data against data of both the
Company and, prior to the Company's formation, from Hansa Trust Ltd.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SFMFMLELSESM