TIDMHAN TIDMHAN TIDMHANA
RNS Number : 9462D
Hansa Investment Company Limited
26 June 2023
Chairman's report
Dear Shareholder
Introduction
I am pleased to present the refreshed format of our Annual
Report, which is intended to give additional information and
clarity.
Shareholder returns
Our Portfolio Manager, Alec Letchfield and his team at Hansa
Capital Partners LLP ("HCP", "Hansa Capital Partners", "PM") have
performed robustly on a relative basis in a very difficult market.
The portfolio he manages - the Company's investment portfolio,
excluding the holding in Ocean Wilsons Holdings Limited ("OWHL",
"Ocean Wilsons") - achieved a gross time-weighted negative return
of -1.1% in the past year (2021/22: gross time-weighted positive
return of 1.1%). Our investment in OWHL generated a gross
time-weighted negative return of -5.17% (2021/22: gross
time-weighted positive return of 24.7%). Collectively, the entire
Hansa Investment Company Limited ("HICL", "the Company") portfolio
generated a gross time-weighted negative return of -2.0% for the 12
months ended 31 March 2023 (2021/22: gross time-weighted positive
return 6.2%).
For the year ended 31 March 2023, the Net Asset Value ("NAV")
Total Return has declined by 3.1%, reducing from 319.1p per share
to 305.8p per share, whilst also returning 3.2p per share in
dividends. Regrettably, consistent with much of the Investment
Trust sector, during the past 12 months there has been an increase
in the discount from 37.8% to 43.1% for the Ordinary shares and
from 39.5% to 44.2% for the 'A' Ordinary shares. More detail on our
results and the longer-term performance can be found further on, as
well as in our Portfolio Manager's detailed review of markets and
portfolio performance in his Report.
Prospects
I noted in my annual Chairman's Statement last year that I could
not remember a more challenging time to be forecasting events with
so many moving parts. I am not sure any of the clouds of
uncertainty have disappeared, other than more clarity on the future
sourcing of energy for Europe and positive signs on the future
decline of inflationary pressures. A decline in job openings and
easing of wage increases are beginning to become apparent in the
US.
The levels of confusion can probably be best illustrated by
several major investment bank's strategists' disagreeing as to
whether either a recession is coming due to higher interest rates
and additional quantitative tightening to defeat inflationary
forces or, conversely, whether there
will be a major decline in rates due to a banking crisis and a
collapse in inflation creating a great new bull market!
At the time of writing, investor sentiment to both fixed income
securities and equities seems to be holding up better than I had
expected. However, to my mind, many obstacles still stand in the
way of a substantial improvement in valuations.
These obstacles include the smaller US regional and local state
banks which are overexposed to commercial lending and battling with
their larger banking competitors and the Fed for deposits. I see
the overabundance of office property in many parts of the world,
partially created by the post Covid "work from home" activity, as a
serious vulnerability for some banks struggling to improve net
interest margins, an improvement which historically would be a
given in a rising interest environment. They have not been helped
by the obliteration of Contingent Convertible bonds from the Credit
Suisse debacle, which will increase their cost of funding either
through future bond issues or equity raises.
The overall net effects on the banking system should be de
minimis - whilst creating a tightening of lending standards. I have
been surprised that the signs of an oncoming recession have not
become clearer, particularly with the shrinkage of the money
supply. It is apparent that the generosity of government handouts
as a result of the Covid pandemic were, in the round, so large that
many recipients are still benefiting from this largesse and
spending it quite slowly. This has deferred any recession and will
probably slow the deceleration of inflation, with obvious
consequences for the timing and speed of any future decline in
interest rates.
Strategy
Alec Letchfield and his team, supported by the Board, have
continued to take an increasingly defensive position during the
year which has helped our overall performance. We do not hold any
direct crypto type assets or real estate assets, other than our
long-held investment in DV4. The Board, in consultation with Alec
Letchfield, has decided to commence investing into a portfolio of
illiquid alternative assets, primarily in Private Equity. We
believe that, over time, this will differentiate HICL's investment
portfolio and give shareholders exposure to an asset class and
underlying investments they could not easily gain exposure to
directly.
The long-term nature of Private Equity also fits well with our
own long-term investment horizons. Our Portfolio Manager has
significant experience investing in Alternative Assets and we are
positive about this new development. By its nature, the Private
Equity portfolio will take a number of years to mature. The plan is
to build this illiquid segment over a period of time, to a level of
around 10% of HICL's portfolio. Further details are set out in the
Portfolio Manager's Report.
The Discount
Your Board is aware that the Company's discount to NAV for both
share classes is in excess of 40%. The Board has listened to
shareholder feedback and discusses this topic at Board meetings to
consider what appropriate steps it could take up to help reduce the
discount over the medium and long term.
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.
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 otherwise readily available.
This, in due course, should increase demand for the Company's
shares. Each Investment Trust 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 has decided to build an allocation to Private
Equity.
We aim to promote the Company and its prospects through clear
and transparent reporting to encourage demand for shares,
particularly amongst private shareholders, thereby widening the
shareholder base. With this in mind, we are revamping our website.
We have refreshed this Annual Report and our regular communication
with shareholders. We continue to work with Edison to produce
appropriate marketing research reports and assist the Portfolio
Manager in meeting with appropriate professionals. We will hold a
hybrid meeting with shareholders in person and by video conference
in London on 27 September this year.
The Board has also considered whether the stubborn level of
discount reflects a lack of understanding of the quality and
liquidity of the portfolio and, therefore, the integrity of the
NAV. It may be helpful to consider:
-- 47.6% of the value of the portfolio at year end was derived
from securities which are tradeable on an Exchange and as such,
their value is based upon their respective market listed share
prices. This includes the holding in Ocean Wilsons (traded on the
London Stock Exchange) which accounts for 22.8% of the
portfolio.
-- 46.2% of the value of the portfolio at year end was derived
from third party fund vehicles, whose value is based on prices
received directly from the funds themselves, the price at which
HICL's units could be sold for at that point in time.
-- 3.7% was held in cash at the year end.
-- Only 2.5% was held in illiquid vehicles (DV4, an evergreen holding).
Of the above, 91.3% of the total NAV has a pricing frequency of
at least monthly, with 73.6% being daily or multiple times a day.
Further, even if the Strategic holding in OWHL were considered
illiquid, 68.5% of the total portfolio can be exited within a
month, with 50.8% being daily. For these reasons, the Board
considers that the values of the diverse investment portfolio are
robust and do not reflect 'stale' values in a period of market
volatility.
Dividends
Your Board has decided to continue with its existing dividend
policy, which is to pay four similar interim dividends at the rate
of 3.2p until it is fully covered by net revenue income and then
increase it in line with any increase in the net revenue income of
the Company. Currently the income 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.
Liquidity and investor base
The Board continues to work with our broker and Alec Letchfield
to promulgate the HICL's story and investment opportunity. We are
also continuing to enhance transparent and timely
communication.
Investment in Ocean Wilsons Holdings Limited
The Board continues to focus on the investment in Ocean Wilsons.
Ocean Wilsons itself has two assets. An investment portfolio, held
through its subsidiary Ocean Wilsons (Investments) Limited and a
circa 56% holding in their main asset Wilson Sons Holdings Brasil
SA ("Wilson Sons"), an established and respected Brazilian shipping
and maritime business. Encouragingly, Wilson Sons performed well in
2022 in Brazilian Real terms with a 6.2% increase in revenue and a
9.3% uplift in EBITDA. All this despite the continuing challenges
of global supply chain bottlenecks in the early part of the year.
During the year to 31 December 2022, the investment portfolio
returned -13.8%, which was better than the MSCI ACWI & Frontier
Markets Index which, in US$ terms was -18.4% for the same
period.
The Board notes that, on 12 June 2023, OWHL announced it was
undertaking a strategic review involving its investment in Wilson
Sons and that it will consider all potential strategic options. The
Board will follow the process with interest but notes from OWHL's
announcement that it is currently at an early stage with no
certainty as to its outcome.
Share classes
The current position of Ordinary and 'A' Ordinary share classes
remains unchanged as the majority of Ordinary shareholders have
informed the Board they do not wish to alter the present structure
at this time.
Environmental, Social and Corporate Governance ("ESG")
matters
As I mentioned in my Report in the Half-Year accounts, our
Portfolio Manager is now a signatory to the UNPRI initiative.
The Board continues to offset the carbon created by flights to
Bermuda for meetings. The amount offset in the past year is 237
tonnes (2022 - 198 tonnes). Further, during the year, the Board
sought an environmental cause that has relevance to Bermuda, our
country of domicile. Amongst many worthy organisations, we
discovered the Blue Marine Foundation, an environmental charity
dedicated to restoring the ocean to health by addressing
overfishing, one of the world's biggest environmental problems. See
more further on in the report.
Annual General Meeting ("AGM") and Amendment to Bye-Laws
At the back of these Financial Statements, you will find a
notice regarding our upcoming AGM to be held on 27 July 2023 in
Bermuda. Within the notice you will find several resolutions that
are presented annually. Additionally, you will note a one-off
change the Company is proposing to its Bye-Laws requiring
shareholders to supply, if requested, information relating to their
tax residency. 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
- approximately 142 shareholders holding less than 1% of our share
capital. 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. The proposed Bye-Law changes enable the Company to
take the necessary measures in relation to those few shareholders
who refuse to provide the information required, so as to enable the
Company to satisfy its reporting requirements.
Please see further on for more detail on the proposed changes
and the more detailed reasoning behind the proposals.
Company Auditor
As at the Company's most recent AGM in August 2022,
PricewaterhouseCoopers Ltd of Bermuda ("PwC") were appointed to
audit the Company.
On behalf of the Board, I should like to extend our best wishes
to you, our shareholders.
Jonathan Davie
Chairman
26 June 2023
Long-term performance
Ten year company performance statistics
Net Asset
Value per
share -
Ordinary
Year ended Shareholders' and Annual
31 March Funds 'A' Ordinary dividends Ordinary 'A' Ordinary Ordinary 'A' Ordinary
-------------- ------------- ---------- -------- ------------ -------- ------------
2023 GBP367.0m 305.8p 3.2p 174.0p 170.5p 43.1% 44.2%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2022 GBP382.9m 319.1p 3.2p 198.5p 193.0p 37.8% 39.5%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2021 GBP367.9m 306.6p 3.2p 198.0p 198.5p 35.4% 35.3%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2020 GBP276.3m 230.2p 3.2p 130.9p 135.5p 43.1% 41.2%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2019 GBP337.3m 281.1p 3.2p 195.5p 195.0p 30.5% 30.6%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2018 GBP323.1m 269.3p 3.2p 198.5p 195.5p 26.3% 27.4%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2017 GBP307.5m 256.3p 3.2p 173.3p 169.6p 32.4% 33.8%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2016 GBP255.6m 213.0p 3.2p 146.0p 145.1p 31.5% 31.9%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2015 GBP273.3m 227.8p 3.2p 172.0p 165.5p 24.5% 27.3%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2014 GBP287.4m 239.5p 3.2p 175.9p 175.5p 26.6% 26.7%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
2013 GBP259.9m 216.6p 3.0p 166.8p 163.0p 23.0% 24.7%
----------- -------------- ------------- ---------- -------- ------------ -------- ------------
The table includes information relating to HICL and historic
information relating to Hansa Trust. The years ended 2020-2023
notes HICL information. The historic year ends 2013-2019 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 2023 1 year 3 years 5 years 10 years
------- ------- ------- --------
Total Return (%)
------------------------------------ ------- ------- ------- --------
Ordinary shares (10.8%) 39.9% (4.3%) 25.5%
------------------------------------ ------- ------- ------- --------
'A' non -- voting Ordinary shares (10.1%) 32.4% (4.7%) 26.1%
------------------------------------ ------- ------- ------- --------
NAV (3.1%) 37.2% 20.4% 60.7%
------------------------------------ ------- ------- ------- --------
Portfolio Manager's report
The domino effect
Year in review
Initially, the financial year to end March 2023 looked to be a
rather middling year. Not great, with growth expected to slow and
inflation above average albeit peaking in the middle of the year,
but equally not disastrous. Something like a -/+10% year was our
rough and ready view as we entered the year.
This view however was quickly overtaken by events. Russia's
decision to invade Ukraine in February 2022 had set-off a domino
effect unleashing a series of increasingly negative events and
serving to push markets into a downward spiral. Initially, energy
and commodity prices spiked with Ukraine and Russia being key
producers of many global commodities. This added fuel to the
already hot inflationary fire meaning that inflation, rather than
falling from around the middle of the year as many expected, spiked
to levels last seen in the 70's. Central bankers, having almost
universally been in the camp that inflation was transitory, were
forced to do an about-turn and acknowledge that inflation was
increasingly structural in nature and necessitated both faster and
larger rate rises. From an environment where rates were effectively
anchored to zero and 25bp moves were deemed significant, we rapidly
moved to a backdrop where central bankers were racing to outdo one
another in an effort to look tough on inflation.
The next domino to fall was that of geopolitical stability. The
war in Ukraine saw a line being drawn between the West and the BRIC
countries. The West backed the sovereignty of Ukraine providing
weaponry and financial support while the BRIC countries aligned
with Russia in the belief that the sphere of influence of countries
such as Russia and China extended beyond their national borders.
Whereas previously countries such as the US and China adopted a
'frenemies' approach to one another, they are now far more open
with their hostility and, in particular, the desire of the US to
stymie China's march to global economic dominance.
China also surprised on the downside. 2022 had been expected to
be the year where it exited its zero-covid policy, providing a
much-needed boost to global growth at a time when the developed
economies were slowing. However, unlike the West, which balanced
the impacts of COVID in terms of deaths and reopening economies,
China continued to adopt a far tougher approach in the belief that
deaths should be minimised even at the expense of their economy. At
the end of the year it finally relented albeit not until there was
civil unrest with the population rebelling against the severity of
the lockdowns.
The domino that is yet to properly fall however is that of
global growth. With many arguing that growth would start to fall
sharply in the face of these challenges and given the extent of
rate rises, growth has remained relatively resilient. In
particular, employment has been remarkably stable much to the
disappointment of central banks given its impact on wage
inflation.
March 2023 saw a further surprise for investors as a mini
banking crisis took hold in the US, beginning with a little-known
bank called Silicon Valley Bank (SVB). SVB was in fact an essential
part of the venture capital industry in the US, providing services
ranging from a home for deposits to loans and credit facilities.
Unfortunately the bank's business model unwound quickly when
interest rates moved upwards, impacting its portfolio of bonds
despite its policy of treating them as hold-to-maturity rather than
marked-to-market. When depositors began withdrawing their cash,
forcing the bonds to be realised at their current value, the model
unwound quickly.
While the US Federal Deposit Insurance Corporation, whose role
is to maintain stability and public confidence in the financial
system, stepped in to backstop all depositors and found a buyer for
the profitable parts of the bank, markets were already identifying
other banks with similarly risky business models. This led to
Signature Bank also being placed under the control of the FDIC,
while the share price of First Republic Bank collapsed and was
subsequently acquired by J.P. Morgan.
However, the woes of the US regional banks, whilst a worrying
development, paled into insignificance compared to the trouble that
Credit Suisse was in, given its much greater importance to the
financial system. The Swiss government was therefore forced to
intervene to ensure its quick sale to rival bank UBS. Although
there were many questions asked about the mechanics of this
transaction, the swift action of regulatory authorities on both
sides of the Atlantic seemed, at least for now, to contain this
crisis.
While the financial sector has been one of the worst performing
parts of the equity market in the first quarter of 2023, markets
were generally up for the quarter despite their falls in March.
Fixed income markets have seen very volatile moves lately as yields
moved up in February amid concerns of faster rate rises, only to
fall swiftly in March as the trouble in the banking sector meant
these were overtaken by worries about a wider slowdown in economic
growth. However, these lower bond yields served to boost longer
duration mega cap technology names that have been viewed somewhat
as bond-proxies in recent years.
Relating this back to markets, we can see that the first quarter
of the financial year, which was at the epicentre of the bad news
flow, saw the worst falls, with global equities down some 14% at
their trough. The second quarter began with a recovery that made
back this loss before falling again in late summer. In the third
and fourth quarters markets edged themselves higher albeit with
setbacks along the way as investors started to anticipate a peak in
inflation and were even looking to a point when interest rates
could start to fall again. Overall, in sterling terms, global stock
markets fell by 1.5% over the past twelve months which perhaps
belies the severity of events as we passed through the year.
At the country level the most interesting factor to note was the
underperformance of the US market, as the UK, Europe and Japan
markets outperformed for the first time in many years. Over the
year the US was down 3.3%, a little worse than the MSCI World
Index, while the UK was up 5.5%, Europe was even stronger up 7.9%
and Japan was just positive with a gain of 0.8%. Europe's relative
strength is somewhat surprising given that it sits on the doorstep
of the Russian-Ukrainian conflict and is most exposed to any energy
shortages due to Russian oil and gas sanctions, although the mild
winter experienced in Europe helped in this regard. The China
market was a rollercoaster, being down 24% by end October but made
this all back to end the year up 1.4%. Brazil was a poor performer
being down 13.5% while India declined 6.5%.
At the core of this year's events however has been the bond
market. Following years of zero interest rates and falling
inflation, the bolt of inflation and the resultant rise in interest
rates meant that bonds failed in their duty to offer defensive
returns when equity markets were falling. Global Treasuries fell by
3.4%, which would have been more were it not for sterling weakness,
while UK government bonds were down by as much as 16.3%. As a
consequence the classic 60:40 portfolio of global equities and UK
gilts, the mainstay of the private investor, was down by 7.4% over
the year, which is likely to come as a shock to many when their
annual portfolio valuations start to come through.
Amongst the alternative asset classes, there were heavy declines
in energy prices as WTI oil, which had reached a high for the year
in June at nearly $124 per barrel, ended the year below $80, while
natural gas was another big faller. Metals such as iron and copper
showed declines, while gold increased from $1,475/oz to nearly
$1,900/oz. The broad commodity index declined 6.9% over the year.
Hedge funds were on the whole somewhat better than equities, with
the broad HFRI index up 4.2%, albeit macro and systematic funds
struggled in the first quarter of 2023 having performed well prior
to then.
The outlook for 2023
The current rally in markets is worth exploring, not least to
determine if we are now past the peak in bad news and whether 2023
offers better prospects for investors.
Two factors seem to be exciting markets. First, the belief that
we have seen the peak of inflation with the current double-digit
levels expected to fall as we move into the first half of 2023. We
have some sympathy with this view. A number of the more cyclical
factors which have been driving inflation higher are indeed rolling
over sharply with oil prices down from a peak of $124/barrel to
$80/barrel now and container shipping prices down 80% to $2,120
now. With the mild autumn helping Europe rebuild its energy
reserves, and hopefully mitigating its dependence on Russian oil,
combined with the base effect as current high prices fall out the
back end, this bodes well for the year ahead and with it a
potential peaking of interest rates (and indeed central banks may
even start to cut rates later in 2023).
The second factor exciting markets has been China relaxing its
zero-COVID policy. Following a period of widespread civil unrest
throughout China and with the Chinese economy weakening, showing
growth of just 3% in the first nine months of 2022 versus a 5.5%
target for the year as a whole, President Xi is relenting on a
number of his measures (presumably recognising that civil unrest
and the danger that the population are pushed back into poverty are
two key factors that dictatorships fear the most). The challenge
now is the speed with which China returns to some kind of
normality. In particular, China has to contend with a relatively
high number of older people who are yet to be fully vaccinated, a
vaccine that is less effective than those being used in the West,
and a healthcare system that is unlikely to be able to cope with
mass outbreaks, especially in its more rural regions. At this stage
markets seem to be anticipating that the exit path will follow that
of the West which, whilst a stop-start process, ultimately led to a
return to normality. The fear in China's case however is that the
outbreaks may be much more severe, especially as they have failed
to build up any herd immunity as was the case in the West.
Perversely such an outcome may lead to further unrest as the
population views it as yet another example of the leadership's
mismanagement of the crisis.
Combined with lower valuations in many markets (but certainly
not all) it is perhaps unsurprising that markets, being forward
looking discounting mechanisms, are trying to look through some of
the more negative news flow to a point where the outlook is more
positive.
So where do we stand? Well, we advocate some caution. We are yet
to see a weakening of the economy or corporate earnings despite the
events discussed above. Whilst the picture is a mixed one, many
important economic indicators are still well into expansionary
territory. GDP growth for the world is expected to come in at 2.7%
in 2023, the US some 0.8% and Europe 0.3%. Whilst it is indeed
possible that economies such as Europe are already in recession,
with important metrics such as the ISM Services PMI measure coming
in at 56.5 many areas are still very much in expansionary
territory. Perhaps most worryingly, employment figures remain very
strong in a number of key markets, hardly the stuff of recession.
It's a similar picture in corporate earnings which again, whilst
showing pockets of weakness, feels as though the worst is still to
come.
The second area where we would exercise some caution is that of
inflation. Whilst it is encouraging that some of the more cyclical
factors appear to be rolling over, and indeed we believe that the
narrative for the coming months will be about inflation falling
from currently extended levels, we worry that some of the more
structural factors will be more persistent and challenging to
eliminate. In particular, wage inflation, with unemployment at
historically low levels, will likely be stickier and harder to
remove, especially with trade unions flexing their muscles
again.
This combination of stronger than expected growth together with
stickier inflation is likely to make it harder for central banks to
cut rates. In all probability rates will stay higher for longer and
under a worst-case scenario they may even have to push up to higher
than anticipated levels to eliminate inflation from the system,
even if this comes at the cost of a deeper, more protracted
recession. Such an outcome is likely to lead to markets retreating
sharply and even going much lower than the previous trough
depending on the severity of the downturn. Even without this bad
outcome, historically it is very unusual for markets to bottom and
start the recovery process without being deeper into recession and
the fuller impact on corporate earnings being felt.
It seems likely then that markets face a period of both push and
pull as the bulls and bears wax and wane depending on news flow. It
is certainly possible that the current rally has legs as we start
the year with news flow dominated by inflation coming off its highs
and global growth bolstered by the Chinese unlocking process.
However, if, as seems likely, there is a growing realisation that
inflation is stickier than many believe to be the case then this
strength is likely to be short-lived. Indeed it may well be a case
of bad news being good news (at least for stock markets) as weaker
growth shows that central bank policy measures are working, and
they can indeed take their foot off the brake. In contrast stronger
growth, and with it stickier inflation, is likely to lead to
central banks being more hawkish, forcing up rates even higher, and
ultimately driving economies into a much deeper recession. Hence,
at this stage, we feel little need to lean into the current market
strength.
A new paradigm?
Whilst the coming months are likely to be dominated by the
events discussed above, we fear that the real challenges that
markets face are yet to come and will be more structural in nature.
Although inflation is likely to fall from the current extremes, the
real question is where does it settle in the medium to longer-term
and what level of interest rate does this imply? We are not
particularly worried by the more cyclical short-term factors
influencing inflation which will undoubtedly drop out sooner or
later, but we do worry that there is a regime shift taking place
due to more deep-rooted inflationary factors. Globalisation, as
noted in the past, now looks to be firmly in reverse as governments
worry about security of supply more than its cost. As highlighted
by recent news that TSMC is investing $40bn in building a new
fabrication unit in the US, rather than in Taiwan or China, no
longer are governments obsessed with achieving the cheapest prices
for consumers but instead avoiding hostile nations holding their
supply chains to ransom. Compounded by the higher labour costs in
China, it feels very much like we are in the sunset of
globalisation.
Similarly, the lack of investment into many commodities as
capital markets got ahead of themselves in their desire to be seen
to be green has meant that the supply of many essential commodities
will struggle to meet demand in the years ahead. With commodities
key components of inflation, again this makes inflation look
stickier than has been the case in the past.
Finally, we now appear to be in a period of structurally much
tighter labour markets. It is unclear at this point the degree to
which this is a post-COVID anomaly that will ultimately normalise
as COVID recedes into history, or if it is more persistent in
nature. Certainly it feels more structural with COVID encouraging
many older people to bring forward their retirement, changing
labour migration patterns and increasing competition for cheap
labour in areas such as internet logistics which all serve to force
up wage levels. For many years now commentators have been calling
for a reversal in the trend towards corporate profits growing at
the expense of the labour force and it is possible that this day
has now arrived. Sticky wage inflation is much more worrying to
central banks as it tends to be harder to eliminate once it becomes
ingrained in the system.
Hence the days of zero, or even negative inflation, seem long
gone and with it the prospect of returning to a low interest rate
environment. Instead it is likely that inflation settles at higher
levels - the key will be how much higher - and as a result we will
enter a higher interest rate environment where quantitative
tightening replaces quantitative easing. This is incredibly
important for stock markets. Recent years have been dominated by an
abundance of liquidity. This drove exceptional returns from bond
markets as yields trended to zero, but also buoyed risk asset
classes such as equities. Through a combination of excess cash in
the financial system needing to find a home and with central banks
able to throw liquidity at markets during periods of distress
without the fear of creating inflation, we have experienced a
golden period in stock markets over the last couple of decades.
Instead, if higher inflation and interest rates are more persistent
it seems likely that stock markets will be somewhat lower and
cycles shorter especially given that the 'Fed Put' will no longer
be an option in many cases.
The second structural change that we would highlight is in the
geopolitical backdrop. In recent years, geopolitics was of little
real concern for investors. The US hegemony prevailed, with the US
adopting the ultimate market friendly economic model with
developing economies expected to trend towards this model and
ultimately were of little relevance from a market context in view
of their small size.
Now however, this period of geopolitical stability appears to be
changing. The developing markets are growing in economic power such
that by 2050 the top five global economies are predicted to include
China, India and Indonesia with the US being displaced by China as
the most important economic nation. This growing strength is
encouraging many of the developing countries to flex their muscles
and, perhaps most worryingly, increasingly countries are aligning
between the two sides with the East no longer prepared to be
dictated to by the US.
Hence having historically been able to largely ignore
geopolitics, at least from an investment context, it is now
becoming harder and harder to ignore. Instead we must factor into
our thought process how the geopolitical landscape evolves and the
risks that this may present. As highlighted in 2022 by Russia's
invasion of Ukraine, the behaviour of many developing markets can
be at best unpredictable and, at worst, extremely disruptive to
world stock markets.
Positioning
So how do we position portfolios for the coming year and the
period ahead? Well, without sounding trite, with some
difficulty!
As detailed previously, whilst we see good reason for equities
to continue to move higher in the near-term we are not overly
inclined to chase this rally as we see challenges developing in the
form of recession, stickier inflation and rates staying higher for
longer. Instead, the main debate we have internally is whether we
should be using this strength to sell into and if we should take a
more negative tilt. Largely this will be dependent on whether or
not existing rate cuts are successful in their goal of dampening
inflation and the more cyclical inflationary elements working their
way out of the system. It certainly seems that the market has got
ahead of itself and if history is anything to go by, the falls
experienced to date would be consistent with a soft-landing rather
than the 35% or so decline for a typical cyclical bear market.
This changing backdrop has also led to a number of important
intra-market changes. No longer is it a question of being purely
focused on longer duration growth names. Instead, with interest
rates unlikely to trend back to zero in the near-term, holding a
blend of value, quality and growth seems more appropriate. Higher
rates typically favour companies who generate more of their
earnings in the near term and, if recession is around the corner,
then quality companies with more predictable earning streams will
likely command a premium. That's not to say we are anti-growth
technology companies! They may well be part of the solution if
companies seek to increase their productivity in the face of wage
price pressure, but the more egregious valuations of recent times
are unlikely to return any time soon. However these technology
companies are likely to be under more pressure to become profitable
rather than continually burning cash in the pursuit of market share
growth.
Perhaps the area of most interest is the bond market. For a
number of years now we have largely ignored the sector, viewing
yields as too low and the risk from higher inflation and rates as
too high. Instead we have favoured equities which represented a
more attractive risk return. Given the jump in yields that we have
seen over the past year however, and with inflation now at
cyclically high levels, parts of the bond market are starting to
become more interesting again. Yields are now higher than equities
in many parts of the bond market meaning we are increasingly
shifting from TINA (There Is No Alternative to equities) to TARA
(There Are Reasonable Alternatives). That's not to say however that
we would be diving in with both feet, and in particular we worry
that the high yield market still fails to reflect the dangers from
rising default rates if recession starts to take hold, but
nonetheless we are beginning to evaluate positions in areas such as
shorter duration high quality investment grade credit.
Similarly the outlook for some sectors of the hedge fund space
is again looking structurally much more attractive. An environment
characterised by greater volatility, the need to be more tactical,
and higher interest rates is exactly the kind of backdrop that
macro and multi-strategy hedge funds thrive in. Equally, CTA funds,
which trade price momentum rather than being fundamentally driven,
again typically do much better in today's fast markets. After a
period of more lacklustre returns, where many have struggled to
justify their fees, this has reinforced the case for having macro
and more systematic funds within a diversified multi-asset class
portfolios especially with bonds failing in
this role. We have significant exposure to both these areas.
Another area of potential change is that of the US dollar.
Whilst by no means arguing that the role of the US dollar as the
global reserve currency is under threat - with no real alternative
to the liquidity and the stability of the fiscal and monetary
backdrop provided by the US - the combination of US interest rates
being raised earlier and more aggressively than other countries and
the valuation of the dollar looking expensive, it is bringing us
closer to the point where dollar strength is replaced by dollar
weakness. With interest rates likely to turn earlier in the US
compared to many other countries, and as the safety premium awarded
to the dollar erodes, we would see investors moving out of the
dollar and favouring other, non-dollar assets. In particular we
would highlight emerging markets which typically do much better in
a weaker dollar environment, especially in light of their more
attractive current valuations.
Conclusion
The challenge facing markets and policy makers in the coming
months will be untangling the drivers of inflation and growth in
terms of which factors are cyclical and which are more structural
in nature. Initially it looks like the more cyclical factors will
hold sway which will likely support stock markets as inflation
falls and investors try to look through the cycle to a point where
interest rates start to turn and a new cycle begins. Whilst
acknowledging this potential strength, we are inclined to sit
tight, viewing markets as having got ahead of themselves and
ignoring the looming economic and corporate sector weakness and the
pressure on valuations that this will bring.
The more difficult question is whether we should be actively
selling into this strength and taking a more cautious position
within portfolios. To a large degree this depends on whether any
economic downturn proves worse than commonly anticipated, i.e. a
hard landing as opposed to a soft landing or, even more worryingly,
that economies and inflation remain more resilient than central
bankers are comfortable with and they are forced into driving
economies much lower to bring inflation back to acceptable
levels.
Overlaying this is a growing sense that we may be nearing some
broader paradigm shift. We do not say this lightly as paradigm
shifts are rare and whilst being wonderful headline makers, are
generally not great for fund managers' careers. Nonetheless, it
feels that having lived through decades of diminishing inflation
and interest rates and copious liquidity, we are entering one where
liquidity is harder to come by and central banks can no longer ride
to the rescue at points of market distress. Such a backdrop likely
implies a period of lower returns, less protracted and shorter
cycles and, as detailed above, greater balance in portfolios
between different asset classes and a combination of value, growth
and quality, something we feel well placed to offer our investors
given our broad, multi-asset approach.
Portfolio review and activity
During what was a volatile year for global markets, your Company
produced a commendable return of -3.1% on an NAV total return basis
for the financial year. High inflation, and the interest rate
increases that they implied, were significant concerns for
investors throughout the year, although as time went on there were
increasing fears of an economic slowdown, and finally a mini
banking crisis that began in California and led to the downfall of
Credit Suisse, precipitating a flight to safety. Of the three key
performance indicators, two are negative over twelve months, with
the MSCI ACWI NR Index (GBP) being down 1.5% and the FTSE UK Gilts
All Stocks TR Index being down a steep 16.3%. Hence performance
compared very favourably with the classic 60:40 equity/bond
balanced portfolio which was down 7.5%. With inflation having been
high over this period, the UK CPI has gained 9.2%. Although the
position in Ocean Wilsons Holdings detracted with a loss of 5.2%
for the year, we believe its investment portfolio offers very
useful diversification benefits, and we note signs of improving
sentiment towards Brazil which should be supportive of its Wilson
Sons position, which will also be helped by increasing global trade
as China continues its reopening post covid.
The Company's net asset value per share was 305.8 pence at the
end of March 2023, down from 319.1 pence at the end of March 2022,
while 3.2 pence per share has been paid out in dividends during the
year.
Core and Thematic Funds
For the financial year the Core Regional silo declined 4.0%
while the Thematic silo was down 8.7%.
Europe as a region has been stronger lately, and this has aided
some of the portfolio's holdings. Schroders Global Recovery, first
purchased in October 2022, has significant exposure to Europe, as
well as the UK and Japan, while being underweight the US. The fund
gained 7.0% in the final quarter of the financial year, leaving it
up 13.7% since purchase. Companies which have performed well for it
include Continental AG, the tyre company, and UniCredit, the
Italian bank, which had a very strong quarter despite the turmoil
in the wider financial sector. Elsewhere, the portfolio's passive
holding in iShares Core MSCI Europe returned 9.4% for the year.
After a long period of leading performance in the portfolio, the
North American holdings have been a little weaker versus other
regions this year. Select Equity declined 9.4% and Pershing Square
Holdings was down 4.3%. Pleasingly, the portfolio's largest holding
outside Ocean Wilsons Holdings, Findlay Park American's decline of
just 0.4% is ahead of the North American index. Findlay Park has
been actively pivoting the fund further away from mega cap
companies towards more midcap companies (the majority of holdings
added in the last two years have been in the $3-50bn range,
including West Pharmaceuticals and United Rentals) where they are
finding better opportunities and more attractive valuations. Beutel
Goodman US Value was purchased in November 2022 to provide exposure
to large cap value stocks. The fund is managed by a dedicated value
investment team that has stuck admirably to their investment
philosophy during a long period when markets have generally been
dominated by growth companies. It registered a small decline of
0.6% during the final quarter of the financial year, as value
stocks lagged, and its return since it was purchased in the
portfolio has been -3.4%.
In Japan, the Indus Japan Long Only made gains over the year,
being up 2.2%, with positions such as Renesas Electronics and Food
& Life Companies being top contributors. Goodhart Partners:
Hanjo Fund, which has a smaller cap focus, was down 0.3% for the
year.
Emerging and frontier markets generally lagged developed markets
over the year, but there were some relatively stronger performers
in this part of the portfolio. NTAsian Discovery gained 1.7% for
the year. Its top holding is BFI Finance, a consumer financing
company in Indonesia, that has contributed positively over the last
year. The manager likes its connection to the growing GDP per
capita in the country and it is benefiting from digitalising its
operations. Vietnam remains a significant exposure for the fund,
although this detracted over the course of the year. BlackRock
Frontiers Investment Trust has delivered positive returns, with a
rise of 4.4% over the last quarter taking it to a return of 7.2%
for the year, aided by some of its holdings in the Middle East
which were buoyed by elevated oil prices, although these have come
off more recently.
The thematic holdings have experienced mixed performance over
the last year. Energy exposure through iShares MSCI World Energy
Sector ETF has been a strong contributor, gaining 12.7%, although
it fell back 5.3% in the last quarter. GAM Star Disruptive Growth
has fallen 20.3% over the year, as the technology sector declined
after many years of leading market gains, although it bounced 7.7%
in the final quarter. Healthcare returns were mixed, with RA
Capital International Healthcare being the best performing over the
year with a rise of 13.6%, while Worldwide Healthcare Trust
declined 3.7% and BB Biotech fell 14.7%. In May 2022 the position
in SPDR MSCI World Financials ETF was switched into the Polar
Capital Global Insurance Fund, which has since outperformed and
fared much better than the broad financials sector in the fallout
from Silicon Valley Bank's failure. The Polar Insurance Fund is up
11.0% since purchase.
We recently agreed with the Board to introduce an allocation to
private equity within the portfolio. This will provide access to
investments that are not contained in the public markets, while
benefiting from private equity's long-term nature that fits well
with the Company's investment horizon. We have significant
experience of investing with some of the world's best private
equity firms, ranging from large blue-chip names to lesser-known
specialist managers. A fully developed private equity programme
will take many years to construct, but some early commitments have
already been made. These include commitments to invest in funds
managed by Khosla and GGV, two leading Silicon Valley venture
capital groups that are very difficult to access. While recent
events surrounding Silicon Valley Bank, combined with falling
technology valuations have been difficult for the venture capital
space, it is hoped that this could work well for funds beginning to
invest money into the space now. A further commitment has been made
to TA Associates XV, the next flagship fund from the leading US
growth private equity firm, which has an excellent track record of
investing across technology, healthcare and services sectors.
Diversifying Funds
The diversifying holdings have continued to provide an
attractive alternative source of returns whilst dampening
volatility and displaying low correlations to the equity market.
They delivered a gain of 0.8% in the last twelve months, which is a
very positive result in an environment of falling equity markets,
and far ahead of the steep losses in the bond markets, where the UK
gilt index fell 16.3%.
The two macro funds have again delivered steady returns this
financial year, with Hudson Bay International rising 3.7% and MKP
Opportunity up 4.5%. Some of the strongest performance over the
year has come from within the fixed income part of the portfolio,
although generally within more niche strategies as sovereign bonds
have declined. BioPharma Credit has been particularly strong,
delivering a 13.6% return for the year. A significant portion of
this total return is derived from income, with the company
continuing to meet its 7% annual dividend target. Selwood Liquid
Credit Strategy benefited from a good final quarter, gaining 7.9%,
to bring it to a return of 7.2% for the financial year.
Keynes Dynamic Beta Strategy pulled back in the last quarter,
with a decline of 2.1% as its directional models detracted in both
equities and bonds, but delivered a return of 7.1% for the year.
Schroder BlueTrend suffered similarly in the last quarter with a
decline of 12.8% that leaves it down 2.4% for the year, but the
other CTA fund, GAM Systematic Core Macro, was less affected and
remains up 4.1% for the year, partly thanks to its diversified,
non-trend models.
Global Equities
The global equity silo returned 18.0% over the past year, with
the biggest contributors being Orion Engineered Carbons,
Interactive Brokers and Arch Capital. The biggest detractors were
CTT, CVS and ViaSat.
Over the past year, our value investing approach has allowed us
to avoid the general declines in the equity markets. However, in
the preceding year, our risk-averse style struggled to keep up,
which is not surprising. Our real challenge is to achieve
satisfactory results during tough times, although it is impractical
to accurately determine or anticipate when these times might occur.
The cost of doing that can be to not keep pace with bull markets
and if that means not buying over-valued stocks just to maintain
relative performance to a benchmark, that is a price we are willing
to pay.
Our process is focused on bottom-up stock picking, rather than
regional or sector selection, and we are pleased to report that
this approach has been the primary driver of our returns. When we
wrote to you three years ago, we were optimistic about the
long-term prospects of our global equity portfolio due to its 50%
discount to its intrinsic value. Although the discount has narrowed
to 35% since then, we still believe that the portfolio offers a
substantial margin of safety.
Continuing our earlier discussion on banking, it's worth noting
that our direct equity portfolio has a 40% weighting in the
financial sector based on the Global Industry Classification
Standard (GICS). However, we do not have any exposure to banks.
Instead, we have invested in brokers, insurers, and an industrial
holding company. Our largest position, Interactive Brokers (IBKR),
suffered a 7% decline from March 8th to the end of the quarter, as
the market sold off all financial stocks indiscriminately. However,
the banking situation has left IBKR in a much stronger position, as
it has showcased its financial strength to potential customers.
Unlike its peers, IBKR offers the best interest rates on customer
deposits, currently at 4.33% on USD balances compared to Charles
Schwab's 0.45%, so is unlikely to see customers move their
deposits. Additionally, it invests its cash in short-duration
treasuries, which stood at 24 days at the end of March, a stark
contrast to the asset-liability mismatch at other financial
institutions. While the sell-side analysts have been frustrated
with the conservative approach to the balance sheet in the past,
over the long term it pays off to be invested alongside an
owner-operator where the chairman and staff hold over 75% of the
shares. Their long-term focus is summed up by the chairman in
response to an analyst asking them about their balance sheet in
January, well before the banking crisis made headlines. "It is a
risk we cannot take because if you're right, we'll actually make
extra money. But if we're wrong, we can lose a fortune because as
rates go up, we have to raise the rate that we pay to our clients.
And we don't want to be a situation where we are lent out on the
long end and we're borrowing on the short term from our customers.
So, we can get creamed that way, and we will not do that."
The relative strength of IBKR has been acknowledged, evidenced
by a 31% drop in its peer, Schwab, over the same period. Moving
forward, customers may re-evaluate the financial strength of their
broker, resulting in a potential uptick in the pace of client wins,
especially from Registered Investment Advisers. In addition,
further client growth is anticipated to come from large
international institutions that white label the IBKR platform. IBKR
has already secured two significant customers who are expected to
begin transferring their clients later in the year.
We believe it is quite possible that IBKR earns over $6 a share
by 2025, which would be a 14% EPS CAGR from 2022. This conservative
estimate is less than the 19% earnings CAGR they have achieved
since our initial purchase in 2017 and represents a forward
multiple of just 13x P/E.
During the year we initiated a new position in Bergman &
Beving, added to our positions in Coats, CTT, Grupo Catalana
Occidente and ViaSat and reduced our positions in CK Hutchison,
CVS, Dollar General, EXOR, Interactive Brokers and Subsea 7.
Ocean Wilsons Holdings
As the largest integrated provider of port and maritime
logistics in Brazil, we believe the Ocean Wilsons' subsidiary,
Wilson Sons, is well-placed to perform in the coming years. The
business has a strong competitive position, being 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: Rio Grande and Salvador. In recent
times the company has seen several challenges, including political
upheaval in Brazil and the disruption stemming from covid that
significantly impacted global trade and hurt the energy sector that
is an important part of the company's demand. However, there are
now signs that these factors are improving, which should be
positive for the company going forward.
Recent results have begun to evidence this improvement, with
earnings for 2022 being 6.2% higher than in 2021. There were still
shortages of empty containers during the year stemming from global
logistics bottlenecks, which particularly affected the terminal at
Rio Grande, but this has started to improve in 2023, with volumes
up 5.2% year-on-year for the first two months. Demand for offshore
energy-linked services is improving, with vessel turnarounds in the
offshore support bases increasing over 30% compared to 2021 and
operating days rising by over 20%. Two new support base contracts
were signed in the last quarter of 2022, while three platform
supply vessels began operating under new four-year contracts with
Petrobras.
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 most recent portfolio report
for the year 2022 shows encouraging relative performance, albeit
with losses given the challenging market conditions. There was a
decline over the calendar year of 13.8%, which was significantly
ahead of the global equity and bond indices. Performance was helped
by thematic exposures to energy and commodities, as well as the
private market investments which have demonstrated resilience.
Private equity holdings now make up 39.1% of the investment
portfolio, and many of the funds returned significant capital
during the year. Some of the largest private equity positions
include venture capital funds of funds managed by Stepstone, US
buyout funds managed by KKR and a financials-focused fund managed
by Reverence Capital. The December 2022 portfolio valuation of
$293.8m was down from $328.2m at the end of March 2022. During 2022
dividends of $5m, in two equal tranches, were paid out from the
portfolio in May and July.
Alec Letchfield
Chief Investment Officer
April 2023
The portfolio
As at 31 March 2023
Fair value % of net
Investments GBP000 assets
Core regional funds
----------------------------------------------------- ---------- --------
Findlay Park American Fund 24,514 6.7
----------------------------------------------------- ---------- --------
iShares Core S&P 500 UCITS ETF 21,360 5.8
----------------------------------------------------- ---------- --------
Select Equity Offshore Ltd 18,385 5.0
----------------------------------------------------- ---------- --------
BlackRock Strategic Equity Hedge Fund 13,917 3.8
----------------------------------------------------- ---------- --------
Schroder ISF Asian Total Return 10,598 2.9
----------------------------------------------------- ---------- --------
Pershing Square Holdings Ltd 9,333 2.5
----------------------------------------------------- ---------- --------
iShares Core MSCI Europe UCITS ETF 8,331 2.3
----------------------------------------------------- ---------- --------
BA Beutel Goodman US Value Fund 7,966 2.2
----------------------------------------------------- ---------- --------
Schroder ISF Global Recovery 7,942 2.2
----------------------------------------------------- ---------- --------
Indus Japan Long-Only Fund 7,178 1.9
----------------------------------------------------- ---------- --------
Egerton Long-Short Fund Ltd 6,653 1.8
----------------------------------------------------- ---------- --------
Goodhart Partners: Hanjo Fund 6,422 1.8
----------------------------------------------------- ---------- --------
KLS Corinium Emerging Markets Equity Fund 4,846 1.3
----------------------------------------------------- ---------- --------
iShares Core EM IMI UCITS ETF 4,117 1.1
----------------------------------------------------- ---------- --------
NTAsian Discovery Fund 4,071 1.1
----------------------------------------------------- ---------- --------
BlackRock Frontiers Investment Trust PLC 3,539 1.0
----------------------------------------------------- ---------- --------
159,172 43.4
----------------------------------------------------- ---------- --------
Strategic
----------------------------------------------------- ---------- --------
Ocean Wilsons Holdings Limited(1) 83,707 22.8
----------------------------------------------------- ---------- --------
Wilson Sons 51,564 14.0
----------------------------------------------------- ---------- --------
Ocean Wilsons (Investments) Limited 32,143 8.8
----------------------------------------------------- ---------- --------
83,707 22.8
----------------------------------------------------- ---------- --------
Diversifying
----------------------------------------------------- ---------- --------
Global Event Partners Ltd 10,328 2.8
----------------------------------------------------- ---------- --------
DV4 Ltd(2) 9,132 2.5
----------------------------------------------------- ---------- --------
Hudson Bay International Fund Ltd 5,126 1.4
----------------------------------------------------- ---------- --------
MKP Opportunity Offshore Ltd 3,336 0.9
----------------------------------------------------- ---------- --------
GAM Systematic Core Macro (Cayman) Fund 3,122 0.8
----------------------------------------------------- ---------- --------
Schroder GAIA BlueTrend 2,884 0.8
----------------------------------------------------- ---------- --------
Keynes Dynamic Beta Strategy (Offshore) Fund Limited 2,660 0.7
----------------------------------------------------- ---------- --------
Selwood AM - Liquid Credit Strategy 2,468 0.7
----------------------------------------------------- ---------- --------
Apollo Total Return Fund 2,415 0.7
----------------------------------------------------- ---------- --------
Prana Absolute Return Fund 1,939 0.5
----------------------------------------------------- ---------- --------
Brevan Howard Absolute Return Government Bond Fund 1,731 0.5
----------------------------------------------------- ---------- --------
Vanguard US Government Bond Index Fund 1,502 0.4
----------------------------------------------------- ---------- --------
BioPharma Credit PLC 1,415 0.4
----------------------------------------------------- ---------- --------
Lazard Convertible Global 715 0.2
----------------------------------------------------- ---------- --------
48,773 13.3
----------------------------------------------------- ---------- --------
Global equities
----------------------------------------------------- ---------- --------
Interactive Brokers Group Inc 4,478 1.2
----------------------------------------------------- ---------- --------
Orion Engineered Carbons SA 4,434 1.2
----------------------------------------------------- ---------- --------
Arch Capital Group Ltd 3,640 1.0
----------------------------------------------------- ---------- --------
Subsea 7 3,120 0.8
----------------------------------------------------- ---------- --------
Grupo Catalana Occidente SA 3,063 0.8
----------------------------------------------------- ---------- --------
Exor NV 2,770 0.8
----------------------------------------------------- ---------- --------
Coats Group PLC 2,524 0.7
----------------------------------------------------- ---------- --------
CK Hutchison 2,432 0.7
----------------------------------------------------- ---------- --------
Glencore PLC 1,672 0.5
----------------------------------------------------- ---------- --------
Dollar General 1,473 0.4
----------------------------------------------------- ---------- --------
Viaset Inc 1,466 0.4
----------------------------------------------------- ---------- --------
Bergman & Beving 1,407 0.4
----------------------------------------------------- ---------- --------
CTT Correios de Portugal 1,080 0.3
----------------------------------------------------- ---------- --------
CVS Health Corp 481 0.1
----------------------------------------------------- ---------- --------
34,040 9.3
----------------------------------------------------- ---------- --------
Thematic assets
----------------------------------------------------- ---------- --------
Polar Capital Insurance Fund 6,883 1.9
----------------------------------------------------- ---------- --------
GAM Star Fund PLC - Disruptive Growth 5,548 1.5
----------------------------------------------------- ---------- --------
Impax Environmental Markets Fund 3,570 1.0
----------------------------------------------------- ---------- --------
Worldwide Healthcare Trust PLC 3,031 0.8
----------------------------------------------------- ---------- --------
RA Capital International Healthcare Fund 2,643 0.7
----------------------------------------------------- ---------- --------
iShares MSCI World Energy Sector UCITS ETF 2,184 0.6
----------------------------------------------------- ---------- --------
BB Biotech AG 1,877 0.5
----------------------------------------------------- ---------- --------
iShares MSCI Global Markets & Mining Producers ETF 1,834 0.5
----------------------------------------------------- ---------- --------
27,570 7.5
----------------------------------------------------- ---------- --------
Total investments 353,262 96.3
----------------------------------------------------- ---------- --------
Net current assets 13,703 3.7
----------------------------------------------------- ---------- --------
Net assets 366,965 100.0
----------------------------------------------------- ---------- --------
(1) Hansa Investment Company Limited owns 9,352,770 shares in
Ocean Wilsons Holdings Limited ("OWHL"). OWHL operates through two
assets: Wilson Sons S.A. and Ocean Wilsons Investments Ltd ("OWIL).
These are shown separately above. The fair value of the Company's
holding in OWHL has been apportioned across the two assets in the
ratio of the latest reported NAV of OWIL, that being the NAV of
OWIL shown per 31 December 2022 OWHL quarterly update, to the
market value of OWHL's holding in Wilson Sons, that being the bid
share price of Wilson Sons multiplied by the number of shares held
by OWHL at 31 March 2023.
(2) DV4 Ltd is an unlisted Private Equity holding. As such, its
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 - investments, typically through third-party funds, that
the Company can expect to hold throughout the economic cycle.
Thematic - investments, typically through third-party funds,
that reflect key investment themes 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 - 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: 0-50%
Thematic: 0-25%
Diversifying Assets: 0-40%
Global Equities: 0-40%
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, following discussions between the Portfolio
Manager and the Board considering ways to develop the portfolio
further in the medium to long-term, HCP has been approved to
introduce an allocation to Private Equity and Venture Capital
within the Portfolio. This will be a multi-year programme to
develop access to investments that are not available in public
markets. The Portfolio Manager has significant experience investing
in Private Equity and Venture Capital. The Board believes this new
exposure will be seen as very attractive by existing and potential
future shareholders. The long-term nature of private equity is
aligned with the long-term investment horizon of the Company.
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 GBP30m,
subject to there being sufficient value and diversity within the
portfolio to meet the lender's borrowing requirements. The
Portfolio Manager is able to utilise 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")
The investment strategy is designed for capital appreciation
over the long-term achieved through diversified multi-asset class
allocation. Returns are not replicated by movements in any single
market index. Furthermore, the Board considers that the use of a
single benchmark will not always offer shareholders the relevance
and the clarity needed to measure the performance of the
Company.
The Board's primary goal is for the Company to generate
long-term returns for shareholders and so we compare the Company's
performance against that of a safe return from an appropriate
government bond - for this the Board has elected to follow the FTSE
Gilts All Stocks TR Index (Bloomberg: FTFIBGT). The Board's second
goal is for the Company to achieve returns that are higher than
inflation and use the UK's CPI (Bloomberg: UKRPCHVJ) as the KPI for
comparison. Finally, the Board compares the Company's returns with
those of an appropriate equity index - for which the Board has
elected to follow the performance in GBP of the MSCI All Country
World Index excluding Frontier Markets (Bloomberg: NDUEACWF). In
discussions between the Board and the Portfolio Manager, returns
are compared with a number of measures, including the return of a
government bond, using the 10 year UK Gilt Return (FTSE All Stocks
Gilts Total Return Index); to the rate of inflation (real returns
are important to shareholders) and with those of appropriate
indices for different elements of the portfolio.
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 KPIs, the cost of managing
the Company is monitored against the NAV (the ratio between costs
and NAV is also known as the 'ongoing charges percentage per annum
ratio'); and the discount/premium the shares sell at in relation to
the NAV are likewise monitored.
The Board of Directors monitors the returns made in absolute
(firstly) and relative (secondly) terms against the KPIs
established. The comparisons are made over 1, 3, 5 and 10 year time
horizons.
i) Shareholders and company - total returns
To 31 March 2023 1 year 3 years 5 years 10 years
------- ------- ------- --------
Share price total return
------------------------------- ------- ------- ------- --------
Ordinary shares (10.8%) 39.9% (4.3%) 25.5%
------------------------------- ------- ------- ------- --------
'A' non voting Ordinary shares (10.1%) 32.4% (4.7%) 26.1%
------------------------------- ------- ------- ------- --------
Portfolio NAV (3.1%) 37.2% 20.4% 60.7%
------------------------------- ------- ------- ------- --------
ii) Discount/premium
A comparison is made between the (discount)/premium of the
Company's two classes of shares and of the AIC average.
1 year 3 years 5 years 10 years
To 31 March 2023 average average average average
-------- -------- -------- --------
Share price total return
------------------------------- -------- -------- -------- --------
Ordinary shares (40.0%) (36.7%) (33.7%) (30.4%)
------------------------------- -------- -------- -------- --------
'A' non voting Ordinary shares (41.0%) (36.8%) (34.5%) (31.5%)
------------------------------- -------- -------- -------- --------
AIC (%) (10.7%)
------------------------------- -------- -------- -------- --------
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 2023 1 year 3 years 5 years 1 year
------- ------- ------- ------
NAV Total Return (3.1%) 37.2% 20.4% 60.7%
---------------------------------- ------- ------- ------- ------
NAV Total Return (Ex OWHL) (2.7%) 29.8% 24.9% 73.2%
---------------------------------- ------- ------- ------- ------
FTSE UK Gilts All Stocks TR Index (16.3%) (24.9%) (14.4%) 5.1%
---------------------------------- ------- ------- ------- ------
UK CPI Inflation 10.1% 18.7% 22.8% 31.4%
---------------------------------- ------- ------- ------- ------
MSCI ACWI NR (GBP) (1.5%) 54.1% 58.7% 167.1%
---------------------------------- ------- ------- ------- ------
iv) Expense ratios
To 31 March 2023 1 year 3 years 5 years 1 year
------ ------- ------- ------
Ongoing annual charges (%) 1.2 1.1 1.1 1.1
--------------------------- ------ ------- ------- ------
To comply with the Packaged Retail and Insurance-based
Investment Products Regulation ("PRIIP"), the Company has issued a
PRIIP's Key Information Document ("KID") for each of its two share
classes. In the 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 1.81% 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 2023 are as follows:
Ordinary shares 'A' non -- voting
ordinary shares
------------------ -------------------
Institutional and wealth managers 16,021,382 40.05% 72,715,872 90.90%
---------------------------------- ---------- ------ ----------- ------
Directors 11,220,745 28.05% 3,817,123 4.77%
---------------------------------- ---------- ------ ----------- ------
Private individuals 12,591,202 31.48% 3,467,005 4.33%
---------------------------------- ---------- ------ ----------- ------
Other 166,671 0.42% 0 0.00%
---------------------------------- ---------- ------ ----------- ------
40,000,000 80,000,000
---------------------------------- ---------- ------ ----------- ------
Substantial shareholders
As at 31 March 2023, 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 % of voting
shares shares
---------- -----------
Nomolas Ltd 10,347,125 25.9%
------------------------------ ---------- -----------
Victualia Limited Partnership 10,347,125 25.9%
------------------------------ ---------- -----------
Sky Hill Limited 1,690,000 4.23%
------------------------------ ---------- -----------
These holdings are correct as of 31 March 2023 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. At the forthcoming
AGM, the Company is proposing a one-off change to its Bye-Laws
requiring shareholders to supply, if requested, information
relating to their tax residency. 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 - approximately 142 shareholders holding less
than 1% of our share capital. 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. The proposed Bye-Law changes enable the
Company to take the necessary measures in relation to those few
shareholders who refuse to provide the information required so as
to enable the Company to satisfy its reporting requirements.
As at 26 June 2023, 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 2023 are shown below:
Ordinary shares 'A' non -- voting Nature
of 1p each ordinary shares of
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 26 June 2023, 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
GBP2,824,000 (including Portfolio Management and Additional
Administrative Services Provider ("AASP") functions). The fees
outstanding at the year end amounted to GBP240,793. 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 26 June 2023, 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.
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. As
a result of the Covid pandemic, the Board used 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
27 September 2023 as a hybrid online and physical meeting.
------------------- ----------------------------------------------------------------
Portfolio The Board's main working relationship is with the staff
Manager and of HCP as the Portfolio Manager and the AASP. HCP is
AASP 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 Key service providers are the Company's Administrator
service providers (Maitland Administration Services Limited), Custodian
(Lombard Odier) and Registrar (Link Market Services
(Guernsey) 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.
The Company is in the process of changing its Registrar.
From late-September 2023, Computershare will replace
Link as the Company's Registrar. New contact details
will be made available on the Company's website at
that time. The new Registrar will hold all the historic
information currently retained by Link.
----------------------------------------------------------------
Main areas of engagement
Key area Topic Engagement and outcomes
Investment The Investment Strategy The Board has engaged with
strategy and incorporates appropriate the Portfolio Manager and encouraged
ESG matters ESG considerations. For them to develop a responsible
clarity, the Company does investment policy. The Board
not purport to be a "Green" notes that the Hanseatic Group,
fund. However, through of which the Portfolio Manager
its ESG disclosures and is a member, has become a signatory
reporting the actions of to the UNPRI during the financial
its Portfolio Manager, year. The Board wholeheartedly
it seeks to give clarity supports this policy. See further
to the processes around on in the report for further
assessing the Environmental, information.
Social and/or Governance
aspects to its investment
decisions and ongoing monitoring.
-------------------- ----------------------------------- ---------------------------------------
Discount management It is a great frustration The Board is mindful of, and
and share to the Board that the discount regularly considers, the share
buybacks has not tightened over price compared to the NAV and
the past year. It is also related discount. The Board
noted that there has been is of the view that providing
general widening of investment transparency and clarity to
trust spreads due to market investors, as well as promoting
volatility and declining demand for the Company's shares,
retail participation in should create a positive impact
the markets. 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
that are not readily available.
This in due course should increase
demand for the company's shares.
Each investment trust 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 that 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 The current position of Ordinary
share classes, both of and 'A' Ordinary share classes
which are traded on the remains unchanged as the majority
LSE. The Ordinary shareholders of Ordinary shareholders have
are entitled to one vote informed the Board that they
per Ordinary share held. do not wish to alter the present
The 'A' non-voting Ordinary structure at the present time.
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. Consideration has
been given to whether the
two share classes could
be merged in some way.
-------------------- ----------------------------------- ---------------------------------------
Dividends The Board continues to The portfolio held by the Company
support maintaining the is currently constructed for
dividend at 3.2p until long-term capital appreciation
it is fully covered by rather than income generation.
net income. At that time As a result, the income generated
it plans to increase it by the portfolio is insufficient
in line with any increase to meet this dividend commitment
in the net income of the and the shortfall is made up
Company. 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 The Company does not have The independent members of
levels of direct employees. Rather, the Board annually review the
service from its operations are conducted performance of the Portfolio
service providers by several key service Manager. Additionally, the
providers. The Company day-to-day performance of other
enters into service-level key service providers (Administrator,
agreements with each provider. Custodian and Registrar) are
The Board oversees these monitored by the AASP on behalf
services to ensure that of the Board. In addition,
best practice is followed there is an annual review of
and that the Company is service providers' annual Controls
receiving a comprehensive Audit Reports. Members of the
service and value for money. 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 adopt new Bye-Laws
(the "New Bye-Laws") in order to update the Company's current
Bye-Laws (the "Existing Bye-Laws"). The resolution will be proposed
as a special resolution.
Requirement for certain shareholders to supply information for
tax authorities, governments and regulatory reporting purposes
The proposed amendments are being introduced in the New Bye-Laws
primarily to:
-- enable the Company to meet its reporting obligations under
the Foreign Account Tax Compliance Act ('FATCA'), the Common
Reporting Standard or any similar law or regulation, by introducing
an obligation for shareholders to provide the required FATCA or
Common Reporting Standard information within a reasonable
timeframe, or to provide for the mandatory sale of shares if the
required information is not provided;
-- provide the Company with more flexibility in dealing with untraced shareholders; and
-- increase the maximum annual remuneration of the Directors to
US$600,000 per annum. Thus, it is proposed to amend Bye-Law 44.1(a)
to replace the text "not exceed US$400,000 per annum" with "not
exceed US$600,000 per annum". Further details are given in the
Directors' Remuneration Report.
In more detail, the key proposed changes are as follows:
a) Obligation to provide information to the Company
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 number of shareholders whose
whereabouts are not known or do not respond to requests for
information. In order to resolve this, the Company requires a
mechanism to obtain the required information or remove the
Non-Responders from the Company's register of members. A new
Bye-Law has therefore been introduced to enable the Company to
provide for the mandatory sale of shares of any shareholder that
fails to provide the required FATCA or Common Reporting Standard
information within a reasonable timeframe following a formal
request from and due process being followed by the Company.
b) Untraceable Shareholders
The Company is also taking this opportunity to consider its
dealings with Untraceable Shareholders. In line with what other
companies are doing, the Company is seeking to reduce the current
period to determine a shareholder untraceable to six years. This
proposal is to help the Company manage the shareholder register in
connection with its reporting obligations under FATCA, the Common
Reporting Standard, or any similar law or regulation and also more
generally to remove longstanding untraced shareholders and where
appropriate, require a compulsory transfer of shares, all having
followed due process to trace shareholders. These Proposals should
enable the Company to provide an accurate account of the
shareholder information of the Company, by removing untraced
shareholders including shareholders who may have passed away and
shareholders who have consistently failed to respond to the
Company's requests for information.
A summary of the principal amendments being introduced in the
New Bye-Laws which the Board considers will be of most interest to
shareholders is set out in the AGM Notice.
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 Controls to mitigate risks
- external
Market risk - long-term The Board:
company share performance * has appointed an appropriate PM whose performance for
Market risk includes the Company is reviewed and challenged on a quarterly
interest rate, basis;
currency, equity,
credit, inflation,
concentration, * has set investment guidelines and restrictions, which
liquidity and macro are reported against by the PM on a monthly basis;
geopolitical risks.
* 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, The Board:
share price, liquidity * regularly reviews the share price, discount level and
and discount monitoring portfolio performance;
Low market trading
volumes of Company
shares and the * maintains periodic oversight on shareholder-base;
discount to the
NAV becoming inherent
in the share price. * 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, The Board:
legal and * obtains regular updates and advice from relevant
regulatory risks professional advisers;
Adverse outcomes
resulting from
legislative changes * maintains oversight and receives regular reporting on
to tax, legal and the legislative and regulatory changes, which impact
regulatory requirements. HICL, as monitored by the PM;
Adverse outcomes
from not meeting
ESG expectations. * 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.
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Reputational risk The Company:
Negative behaviours, * requires the annual selection of Board members, all
publications or of whom must have a commitment to governance;
market sentiment
impacting the reputation
of the Company. * 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 - Controls to mitigate risks
INTERNAL
Operational risk
Risks associated * Pre-approval processes are in place prior to the
with process, system publication of any financial information.
and control failures
including those associated
with the Company's * Identification and certification of key controls by
third-party service AASP compliance team.
providers.
Operational areas * Due diligence is undertaken prior to appointing all
considered includes service providers. Regular performance reviews of
Liquidity, Safeguarding third-party providers are made and, where relevant,
of Assets and Reliability the Company annually requests independent service
of Financial Reporting. provider assurance reports on 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.
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Gearing/balance sheet
risk * A maximum limit on the overdraft facility is in
Risk of over-gearing place.
the balance sheet
and creating financial
stress on the Company. * Any increase in overdraft or credit facility requires
Board pre-approval.
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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
2023 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 20 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.
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 19 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 and Oakley Capital
Investments.
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..
He is also a shareholder representative on the investment advisory
committee for DV4 Ltd ("DV4"). 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
28 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.
Board members are selected based on their individual and
complementary skills and experience and their ability to commit
sufficient time to drive the Company's success. All Directors will
retire at each AGM and offer themselves for consideration for re --
election.
The Board recommends the re -- appointment of each of the
Directors, based on their continuing contribution to the Company
and its shareholders. The 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 in the liaison with,
and assessment of, the 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 is chaired by Nadya Wells. 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.
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
currencies. 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.
Senior Independent Director ("SID")
During the Company's financial year, Nadya Wells was appointed
to act as the Company's Senior Independent Director. The SID acts
as a sounding board for the Chairman as well as to serve as an
intermediary between the Chairman and the views of the other
Directors, shareholders, other key stakeholders and the Company's
Portfolio Manager when necessary.
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.
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 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's 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 0.45
incidents per one million hours worked. This rate exceeds the
world-class benchmark. Additionally, the reduction of Greenhouse
Gas emissions remain 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 2022 Sustainability Report, published on their
website.
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 237 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 GBP10,000 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 earlier 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), after
deducting the value of the investment in OWHL, on which no fee is
payable. The Portfolio Manager has charged GBP2,824,000 for the
year ended 31 March 2023 (year ended 31 March 2022: GBP3,010,000).
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 GBP115,000 per annum for this service (year ended 31 March
2022: GBP115,000).
Auditor
The Company's Auditor is PricewaterhouseCoopers Ltd, a Bermudan
registered firm. The Board is satisfied with the quality of work
performed by PwC. The reappointment of PwC as Auditor to the
Company will be proposed at the forthcoming AGM.
Auditor independence rules restrict the amount and type of
non-audit related work that can be performed by a company's
Auditor. Any non-audit related work must be pre-approved by the
Board. PwC did not provide any non-audit services in the year.
Company Secretary
The Company has engaged Conyers Corporate Services (Bermuda) Ltd
("Conyers") as its Company Secretary. During the year to 31 March
2023, Conyers has charged GBP38,275 (year ended 31 March 2022:
GBP32,713).
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 Maitland Administration Services Limited
as its Administrator. The Administrator has charged GBP149,722 for
the year ended 31 March 2023 (year ended 31 March 2022:
GBP155,289). On 9 January 2023 Apex Group Ltd announced the
completion of its acquisition of the fund services and third-party
management company businesses of Maitland International Holdings
plc, which includes our Administrator.
Custodian
The Company has engaged Banque Lombard Odier & Cie SA as the
Company's Custodian. During the year to 31 March 2023, Lombard
Odier charged GBP180,335 for the custodial service (year ended 31
March 2022: GBP184,868).
Registrar
The Company's Registrar is Link Market Services (Guernsey)
Limited ("Link"). The Registrar has charged GBP91,728 for the year
ended 31 March 2023 (year ended 31 March 2022: GBP89,001). During
the year, following a review of services received by the Company's
Management Engagement Committee, it has been decided to change
registrar. From 25 September 2023, the Company's new Registrar will
be Computershare Investor Services (Bermuda) Limited
("Computershare"). The Directors thank Link for their work with the
Company and its predecessor, Hansa Trust, and look forward to
working with Computershare.
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 9.8.6R(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 are required to annually report 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 2023. The Board is pleased
to report that it is compliant with each of the three FCA targets.
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. There have been no changes made to the
composition of the Board, or the roles the Directors have been
appointed, between the year end and approval of this Annual
Report.
As per LR 9.8.6R(10), numerical data is disclosed in the tables
below, which shows the Company's compliance with these three FCA
targets.
Number
of
Number senior
of Percentage positions
Board of the on the
Gender Diversity members Board Board(1)
-------- ---------- ----------
Men 3 60% 2
-------------------------------- -------- ---------- ----------
Women 2 40% 1
-------------------------------- -------- ---------- ----------
Other - - -
-------------------------------- -------- ---------- ----------
Not specified/prefer not to say - - -
-------------------------------- -------- ---------- ----------
Number
of
Number senior
of Percentage positions
Board of the on the
Ethnic Diversity members Board 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 an
externally managed closed-ended investment company and as such does
not have any employees or appoint executive board positions.
Accordingly, the senior board positions which the Company defines
as applicable are Chairman, Audit Committee Chairman and SID.
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.
Future Developments and Post Balance Sheet Events
On 12 June 2023, OWHL announced it was undertaking a strategic
review involving its investment in Wilson Sons and the Board notes
from the announcement that it is currently at an early stage with
no certainties as to the outcome.
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
26 June 2023
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 2023, 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 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.
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.
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.
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 27 September 2023,
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. The Board has also established the role of
Senior Independent Director. The SID acts as a sounding board for
the Chairman as well as to serve as an intermediary between the
Chairman and the views of the other Directors, shareholders, other
key stakeholders and the Company's Portfolio Manager when
necessary.
Principle E is omitted by the AIC Code.
Division of Responsibilities
The chair leads the board and is responsible for its overall
effectiveness in directing the company. They should demonstrate
objective judgement throughout their tenure and promote a culture
of openness and debate. In addition, the chair facilitates
constructive board relations and the effective contribution of all
non-executive directors, and ensures that directors receive
accurate, timely and clear information.
The Chairman is Jonathan Davie. The Chairman promotes and
encourages active participation from all Directors at Board
meetings. Further, whilst adhering to membership guidelines, sub --
committees also seek to include as many Directors as possible to
ensure a broad range of views. All Directors receive regular
monthly and quarterly information prepared by the Portfolio Manager
and Administrator, as well as portfolio performance presentations
from the Portfolio Manager.
The board should consist of an appropriate combination of
directors (and, in particular, independent non-executive directors)
such that no one individual or small group of individuals dominates
the board's decision making.
The Board consists of five Directors. All have 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.
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.
The board, supported by the company secretary, should ensure
that it has the policies, processes, information, time and
resources it needs in order to function effectively and
efficiently.
The Company Secretary and AASP support the Board in identifying
and monitoring all governance matters. Additionally, Directors are
able to consult external professional advisors to assist them in
the performance of their duties as and when required. Board
reporting and materials are refined on an ongoing basis.
Composition, succession and evaluation
Appointments to the board should be subject to a formal,
rigorous and transparent procedure, and an effective succession
plan should be maintained. Both appointments and succession plans
should be based on merit and objective criteria and, within this
context, should promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
The Board has appointed a Nominations Committee chaired by Nadya
Wells. The 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.
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.
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
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.
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.
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
Remuneration policies and practices should be designed to
support strategy and promote long-term sustainable success.
The remuneration of Directors is overseen by the Remuneration
Committee, chaired by Simona Heidempergher. The Directors each
receive a fixed annual fee and do not receive any additional
element based on performance of the Company. Additionally,
Directors offer themselves annually for re-election at the
Company's AGM.
A formal and transparent procedure for developing policy on
remuneration should be established. No director should be involved
in deciding their own remuneration outcome.
The Directors' Remuneration Report notes that each Director is
paid a fixed fee representative of their roles and additional
responsibilities on the Board. This fee level is reviewed by the
Remuneration Committee 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.
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 Company Law in 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
26 June 2023
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 75% 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 25% unquoted fund investments, the
majority primarily hold traded securities. Valuations for these
funds are supplied by third party managers. The Audit Committee
recognises that 57% of the total portfolio assets are Level 1 and
40% 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. 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.
For and on behalf of the Audit Committee.
Richard Lightowler
Audit Committee Chairman
26 June 2023
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 $400,000) as set out in the Company's
Bye-Laws. The maximum is set as a USD amount. The equivalent is
GBP325,203 if translated at the applicable rate on 31 March 2023.
The Board has reviewed the current maximum annual fee for director
remuneration and will seek shareholder approval to increase this to
$600,000 per annum (GBP487,804 if translated at the applicable rate
on 31 March 2023) at the upcoming AGM. The increase is for two
reasons:
-- During the year, the Remuneration Committee has assessed, and
increased, Director remuneration for the first time since the
Company's formation in June 2019. Considering the criteria noted
above, the Committee increased director remuneration to the annual
equivalent of $375,000 (GBP304,870 if translated at the applicable
rate on 31 March 2023) effective 1 October 2022. This is broken out
by Director in the remuneration table below.
-- Subsequent to the change in the current level of
remuneration, the increased limit is sought to allow sufficient
headroom over the current fees payable to existing directors to
appoint another director if required, including as part of board
succession planning, as well as allow capacity to permit future
remuneration reviews in the coming years.
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 2023. It also notes their fee, in USD,
for the current and prior financial years. For each financial year,
the equivalent Sterling fee is shown converted at the relevant
year-end exchange rate respectively:
2023 2023 2022 2022
fee fee fee fee
$000 GBP000 $000 GBP000
----- ------- ----- -------
Jonathan Davie (Chairman) 85 72 70 53
-------------------------- ----- ------- ----- -------
Simona Heidempergher 65 55 50 38
-------------------------- ----- ------- ----- -------
Richard Lightowler 75 63 60 46
-------------------------- ----- ------- ----- -------
William Salomon(3) 25 21 25 19
-------------------------- ----- ------- ----- -------
Nadya Wells 65 55 50 38
-------------------------- ----- ------- ----- -------
315 266 255 194
-------------------------- ----- ------- ----- -------
The annual fee paid to each Director, in USD, was reviewed, as
noted above, and increased from their previous amount effective 1
October 2022. Prior to that date, their fees remained unchanged
from the date of their appointments in June 2019. The above table
compares the current year to prior year fees in USD versus
Sterling. Approximately 1/3 of the increase in the Sterling
equivalent is due to the movement in the USD/Sterling exchange rate
between the two periods.
The Company also pays the expenses of the Directors to attend
the Board meetings. Directors' travel costs incurred during the
year were GBP141,000 (2022: GBP48,000).
Statement of shareholder voting
Votes in respect of the resolution to approve the Directors'
Remuneration Report at the Company's AGM in August 2022 were cast
as follows:
No. of % of
shares votes
voted cast
---------- ------
Votes cast in favour 22,335,068 99.55
--------------------- ---------- ------
Votes cast against 100,000 0.45
--------------------- ---------- ------
Total votes cast 22,435,068 100.00
--------------------- ---------- ------
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 2023 are shown below:
Ordinary shares 'A' non -- voting
of 1p each ordinary shares
of 1p each
---------------------- -------------------- ----------
Nature
of
2023 2022 2023 2022 interest
--------------------- ---------- ---------- --------- --------- ----------
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 26 June 2023, 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
GBP2,824,000 (including Portfolio Management and AASP functions).
The fees outstanding at the year end amounted to GBP240,793. 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.
Management
Strategy Audit Remuneration Nomination Engagement
Board(1) Day Committee Committee Committee Committee
-------- -------- ---------- ------------ ---------- -----------
Number of Meetings 13 1 2 2 2 2
--------------------- -------- -------- ---------- ------------ ---------- -----------
Jonathan Davie 8 1 2 2 1 2
--------------------- -------- -------- ---------- ------------ ---------- -----------
Simona Heidempergher 12 1 2 2 2 2
--------------------- -------- -------- ---------- ------------ ---------- -----------
Richard Lightowler 10 - 2 2 - 2
--------------------- -------- -------- ---------- ------------ ---------- -----------
William Salomon(2) 8 1 2 2 2 2
--------------------- -------- -------- ---------- ------------ ---------- -----------
Nadya Wells 8 1 2 2 2 2
--------------------- -------- -------- ---------- ------------ ---------- -----------
(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.
On behalf of the Board, I confirm that the above Report on
Directors' Remuneration summarises, as applicable, for the year
ended 31 March 2023:
(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
26 June 2023
Nominations Committee Report
The Committee is chaired by Nadya Wells. 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 has 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.
The current Directors were all originally appointed in June
2019. There have been no resignations during the year and all Board
members have indicated their desire to stand for re-election at the
forthcoming AGM. Following the annual review of Board Skills, the
Nomination Committee is supportive of re-appointing the Directors
to the Board within the 2023 AGM.
While the Nomination Committee did not recommend the appointment
of new Directors within the Company's financial year, during the
year, the Committee decided to appoint a Senior Independent
Director ("SID"). The role of the SID is to act as a sounding board
for the Chairman, as well as to serve as an intermediary between
the Chairman and the views of the other Directors, Shareholders,
other key stakeholders and the Company's Portfolio Manager if
necessary. Nadya Wells offered to take on this additional
responsibility and was appointed to act as the Company's Senior
Independent Director ("SID").
Succession planning
No new appointments to the Board are proposed at this time. 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
Nadya Wells
Chairman of the Nomination Committee
26 June 2023
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 2023, and its
financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards (IFRSs)
as issued by the International Accounting Standards Board
(IASB).
What we have audited
The Company's financial statements comprise:
-- the balance sheet as at 31 March 2023;
-- 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, which include
significant accounting policies 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
Materiality Overall materiality: GBP3,669,000 based on approximately
1% of net assets.
Audit scope 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
=================================================================
Key audit matters
* 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 was 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 GBP3,669,000
How we determined it Approximately 1% of net assets
==========================================
Rationale for the materiality This benchmark was applied as a generally
benchmark applied 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 GBP183,000, 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 Listed equity investments: We tested
investments the existence of the listed investment
Refer to notes 1(c) and 8 portfolio by agreeing the holdings
to the financial statements for investments to an independent
for disclosures of related custodian confirmation.
accounting policies and balances.
We tested the valuation of the listed
The investment portfolio at investments by agreeing the prices
the year end was comprised used in the valuation to independent
of listed equity investments third-party sources.
valued at GBP264 million (75%) Unquoted investments: We understood
and unquoted investments valued and evaluated the controls around
at GBP90 million (25%). the pricing of unquoted investments
including the final approval of the
We focused on the existence valuation by the Manager and the Board.
of both listed and unquoted
investments, as listed investments * We obtained direct confirmation of the existence of
comprise the majority of the investments held and the price from each fund
investments balance and unquoted administrator. We used these two key inputs to
investments are, individually recalculate the valuation applied by management. This
and in aggregate, material recalculation was performed for 100% of the unquoted
to the financial statements. investments.
We focused on the valuation
of listed equity investments * We obtained an understanding of the underlying
because listed investments methodology applied to each unquoted investment
represent the principal element through review of their most recently available
of the net asset value as disclosed audited financial statements to evaluate whether it
on the Balance Sheet in the was based on fair value.
financial statements. We also
focused on the valuation of
the unquoted investments as
the valuation of these investments Based on the procedures detailed above,
is material to the Company. no misstatements were identified which
required reporting to those charged
with governance.
==================================================================
Accuracy, occurrence and completeness We assessed the accounting policy
of investment income for investment income recognition
Refer to notes 1(e) and 2 for compliance with accounting standards
to the financial statements and the AIC SORP and performed testing
for disclosures of related to evaluate whether income had been
accounting policies and balances. accounted for in accordance with this
stated accounting policy. We found
Investment income consists that the accounting policies implemented
of dividend income of GBP6.9 were in accordance with accounting
million. As part of our procedures, standards and the AIC SORP, and that
we focused on the accuracy, income has been accounted for in accordance
occurrence and completeness with the stated accounting policy.
of investment income recognition
as incomplete or inaccurate We tested the accuracy of dividend
income could have a material receipts by agreeing the dividend
impact on the Company's net rates from investments to independent
asset value and dividend cover. market data.
We also focused on the accounting
policy for income recognition To test for completeness, we tested,
along with its allocation and for a sample of investment holdings
presentation in the Income in the portfolio, that all dividends
Statement as set out in the declared in the market by investment
requirements of The Association holdings had been recorded. We tested
of Investment Companies Statement occurrence by confirming that all
of Recommended Practice (the dividends recorded in the period had
"AIC SORP") as incorrect application been declared in the market by investment
could indicate a misstatement holdings, and we traced a sample of
in income recognition. dividends received to bank statements.
We also 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 determining reasons
behind dividend distributions.
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
International Financial Reporting Standards (IFRSs) as issued by
the International Accounting Standards Board (IASB) and for such
internal control as management determines is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Company's financial reporting process.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by management.
-- Conclude on the appropriateness of management's use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or
conditions may cause the Company to cease to continue as a going
concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, 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
26 June 2023
Income Statement
For the year ended 31 March 2023
Year ended Year ended
31 March 31 March
2023 2022
--------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
==== ======= ======== ======== ======= ======= =======
(Losses)/gains on investments
held at fair value through profit
or loss 8 - (14,924) (14,924) - 17,065 17,065
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
Foreign exchange gains - 327 327 - 80 80
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
Investment income 2 6,892 - 6,892 5,904 - 5,904
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
6,892 (14,597) (7,705) 5,904 17,145 23,049
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
Portfolio management fees 3 (2,824) - (2,824) (3,010) - (3,010)
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
Other expenses 4 (1,527) - (1,527) (1,227) - (1,227)
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
(4,351) - (4,351) (4,237) - (4,237)
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
Income/(losses) before finance
costs 2,541 (14,597) (12,056) 1,667 17,145 18,812
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
Finance costs 5 (1) - (1) - - -
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
Income/(losses) for the period 2,540 (14,597) (12,057) 1,667 17,145 18,812
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
Return per Ordinary and 'A' non-voting
Ordinary share 7 2.1p (12.2)p (10.1)p 1.4p 14.3p 15.7p
--------------------------------------- ---- ------- -------- -------- ------- ------- -------
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/(losses) 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 International Financial
Reporting Standards as issued by the International Accounting
Standards Board ("IASB").
All revenue and capital items in the above Statement derive from
continuing operations.
The accompanying notes are an integral part of this
Statement.
Balance Sheet
As at 31 March 2023
31 March 31 March
2023 2022
Note GBP000 GBP000
-------- --------
Non-current assets
------------------------------------------------ ---- -------- --------
Investments held at fair value through profit
or loss 8 353,262 379,986
------------------------------------------------ ---- -------- --------
353,262 379,986
------------------------------------------------ ---- -------- --------
Current assets
------------------------------------------------ ---- -------- --------
Trade and other receivables 10 128 201
------------------------------------------------ ---- -------- --------
Cash and cash equivalents 11 13,987 3,043
------------------------------------------------ ---- -------- --------
14,115 3,244
------------------------------------------------ ---- -------- --------
Current liabilities
------------------------------------------------ ---- -------- --------
Trade and other payables 12 (412) (368)
------------------------------------------------ ---- -------- --------
Net current assets 13,703 2,876
------------------------------------------------ ---- -------- --------
Net assets 366,965 382,862
------------------------------------------------ ---- -------- --------
Capital and reserves
------------------------------------------------ ---- -------- --------
Called up share capital 13 1,200 1,200
------------------------------------------------ ---- -------- --------
Contributed surplus 14 323,799 324,759
------------------------------------------------ ---- -------- --------
Retained earnings 15 41,966 56,903
------------------------------------------------ ---- -------- --------
Total equity shareholders' funds 366,965 382,862
------------------------------------------------ ---- -------- --------
Net asset value per Ordinary and 'A' non-voting
Ordinary share 16 305.8p 319.1p
------------------------------------------------ ---- -------- --------
The Financial Statements of Hansa Investment Company Limited,
registered in Bermuda under company number 54752, were approved by
the Board of Directors on 26 June 2023 and were signed on its
behalf by
Jonathan Davie
Chairman
The accompanying notes are an integral part of this
Statement.
Statement of Changes in Equity
Contributed
Share surplus Retained
capital reserve earnings Total
For the year ended 31 March 2023 Note GBP000 GBP000 GBP000 GBP000
-------- ----------- --------- --------
Net assets at 1 April 2022 1,200 324,759 56,903 382,862
--------------------------------- ---- -------- ----------- --------- --------
Losses for the period - - (12,057) (12,057)
--------------------------------- ---- -------- ----------- --------- --------
Dividends 6 - (960) (2,880) (3,840)
--------------------------------- ---- -------- ----------- --------- --------
Net assets at 31 March 2023 1,200 323,799 41,966 366,965
--------------------------------- ---- -------- ----------- --------- --------
Contributed
Share surplus Retained
capital reserve earnings Total
For the year ended 31 March 2022 Note GBP000 GBP000 GBP000 GBP000
-------- ----------- --------- -------
Net assets at 1 April 2021 1,200 326,019 40,671 367,890
--------------------------------- ---- -------- ----------- --------- -------
Profit for the year - - 18,812 18,812
--------------------------------- ---- -------- ----------- --------- -------
Dividends 6 - (1,260) (2,580) (3,840)
--------------------------------- ---- -------- ----------- --------- -------
Net assets at 31 March 2022 1,200 324,759 56,903 382,862
--------------------------------- ---- -------- ----------- --------- -------
The accompanying notes are an integral part of this
Statement.
Cash Flow Statement
For the year ended 31 March 2023
Year ended Year ended
31 March 31 March
2023 2022
Note GBP000 GBP000
---------- ----------
Cash flows from operating activities before finance
costs for the year
---------------------------------------------------- ---- ---------- ----------
(Loss)/income* (12,056) 18,812
---------------------------------------------------- ---- ---------- ----------
Adjustments for:
---------------------------------------------------- ---- ---------- ----------
Realised gains on investments 8 (5,571) (5,440)
---------------------------------------------------- ---- ---------- ----------
Unrealised losses/(gains) on investments 8 20,495 (11,625)
---------------------------------------------------- ---- ---------- ----------
Foreign exchange (327) (80)
---------------------------------------------------- ---- ---------- ----------
Decrease/(increase) in trade and other receivables 10 73 (24)
---------------------------------------------------- ---- ---------- ----------
Increase/(decrease) in trade and other payables 12 44 (20)
---------------------------------------------------- ---- ---------- ----------
Purchase of non-current investments (78,568) (30,840)
---------------------------------------------------- ---- ---------- ----------
Sale of non-current investments 90,368 33,187
---------------------------------------------------- ---- ---------- ----------
Net cash inflow from operating activities 14,458 3,970
---------------------------------------------------- ---- ---------- ----------
Cash flows from financing activities
---------------------------------------------------- ---- ---------- ----------
Interest paid (1) -
---------------------------------------------------- ---- ---------- ----------
Dividends paid 6 (3,840) (3,840)
---------------------------------------------------- ---- ---------- ----------
Net cash outflow from financing activities (3,841) (3,840)
---------------------------------------------------- ---- ---------- ----------
Increase in cash and cash equivalents 10,617 130
---------------------------------------------------- ---- ---------- ----------
Cash and cash equivalents at start of period 3,043 2,833
---------------------------------------------------- ---- ---------- ----------
Effect of foreign exchange rate changes 327 80
---------------------------------------------------- ---- ---------- ----------
Cash and cash equivalents at end of year 11 13,987 3,043
---------------------------------------------------- ---- ---------- ----------
*Includes dividends received of GBP6,810,000 (2022:
GBP5,918,000) and interest received of nil (2022: nil)
The accompanying notes are an integral part of this
Statement.
Notes to the Financial Statements
1 Accounting policies
Hansa Investment Company Limited is a company limited by shares,
registered and domiciled in Bermuda with its registered office
shown further on in the report. The principal activity of the
Company is as an investment vehicle.
(a) Basis of preparation
The Financial Statements of the Company have been prepared in
accordance with International Financial Reporting Standards. IFRS
means standards and interpretations issued (or adopted) by the
International Accounting Standards Board (they comprise:
International Financial 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 an historical
cost and going concern basis in line with the assertion of the
Board. The Financial Statements have also been prepared in
accordance with the AIC Statement of Recommended Practice ("SORP")
for investment trusts, issued by the AIC in July 2022, to the
extent that the SORP does not conflict with IFRS. The principal
accounting policies adopted are set out below.
(b) 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 or loss on initial recognition in
accordance with IFRS 9. The Company manages and evaluates the
performance of these investments on a fair value basis, in
accordance with its investment strategy and information about the
investments is provided on this basis to the Board of
Directors.
Investments are recognised and de-recognised on the trade date.
For listed investments fair value is deemed to be bid market
prices, or closing prices for 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 as determined by using various valuation techniques,
in accordance with the International Private Equity and Venture
Capital Valuation Guidelines. In the absence of a valuation at the
balance sheet date, additional procedures to determine the
reasonableness of the fair value estimate for inclusion in the
financial statements may be used. These could include direct
enquiries of the manager of the investment to understand, amongst
others, the valuation process and techniques used, external experts
used in the valuation process and updated details of underlying
portfolio. In addition, the Company can obtain external independent
valuation data and compare this to historic valuation movements of
the asset. Further, recent arms-length market transactions between
knowledgeable and willing parties where available might also be
considered.
Unrealised gains and losses, arising from changes in fair value,
are included in net profit or loss for the period as a capital item
in the Income Statement and are ultimately recognised in the
Capital Reserves.
(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 are charged to the capital column of the Income
Statement.
(g) Taxation
Under current Bermuda law, the Company is not required to pay
taxes in Bermuda on either income or capital gains. The Company has
received an undertaking from the Bermuda government exempting it
from all local income, withholding and capital gains taxes being
imposed and will be exempted from such taxes until 31 March
2035.
(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 gain or loss
arising from a change in exchange rates, subsequent to the date of
the transaction, is included as an exchange gain or loss in the
capital or revenue column of the Income Statement, depending on
whether the gain or loss is of a capital or revenue nature
respectively.
(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 Bermudan 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 2023. The most recent valuation
statement was received on 21 March 2023 stating the value of the
Company's holding as at 31 December 2022. In the absence of a
valuation for 31 March 2023 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 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 the prior year 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 2023. It is believed the value of DV4 as at 31
March 2023 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 the
following standards and amendments to standards, which have not
been applied in these Financial Statements, were in issue, but not
yet effective:
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).
The Company does not believe that there will be a material
impact on the financial statements or the amounts reported from the
adoption of these standards.
In the current financial period the Company has applied to the
following amendments to standards:
Minor amendments to IAS 16, 37 and 41 and IFRS 4, 7, 9, and 16
(effective for annual periods beginning on or after 1st January
2022).
There is no material impact on the Financial Statements or the
amounts reported from the adoption of these amendments to the
standards.
(l) Operating Segments
The Company considers it has one operating segment for the
purposes of IFRS8.
2 Investment income
Revenue Revenue
Year ended Year ended
31 March 31 March
Revenue Revenue
2023 2022
GBP000 GBP000
----------- -----------
Income from quoted investments
------------------------------- ----------- -----------
Dividends 6,892 5,904
------------------------------- ----------- -----------
Total income 6,892 5,904
------------------------------- ----------- -----------
3 Portfolio management fee
Revenue Revenue
Year ended Year ended
31 March 31 March
2023 2022
GBP000 GBP000
----------- -----------
Portfolio management fee 2,824 3,010
------------------------- ----------- -----------
Total management fee 2,824 3,010
------------------------- ----------- -----------
4 Other expenses
Revenue Revenue
Year ended Year ended
31 March 31 March
2023 2022
GBP000 GBP000
----------- -----------
Administration fees 150 155
------------------------------------------ ----------- -----------
Directors' remuneration 262 188
------------------------------------------ ----------- -----------
Auditor's remuneration for:
------------------------------------------ ----------- -----------
- audit of the Company's Annual Accounts 68 76
------------------------------------------ ----------- -----------
Printing fees 36 30
------------------------------------------ ----------- -----------
Directors' liability insurance 67 69
------------------------------------------ ----------- -----------
Marketing 140 127
------------------------------------------ ----------- -----------
Registrar's fees 93 82
------------------------------------------ ----------- -----------
Banking charges 38 15
------------------------------------------ ----------- -----------
Secretarial services 153 167
------------------------------------------ ----------- -----------
Travel expenses 217 80
------------------------------------------ ----------- -----------
Broker fees 25 26
------------------------------------------ ----------- -----------
Stock Exchange listing fees 50 46
------------------------------------------ ----------- -----------
Safe custody fees 180 185
------------------------------------------ ----------- -----------
Management fee rebate from GAM (28) (138)
------------------------------------------ ----------- -----------
Other 76 119
------------------------------------------ ----------- -----------
Total other expenses 1,527 1,227
------------------------------------------ ----------- -----------
5 Finance costs
Revenue Revenue
Year ended Year ended
31 March 31 March
2023 2022
GBP000 GBP000
----------- -----------
Interest payable 1 -
-------------------- ----------- -----------
Total finance costs 1 -
-------------------- ----------- -----------
6 Dividends paid
Year ended Year ended
31 March 31 March
2023 2022
GBP000 GBP000
---------- ----------
Amounts recognised as distributed to shareholders
in the year are as follows:
------------------------------------------------------- ---------- ----------
Fourth interim dividend for 2022 (paid 27 May 2022):
0.8p (2021: 0.8p) 960 960
------------------------------------------------------- ---------- ----------
First interim dividend for 2023 (paid 26 August 2022):
0.8p (2022: 0.8p) 960 960
------------------------------------------------------- ---------- ----------
Second Interim dividend for 2023 (paid 25 November
2022): 0.8p (2022: 0.8p) 960 960
------------------------------------------------------- ---------- ----------
Third Interim dividend for 2023 (paid 24 February
2023): 0.8p (2022:0.8p) 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
2023 2022
GBP000 GBP000
---------- ----------
First interim dividend for 2023 (paid 26 August 2022):
0.8p (2022: 0.8p) 960 960
------------------------------------------------------- ---------- ----------
Second Interim dividend for 2023 (paid 25 November
2022): 0.8p (2022: 0.8p) 960 960
------------------------------------------------------- ---------- ----------
Third Interim dividend for 2023 (paid 24 February
2023): 0.8p (2022:0.8p) 960 960
------------------------------------------------------- ---------- ----------
Fourth interim dividend for 2023 (payable 26 May
2023):0.8p 2022 (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 2023. No final dividend is proposed for the year
ended 31 March 2023.
.
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
2023 2023 2023 2022 2022 2022
------------------ ----------- ----------- ----------- ----------- ----------- -----------
Returns per share 2.1p (12.2)p (10.1)p 1.4p 14.3p 15.7p
------------------ ----------- ----------- ----------- ----------- ----------- -----------
Returns
Revenue return per share is based on the revenue attributable to
equity shareholders of GBP2,540,000 (2022: GBP1,667,000).
Capital return per share is based on the capital loss
attributable to equity shareholders of GBP14,597,000 (2022: profit
of GBP17,145,000).
Total return per share is based on a combination of revenue and
capital returns attributable to equity shareholders, amounting to
net loss of GBP12,057,000 (2022: profit of 18,812,000).
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
2023 2022
Listed Unquoted Total Total
GBP000 GBP000 GBP000 GBP000
-------- -------- -------- --------
Cost at 1 April 250,660 74,267 324,927 321,834
---------------------------------------------- -------- -------- -------- --------
Investment holding gains at 1 April 39,611 15,448 55,059 43,434
---------------------------------------------- -------- -------- -------- --------
Valuation as at 1 April 290,271 89,715 379,986 365,268
---------------------------------------------- -------- -------- -------- --------
Movements in the year:
---------------------------------------------- -------- -------- -------- --------
Purchases at cost 72,138 6,430 78,568 30,840
---------------------------------------------- -------- -------- -------- --------
Sales - proceeds (84,501) (5,867) (90,368) (33,187)
---------------------------------------------- -------- -------- -------- --------
Movement in investment holding (losses)/gains (13,948) (976) (14,924) 17,065
---------------------------------------------- -------- -------- -------- --------
Valuation as at 31 March 263,960 89,302 353,262 379,986
---------------------------------------------- -------- -------- -------- --------
Cost as at 31 March 242,560 76,138 318,698 324,927
---------------------------------------------- -------- -------- -------- --------
Investment holding gains 21,400 13,164 34,564 55,059
---------------------------------------------- -------- -------- -------- --------
Valuation as at 31 March 263,960 89,302 353,262 379,986
---------------------------------------------- -------- -------- -------- --------
2023 2022
GBP000 GBP000
---------------------------------------------- -------- -------- -------- --------
Gains on sales 5,571 5,440
---------------------------------------------- -------- -------- -------- --------
Movement in investment holding (losses)/gains (20,495) 11,625
---------------------------------------------- -------- -------- -------- --------
(Losses)/gains on investments held
at fair value through profit or loss (14,924) 17,065
---------------------------------------------- -------- -------- -------- --------
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:
2023 2022
GBP000 GBP000
------- -------
Purchases 38 14
------------ ------- -------
Sales 18 23
------------ ------- -------
56 37
---------- ------- -------
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 2023 are detailed
below:
Exc. Minority Interest
Country Profit
of incorporation % Latest Total after
or Class of class available capital tax for
registration of Capital held accounts and reserves the period
------------------------------- ------------------ ------------ --------- ---------- ------------- -------------
Ocean Wilsons Holdings Limited Bermuda Ordinary 26.5 31.12.2022 $554,608,000 ($18,675,000)
------------------------------- ------------------ ------------ --------- ---------- ------------- -------------
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.
2023 2022
GBP000 GBP000
------- -------
Prepayments and accrued income 128 201
------------------------------- ------- -------
128 201
------------------------------- ------- -------
11 Cash and cash equivalents
2023 2022
GBP000 GBP000
------- -------
Cash at bank 13,987 3,043
------------- ------- -------
13,987 3,043
------------- ------- -------
12 Trade and other payables
2023 2022
GBP000 GBP000
------- -------
Other creditors and accruals 412 368
----------------------------- ------- -------
412 368
----------------------------- ------- -------
13 Called up share capital
2023 2022
GBP000 GBP000
------- -------
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
2023 2022
GBP000 GBP000
------- -------
Opening balance at 1 April 324,759 326,019
---------------------------- ------- -------
Dividend paid (960) (1,260)
---------------------------- ------- -------
Closing balance at 31 March 323,799 324,759
---------------------------- ------- -------
15 Retained earnings
Reserves Reserves
Capital Capital
- investment Total - investment Total
Capital holding retained Capital holding retained
Revenue - other profit earnings Revenue - other profit earnings
2023 2023 2023 2023 2022 2022 2022 2022
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------- -------- ------------- --------- ------- -------- ------------- ---------
Opening balance
at 1 April (2,024) 3,868 55,059 56,903 (1,111) (1,652) 43,434 40,671
------------------ ------- -------- ------------- --------- ------- -------- ------------- ---------
Profit/(loss) for
the year 2,540 5,898 (20,495) (12,057) 1,667 5,520 11,625 18,812
------------------ ------- -------- ------------- --------- ------- -------- ------------- ---------
Dividend paid (2,880) - - (2,880) (2,580) - - (2,580)
------------------ ------- -------- ------------- --------- ------- -------- ------------- ---------
Closing balance
at 31 March (2,364) 9,766 34,564 41,966 (2,024) 3,868 55,059 56,903
------------------ ------- -------- ------------- --------- ------- -------- ------------- ---------
16 Net asset value
2023 2022
GBP000 GBP000
------- -------
NAV per Ordinary and 'A' non-voting Ordinary share 305.8p 319.1p
--------------------------------------------------- ------- -------
The NAV per Ordinary and 'A' non-voting Ordinary share is based
on the net assets attributable to equity shareholders of
GBP366,965,000 (2022: GBP382,862,000) and on 40,000,000 Ordinary
shares (2022: 40,000,000) and 80,000,000 'A' non-voting Ordinary
shares (2022: 80,000,000) in issue at 31 March 2023.
17 Commitments and contingencies
The Company has made two commitments during the year to Private
Equity vehicles totalling $2.4m as at the year end (2022: GBPnil).
As at the year end, no amount has been drawn against either of
those commitments.
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 Direct No direct
foreign foreign foreign foreign
currency currency currency currency
risk risk Total risk risk Total
2023 2023 2023 2022 2022 2022
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- --------- --------- ------- --------- --------- -------
Investments 115,139 238,123 353,262 115,858 264,128 379,986
----------------------- --------- --------- ------- --------- --------- -------
Other receivables
including prepayments 72 56 128 29 172 201
----------------------- --------- --------- ------- --------- --------- -------
Cash at bank - 13,987 13,987 24 3,019 3,043
----------------------- --------- --------- ------- --------- --------- -------
Current liabilities - (412) (412) - (368) (368)
----------------------- --------- --------- ------- --------- --------- -------
115,211 251,754 366,965 115,911 266,951 382,862
----------------------- --------- --------- ------- --------- --------- -------
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 2023 and 31 March 2022. 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.
US$ Euro Other US$ Euro Other
2023 2023 2023 2022 2022 2022
If sterling had weakened
by 10% against the
currencies shown,
this would have had
the following effect
on the Company: GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ------- ------- ------- ------- ------- -------
Income statement -
profit/(loss) 918 (328) (204) 785 (331) (191)
------------------------- ------- ------- ------- ------- ------- -------
Equity shareholders
funds 9,228 692 1,601 8,536 1,453 1,600
------------------------- ------- ------- ------- ------- ------- -------
10,146 364 1,397 9,321 1,122 1,409
------------------------- ------- ------- ------- ------- ------- -------
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 GBP30m (2022:
GBP30m) which are available for the Portfolio Manager to use in
purchasing investments; the costs of which are based on the
prevailing interest 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 GBPnil (2022: GBPnil). The level of banking facilities
utilised at 31 March 2023 was GBP1,000 (2022: GBPnil).
Interest rate changes usually impact equity prices. The level
and direction of change in equity prices is subject to prevailing
local and world economic conditions as well as market sentiment,
all of which are very difficult to predict with any certainty. The
Company has floating rate financial assets, consisting of bank
balances and cash funds that have received average rates of
interest during the year of 0% on bank balances.
Cash flow No Cash flow No
interest interest interest interest
rate risk rate risk Total rate risk rate risk Total
2023 2023 2023 2022 2022 2022
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- ---------- ---------- ------- ---------- ---------- -------
Investments - 353,262 353,262 - 379,986 379,986
----------------------- ---------- ---------- ------- ---------- ---------- -------
Other receivables
including prepayments - 128 128 - 201 201
----------------------- ---------- ---------- ------- ---------- ---------- -------
Cash at bank 13,987 - 13,987 3,043 - 3,043
----------------------- ---------- ---------- ------- ---------- ---------- -------
Current liabilities - (412) (412) - (368) (368)
----------------------- ---------- ---------- ------- ---------- ---------- -------
13,987 352,978 366,965 3,043 379,819 382,862
----------------------- ---------- ---------- ------- ---------- ---------- -------
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, GBP83.7m as valued at 31 March 2023 (2022:
GBP93.5m) and as a proportion of the NAV, 22.8% (2022: 24.4%).
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 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 in the statement earlier on 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 GBP35.3m (2022: GBP38.0m).
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 2023 are
shown in Note 10 and Note 12.
The Company's maximum exposure to credit risk on cash is
GBP14.0m (2022: GBP3.0m) and on cash funds is GBPnil (2022:
GBPnil). Surplus cash is on deposit with the
Depositary/Custodian.
Liquidity risk
The liquidity risk to the Company is that it is unable to meet
its obligations as they fall due, as a result of a lack of
available cash and an inability to dispose of investments in a
timely manner. A substantial proportion of the Company's portfolio
is held in liquid quoted investments; however, there is a large,
Strategic, holding in Ocean Wilsons of 22.8% (2022: 24.4%),
unquoted equity investments of 2.6% (2022: 2.3%) and investments
into open-ended investment funds with varying liquidity terms of
58.6% (2022: 61.7%).
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 2023 is shown
in the Portfolio Statement 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:
Level 1 Level 2 Level 3 Total
31 March 2023 GBP000 GBP000 GBP000 GBP000
------- ------- ------- -------
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
--------------------------------------- ------- ------- ------- -------
Fair Value 174,768 169,362 9,132 353,262
--------------------------------------- ------- ------- ------- -------
Level 1 Level 2 Level 3 Total
31 March 2022 GBP000 GBP000 GBP000 GBP000
------- ------- ------- -------
Financial assets at fair value through
profit or loss
--------------------------------------- ------- ------- ------- -------
Quoted equities 136,771 - - 136,771
--------------------------------------- ------- ------- ------- -------
Unquoted equities - - 8,917 8,917
--------------------------------------- ------- ------- ------- -------
Fund investments 27,328 206,970 - 234,298
--------------------------------------- ------- ------- ------- -------
Fair Value 164,099 206,970 8,917 379,986
--------------------------------------- ------- ------- ------- -------
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
2023 2022
equity equity
investments investments
GBP000 GBP000
------------ ------------
Opening Balance 8,917 11,234
------------------------------------------------------- ------------ ------------
Dissolution of Hansa Trust - (3,179)
------------------------------------------------------- ------------ ------------
Sales (Capital Distribution) - (648)
------------------------------------------------------- ------------ ------------
Total gains or losses included in gains on investments
in the Income Statement:
------------------------------------------------------- ------------ ------------
on assets held at year end 215 1,510
------------------------------------------------------- ------------ ------------
Closing Balance 9,132 8,917
------------------------------------------------------- ------------ ------------
Note: Hansa Trust Limited was dissolved on 9 November 2021. As a
result, the remaining equity investment was cancelled at this time
as well as the Intercompany loan balance with the subsidiary of the
same value. More information can be found in the prior year
accounts.
As at 31 March 2023, 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 2023. The most recent
valuation statement was received on 21 March 2023 and relates to
the DV4 portfolio at 31 December 2022. 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 2023 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 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 the prior year 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 2023. It is
believed the value of DV4 as at 31 March 2023 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 2023 would have
increased or decreased by GBP913,000 (2022: GBP892,000). 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. In the prior year, the subsidiary was valued taking into
account the latest assets and liabilities remaining In Hansa
Trust.
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 2023, 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 2023, are disclosed in the Governance
Section - The Board, and also in the Directors' Remuneration
Report.
21 Controlling parties
At 31 March 2023 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 Clarendon House, 2 Church
Street, Hamilton, HM 11, Bermuda on Thursday 27 July 2023 at 9:00
a.m. (Bermuda time) for the following purposes:
Agenda
1. To appoint a chairperson of the meeting.
2. To confirm notice.
Resolutions
3. To receive and consider the audited Financial Statements and
the Reports of the Directors and Auditor for the year ended 31
March 2023.
4. To re-elect Jonathan Davie (a biography and Board endorsement
can be found earlier on in the report) as a Director of the
Company.
5. To re-elect Richard Lightowler (a biography and Board
endorsement can be found earlier on in the report) as a Director of
the Company.
6. To re-elect Nadya Wells (a biography and Board endorsement
can be found earlier on in the report) as a Director of the
Company.
7. To re-elect William Salomon (a biography and Board
endorsement can be found earlier on in the report) as a Director of
the Company.
8. To re-elect Simona Heidempergher (a biography and Board
endorsement can be found earlier on in the report) as a Director of
the Company.
9. To approve the Directors' Remuneration Report.
10. To approve the Directors' Remuneration Policy and authorise
the Board to determine the remuneration of the Directors.
11. To approve the Company's Dividend Policy as can be found
earlier on in the Annual Report.
12. To appoint PricewaterhouseCoopers Ltd as Auditor of the
Company and to authorise the Directors to determine the
remuneration of the Auditor.
13. 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.
14. Special Resolution
Approval to adopt new Bye-Laws (the 'New Bye-Laws') in order to
update the Company's current Bye-Laws (the '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 New 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 amendments or issues which may be of interest to all
shareholders. This summary is not a substitute for reviewing the
full terms of the New Bye-Laws which will be available for
inspection at the Company's registered office, [also being the
venue of the AGM] 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 new 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.aspx
1.1 - Interpretation
A definition of "Common Reporting Standard" has been included.
This is used in Bye-Law 83 (Obligation to provide information to
the Company).
A definition of "FATCA" has been included. This is used in
Bye-Law 83 (Obligation to provide information to the Company).
A definition of "Hansa Trust" has been included. This is used in
Bye-Law 15.4 (Untraced Shareholders).
A definition of "US Tax Code" has been included. This is used in
Bye-Law 83.1.3 (Obligation to provide information to the
Company).
15.1 (a) - Untraced Shareholders
Bye-law 15 sets out the current provisions in relation to
Untraceable Shareholders and adopts the historic provisions of the
articles of association of Hansa Trust plc which were incorporated
into the Company's Bye-laws. Under Bye-law 15, the Company is
entitled to sell shares held by any shareholders that remain
untraceable for a period of 12 years. Shareholders are held to be
untraceable if they have failed to claim any dividends within the
12-year period. In line with what other companies are doing, we are
seeking to reduce the current 12-year period to six years to help
the Company tidy up the shareholder register in connection with its
reporting obligations under FATCA, the Common Reporting Standard or
any relevant law or regulation and also more generally to remove
longstanding untraced shareholders, having followed due
process.
The language has been updated to include a reference to
distributions in respect of the shares that have become
payable.
Language has been included to note that the Company will be
entitled to sell shares held by Untraceable shareholders if the
shareholder has been uncontactable for a period of two calendar
years within the six-year period (being the last two calendar years
of the six year period).
15.1 (b) - Untraced Shareholders
The language that referred to the Company's method of
circulating an advertisement in national newspapers in order to
notify Untraced Shareholders that their shares are to be sold has
been amended to reflect the Company's more direct approach to
notification including sending a notice to a shareholder's last
known address and showing that reasonable efforts have been made to
trace a shareholder,
such as engaging a professional asset reunification company.
These changes reflect current practice of third party registrar
service providers.
Language has been included to note that where the Company has no
record of the address of a shareholder, the Company is not required
to send a notice but must demonstrate that reasonable efforts have
been used to trace the shareholder including, if necessary,
appointing a professional asset reunification company.
15.1 (c) - Untraced Shareholders
The language has been updated to reflect the changes to Bye-Law
15.1(a) relating to the six-year period for Untraced Shareholders
and the notice requirements relating to Untraced Shareholders noted
in Bye-Law 15.1(b).
15.2 - Untraced Shareholders
The language has been updated to reflect the six-year period for
Untraced Period noted in Bye-Law 15.1(a).
15.3 - Untraced Shareholders
Language has been included to note that the net proceeds of sale
of shares of untraced shareholder shall be forfeited and will
belong to the Company. Language relating to the obligation of the
Company to account to the Untraced Shareholders for an amount equal
to such proceeds has been removed to correspond with the addition
noted above.
These changes are to enable the Company to comply with its
reporting obligations under FATCA, the Common Reporting Standard or
any relevant law or regulation.
15.4 - Untraced Shareholders
Given the long term nature of some of the untraced shareholders
in comparison to the relatively recent re- domiciliation of the
investment company to Bermuda in 2019, this Bye-Law has been
included to provide the Board with discretion to include, in the
calculation of the six-year period for Untraced Shareholders, the
time the Untraced Shareholder held shares in Hansa Trust, being the
long standing predecessor to the Company.
19.3 - Method of Payment
This Bye-Law has been updated to clarify that the period for
which dividends of unclaimed shares are to be forfeited from the
date when payment became due is six-years rather than 12-years to
correspond with Bye-Law 15.1.(a).
44.1 - Directors Fees
This Bye-Law has been updated to increase the current upper
annual limit of Directors' remuneration from $400,000 to $600,000
as explained in the Directors' Remuneration Report.
81.2 - Definition applicable to Bye-Laws 82, 83 and 84
This Bye-Law has been updated to include definitions of
"Information" in terms of Bye-Law 83.1, "Relevant Laws" in terms of
Bye-Law 83.1.1.
83.1 - Obligations to provide information to the Company
A new Bye-Law 83.1 has been included to provide that the Company
may serve a written notice on any holder to request that any
information, representations, certificates, waivers, documents or
forms relating to the holder is provided to the Company. This has
been included to provide the Company with the ability to satisfy
the requirements under FATCA, the Common Reporting Standard or any
relevant laws or regulations of any jurisdiction or territory to
which the Company is subject.
The inclusion of this Bye-Law will provide the Company with the
ability to require shareholders to co-operate in respect of the
exchange of information to comply with the Company's international
tax reporting obligations.
83.2 - Obligations to provide information to the Company
A new Bye-Law 83.2 has been included to provide that the Company
is entitled to hold and process the information noted above, and to
disclose any information as required to the relevant government
division or department and to any person or entity in order to
comply with the relevant laws or regulations and for the purposes
of carrying out the business of the Company.
83.3 - Obligations to provide information to the Company
A new Bye-Law 83.3 has been included to provide that where any
holder of the Company fails to provide the requested information
within the period set out in Bye-Law 83.1, being 30 days, then the
Company will issue a further notice with a specified period of 21
days, failing which if the Company receives no response, they shall
be entitled to sell or transfer the holder's shares.
83.4 - Obligations to provide information to the Company
A new Bye-Law 83.4 has been included to provide that, if the
requirements in Bye-Laws 83.3.1 or 83.3.2 noted above are not
satisfied, then the holder will have been deemed to have agreed to
the sale and transfer of their shares.
83.5 - Obligations to provide information to the Company
A new Bye-Law 83.5 has been included to provide that the holder
shall execute any documents, opinions, instruments, and
certificates as requested by the Company in order for the Company
to exercise their rights and entitlements under Bye-Law 83.
83.6 - Obligations to provide information to the Company
A new Bye-Law 83.6 has been included to provide that the
inclusion of new Bye-Law 83 in the Company Articles will not
restrict the Company from withholding or deducting any taxes or
other sums required to be withheld or deducted by the Company in
accordance with FATCA, the Common Reporting Standard or any
relevant law or regulation.
83.7 - Obligations to provide information to the Company
The inclusion of a new Bye-Law 83.7 provides that where any
monies received by the Company become subject to any tax
deductions, the Company is not required to compensate or make good
the holders, and the holders will receive no credit or refund in
relation to the deduction.
83.8 - Obligations to provide information to the Company
In order for the Company to comply with reporting obligations
under FATCA, the Common Reporting Standard or any relevant law or
regulation, a new Bye-Law 83.8 provides that if the holder
undergoes any material change which effects their status, the
holder must immediately notify the Company so that the relevant
records can be updated.
For and on behalf of Conyers Corporate Services (Bermuda)
Limited
Vida Kam
Secretary
26 June 2023
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 25 July 2023)
(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 25 July 2023) 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 25 July 2023 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.signalshares.com by logging on and selecting the 'Proxy Voting'
link. If you have not previously registered for electronic
communications, you will first be asked to register as a new user,
for which you will require your investor code ("IVC"), (which can
be found on your share certificate), family name and postcode (if
resident in the UK); or
in hard copy form by post, by courier or by hand to the
Company's Registrars, Link Group, PXS 1, Central Square, 29
Wellington Street, Leeds, LS1 4DL.
If you need help with voting online or need to request a proxy
form, please contact our Registrars, Link Group, on 0371 664 0300.
Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the UK will be charged at the applicable
international rate. They are open between 09:00 - 17:30, Monday to
Friday excluding public holidays in England and Wales.
Alternatively, you can email Link at
shareholderenquiries@linkgroup.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 RA10 by 1:00pm UK time on 24
July 2023. For this purpose, the time of receipt will be taken to
be the time (as determined by the time stamp applied to the message
by the CREST Application Host) from which the issuer's agent is
able to retrieve the message by enquiry to CREST, in the manner
prescribed by CREST. After this time any change of instructions to
proxies appointed through CREST should be communicated to the
appointee through other means. CREST members and, where applicable,
their CREST sponsors, or voting service providers should note that
Euroclear UK & Ireland Limited does not make available special
procedures in CREST for any particular message. Normal system
timings and limitations will, therefore, apply in relation to the
input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST
personal member, or sponsored member, or has appointed a voting
service provider, to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers
are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
2 In the case of Depositary Interest Holders, a form of
direction may be requested and completed in order to instruct Link
Market Services Trustees Limited, the Depositary, to vote on the
holder's behalf at the Meeting by proxy or, if the Meeting is
adjourned, at the adjourned meeting. Requests for a hard copy
should be sent Link Group, PXS 1, Central Square, 29 Wellington
Street, Leeds, LS1 4DL (telephone number: 0371 664 0300).
3 To be effective, a valid form of direction (and any power of
attorney or other authority under which it is signed) must be
received electronically or delivered to Link Group, PXS 1, Central
Square, 29 Wellington Street, Leeds, LS1 4DL by no later by 1:00pm
UK time on 24 July 2023 or 72 hours before any adjourned
Meeting.
4 The Depositary will appoint the Chairman of the meeting as its
proxy to cast your votes. The Chairman may also vote or abstain
from voting as he or she thinks fit on any other business
(including amendments to resolutions) which may properly come
before the meeting.
5 The 'Vote Withheld' option is provided to enable you to
abstain from voting on the resolutions. However, it should be noted
that a 'Vote Withheld' is not a vote in law and will not be counted
in the calculation of the proportion of the votes 'For' and
'Against' a resolution.
6 Depositary Interest holders wishing to attend the meeting
should contact the Depositary at Link Group, PXS 1, Central Square,
29 Wellington Street, Leeds, LS1 4DL or by email by using
nominee.enquiries@linkgroup.co.uk by no later than by 1:00pm UK
time on 24 July 2023.
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 26 June 2023 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-2023.aspx#2023
Investor information
Company information
The Company currently manages its affairs so as to be a
qualifying investment company for ISA purposes, for both the
Ordinary and 'A' non-voting Ordinary shares. It is the present
intention that the Company will conduct its affairs so as to
continue to qualify for ISA products. In addition, the Company
currently conducts its affairs so shares issued by Hansa Investment
Company Limited can be recommended by independent financial
advisers to ordinary retail investors, in accordance with the
Financial Conduct Authority's ("FCA") rules in relation to
non-mainstream investment products and intends to continue to do so
for the foreseeable future. The shares are excluded from the FCA's
restrictions which apply to non-mainstream investment products,
because they are excluded securities as defined in the FCA Handbook
Glossary. Finally, Hansa Investment Company Limited is registered
as a Reporting Financial Institution with the US IRS for FATCA
purposes.
Capital structure
The Company has 40,000,000 Ordinary shares of 1p each and
80,000,000 'A' non-voting Ordinary shares of 1p each in issue. The
Ordinary shareholders are entitled to one vote per Ordinary share
held. The 'A' non-voting Ordinary shares do not entitle the holders
to vote or receive notice of meetings, but in all other respects
they have the same rights as the Company's Ordinary shares.
Secretary and registered office
Conyers Corporate Services (Bermuda) Limited
Clarendon House
2 Church Street PO Box HM666
Hamilton HM CX Bermuda
Investor disclosure
AIFMD
Hansa Investment Company Limited's AIFMD Investor Disclosure
document can be found on its website. The document is a regulatory
requirement and summarises key features of the Company for
investors.
Packaged Retail and Insurance -- based Investment Products
("PRIIPs")
The Company's AIFM, Hanseatic Asset Management LBG, is
responsible for applying the product governance rules defined under
the MiFID II legislation on behalf of Hansa Investment Company
Limited. Therefore, the AIFM is deemed to be the 'Manufacturer' of
Hansa Investment Company's two share classes. Under MiFID II, the
Manufacturer must make available Key Information Documents ("KIDs")
for investors to review if they so wish ahead of any purchase of
the Company's shares.
Links to these documents can be found on the Company's website:
www.hansaicl.com.
Service providers
Independent Auditor
PricewaterhouseCoopers Ltd
Solicitors - Bermuda
Conyers Dill & Pearman Limited
Solicitors - UK
Dentons UK and Middle East LLP
Custodian
Banque Lombard Odier & Cie SA
Stockbroker
Winterflood Investment Trusts
Administrator
Maitland Administration Services Limited
Alternative Investment Fund Manager
Hanseatic Asset Management LBG
Financial calendar
Company year end
31 March
Annual Report sent to shareholders
June
Annual General Meeting
July/August
Announcement of half-year results
November
Half-year Report sent to shareholders
December
Interim dividend payments
August, November, February and May
Share price listings
The price of your shares can be found on our website. In
addition, share price information for Ordinary shares / 'A'
non-voting Ordinary shares can be found via the following
codes:
ISIN
BMG428941162 / BMG428941089
SEDOL
BKLFC18 / BKLFC07
Reuters
HAN.L / HANA.L
Bloomberg
HAN LN / HANA LN
TIDM
HAN / HANA
Legal Entity Identifier
213800RS2PWJXS2QDF66
Further information about Hansa Investment Company Limited,
including monthly fact sheets, stock exchange announcements and
shareholder presentations, can be found on the Company's website:
www.hansaicl.com
Please contact the Portfolio Manager, as below, if you have any
queries concerning the Company's investments or performance.
Portfolio Manager and additional administrative services
provider
Hansa Capital Partners LLP
50 Curzon Street
London
W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hiclenquiry@hansacap.com
Website: www.hansagrp.com
Please contact the Registrars, as below, if you have a query
about a certificated holding in the Company's shares.
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH
Email: enquiries@linkgroup.co.uk
Website: www.linkassetservices.com
If you do not have internet access you can call the Shareholder
Support Centre on +44 (0) 371 664 0300. Calls are charged at the
standard geographic rate and will vary by provider. Calls outside
the UK will be charged at the applicable international rate.
The Registrars are open between 09:00 - 17:30, Monday to Friday
excluding public holidays in England and Wales.
Register for updates
To receive the latest news and views on the Company, please
register at
www.hansaicl.com
Glossary of terms
Association of Investment Companies ("AIC")
The Association of Investment Companies is the UK trade
association for closed-ended investment companies
(www.theaic.co.uk). Despite the Company not being UK domiciled, the
Company is UK listed and operates in most ways in a similar manner
to a UK Investment Trust. Therefore, the Company follows the AIC
Code of Corporate Governance and the Board considers that the AIC's
guidance on issues facing the industry remains very relevant to the
operations of the Company.
Alternative Investment Fund Managers Directive
("AIFMD")
The AIFMD is a regulatory framework for alternative investment
fund managers ("AIFMs"), including managers of hedge funds, private
equity firms and investment trusts. Its scope is broad and, with a
few exceptions, covers the management, administration and marketing
of alternative investment funds ("AIFs"). Its focus is on
regulating the AIFM rather than the AIFs.
Annual Dividend / Dividend
The amount paid by the Company to shareholders in dividends
(cash or otherwise) relating to a specific financial year of the
Company. The Company's dividend policy is to announce its expected
level of dividend payment at the start of each financial year.
Barring unforeseen circumstances, the Company then expects to make
four interim dividend payments each year - at the end of August,
November and February during that financial year and at the end of
May following the end of the financial year.
Bid Price
The price at which you can sell shares determined by supply
and demand.
Capital Structure
The stocks and shares that make up a company's capital i.e. the
amount of ordinary and preference shares, debentures and unsecured
loan stock etc. which are in issue.
Closed -- ended
A company with a fixed number of shares in issue.
Depositary/Custodian
A financial institution acting as a holder of securities for
safekeeping.
Discount
When the share price is lower than the NAV, it is referred to as
trading at a discount. The discount is expressed as a percentage of
the NAV.
Expense Ratio
An expense ratio is determined through an annual calculation,
where the operating expenses are divided by the average NAV. Note
there is also a description of an additional PRIIPs KID Ongoing
Charges Ratio explained in the 31 March 2022
Annual Report.
Five Year Rolling NAV Return (per annum)
The rate at which, compounded for five years, will equal the
five year NAV total return to end March, assuming dividends are
always reinvested at pay date.
Five Year NAV and Share Price Total Return
Rebased from 0% at the start of the five year period, this is
the rate at which the Company's NAV and share prices would have
returned at any period from that starting point, assuming dividends
are always reinvested at pay date. The Company will continue to
quote results from its predecessor, Hansa Trust Ltd,
as part of that reporting so shareholders can see the
longer-term performance of the portfolio.
Gearing
Gearing refers to the level of borrowing related to equity
capital.
Hedging
Strategy used to reduce risk of loss from movements in interest
rates, equity markets, share prices or currency rates.
Issued Share Capital
Issued share capital is the total number of shares subscribed to
by the shareholders.
Key Information Document ("KID")
This is a document of a form stipulated under the PRIIPs
Regulations. It provides basic, pre-contractual, information about
the Company and its share classes in a simple and accessible
manner. It is not marketing material. The UK regulatory authorities
have introduced legislation from 1 January 2023 to amend some of
the disclosures in the KID for UK shareholders. The Company's AIFM
will be producing both UK KIDs and European KIDs going forward.
Key Performance Indicators ("KPIs")
A set of quantifiable measures a company uses to gauge its
performance over time. These metrics are used to determine a
company's progress in achieving its strategic and operational goals
and also to compare a company's finances and performance against
other businesses within its industry. In the case of historic
information, the KPIs will be compared against data of both the
Company and, prior to the Company's formation, from Hansa Trust
Ltd.
Market Capitalisation
The market value of a company's shares in issue. This figure is
found by taking the stock price and multiplying it by the total
number of shares outstanding.
Mid Price
The average of the Bid and Offer Prices of a particular
traded share.
Net Asset Value ("NAV")
The value of the total assets minus liabilities of a
company.
Net Asset Value Total Return
See Total Return.
Offer Price
The price at which you can buy shares determined by supply
and demand.
Ordinary Shares
Shares representing equity ownership in a company allowing
investors to receive dividends. Ordinary shareholders have the
pro-rata right to a company's residual profits. In other words,
they are entitled to receive dividends if any are available after
payments to financial lenders and dividends on any preferred shares
are paid. They are also entitled to their share of the residual
economic value of the company should the business unwind.
Hansa Investment Company Limited has two classes of Ordinary
shares - the Ordinary shares (40 million shares) and the 'A'
non-voting Ordinary shares (80 million shares). Both have the same
financial interest in the underlying assets of the Company and
receive the same dividend per share, but differ only in that only
the former shares have voting rights, whereas the latter do not.
They trade separately on the London Stock Exchange, nominally
giving rise to different share prices at any given time.
Premium
When the share price is higher than the NAV it is referred to as
trading at a premium. The premium is expressed as a percentage of
the NAV.
Packaged Retail and Insurance -- based Investment Product
("PRIIP")
Packaged retail investment and insurance-based products
("PRIIPs") make up a broad category of financial assets that are
regularly provided to consumers in the European Union. The term
PRIIPs, created by the European Commission to regulate the
underlying market, is defined as any product manufactured by the
financial services industry, to provide investment opportunities to
retail investors, where the amount repayable is subject to
fluctuation because of exposure to reference values, or the
performance of underlying assets not directly purchased by the
retail investor. See also Key Information Document ("KID").
Shareholders' Funds/Equity Shareholders' Funds
This value equates to the NAV of the Company. See NAV.
Spread
The difference between the Bid and Ask price.
Tradable Instrument Display Mnemonics ("TIDM")
A short, unique code used to identify UK-listed shares. The TIDM
code is unique to each class of share and to each company. It
allows the user to ensure they are referring to the right share.
Previously known as EPIC.
Total Return
When measuring performance, the actual rate of return of an
investment or a pool of investments over a given evaluation period.
Total return includes interest, capital gains, dividends and
distributions realised over a given period of time.
Total Return - Shareholder
The Total Return to a shareholder is a measure of the
performance of the company's share price over time. It combines
share price appreciation/depreciation and dividends paid to show
the total return to the shareholder expressed as an annualised
percentage. In the case of historic information, the Total Return
will include data against data of both the Company and, prior to
the Company's formation, from Hansa Trust Ltd.
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END
FR SEWFIMEDSEDM
(END) Dow Jones Newswires
June 26, 2023 11:41 ET (15:41 GMT)
Hansa Investment (LSE:HAN)
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Hansa Investment (LSE:HAN)
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