Hansa
Investment Company Limited
Annual
Report: Year ended 31 March 2024
Chairman's report
Dear Shareholder
Shareholder Returns
It is very pleasing to report an increase of
14.6% over the year in the value of Hansa Investment Company
Limited's ("Hansa", "the Company", HICL) investment portfolio. Our
Portfolio Manager, Alec Letchfield and his team at Hansa Capital
Partners LLP (HCP, "Hansa Capital Partners", "PM", "the Manager")
have performed well in a very challenging market. Additionally,
after a period of underperformance, it is very gratifying to report
an increase of 55.3% in the value of our holding in Ocean Wilsons
Holdings Limited (OWHL, "Ocean Wilsons"). Overall, the net asset
value increased from 305.8p to 378.8p as at 31 March 2024,
generating a 23.9% increase in the portfolio. The shareholders also
received dividends totalling 3.2p per share during the period,
implying a total NAV return of 25.1% for the year.
The Ordinary share price has increased from
174.0p to 210.0p, whilst the 'A' Ordinary shares increased from
170.5p to 204.0p. Regrettably the discount on the Ordinary shares
increased from 43.1% to 44.6% and the 'A' Ordinary shares increased
from 44.2% to 46.1%.
More details about our results and performance
can be found further on and also in our Portfolio Manager's
detailed review of markets and portfolio performance in his
Report.
Strategy
As memories of near-zero inflation and interest
rates recede, the debate in markets has moved to where the natural
rate of interest settles, with markets anticipating it to be
approximately 2.5%, whilst leading economists such as Larry Summers
lean towards the number being 4.5%. I prefer the latter view as if
inflation gets back to 2% then a real rate of 2.5% is not unusual
or unreasonable, particularly with the backdrop of voracious and
increasing government debt requirements in all parts of the
world.
Alec Letchfield and his team at Hansa Capital
Partners, supported by the Board continue to look for opportunities
to broaden and diversify the portfolio. This has been most notable
with an increasing investment in Japan. Our commitment to Private
Markets continues to grow as planned, with our strategy to continue
to commit approximately £10m each year to this sector.
As a consequence of our recent rolling
commitment to an annual investment in Private Equity and Venture
Capital opportunities, the Board has decided to include this as one
of the four key investment categories. Consequently, the Core and
Thematic categories have been combined.
Ocean Wilsons Holdings Limited
As you will recall Ocean Wilsons announced on
12 June 2023 that it was undertaking a strategic review involving
its investment in Wilson Sons and that all strategic options were
being considered. A further announcement on 15 November 2023
confirmed that a number of indicative non-binding offers had been
received, but the process remains ongoing. Recent results have been
very encouraging, with an excellent performance by both Wilson Sons
and the investment portfolio, which is continuing to demonstrate
strong resilience. The Board awaits further updates, as I am sure
do all other shareholders. It needs to be borne in mind that as
stated by Ocean Wilsons, there can be no certainty as to the
outcome of its deliberations and decisions.
Your Board remains vigilant on this very
important matter for all our shareholders and continues to review
and update potential strategic options.
Prospects
Stock markets have had a particularly good run
in the second half of our financial year. Pleasingly, this has
continued into May.
Whilst I have been correct on interest rates
being higher for longer than the market participants anticipated
and the oil price remaining firm, I have completely underestimated
the continuing high levels of liquidity in markets, the sudden
arrival of AI and the reasonably dovish comments from the Fed about
progress towards their 2% inflation target.
As has been pointed out by some leading
financial commentators, the relentless increase in outstanding US
debt will probably become a serious problem at some point. This, of
course, does not only apply to the US. What is particularly
troubling is the fact there seems no determination to take any
action on this. If anything, the opposite is true, with increasing
amounts of debt being issued to bribe voters and special interest
groups. I can only assume this will continue to reduce, to some
degree, the speed of the decline in inflation and interest rates.
It will be interesting to see if Chairman Powell starts to make any
comments on this issue.
The recent increase in the price of gold is
begging the question of whether it is signalling problems ahead, or
just catching up with global events of both an economic and
political nature. The ominous increase in the price of oil together
with events in Ukraine and the Middle East will need to be
monitored carefully.
On a more positive note, it is encouraging to
find Europe getting through the recent winter with little stress on
gas prices or its supply. In fact, stocks of gas seem to indicate a
lowering of demand next year due to present storage
reserves.
Discount Management
The Board is disappointed and frustrated that
the discount has widened during a period of good investment
performance. Our present policy of not intervening to try to reduce
the discount will remain in place until we have learned about the
outcome of Ocean Wilsons deliberations on the options open to
Wilson Sons. At that time the Board will carry out a thorough
review of its present discount management policies.
Dividends
The Board has decided to continue with its
existing dividend policy of paying quarterly interim payments of
0.8p per share, being an annual total of 3.2p per share. The
present plan will continue until such time as the dividend is fully
covered by net revenue. It will then increase in line with any
improvement in the net revenue of the Company. Currently the income
generated by the portfolio is insufficient to meet this dividend
commitment, with the shortfall being made up by drawing from
Hansa's reserves. In principle, the Board does not believe it to be
in the Company's best interests to use capital as a source from
which to pay dividends. As I mentioned in my Half-Year Report, our
dividend policy will be reviewed after the Ocean Wilsons board have
completed their deliberations on the strategic options open to the
holding in Wilson Sons Limited.
Company Bye-laws
As you may recall, one of the resolutions
passed at Hansa's Annual General Meeting on 27 July 2023 was to
ensure that all shareholders, if so requested, supply information
relating to their tax residency. We have engaged Computershare to
work with Hansa's management team to try to find and engage
shareholders who have not yet responded to requests for
information. I am pleased to report that some progress is being
made on this issue, although much work remains to be done. I will
keep shareholders updated on progress.
Shareholder Event
As you may recall, we held an event at the
Mayfair Hotel in London on 27 September 2023. The presentation was
live streamed via our website for those who could not attend in
person.
It is our intention to hold a similar meeting
on 25 September 2024 which will include presentations from myself,
William Salomon and Alec Letchfield and the opportunity for
attendees, whether in person or online, to ask
questions.
ESG Matters
The Board remains responsible for the Company's
ESG policy. In 2020, the Board adopted our Manager's Responsible
Investing Policy. HCP continues to develop and refine its policy in
line with the evolving nature of ESG's integration within financial
services. As previously reported in 2022, the Hanseatic Group, of
which our Manager is a part, became signatories to the UN PRI, a
UN-supported network of investors works to promote sustainable
investment. I am pleased to be able to report that they have
recently received a positive response to their first annual
submission.
Key Performance Indicators (KPIs)
The Board has completed its annual review of
our investment KPIs and decided to maintain our previous investment
stance. However, I should like to direct you further on where we
have added further colour to our decision to review investment
performance versus a range of KPIs as opposed to a single
benchmark.
Board composition
Nadya Wells has chosen not to stand for
re-election as a Director of the Company at the AGM as a result of
additional professional commitments that she intends to take on.
The Board is starting the process of identifying a director to join
the Board in Nadya's place.
Following Nadya's decision to not stand for
re-election, with effect from 14 June 2024, the Board has appointed
Simona Heidempergher to chair the Nomination Committee in addition
to her continuing role as Chair of the Remuneration
Committee.
I should like to take this opportunity to thank
Nadya for her excellent and valuable contributions to the business
of the Company and the Board over the period since the Company was
formed in 2019 and the whole Board wishes her well in her future
roles.
Annual General Meeting (AGM) and Amendment to
Bye-laws
At the end of these Financial Statements, you
will find a notice regarding our upcoming AGM, to be held on 2
August 2024 in Bermuda. Within the notice you will find several
resolutions that are presented annually. Additionally, you will
note a further resolution to adopt new Bye-laws, which is to effect
two changes to the Company Bye-laws.
First, in line with developments in market and
industry practice and to enable the Company to promote efficient,
cost effective and modern methods of engagement with shareholders,
the Company is proposing an update to Bye-law 19 which allows the
Board to determine how dividends are paid to Members in the most
efficient manner.
The Board intends to stop paying cash dividends
by cheque and move toward payment of all dividends to Members by
inter-bank transfer and electronic means.
Secondly, as you may recall, one of the
resolutions passed at the Company's AGM on 27 July 2023 was to
ensure that all shareholders, if so requested, supply information
relating to their tax residency. To assist the existing process,
the Company is proposing an update to Bye-law 83, Globally tax
authorities and government agencies require financial institutions,
including investment companies, to collect and report certain tax
information in relation to their shareholders. In principle, this
should only affect a very small number of our shareholders who are
personally on our share register. Failure by those shareholders to
supply the required information, will cause the Company to submit
incomplete returns, with the consequent risk of penalties or
censure by the authorities. This proposed update to Bye-law 83 is
intended to encourage action from those few shareholders who fail
to provide the information required by withholding the payment of
dividends to any non-responding shareholders, until such time as
the required information is received, so as to enable the Company
to satisfy its reporting requirements. We have also engaged
Computershare to work with us to try to find and engage
shareholders who have not yet responded to requests for
information. I am pleased to report that some progress is being
made on this issue, although much work remains to be done. I will
keep shareholders updated on progress.
Please see further down for more detail on the
proposed changes and the more detailed reasoning behind the
proposals.
I should like to thank my fellow Board members,
as well as Alec Letchfield and his team at Hansa Capital Partners,
for their dedicated hard work during this past year. We appreciate
the support of our shareholders, for whom we are all constantly
seeking to deliver value over the longer-term. I believe the
Company is in a very good position to do this, whatever the markets
and global economies may have in store for us in the
future.
Jonathan Davie
Chairman
14 June 2024
Long-term performance
Ten year company performance
statistics
As at 31
March
|
Shareholders' Funds
|
Net Asset Value per share -
Ordinary and
'A' Ordinary
|
Annual
dividends
|
Ordinary
|
'A' Ordinary
|
Ordinary
|
'A' Ordinary
|
2024
|
£454.6m
|
378.8p
|
3.2p
|
210.0p
|
204.0p
|
44.6%
|
46.1%
|
2023
|
£367.0m
|
305.8p
|
3.2p
|
174.0p
|
170.5p
|
43.1%
|
44.2%
|
2022
|
£382.9m
|
319.1p
|
3.2p
|
198.5p
|
193.0p
|
37.8%
|
39.5%
|
2021
|
£367.9m
|
306.6p
|
3.2p
|
198.0p
|
198.5p
|
35.4%
|
35.3%
|
2020
|
£276.3m
|
230.2p
|
3.2p
|
130.9p
|
135.5p
|
43.1%
|
41.2%
|
2019
|
£337.3m
|
281.1p
|
3.2p
|
195.5p
|
195.0p
|
30.5%
|
30.6%
|
2018
|
£323.1m
|
269.3p
|
3.2p
|
198.5p
|
195.5p
|
26.3%
|
27.4%
|
2017
|
£307.5m
|
256.3p
|
3.2p
|
173.3p
|
169.6p
|
32.4%
|
33.8%
|
2016
|
£255.6m
|
213.0p
|
3.2p
|
146.0p
|
145.1p
|
31.5%
|
31.9%
|
2015
|
£273.3m
|
227.8p
|
3.2p
|
172.0p
|
165.5p
|
24.5%
|
27.3%
|
2014
|
£287.4m
|
239.5p
|
3.2p
|
175.9p
|
175.5p
|
26.6%
|
26.7%
|
The table includes information relating to HICL
and historic information relating to Hansa Trust. The years ended
2020-2024 notes HICL information. The historic year ends 2014-2019
all relate to Hansa Trust. So that data is consistent and
comparable, the historic data in columns "Net Asset Value per
Share", "Annual Dividends" and "Share Price (Mid)" have been
restated to reflect that, as part of the redomicile of the business
of Hansa Trust to HICL in August 2019, HICL issued five times as
many shares in each share class of HICL as there were in Hansa
Trust.
The Company's KPIs can be found further on in
the report.
To 31 March
2024
|
1 year
|
3 years
|
5 years
|
10 years
|
Total Return (%)
|
|
|
|
|
 Ordinary shares
|
22.7%
|
11.4%
|
17.4%
|
43.1%
|
 'A' non‑voting Ordinary shares
|
21.8%
|
8.0%
|
14.4%
|
39.7%
|
 NAV
|
25.1%
|
27.4%
|
42.6%
|
79.0%
|
Portfolio Manager's report
Key questions for the year ahead.
Market review
Every year stock markets have their notable
features, whether it is bull markets, the occasional crash or
bubbles forming. The last financial year was no exception, but what
was of particular note was the degree to which it confounded broker
forecasts. As we sit here reviewing the various broker predictions
for last year, we struggle to remember a year when commentators got
it so wrong on so many fronts.
Directionally, with very few exceptions, almost
all commentators expected muted markets and many thought further
falls were on the cards. Following on from the challenging 2023
financial year, inflation was forecast to remain sticky and high,
necessitating that interest rates remain elevated if structurally
higher inflation was to be avoided. This in turn was seen by many
as creating a no-win situation, whereby a recession was seen as an
almost inevitable side effect of the higher rates.
The outcome was very different from this. Most
notably, inflation came rattling back. In the US, inflation in
March 2023 was at 5.0% and rapidly fell back to 3.1% by the end of
November, before slightly increasing to 3.5% in March 2024. Europe
saw inflation fall even more dramatically, from 6.9% to 2.4% during
the financial year, with some regional variations such as Germany
where the inflation rate took longer to decline. The UK was the
laggard but even here inflation declined to 3.2% by March 2024 and
even beat Rishi Sunak's target levels which looked optimistic only
a few months back.
Similarly, growth levels have confounded the
bears with economies mostly avoiding even modest recessions. Most
notably, despite the much higher interest rates, the US economy has
remained remarkably robust. Buoyed by both a consumer who is still
willing to spend and a corporate sector that seems to be largely
unaffected by the higher borrowing costs, growth stayed in the
black. Other economies were a little more mixed, with Germany for
example dipping into mild recession, but overall the outcome was
much better than forecast by most. Whether this means we have
avoided recession completely, or merely delayed it, is up for
debate.
An area where forecasters were proved right was
interest rates remaining higher for longer but, even here, it was
for the wrong reasons. Central bankers were initially behind the
curve as the sharp rise in inflation in 2022 caught them somewhat
by surprise. They then pivoted to become inflation hawks and shot
up rates, quicker and higher than many anticipated, in an effort to
control the inflationary pressure. Although inflation then started
falling sharply as price rises, firstly of goods and then of
services, dropped away, central bankers continued in their higher
for longer rhetoric, while investors started anticipating multiple
rate cuts in 2024. Now, when inflation has slightly increased again
in the US and investors have dramatically reduced their rate cut
expectations, the Fed has switched to become modestly dovish, still
predicting it will soon be cutting rates.
At the country level, the forecasters' track
record was little better. The consensus coming into the last
financial year was for emerging markets, Japan and Europe, to
outperform the US. Partially, this was a reflection of emerging
markets being seen as having been more prudent in their fiscal and
monetary policies, both during and after COVID, and with many
exiting the tightening phase of their monetary cycles last year,
whereas developed markets were earlier in their cycles. With the
valuation gap between the US and the rest of the world also
extreme, largely due to the preponderance of technology companies
within the US stock market, almost all commentators were
underweight in the US and overweight in the other
regions.
Yet again the US confounded the bears. In what
is almost certainly one of the largest, if not the largest, money
losing trades of recent times, the desire to forecast the demise of
the US was once again proved to be wrong. As we always say, you bet
against the US at your own peril! Rising by 26.2% in the year, the
US market helped drag the wider stock market up by 20.5% by virtue
of it now accounting for a lofty 63.7% of the World Index.
Underlying this performance were five US mega-cap technology names
- Microsoft, Alphabet, Amazon, NVIDIA and Meta - with the group
surging by 80.7% over the year as AI fever grabbed investors'
imaginations. Outside of these names however the story was less
good, with the rest of the S&P 500 rising by just 16.1%. This
concentration created a challenging backdrop for many active
managers with most being not only underweight in the wider US
market but also underweight in the mega-cap five names, due to
their high valuations and for risk management reasons with managers
unwilling to have such a large proportion of their funds invested
in such a small number of names.
Outside the US the picture was mixed. The
emerging markets could only manage a 5.8% rise, but this was
largely a reflection of the poor performance of China which faces
challenges on a multitude of fronts. Not only has it failed to
deliver the post-COVID rebound many had hoped for, but China has
also become embroiled in a wider East versus West struggle. It
wasn't all one-way traffic within the emerging markets, however,
with countries such as India and Brazil producing excellent
returns. Japan was also notably strong. Despite seeing numerous
false dawns, the current revival appears to be more persistent with
numerous measures being put into place by the government and
genuine change happening in the corporate sector.
An area where there was little consensus was
the outlook for bonds. On the one hand, some believed yields being
back at levels where they offered a real alternative to equities,
combined with the prospect of slowing growth, created a better
backdrop for bonds (albeit one which was better for government
bonds and shorter dated investment grade debt, than for high yield
bonds where spreads remained extremely tight). On the other, a
number of commentators argued we were entering a more protracted
bear market in bonds that would take many years to play out with
the spectre that this might become disorderly due to the high debt
taken on in many areas of the economy. The year-end outcome of
global government bonds falling by 3.9% suggested a rather poor
backdrop, although global high yield bonds rose by 8.7%. The
journey, however, was anything but muted with the asset class
seeing wild swings depending on which camp held sway as the year
progressed.
In contrast to the excitement seen in bonds,
alternative investments were more muted over the past year. Private
Equity (PE), which was one of the bright spots in the 2023
financial year bear market, was more muted in the 2024 financial
year. Whilst the final year numbers are yet to fully come through,
the returns to the end of December 2023 were a rise of 4.1%. This
relative underperformance versus public markets is unsurprising
with the sector typically lagging public market performance by six
to nine months. Hopefully this represents the full extent of the
underperformance. However, we do note one or two worrying signs in
the form of PE firms being built on a model of cheap debt and a
number of managers engaging in activities such as continuation
funds, which smells a little like the can being kicked down the
road.
Key questions for the year ahead
Despite our scepticism on broker forecasts, it
doesn't mean we disregard them entirely. Instead, we believe
markets are faced with just a handful of important drivers and
questions at any one time. Understanding what these drivers are and
where the consensus stands on them is key to constructing
portfolios. Often there are a number of likely outcomes and our aim
is to create all-weather portfolios that can thrive in these
different scenarios.
Hence, as we enter the 2025 financial year, we
view the following as being key to the success of markets in the
year ahead:
1.
Has the battle against inflation been won and are we returning to a
low inflation environment?
2.
Is a recession inevitable in the next year?
3.
Is it too early to buy bonds?
4.
Contrasting Asian fortunes - Japan versus China.
5.
What are the tail risks in the year ahead?
1. Has the battle against inflation been won
and are we returning to a low inflation environment?
As discussed previously, 2023 was notable for
the extent to which inflation fell back from the extremes of 2022.
The headline forecasts are, however, still above central bank
targets raising the question as to whether it is only a matter of
time before this final inflation is eradicated, or if the low
hanging fruit has been had and this last element of inflation will
prove to be stickier and ultimately necessitate central bankers to
remain hawkish for longer.
Initially, the consensus was that COVID had
caused a reset in the world inflationary order and a number of the
factors that had caused persistent deflation over the past 10
years, such as globalisation and the power of the corporate sector
over the labour force, were coming to an end. Hence, whilst the
base effect from the supernormal inflation of 2022 meant that
inflation appeared to be dropping sharply, inflation is now
structurally higher.
There is, however, an alternative view to which
we are becoming increasingly sympathetic. For much of the post-
COVID period commentators have been trying to overlay conventional
economic cycle analysis in what is, in practice, a completely
unique backdrop. This played out in the form of revenge buying, as
consumers exited COVID lockdowns with supply unable to meet demand.
We then had service sector and wage inflation as certain sectors
were hit by labour shortages due to people retiring early or making
lifestyle choices favouring their quality of life over work.
Increasingly, however, these factors are proving to be temporary
and we are seeing a return to pre-COVID norms. On the goods side,
demand has fallen away and supply has caught up (and in some places
overtaken demand). On the service side, which initially looked to
be stickier, we are seeing signs that important components of
service inflation, such as shelter costs and wage inflation, are
normalising. Hence, whilst the jury remains out, we are
increasingly optimistic that inflation is not structurally very
high, albeit we equally do not see markets moving back to a
deflationary backdrop anytime soon. This could prove positive for
interest rates, markets and long duration assets in
general.
2. Is a recession inevitable in the next
year?
One would think that if we are seeing the last
remnants of COVID passing their way through the system, with
inflation beaten and rate cuts on the cards, this would remove the
threat of recession. Unfortunately, the reality is not quite as
simple. The challenge with inflation and rates is that inflation is
backward looking, whereas rates are instruments that impact
economies in the future. It would appear that central bankers would
rather err on the side of caution and ensure inflation is
completely eradicated from the system, before they risk loosening
monetary policy and avoid running the risk that they need to pivot
by moving too early. No central banker wants to be remembered as
the one who caused deep, entrenched, long-term inflation and would
rather keep rates higher for longer even if this catalysed a
recession.
Our hope, and view, is that the data continues
to indicate that the inflationary battle is won and central bankers
will stay true to their word of being driven by the data.
Encouragingly more recent comments from the Federal Reserve
governors have been saying just this with even more hawkish
members, such as Governor Waller, sounding more dovish in their
comments. Reinforcing this position is the prospect of a US
election. Despite claims of independence, central bankers are
increasingly driven by political pressure, and the pressure on them
to shore up the economy in an election year will be powerful.
Hence, we would argue that without a significant policy misstep, a
recession should be avoided, and, at worst, any recession will be a
soft one.
3. Is it too early to buy bonds?
Interlinked with the outlook for interest rates
and inflation is the outlook for bonds. Depending on which side
wins through, bonds will rise or fall accordingly. If inflation
does in fact remain persistent, necessitating that rates have to go
higher and potentially catalysing a recession in the process, this
will likely weigh heavily on bond prices in 2024. Conversely, if
the disinflation we saw in 2023 continues bringing forward the
prospect of rate cuts, then the rally we saw in the latter part of
the year is likely to continue.
Regardless of which scenario plays out, the
rise in yields seen over the past 18 months has seen bonds shift
from a position of having deeply unattractive risk/reward
characteristics, with zero yields, zero inflation and zero rates
making them extremely vulnerable to any disappointment, to one
where they now have historically more normal yields with positive
real yields and for the first time in many years providing a
genuine alternative to equities. Whilst we would avoid high yield
bonds, given their sensitivity to recession, and with spreads not
offering a sufficient margin of safety, we do think that short and
mid duration bonds can be bought and, if held to maturity, should
provide attractive returns.
4. Contrasting Asian fortunes - Japan versus
China
One of the most notable features of the past 12
months has been the starkly diverging fortunes of China and Japan.
As highlighted above, China faced challenges within its important
real estate sector, from geopolitical pressure and from a sluggish
post-COVID rebound, whereas Japan was enjoying the benefits of
government measures encouraging corporates to become more
competitive and, to some degree, its economy benefiting at the
expense of China.
The key question for the year ahead is whether
to expect more of the same or if a contrarian view is the way
forward? Typically, we would tend to favour the contrarian view.
Japan has a long history of grabbing failure from the jaws of
success as efforts to change eventually peter out, often due to
political instability and institutional inertia. This time around
though we are feeling more optimistic. Politically, Japan is
looking unusually stable at the governmental level (although
political manoeuvring is always going on within the Liberal
Democratic Party) and, even without this stability, there is
cross-party acceptance that Japan has to be more ambitious in its
actions if it is to compensate for the structural challenges it
faces. With an aging population and the Chinese powerhouse
breathing down its neck, Japan increasingly recognises radical
action is needed and productivity growth is a necessity if it is
not to slide into oblivion. This recognition, combined with Japan's
starting point of low valuations and deeply inefficient balance
sheets, creates huge opportunities for investors, especially given
the herd-like mentality of corporate Japan - if one does it, others
tend to follow to avoid losing face.
Clearly, this change in direction is not
without risks. Time and again, Japan has failed to deliver and even
if it is successful, we would expect it to be a slow and rather
tortuous journey but, even so, we remain significantly overweight
in Japanese equities at this juncture.
Conversely, China's history has been one of
substantial structural gains interspersed by the occasional
missteps which have typically represented excellent buying
opportunities. Whether it was Tiananmen Square in 1989, when China
faced significant sanctions from the developed world, or the
aftershocks of the Asian crisis in the early 2000s, these in fact
represented excellent entry points.
Why then would we not view the current
situation in China as being another opportunity to buy? Well, it
possibly does represent a tactical buying opportunity, but our main
concern at this juncture is that we see several significant binary
risks. Following his coronation as president for life, Xi Jinping
has shown his hand on two counts. One, he is an unashamed communist
leader who will unilaterally move the goal posts in the pursuit of
his goals. Whether it is the overnight regulation of the education
sector or installing government officials into the big Chinese tech
companies, this changing backdrop makes investing very difficult.
Two, the growing wedge between the East and the West is creating a
potentially significant risk to stock prices. In particular we
would highlight the situation with Taiwan. Whilst one would hope
that the fate of Russia following its invasion of Ukraine would put
Xi off from forcibly taking control of Taiwan, the unification of
Taiwan and China is Xi's ultimate aspiration and the one thing you
can say about Xi is that he always follows through on his word. How
the West and the US would react to such a move is open to debate,
but one would not want to be a holder of Chinese assets at that
point. Whilst we do not think China will invade Taiwan imminently,
it represents a binary risk that we feel is not well compensated at
this point.
A couple of years back we had pondered whether
we should be adding a structural position in China, reflecting its
growing economic power and importance on the world stage.
Ultimately, we decided not to as we saw the negatives discussed
above starting to evolve. Instead, we remain content to leave it to
our specialist Asian managers to invest in China on a tactical
basis as they see fit and not to view the current situation as a
time to add a structural stake to our portfolios.
5. What are the tail risks in the year
ahead?
As long-term investors, tail risks always
remain at the forefront of our minds, as it is often these that
catalyse more extreme pullbacks in stock markets. Worryingly the
current environment looks especially vulnerable to such risks.
Structural shifts, as we are seeing at present, often place
considerable stress on those areas of the market that have been
built on the continuation of the status quo.
Top of the list is the step change in rates and
bond yields. As we have discussed in the past, a number of sectors
built their business models on rates remaining low, gorging
themselves on free money and boosting their returns in the process.
Commercial real estate and private equity are particularly notable
on this front. Both sectors took on more and more debt and saw
their fund sizes ramp up on the back of the often-illusory high
returns they generated. Already, the speed with which yields have
risen has placed pressure on a number of players. Commercial real
estate has been at the forefront of this with the funding issues
coming at a time when the demand for real estate has dropped
sharply, due to the trend towards working from home post-COVID. PE
has been more immune, but it is possible that a slower-motion crash
may be in motion. Currently the PE firms have been kicking the can
down the road, by slowing their realisations and avoiding taking
any losses through the use of structures such as continuation
funds. Ultimately, they are gambling markets will normalise and
they will have avoided the need to sell at more distressed levels.
Time will tell.
This slow-motion crash may also be the key
story for other sectors in the year ahead. The next couple of years
will be a much more active period for the rollover of debt and it
will be interesting to see which companies and sectors have been
swimming naked. At this point we're not overly worried about the
broader corporate sector, with companies typically managing
themselves more prudently post the financial crisis, with lower
levels of debt and generally longer maturity profiles, but it will
be an area to watch closely, especially if economies dip into
recession.
Perhaps more worrying is the debt that has been
accumulated in the government sector. Crises rarely strike the same
area twice and, whereas corporates were the main victims in the
Global Financial Crisis (GFC), government debt is looking more
vulnerable this time around. Typically, governments, in particular
developed market governments, are seen as possessing more prudent
finances and often have the luxury that they are perceived as the
safest form of debt and hence are able to fund their debt come
whatever. Government debt levels have, however, been rising sharply
over recent years and dangerously so in many cases. Having spent
their way out of the GFC, governments then embarked on a second
round of major spending to dampen the impact of COVID. This pushed
borrowing up to precariously high levels and could result in a
disorderly sell-off if confidence is lost. We have seen a mini
version of this already with the Truss/Kwarteng debacle in late
2022, resulting in a collapse in gilt prices on the back of
imprudent policy measures.
Despite the challenges faced in the UK, it is
in practice a sideshow with the real danger lying in the US. US
debt levels have risen significantly in recent years, rising from
$10 trillion in 2000 to $33 trillion in 2023, at a time when
funding costs are becoming more expensive and the demand for US
bonds is diminishing. Importantly, both China and Japan, who have
historically been important marginal buyers of US government bonds,
are increasingly looking elsewhere. Japan is likely to start
investing more into domestic bonds on the back of higher yields, as
it moves away from its Yield Curve Control measures, while China is
trying to wean itself off buying US Treasuries to reduce its
dependence on the US market, in light of the sanctions the West put
on Russia post its invasion of Ukraine.
At this stage we have a watching brief on the
situation and do not anticipate an imminent collapse in the US
government bond market. Partly this reflects the lack of options
for global investors, with the US bond markets remaining the only
real viable option to absorb global liquidity, but also the US has
the luxury of being able to print money to ultimately fund this
debt. Nonetheless, we will be monitoring the situation closely and
we hope that debt is ultimately reduced to lower and more
sustainable levels and doesn't become a source of global market
volatility.
The other tail risk we watch closely is
geopolitical. For many years we have had relative geopolitical
harmony with the US hegemony creating a favourable backdrop for
global stock markets and with the US's influence encouraging the
adoption of capitalist models based on the rule of law, with the
desire to do business being at the heart of the US mantra.
Increasingly, however, the combination of the rising power of the
East with the unholy undemocratic alliance between China, Russia
and India, and to some extent the US stepping back from its role as
the global policeman, is creating a less stable and more volatile
global backdrop. Already we have seen this with Russia's invasion
of Ukraine and now the conflict in the Middle East. Dictators and
undemocratic actors around the world are increasingly seeing the
model established by the East as a real alternative to the one
pushed forward by the US and the West for several
decades.
Unfortunately, we fear future years will see
geopolitics becoming an even greater problem and whilst one would
have hoped that the events in Ukraine and the Middle East would
have solidified the world against tyranny, they have in fact
polarised the world into competing factions. Hence, whilst we have
typically ignored geopolitical risk in the past, often viewing it
as an entry point into markets, we are increasingly having to
factor these risks into our investment rationales, which is
particularly challenging given the binary nature of the
outcomes.
Conclusion
Almost invariably the drivers of stock market
returns can be distilled down to two or three key factors. The last
financial year was all about inflation, with few market
participants predicting the extent to which it would pullback which
set-off a domino effect of missed growth targets, interest rates
remaining high and surprisingly strong equity markets.
Inflation is also likely to play an important
role in the year ahead, with the focus now on whether inflation can
be brought back to central bank targets, freeing up central bankers
to start cutting rates and avoiding a hard landing. Previously we
had been more in the camp that the low hanging fruit had been had
with this last slice of inflation proving more challenging to
remove, creating scope for disappointment as rates stay higher for
longer. More recently, however, we had become more sympathetic to
this rump inflation also dropping out as important inflationary
components such as shelter inflation and wages become less
problematic. Recent data has indicated that inflation has ticked
back up in early 2024 leading to the possibility of delays in
global rate cuts which may well disappoint markets, who seemed to
think inflation had been beaten. We are still of the view that
inflation is on the downward trajectory, even if the journey is not
as linear as markets had hoped it would be, although there is a
risk that central banks will cut too much, too fast due to
political pressure.
This backdrop should create a reasonable
environment for global stock markets with falling inflation, peak
rates and a soft landing good for both equities and bonds.
Volatility is however likely to remain a feature. The inflationary
journey will in all probability be a mixed one and certainly not
linear. As alluded to above, there is the real risk of policy
misstep by central banks who are not as independent as many believe
them to be. Similarly, we do not think we are returning to the
backdrop we saw in the 2010s. As we have discussed in the past, we
view this period as being something of an anomaly and think it
unlikely we will return to an environment dominated by low
volatility, deflation and zero rates any time soon. Hence, whilst
remaining broadly pro-risk as we enter the 2025 financial year, we
have introduced more balance into portfolios both at the country
level, including a meaningful overweight to Japan, but also across
asset classes with bonds becoming a genuine alternative to
equities. We have also blended styles through owning value and
growth rather than the rather unidirectional portfolios we ran over
the last cycle. We remain vigilant and think active management will
be even more important for the period ahead.
Portfolio Review and Activity
Global equity markets performed very strongly
over the course of the financial year, with the MSCI ACWI NR Index
(GBP) rising 20.6%. Bonds struggled, with the FTSE UK Gilts All
Stocks TR Index flat over the year, with investors pushing back
their forecasts for interest rate cuts as inflation fell more
slowly than some had hoped. The UK CPI rose 3.2% over the
year.
The portfolio performed very well during the
year with the Company's NAV total return outperforming the global
market, with a gain of 25.1%. As well as being ahead of all three
KPIs, this return is also strongly ahead of the performance of a
traditional 60:40 equities and bonds portfolio (up 12.0% over the
financial year).
The Company's position in Ocean Wilsons was a
strong contributor during the financial year, with a return of
64.8%.
The Company's net asset value per share rose
from 305.0p at the end of March 2023 to 378.6p at the end of March
2024; with 3.2p per share having been paid out in dividends during
that time.
Core and Thematic Funds
The Core Regional and Thematic silo returned
19.2% for the financial year.
The Company's North American holdings were
amongst the strongest performers largely keeping up with the
regional index. Pershing Square
Holdings delivered a return of 46.4% over the
financial year. The manager's decision to initiate a position in
Alphabet in early 2023 proved to be an excellent one with the
company strongly contributing to performance throughout the year. A
position in Chipotle Mexican Grill also increased significantly in
value following very strong results, which showed traffic growth
accelerating and successful new product launches. The company
continues to grow its restaurant count at 10% a year in North
America and is now increasing investment in its international
expansion. Findlay Park American
gained 28.9%, while Select
Equity increased by 23.4%, with Select slightly
lagging due to its lower exposure to large cap technology
stocks. Beutel Goodman US Value
did well considering its value bias with a return over the
last year of 17.2%.
In Japan, two new positions,
Arcus Japan and Alma Eikoh Japan Large Cap, were added in
November and they have since performed well with returns of 15.4%
and 11.2%, respectively, since purchase. Arcus' largest holding,
IHI Corp, performed very strongly in February and March 2024 as
investors forecasted the company would post record operating
profits for the year ahead. The company had suffered with an issue
in its aero engines division that has now largely been contained,
which led to a large operating loss in the year ending March 2024.
For Alma, Mitsubishi Heavy
Industries was a strong performer benefiting from the thematic
drivers of increasing defence expenditure and the energy
transition. The Japanese government has been investing heavily to
improve their defensive capabilities in the face of a more
assertive China following decades of relative calm.
Indus Japan gained 9.8% over the
year, while Simplex Value Up
has been more muted, up 4.5%, as its small/mid-cap bias and
benchmark agnostic strategy meant it benefited less from the broad
market upswell.
Within our emerging and frontier market
holdings, BlackRock Frontier Investment
Trust continued its strong run with a return over the
last 12 months of 19.5%, compared to the MSCI FM Index which gained
11.5%. Much of the trust's financial services exposure performed
well, with Bank of Georgia seeing a significant increase in its
share price following its acquisition of Armenian bank Ameriabank,
which allowed the company to access the fast-growing Armenian
market. The manager also added to its position in Bank Central Asia
in Indonesia given its relatively stronger funding franchise,
though performance has been volatile since. E-commerce company
Kaspi performed well after announcing net profit numbers that were
up 60% from the previous year, with strong growth in all areas of
the business. In the last quarter we sold KLS Corinium Emerging Markets Equity following
poor performance and a rapid decline in assets under management and
added Redwheel Next Generation Emerging
Markets Equity, which we feel is better placed to
succeed going forward.
Schroder Asian Total Return
benefited from its significant underweight to China
throughout the year, gaining 8.7% over the whole year, while the
MSCI AC Asia Pacific ex Japan Index was up just 5.3% over the last
12 months. Aside from the structural underweight to China, the
manager's holdings in the semiconductor producers, TSMC and Samsung
Electronics, performed strongly as they benefited from the surge in
interest in AI. These were the fund's largest two holdings
accounting for c.18% of the fund at the end of March 2024.
NTAsian Discovery delivered an annual
return of 7.7%.
There were some exceptional performances in the
thematic holdings, with RA Capital
International Healthcare gaining 42.7%. The fund has
seen several of its portfolio companies being acquired over the
last six months. Icosavax was acquired by AstraZeneca at slightly
above the IPO price, representing a gain of over 160% over the last
year. Carmot Therapeutics was acquired by Roche for $2.7bn upfront
reflecting a 3.5x uplift from the company's last valuation, with an
additional $400m if certain milestones are met. The company has a
series of promising treatments for type 2 diabetes and obesity,
areas which have seen a surge in investor interest over the last
year. Worldwide Healthcare Trust
made a return of 8.3% over 12 months, while
BB Biotech was down 6.9% over the
year.
Both technology funds had strong years
with Polar Capital Global Technology
gaining 26.8% and GAM Star Disruptive
Growth increasing 33.7%. The Polar fund has leant into
AI with a significant amount of its holdings positioned to directly
benefit from the increased investor interest in the area. Its top
10 holdings include five of the Magnificent Seven (NVIDIA,
Microsoft, Meta, Alphabet and Apple) with Amazon also being a large
position for much of the last year. The fund is also significantly
overweight semiconductors with Advanced Micro Devices, TSMC and
Samsung Electronics all in the portfolio (alongside NVIDIA) over
the course of the year. GAM is
slightly different with the manager being more cautious on AI with
a smaller weighting to semiconductors and more investments in small
and mid-cap technology companies. Polar
Capital Global Insurance has also performed well,
gaining 21.3% over the year. Pricing in the insurance market
continues to be strong with many companies producing significantly
higher profits off the back of it.
Diversifying Funds
The diversifying holdings are intended to
provide an alternative source of returns, whilst dampening
volatility and displaying low beta to the equity market. It is
pleasing that they have contributed positively over the
longer-term, especially when compared to the strongly negative
returns from bonds in that period. The Diversifying silo returned
5.3% over the year, while the FTSE All Stocks Gilts Index was flat.
Over three years, the diversifying silo has returned 13.0%, far
ahead of the 20.6% loss of the Gilts Index.
Some of the portfolio's alternative hedge funds
have performed especially strongly. Prana
Absolute Return made an impressive 17.2% over the
year. The fund is an equity market neutral long/short fund
specialising in investing in the financials and business services
sectors. The strategy focuses on trying to hit singles rather than
home runs, meaning that no one particular trade was a big winner
for the fund, but more the team got the general direction of travel
of the market correct. Some long positioning in the insurance
industry contributed positively with some banking positions
benefiting from higher interest rates as well. The two
trend-following CTA
funds, GAM Systematic Core
Macro and Schroder GAIA
BlueTrend, also performed strongly over the year with
returns of 7.6% and 13.6%, respectively. BlueTrend has benefited
from being more trend focused while the GAM strategy, which has a
value model alongside its trend model, has not been quite as strong
although it has still performed well.
Nephila Iron Catastrophe
Fund, a specialist strategy investing in catastrophe
bonds and other insurance-related securities, also continued to
perform well and is now up 24.2% since purchase in May 2023. We
believe these strong returns reflect the extremely strong pricing
environment in the space and will have been boosted by the
relatively low US hurricane activity during the 2023 season.
Pricing continues to look attractive for the 2024 season, remaining
at similar levels to the previous year, with only a limited amount
of new capital entering the market. The macro trading fund
Hudson Bay rose 5.6% over the year.
The fund has performed well during the period we have held it, but
we took the decision to reduce its position size at the end of the
year after the manager changed the liquidity terms and increased
the amount of costs charged to investors as fund expenses.
MKP Opportunity Fund made a small
loss over the year, being down 0.2%.
The portfolio's diversifying fixed income
holdings mostly managed to deliver positive performance over the
year, despite gilts being flat over that period.
Selwood Liquid Credit Strategy was
the strongest, gaining 14.5%. The fund sells credit default swaps
to investors looking for protection against potential defaults of
investment grade debt. Demand has remained robust as rising rates
have made some investors nervous about whether companies will be
able to refinance their debt piles. Apollo
Total Return also performed well, being up 8.4% over
the year. BioPharma Credit had
a poor first six months but was stronger in the latter part of the
year and delivered a return of 1.6% over 12 months. The company had
a difficult period in mid-2023 when a loan to LumiraDx looked in
danger of default. However, the manager took a very active role in
the situation and forced the company to sell itself to Roche in
January 2024, in a deal which will return the majority of the
manager's invested capital. The market reacted positively to this
development, making up the earlier losses and vindicating the
protection the manager wrote into their loan agreement which
allowed them to force the sale.
Private Equity
As we look to add an element of private equity
exposure to the portfolio, we made four commitments during the
financial year. These were to BPEA EQT
Mid-Market Growth Partnership, Triton 6, TrueBridge
Capital Partners Fund VIII and TrueBridge Direct Fund III. These now sit
alongside prior commitments to TA
XV, Khosla Ventures
VIII, GGV Discovery
IV-US and GGV Discovery
IV-Asia. All are Limited Partnership vehicles that
will draw down capital over several years as the managers identify
investment opportunities. We feel we are putting together a very
high-quality group of funds in the private equity arena that will
add differentiated exposures to the portfolio. It can take several
years to build a private equity portfolio and it is important not
to rush to reach a target allocation and overcommit. While private
equity markets have been more sedate over the last year, we
anticipate activity picking up during the year ahead and we will
continue to be prudent about which funds we commit to. Such
investing requires a long-term mindset that we think sits well with
the portfolio's structure.
Global Equities (direct)
The portfolio rose 14.7% over the past year,
with the biggest contributors being Interactive Brokers, Subsea 7 and Bergman
& Beving. The biggest detractors were
CK Hutchison, Orion and Dollar
General.
It's been an exciting journey over the past
seven years as we transitioned the portfolio from UK equities to a
global equity portfolio. During this time, we've achieved an
annualized return of 10%.
Last year, our portfolio exceeded expectations,
achieving a remarkable 20% earnings growth, surpassing our initial
projection of 10%. Despite this exceptional performance, we think
the intrinsic values should grow by 10% in the next year, in line
with consensus analyst forecasts.
What's truly compelling is the potential for
further performance improvement. Despite the impressive growth, our
businesses continue to be undervalued, trading at just 70% of our
growing intrinsic value. Our portfolio's current P/E ratio of 10.9x
2024 earnings may appear conservative compared to the market's 18x,
but the quality of our businesses remains underappreciated. Should
the market recognise this quality and revalue our holdings, we're
positioned to compound at even higher rates.
GCO embodies the
qualities we prize in our investments: a high-quality business with
sustainable growth, led by a management team that's both aligned
and accomplished. Yet, despite these remarkable attributes, GCO
remains underappreciated, affording us the opportunity to own it
with a significant margin of safety.
Let's delve into the pillars of our investment
thesis:
Quality: With a rich 160-year history, GCO
stands as a stalwart in the insurance industry, offering credit
insurance alongside traditional homeowner and auto coverage.
Despite the perceived risk in credit insurance, GCO's disciplined
underwriting practices and the market's oligopolistic nature have
ensured consistent profitability and high margins.
Growth: Over the past two decades, GCO has
delivered impressive growth, boasting a 15.6% CAGR in book value
per share, far outpacing global peers. With a promising outlook for
continued growth, fuelled by its excess capital of €1.3 bn for
strategic acquisitions, GCO is primed to sustain its trajectory of
double-digit growth in book value and EPS.
Management: The Serra family's majority
ownership spanning over 75 years underscores their prudent
stewardship of GCO. Their conservative management style,
characterised by a long-term horizon and strategic capital
allocation, resonates with our investment philosophy. Instead of
chasing short-term gains, they prioritise value creation through
counter-cyclical capital deployment and astute
acquisitions.
Valuation: Despite its sterling fundamentals,
GCO's valuation remains compelling. While our initial investment in
2020 was made at 9.5x P/E and 0.8x book value, GCO's current
trading multiples of 7x P/E and 0.8x book represent an even wider
discount to historical and peer averages. The valuation remaining
low has worked to our advantage as we were able to add to our
holding at attractive prices. Despite the stubbornly low valuation
the shares have returned 80% since our investment, as GCO has
produced robust earnings growth and dividends. We estimate the
business's intrinsic value at €54 per share today, with the
potential to reach €92 in the next 4-5 years if they maintain their
low teens ROE, offering us an enhanced margin of safety at the
current price of €35.
In summary, GCO epitomises the type of
investment opportunity we actively seek-combining quality, growth,
sound management and attractive valuation-a recipe for sustainable
long-term value creation.
Overall, we remain optimistic about the future
prospects of our portfolio and are excited about the opportunities
that lie ahead. We look forward to continuing our journey of
delivering strong returns for our investors, while carefully
managing risk and maintaining our focus on long-term value
creation.
During the year as well as initiating a
position in Eurowag, we added
to our positions in Bergman &
Beving, Subsea
7, Interactive
Brokers, GCO, Glencore
and CTT, reduced our
positions in EXOR,
CK Hutchison and Arch and sold our positions in
ViaSat, CVS and Dollar
General.
Ocean Wilsons Holdings
As the largest integrated provider of port and
maritime logistics in Brazil, the Ocean Wilsons subsidiary, Wilson
Sons, has a strong competitive position. It is the leading provider
of towage services in Brazil with the largest and most modern
fleet, as well as operating major container terminals in the north
and south of the country: Salvador and Rio Grande. The company is
benefiting from the continuing recovery in global trade, as well as
a rebounding demand for its offshore energy-linked services, which
should provide the basis for improved performance of the firm's
assets.
Wilson Sons operational results have shown
strong growth across the business during 2023 and the fourth
quarter results (released in March 2024) reflected this. There was
strong revenue growth over the course of the year (10.6% higher
than the prior year), driven by excellent towage results,
operational growth in container terminals and a strong recovery in
offshore energy-linked services. Results in the towage division
were particularly strong, with higher volumes and an increase in
average revenue per manoeuvre, combined with the launch of two new
tugboats. In the container terminal division, operational growth
has been mainly driven by a surge in volume at the Rio Grande
terminal (+21.9%). The number of vessel turnarounds in the offshore
support bases were 37.6% higher than the previous year, thanks to
markedly higher demand for the company's offshore energy-linked
services.
The investment portfolio shares many
characteristics with the portfolio held directly within Hansa
Investment Company, with a preference for funds with clearly
defined strategies run by managers with skin in the game. The
portfolio delivered a return of 10.1% for the 2023 calendar year,
with particularly strong performance coming from its core regional
exposures later in the year. The most recent valuation for the
investment portfolio was $310.9m as at the end of December 2023.
Performance has been helped by thematic exposures to the technology
and insurance sectors. Several of the technology holdings have
benefited significantly from the surge in investor interest in AI,
while the insurance industry has seen elevated pricing continue
into 2024. Some of the largest private equity positions include
venture capital funds of funds managed by Stepstone, US buyout and
growth funds managed by KKR and TA Associates and a
financials-focused fund managed by Reverence Capital. Dividends
totalling $9.1m, in four tranches, were paid to the parent company
from the portfolio throughout the year. The board of Ocean Wilsons
Holdings has proposed increasing the annual dividend payment to
shareholders from 70p to 85p per share from 14 June
2024.
Following its 12 June 2023 announcement
regarding the strategic review of the OWHL's investment in Wilson
Sons, the board of OWHL updated investors on 15 November 2023 to
state they have engaged Banco BTG Pactual S.A. as an advisor. The
board also confirmed they have received a number of indicative
non-binding offers. The board has previously stated that the review
will consider all potential strategic options and there can be no
certainty as to its outcome. We will report on any further
developments as they are made known.
Alec Letchfield
Chief Investment Officer
March 2024
The portfolio
As at 31 March 2024
Investments
|
Fair value
£000
|
% of net
assets
|
Core Regional Funds / Thematic
Assets
|
|
|
Findlay Park American Fund
|
31,578
|
6.9
|
iShares Core S&P 500 UCITS EFT
|
27,202
|
6.0
|
Select Equity Offshore Ltd
|
22,690
|
5.0
|
Blackrock European Hedge
|
17,387
|
3.8
|
Pershing Square Holdings Ltd
|
13,482
|
3.0
|
Schroder ISF Asian Total Return
|
11,516
|
2.5
|
Polar Capital Global Technology
|
10,056
|
2.2
|
BA Beutel Goodman US Value Fund
|
9,338
|
2.1
|
iShares Core MSCI Europe UCITS ETF
|
9,331
|
2.1
|
Schroder ISF Global Recovery
|
8,817
|
1.9
|
Polar Capital Insurance Fund
|
8,349
|
1.9
|
Indus Japan Long-Only Fund
|
7,878
|
1.7
|
Armistice Capital Offshore Fund Ltd
|
6,592
|
1.5
|
Simplex Value UP Master Fund
|
5,735
|
1.3
|
GAM Star Fund PLC - Disruptive
Growth
|
5,502
|
1.2
|
Redwheel Next Generation
|
4,855
|
1.0
|
iShares Core EM IMI UCITS ETF
|
4,408
|
0.9
|
NTAsian Discovery Fund
|
4,385
|
1.0
|
BlackRock Frontiers Investment Trust
PLC
|
4,051
|
0.9
|
RA Capital International Healthcare
Fund
|
3,769
|
0.8
|
Impax Environmental Markets Fund
|
3,662
|
0.8
|
Ishares MSCI World Energy Sector UCITS
ETF
|
3,250
|
0.7
|
Ishares MSCI Global Markets & Mining Prods
ETF
|
1,751
|
0.4
|
Arcus Japan
|
1,731
|
0.4
|
BB Biotech AG
|
1,699
|
0.4
|
Alma Capital
|
1,668
|
0.4
|
|
230,682
|
50.8
|
|
|
|
Strategic
|
|
|
Ocean Wilsons Holdings
Limited1
|
130,004
|
28.6
|
Wilson Sons
|
96,263
|
21.2
|
Ocean Wilsons (Investments) Limited
|
33,741
|
7.4
|
|
130,004
|
28.6
|
|
|
|
Diversifying
|
|
|
Global Event Partners Ltd
|
8,269
|
1.8
|
DV4 Ltd2
|
7,697
|
1.7
|
Hudson Bay International Fund Ltd
|
4,061
|
0.9
|
Selwood AM - Liquid Credit Strategy
|
3,889
|
0.9
|
GAM Systematic Core Macro (Cayman)
Fund
|
3,361
|
0.6
|
MKP Opportunity Offshore Ltd
|
3,328
|
0.7
|
Schroder GAIA BlueTrend
|
3,277
|
0.7
|
Nephila Iron Catastrophe Fund Ltd
|
3,141
|
0.7
|
Apollo Total Return Fund
|
2,618
|
0.6
|
Keynes Systematic Absolute Return
Fund
|
2,542
|
0.6
|
Prana Absolute Return Fund
|
2,178
|
0.5
|
BH Absolute Return Government Bond
|
1,820
|
0.4
|
Vanguard US Govt Bond Index Fund
|
1,492
|
0.3
|
BioPharma Credit PLC
|
1,259
|
0.3
|
Lazard Convertible Global
|
717
|
0.2
|
|
49,649
|
10.9
|
|
|
|
Global Equities (direct)
|
|
|
Interactive Brokers Group Inc
|
6,365
|
1.4
|
Grupo Catalana Occidente SA
|
4,691
|
1.0
|
Subsea 7
|
4,598
|
1.0
|
Orion Engineered Carbons SA
|
3,902
|
0.9
|
Arch Capital Group Ltd
|
3,896
|
0.9
|
Exor NV
|
3,302
|
0.7
|
Bergman & Beving
|
3,104
|
0.7
|
Coats Group PLC
|
2,778
|
0.6
|
Glencore PLC
|
1,719
|
0.4
|
CK Hutchison
|
1,630
|
0.4
|
CTT-Correios de Portugal
|
1,553
|
0.3
|
Eurowag
|
938
|
0.2
|
|
38,476
|
8.5
|
|
|
|
Private Assets
|
|
|
Khosla Ventures VIII
|
135
|
0.0
|
BPEA Equity Mid-Market Growth
Partnership
|
99
|
0.0
|
Truebridge Direct VIII
|
80
|
0.0
|
Truebridge Capital VIII
|
28
|
0.0
|
|
342
|
0.0
|
|
|
|
Total investments
|
449,153
|
98.8
|
Net current liabilities
|
(421)
|
(0.1)
|
Net current assets
|
5,815
|
1.3
|
Net assets
|
454,547
|
100.0
|
1 Hansa Investment
Company Ltd owns 9,352,770 shares in Ocean Wilsons Holdings Limited
(OWHL). In order to better reflect Hansa Investment Company's
exposure to different market silos, the two subsidiaries of OWHL,
Wilson Sons and Ocean Wilsons (Investments) Limited (OWIL), are
shown separately above. The fair value of the Company's holding in
OWHL has been apportioned across the two subsidiaries in the ratio
of the latest reported NAV of OWIL, that being the NAV of OWIL
shown per the 31 December 2023 OWHL Financial Statements, to the
market value of OWHL's holding in Wilson Sons, that being the bid
share price of Wilson Sons multiplied by the number of shares held
by OWHL at 31 March 2024.
2 The holdings within
the private assets silo, as well as DV4 Ltd are unlisted Private
Equity holdings. As such, their value is estimated as a Level 3
Asset in note 19. All other valuations are either derived from
information supplied by listed sources, or from pricing information
supplied by third party fund managers.
Strategic Review
Investment objective, strategy and
performance
Investment objective policy
The Company objective is to grow the net assets
of the Company over the medium to long-term by investing in a
diversified and multi-strategy portfolio.
The Company seeks to achieve its investment
objective by investing in third-party funds, global equities and
other international financial securities. The Company may invest in
quoted and unquoted securities.
The Company currently holds a strategic position
in the share capital of OWHL. The Company will not make further
investments into OWHL.
The Company has no set maximum or minimum
exposures to any asset class, geography or sector and will seek to
achieve an appropriate spread of risk by investing in a diversified
global portfolio of securities and other assets.
Investment strategy
The Portfolio Manager, engaged by and acting on
behalf of the Company, seeks to build a multi-strategy portfolio by
selecting investments across four key investment categories, in
addition to the strategic investment in OWHL:
Core / Thematic - investments, typically through
third-party funds, selected by the Portfolio Manager to provide
appropriate regional and thematic exposures.
Thematic - investments, typically through
third-party funds, that reflect key investment themes the Portfolio
Manager believes will generate excess returns.
Diversifying Assets - investments, typically
through third‑party funds and
directly, that create asset diversification within the
portfolio.
Global Equities (direct) - a diversified
portfolio of global equities identified by the Portfolio Manager as
having long-term growth potential.
Although the Company has no set maximum or
minimum exposures to any asset class, geography or sector, the
Board establishes set guidelines which the Portfolio Manager
adheres to. These can be adjusted by the Board. While the
proportion of the portfolio represented by each of these categories
will vary over time, the Board establishes parameters for the
Portfolio Manager, based on its view of the global investment
environment. The Board has set the following guidelines for each
category as a percentage of the portfolio (including the strategic
investment in OWHL):
Core / Thematic: 0-75%
Diversifying Assets: 0-40%
Global Equities: 0-40%
Private Assets: 0-15%
The Portfolio Manager has a strong focus on
identifying investments with excellent fundamentals, taking a
long-term approach to investing, good alignment and not seeking to
replicate a benchmark. These investments range from those sectors
benefiting from structurally higher growth, such as technology, to
assets which the Company believes stand on unwarranted discounts to
their intrinsic value.
During the year, further commitments to limited
partnerships have been made as part of the build-out of a private
equity programme. This follows the prior year's agreement between
the Portfolio Manager and the Board to add an allocation to Private
Equity and Venture Capital to the Portfolio. This is expected to be
a multi-year programme, which will develop access to investments
that are not available in public markets. The long-term nature of
private equity aligns well with the long-term investment horizon of
the Company, and the Board believes this new exposure will be seen
as very attractive by existing and potential future
shareholders.
Borrowing limits
The Board considers whether returns may be
enhanced if the Company introduces leverage at appropriate times.
The Company has an unsecured lending facility through its
Custodian, Banque Lombard Odier & Cie SA ("Lombard Odier"), in
the amount of £30m, subject to there being sufficient value and
diversity within the portfolio to meet the lender's borrowing
requirements. The Portfolio Manager is able to utilise this
facility as required up to the upper limit available. No amounts
have been drawn from this facility during the year.
Investment monitoring and key performance
indicators (KPIs)
We recognise that measuring the performance of
portfolios is essential to both determining if they are meeting
their return targets and the risks taken in achieving these
returns. However, we also passionately believe that the
benchmarks and/or comparators against which portfolios are measured
should be appropriate for achieving the end objectives, with poorly
chosen benchmarks often encouraging short-term actions which more
often than not are damaging to meeting the longer-term
aspirations.
It is for this reason that we believe it right
to adopt a handful of KPIs rather than a single benchmark. As
long-term multi-asset class investors we are seeking to both
preserve and grow the real spending power of our capital over time
through the dynamic selection of different countries, assets and
sectors. No one benchmark captures this approach and, indeed,
the adoption of a single benchmark may result in the fund deviating
from its longer-term goals in the pursuit of short-term
returns.
Instead, the Board believes that considering the
portfolio performance against the following KPIs will provide a
more informed understanding of the performance of the portfolio and
if it is meeting its longer-term objectives:
Objective
|
KPI
|
Indices used
|
Safe return
|
UK Government bonds
|
FTSE Gilts All Stocks TR Index
|
Growing the real spending power of money through
time
|
Achieve returns that are higher than
inflation
|
UK CPI
|
Long-term capital growth
|
Equity market performance
|
MSCI All Country World Index (both market cap
weighted and equally weighted to remove the distorting effect of
the Magnificent 7)
|
The Board regularly, and at least quarterly,
reviews the returns and the performance of the Company with the
Portfolio Manager, including an analysis using the KPIs.
Additionally, whilst not specifically a KPI, the
cost of managing the Company is monitored against the NAV (the
ratio between costs and the NAV is also known as the 'ongoing
charges percentage per annum ratio'); and the discount/premium the
shares sell at in relation to the NAV are likewise
monitored.
The Board of Directors monitors the
returns made in absolute and relative terms against the KPIs
established. The comparisons are made over 1, 3, 5 and 10
year time horizons.
i) Shareholders and company - total
returns
To 31 March 2024
|
1 year
|
3 years
|
5 years
|
10 years
|
Share price total return
|
|
|
|
|
Ordinary shares
|
22.7%
|
11.4%
|
17.4%
|
43.1%
|
'A' non voting Ordinary shares
|
21.8%
|
8.0%
|
14.4%
|
39.7%
|
Portfolio NAV
|
25.1%
|
27.4%
|
42.6%
|
79.0%
|
ii) Discount/premium
A comparison is made between the
(discount)/premium of the Company's two classes of shares and of
the AIC average.
To 31 March 2024
|
1 year
average
|
3 years
average
|
5 years
average
|
10 years
average
|
Share price total return
|
|
|
|
|
Ordinary shares
|
(41.4%)
|
(38.4%)
|
(36.9%)
|
(31.9%)
|
'A' non voting Ordinary shares
|
(42.9%)
|
(39.4%)
|
(37.3%)
|
(33.2%)
|
AIC (%)
|
(12.1%)
|
(8.7%)
|
(7.6%)
|
(5.4%)
|
Note: AIC only produces an AIC average for one
year.
Whilst there are investment trusts that exhibit
one or more similarities to the Company, the Board does not
consider the Company to have any direct peers.
iii) Key performance indicators
The following are the KPIs the Board uses to
assess the returns of elements of the portfolio and of the Company
as a whole.
To 31 March 2024
|
1 year
|
3 years
|
5 years
|
10 years
|
NAV Total Return
|
25.1%
|
27.4%
|
42.6%
|
79.0%
|
NAV Total Return (Ex OWHL)
|
14.0%
|
10.6%
|
37.0%
|
71.8%
|
FTSE UK Gilts All Stocks TR Index
|
0.0%
|
-20.6%
|
-17.5%
|
7.8%
|
UK CPI Inflation
|
3.2%
|
21.6%
|
24.3%
|
33.4%
|
MSCI ACWI NR (GBP)
|
20.6%
|
33.8%
|
73.9%
|
203.3%
|
iv) Expense ratios
To 31 March 2024
|
1 year
|
3 years
|
5 years
|
10 years
|
Ongoing annual charges (%)
|
1.0
|
1.1
|
1.1
|
1.1
|
To comply with the Packaged Retail and
Insurance-based Investment Products Regulation (PRIIP), the Company
has issued a PRIIPs Key Information Document (KID) for each of its
two share classes. In the PRIIP, KID regulations are very
prescriptive as to how costs are calculated and presented. In
particular, in addition to the costs of the Company itself noted
above, the PRIIP calculation also incorporates the costs of the
directly held fund investment vehicles themselves, but not those
for directly held equities. Based upon the financial results for
the year to 31 March 2023, the PRIIP KID cost ratio is 1.78% per
annum.
Shareholder profile
Capital structure
The Company has 40,000,000 Ordinary shares of 1p
(1/3 of the total capital) and 80,000,000 'A' non-voting Ordinary
shares of 1p (2/3 of the total capital) each in issue. The Ordinary
shareholders are entitled to one vote per Ordinary share held. The
'A' non-voting Ordinary shares do not entitle the holders to vote
or receive notice of meetings, but in all other respects they have
the same rights as the Company's Ordinary shares. See also Note 13
in the Notes to the Financial Statements.
Shareholder profile
The Company's shares owned at 31 March 2024 are
as follows:
|
Ordinary shares
|
'A' non‑voting ordinary shares
|
Institutional and wealth managers
|
16,326,624
|
40.82%
|
72,605,306
|
90.76%
|
Directors
|
11,220,745
|
28.05%
|
3,817,123
|
4.77%
|
Private individuals
|
12,423,589
|
31.06%
|
3,348,753
|
4.19%
|
Other
|
29,042
|
0.07%
|
228,818
|
0.29%
|
|
40,000,000
|
|
80,000,000
|
|
Substantial shareholders
As at 31 March 2024, the Directors were aware of
the following interests in the Ordinary shares of the Company,
which exceeded 3% of the voting issued share capital of that
class.
|
No. of voting shares
|
% of voting shares
|
Nomolas Ltd
|
10,347,125
|
25.87%
|
Victualia Limited Partnership
|
10,347,125
|
25.87%
|
Sky Hill Limited
|
1,730,000
|
4.33%
|
These holdings are correct as of 31 March 2024
and have not changed as at the signing date of these Financial
Statements.
Hansa Investment Company traces its origins back
to 1912 when the Alto Paranà Development Company was launched to
develop forestry in Brazil. Having become an investment trust
company in the late-1940s, the Company became closely associated
with the Salomon Family, initially through Sir Walter Salomon,
whose family trusts became substantial shareholders. The late-1950s
also saw the acquisition of a significant shareholding of Ocean
Wilsons Holdings Limited through the issuance of the 'A' non-voting
Ordinary shares by the Company's predecessor, Hansa Trust. Over the
following decades, the Salomon family helped to build the
publicly-owned and independently run investment company we know
today, with its focus on delivering reliable long-term asset growth
for shareholders.
The wider Salomon family remain significant
investors in the Company. William Salomon, Sir Walter's son, a
director of HICL and Senior Partner of the Company's Portfolio
Manager, is interested in 10,347,125 of the shares held by
Victualia Limited Partnership, representing 25.9% of the voting
share capital. In addition, William Salomon has further interests
in the Company's shares; the total interest is detailed in the
Directors' Interests section. Other members of the wider Salomon
family, who are also descendants of Sir Walter, are interested in a
further 12m shares in the Company.
Restrictions associated within the share
classes
The giving of powers to issue or buy back the
Company's shares requires an appropriate resolution to be passed by
shareholders. Proposals for the renewal of the Board's powers to
buy back shares are set out in the Notice of the Annual General
Meeting.
There are: no restrictions concerning the
transfer of securities in the Company; no agreements between
holders of securities regarding their transfer known to the
Company; and no agreements between the Company and its Directors
concerning compensation for loss of office. Notwithstanding the
foregoing, the Company can require any holder of the Ordinary
voting shares to transfer some or all of its shares (or otherwise
refuse to register any transfer of shares) to avoid the Company, if
the Company were a company which was resident for tax purposes in
the UK, being regarded as a "close company" as defined in s.414 of
the UK Income and Corporation Taxes Act 1988, to another person
whose holding of such shares, in the sole and conclusive
determination of the Board, would not cause the Company to be a
close company. Additionally, the Company's Bye‑Laws provide for the voting rights of Ordinary
shares to be automatically reallocated to other shareholders to
prevent the Company becoming a close company.
As at 14 June 2024, the date of signing of the
Annual Financial Statements, there have been no disclosures to the
Company of changes of interests under DTR 5.
Board and management shareholdings
Directors' Interests
The interests of Directors and their connected
parties in the Company at 31 March 2024 are shown below:
|
Ordinary shares
of 1p each
|
'A' non‑voting ordinary shares
of 1p each
|
Nature of
interest
|
W Salomon
|
11,169,345
|
27.92%
|
3,587,123
|
4.48%
|
Beneficial
|
J Davie
|
45,000
|
0.11%
|
230,000
|
0.29%
|
Beneficial
|
S Heidempergher
|
6,400
|
0.02%
|
-
|
-
|
Beneficial
|
Total
|
11,220,745
|
28.05%
|
3,817,123
|
4.77%
|
|
As at 14 June 2024, the date of signing the
Annual Financial Statements, there were no changes to report to the
Directors' holdings.
William Salomon is the senior partner of Hansa
Capital Partners LLP. Fees payable to Hansa Capital Partners LLP
amounted to £3,065,129 (including Portfolio Management and
Additional Administrative Services Provider (AASP) functions). The
fees outstanding at the year end amounted to £285,000. During the
year, no rights to subscribe for the shares of the Company were
granted to, or exercised by Directors, their spouses or infant
children.
Portfolio Manager's interests
As at 14 June 2024, the date of signing of this
Annual Report, the management and staff of the wider Portfolio
Manager's group (Hanseatic Asset Management LBG, an Investment
Manager and AIFM located and regulated in Guernsey), excluding the
holding of William Salomon, shown above, were interested in circa
10.3m shares in the Company - a mixture of Ordinary and 'A'
non-voting Ordinary shares.
Stakeholder engagement
Requirements of Section 172 UK Companies
Act
As required by the AIC Code, the Board describes
below how it has met the requirements of Section 172 of the UK
Companies Act, as applicable to the Company. This includes an
explanation of how the Board has sought to promote the Company for
the benefit of its members, how it has taken into account the
likely long-term consequences of decisions and how it fosters
relationships with stakeholders. The Company is an investment
company with an appointed Portfolio Manager. As a result, it has no
direct employees or customers. The Board has identified the
Company's shareholders, its Portfolio Manager (as well as the
Additional Administrative Services Provider, "AASP"), its other key
service providers as its key stakeholders.
Stakeholder
|
Interaction
|
Shareholders
|
The shareholder base is a mixture of private
investors, wealth managers and asset managers across both classes
of the Company's shares. The Board monitors changes in the
shareholder base at its Board meetings. The Company communicates
through the publication of Annual and Half-Year Financial
Statements, through detailed quarterly and monthly factsheets, as
well as through the Company's website. The Company also holds
periodic shareholder presentations incorporating presentations by
the Board and key service providers to keep shareholders
informed.
The Board seeks to understand the opinions of a
wide variety of shareholders. The Company maintains a dedicated
email address for shareholders to contact the Board
(HICLenquiry@hansacap.com) and shareholder correspondence and
feedback is a regular item of discussion at Board
meetings.
The Company continues to meet shareholders and
other interested parties facilitated by its broker, as well as
through direct contact. The Portfolio Manager also runs an outreach
programme in conjunction with an investor relations
specialist.
Investors are also kept informed through
paid-for editorial pieces and discussion with media organisations.
The Board uses online shareholder presentations to enable
shareholders to meet with the Board and Portfolio Manager. Whilst
the Board believes there is still a place for face-to-face
shareholder updates, the strong attendance at the online events
encourages the Board that these online events will remain a feature
of the Company's shareholder outreach. The next shareholder event
is planned for 25 September 2024 as a hybrid online and physical
meeting.
|
Portfolio Manager and AASP
|
The Board's main working relationship is with
the staff of HCP as the Portfolio Manager and the AASP. HCP is
responsible for the Company's portfolio management (including asset
allocation, stock and sector selection in accordance with
guidelines established by the Board). It is also responsible for
administrative and operational functions including day-to-day
oversight of the other key service providers (Administrators,
Custodians, Registrar and Company Secretarial). Successful
management of shareholders' assets by the Portfolio Manager is
crucial to enable the Company to deliver its investment strategy
and meet its objective. The AASP also assists with the preparation
of the Annual and Half-Year Financial Statements as well as
Factsheets and website updates. The Board works closely with the
AASP to approve disclosures made via these publications.
|
Other key service providers
|
Key service providers are the Company's
Administrator (Apex Fund Administration Services (UK) Ltd),
Custodian (Lombard Odier) and Registrar (Computershare Investor
Services (Bermuda) Limited). Whilst the Board looks to the
Portfolio Manager and the AASP to keep a day-to-day oversight of
these providers, they are contracted directly to the Company. As
such, the Board retains ultimate responsibility for their roles.
The AASP reports regularly on operational matters. The Board seeks
to visit each provider at least annually for a face-to-face meeting
to discuss service levels, operations and future
developments.
|
Main areas of engagement
Key area
|
Topic
|
Engagement and outcomes
|
Investment strategy and ESG matters
|
The Investment Strategy incorporates appropriate
ESG considerations. For clarity, the Company does not purport to be
a "Green" fund. However, through its ESG disclosures and reporting
the actions of its Portfolio Manager, it seeks to give clarity to
the processes around assessing the Environmental, Social and/or
Governance aspects to its investment decisions and ongoing
monitoring.
|
The Board has engaged with the Portfolio Manager
and encouraged them to develop a responsible investment policy. The
Board notes that the Hanseatic Group, of which the Portfolio
Manager is a member, is a signatory to the UNPRI. The Board
wholeheartedly supports this policy. See further on in the report
for further information.
|
Discount management and share
buybacks
|
It is a great frustration to the Board that the
discount has not tightened over the past year. It is also noted
that there has been general widening of investment trust spreads
due to market volatility and declining retail participation in the
markets.
|
The Board is mindful of, and regularly
considers, the share price compared to the NAV and related
discount. The Board is of the view that providing transparency and
clarity to investors, as well as promoting demand for the Company's
shares, should create a positive impact on the discount for the
medium to longer-term. To this end, the Board has redeveloped the
Company's website, its Annual and Half-Year Financial Statements
and its factsheets and quarterly reviews. The Board continues to
develop the Company's branding and communications strategy with
shareholders and potential shareholders alike. The aim is to
enhance and broaden the understanding of the Company, with the
ultimate objective of widening the shareholder base and deepening
the market for shares.
The primary objective of the Company is to
generate a good economic return over the medium to long-term and
create a compelling investment proposition for private investors,
enabling them to gain access to investments not readily available.
This in due course should increase demand for the Company's shares.
Each investment company must consider its own particular
circumstances and objectives in assessing what is in the best
interests at any particular point in time for the company and its
shareholders. Your Board continues to focus on the construction of
a portfolio to create long-term value and it is in the light of
this that it decided to build an allocation to Private Equity. The
Board has considered a share buy-back policy but does not consider
this would have a significant effect on the discount, at which the
shares trade. In the opinion of the Board:
it reduces the number of shares outstanding and
therefore the liquidity of the shares in the marketplace; reduced
liquidity may, in fact, cause a rise in the discount;
it means a liquid investment portfolio needs to
be maintained, compromising the ability to have a portfolio of
special situations; the maintenance of the long-term investment
policy and its portfolio takes precedence over the
short‑term discount policy;
and
the holding in OWHL would represent an even greater percentage of
the portfolio and buying back shares would raise the relative
exposure to Brazil, which the Board does not wish to do, giving
preference to the return generation potential and benefits of
diversification generated by the investment portfolio.
|
Capital structure
|
The Company has two separate share classes, both
of which are traded on the LSE. 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. Consideration has been
given to whether the two share classes could be merged in some
way.
|
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 the present time.
|
Dividends
|
The Board continues to support maintaining the
dividend at 3.2p until it is fully covered by net income. At that
time it plans to increase it in line with any increase in the net
income of the Company.
|
The portfolio held by the Company is currently
constructed for long-term capital appreciation rather than income
generation. As a result, 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.
|
Maintaining levels of service from service
providers
|
The Company does not have direct employees.
Rather, its operations are conducted by several key service
providers. The Company enters into service-level agreements with
each provider. The Board oversees these services to ensure best
practice is followed and that the Company is receiving a
comprehensive service and value for money.
|
The independent members of the Board annually
review the performance of the Portfolio Manager. Additionally, the
day-to-day performance of other key service providers
(Administrator, Custodian and Registrar) are monitored by the AASP
on behalf of the Board. In addition, there is an annual review of
service providers' annual Controls Audit Reports. Members of the
Board also visit each key service provider annually to review
performance and understand any changes in their
businesses.
|
Notice period for general meetings
The Company's Bye‑Laws permit that the Company's general meetings
(other than AGMs) may be held on 14 days' notice.
Annual General Meeting
The Company's Notice of Annual General Meeting
is included in this Report.
Authority to repurchase 'A' non-voting Ordinary
shares
A resolution will be proposed at the forthcoming
AGM, seeking shareholder approval for the renewal of the authority
for the Company to repurchase its own 'A' non-voting Ordinary
shares. The Board believes the ability of the Company to repurchase
its own 'A' non-voting Ordinary shares in the market could
potentially benefit all equity shareholders of the Company in the
long-term.
The Company's Bye-laws are drafted in such a way
that the Company may from time to time purchase and cancel its own
shares. However, the Company requires that shareholders' approval
to repurchase shares be sought. At the AGM the Company will
therefore seek the authority to purchase up to 11,992,000 'A'
non-voting Ordinary shares (representing 14.99% of the Company's
issued 'A' non-voting Ordinary share capital, the maximum permitted
under the FCA Listing Rules), at a price not less than 1p per share
(the nominal value of each share) and not more than 5% above the
average of the middle‑market
quotations for the five business days preceding the day of purchase
or, where a series of transactions have taken place the higher of
the last independent trade and current highest independent bid on
the trading venue where the purchase(s) will be carried out. The
authority being sought, the full text of which can be found in the
Notice of Meeting, will last until the date of the next
AGM.
The Company is seeking authority to use its
realised capital reserve to allow repurchase of shares in the
market. The decision as to whether the Company repurchases any
shares will be at the absolute discretion of the Board. Any shares
purchased will be cancelled.
The Directors consider that all the resolutions
to be proposed at the forthcoming AGM, as set out in the Notice of
AGM, are in the best interests of shareholders as a whole and
unanimously recommend all shareholders to vote in favour. Guidance
on how to vote at the AGM can be found in the notes to the Notice
of AGM.
If the Board considers a significant proportion
of votes have been cast against a resolution at the AGM, the
Company will explain, when announcing the results of voting, what
action it intends to take to understand the reasons behind the
results of the vote.
Bye-laws
The Company seeks shareholder approval to amend
its Bye-laws. The resolution will be proposed as a special
resolution. The proposed amendments are being introduced in the
Bye-laws primarily to:
provide the Company with a more modern,
efficient and cost-effective approach to paying dividends to
shareholders; and
encourage action from the very small number of
shareholders who fail to provide information required by the
Company to enable it to meet its reporting obligations under the
Foreign Account Tax Compliance Act (FATCA), the Common Reporting
Standard (CRS) or any similar law or regulation.
In more detail, the key proposed changes are as
follows:
a)
Method of Payment of Dividends - Bye-law 19
Bye-law 19 has been updated to provide the
Company with discretion to prescribe the manner in which dividends
and other monies are paid. Currently the Company pays dividends by
cheque or electronic payment. The use of cheques has reduced in
recent years, while development of new payment methods (that offer
greater efficiency, improved security of payments and reduced
costs) has steadily increased. There has therefore been a move by
companies across the market to re-evaluate their dividend payment
processes and allow their Boards to determine the most efficient
manner to pay dividends to shareholders, including that it is in
the best interests of members for payments to be made exclusively
by inter-bank transfer or other electronic means approved by the
Board. The updates to Bye-law 19 will provide the Company with the
same discretions, and the ability to apply different methods of
payments or different combinations of methods to different
shareholders or groups of shareholders.
Where payment of the dividend or other monies
cannot be made by the Company to a Member in the method prescribed
by the Board using the information that member has provided, or the
member has not provided the Company with the required information,
account or address details necessary in order for the Company to
make the payment, a new Bye-law 19.3 has been included to provide
that such dividend or other monies will be treated as unclaimed
until the Member can provide the required details to the
Company.
b)
Withholding payment of dividends from shareholders who refuse to
provide FATCA or CRS information to the Company - Bye-law
83.
The FATCA rules which require certain non-US
financial institutions to report information about shareholders and
other "account holders" are underpinned by a special US withholding
tax, which applies to both the income and gross proceeds of sale
derived from US investments. To avoid the withholding tax, a
financial institution must comply with its FATCA due diligence and
reporting obligations, whether imposed under a direct agreement
between the financial institution and the IRS, or under the
domestic law of the jurisdiction in which the financial institution
is established. In addition, the financial institution may be
subject to financial penalties under its domestic law if it fails
to comply with the relevant due diligence and reporting
obligations. In order to meet its reporting obligations under
FATCA, the Common Reporting Standard, or any similar law or
regulation, the Company must collect and provide certain
information on its shareholders. Where the Company's shareholders
fail to provide the required information ("Non-Responders"), the
Company's reporting is deficient, and the Company may be subject to
negative intervention from the authorities in Bermuda, including
finding itself subject to financial penalties. There are a small
number of shareholders who do not respond to requests for
information. In order to resolve this, the Company's Bye-laws were
updated in 2023 to put in place a mechanism (under Bye-law 83) to
obtain the required information or remove the Non-Responders from
the Company's register of members.
As a further effort by the Company to encourage
Non-Responders to provide the required information, the Company has
proposed updates to Bye-law 83.3 to allow the Company to withhold
payment of dividends to Non-Responders until they provide the
required FATCA/CRS information to the Company. To the extent
exercised, this withholding sanction will only be implemented after
efforts by the Company to first obtain the necessary information
from the Non-Responder.
Please also see set out in the AGM Notice a
summary of the two proposed amendments to the Bye-laws.
Principal risks
The Company has risk management processes in
place which enables the Board to identify, assess and manage the
principal risks faced by the Company. Consistent with the AIC Code
and UK Corporate Governance Code, these risks are considered to
have the potential to threaten the Company's business model, future
performance/returns, solvency, liquidity, reputation, or regulatory
status. An integral part of this process is the maintenance and
ongoing evaluation of the Company's Risk Assessment & Controls
(RAC) Matrix, which identifies both the risks and associated
controls operating within the Company and relevant third-party
service providers. To ensure emerging risks are assessed on an
ongoing basis, the Board reviews the RAC Matrix at each Board
meeting, considering HICL's current and future anticipated risk
environment. The Board also receives updates at each meeting from
the Portfolio Manager and the AASP on operational risk matters.
Additionally, as part of the risk management processes, the Company
also annually reviews the Custodian, Administrator and Registrar
assurance reports of their internal controls (e.g. AAF 01/06, AAF
01/20, ISAE 3402). The impact of any exceptions are considered by
the Board.
Consideration of the Company's principal risks
and uncertainties, is made in the context of the Company's stated
objective of generating superior, but sustainable,
long‑term growth in
shareholder value. The main risk being that over the long-term
(determined as greater than five years), shareholders do not make a
return from investing in the Company. The Company's
closed‑ended fund structure is
also considered to be in alignment with its stated objective,
especially within extremely volatile market conditions. This is due
to the portfolio not having to be managed and maintained to manage
potential significant redemptions or short-term liquidity needs as
open-ended funds would. Additionally, the closed-ended structure
can take advantage of less liquid market opportunities as part of
its portfolio holdings.
The principal risks and uncertainties identified
and associated controls in place to manage these risks are
described below:
Principal risks - external
|
Controls to mitigate risks
|
Market risk - long-term company share
performance
Market risk includes interest rate, currency,
equity, credit, inflation, concentration, liquidity and macro
geopolitical risks.
|
The Board:
has appointed an appropriate PM whose
performance for the Company is reviewed and challenged on a
quarterly basis;
has set investment guidelines and restrictions,
which are reported against by the PM on a monthly basis;
operates an asset allocation model, which is
regularly reviewed and discussed with the PM; and
monitors and discusses portfolio construct and
performance quarterly.
|
Performance risk, share price, liquidity and
discount monitoring
Low market trading volumes of Company shares and
the discount to the NAV becoming inherent in the share
price.
|
The Board:
regularly reviews the share price, discount
level and portfolio performance;
maintains periodic oversight on
shareholder-base;
actively seeks feedback both directly from
shareholders and indirectly through the Company's Broker or
specific outreach programmes involving the Portfolio
Manager;
has the ability to buy-back non-voting shares of
the Company; and
initiates strategies to reduce discount over the
medium term.
|
Tax, accounting, legal and
regulatory risks
Adverse outcomes resulting from legislative
changes to tax, legal and regulatory requirements. Adverse outcomes
from not meeting ESG expectations.
|
The Board:
obtains regular updates and advice from relevant
professional advisers;
maintains oversight and receives regular
reporting on the legislative and regulatory changes, which impact
HICL, as monitored by the PM;
maintains the Company's membership with the
Association of Investment Companies;
has adopted the PM's responsible investing
policy;
has set explicit expectations on the integration
of ESG considerations within the investment process;
continues to develop ESG disclosures in
compliance with reporting regulations; and
receives documented confirmation of the PM's
adherence to relevant regulatory requirements and emerging sanction
risks.
|
Reputational risk
Negative behaviours, publications or market
sentiment impacting the reputation of the Company.
|
The Company:
requires the annual selection of Board members,
all of whom must have a commitment to governance;
has direct oversight of PM;
communicates with investors and the public in a
clear and transparent manner; and
has set pre-approval procedures for accuracy and
reliability of such information.
|
Principal risks - INTERNAL
|
Controls to mitigate risks
|
Operational risk
Risks associated with process, system and
control failures including those associated with the Company's
third-party service providers.
Operational areas considered includes Liquidity,
Safeguarding of Assets and Reliability of Financial
Reporting.
|
Pre-approval processes are in place prior to the
publication of any financial information.
Identification and certification of key controls
by AASP compliance team.
Due diligence is undertaken prior to appointing
all service providers. Regular performance reviews of third-party
providers are made and, where relevant, the Company annually
requests independent service 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.
|
Gearing/balance sheet risk
Risk of over-gearing the balance sheet and
creating financial stress on the Company.
|
A maximum limit on the overdraft facility is in
place.
Any increase in overdraft or credit facility
requires Board pre-approval.
|
Insurance
The Company through its Bye-laws has indemnified
its Directors and Officers to the fullest extent permissible by
law. During the year the Company also purchased and maintained
liability insurance for its Directors and Officers.
Going concern
The Company's business activities, together with
the factors likely to affect its future development, performance
and position, including its financial position, are set out in the
Chairman's Statement and the Portfolio Manager's Report within this
Annual Report.
After due consideration of the Balance Sheet,
estimated liabilities for the 12 months following the signing of
this Report and having made appropriate enquiries, the Directors
have concluded the Company is a going concern and has adequate
resources to continue in operational existence for at least 12
months. Assets of the Company consist of securities, the majority
of which are traded on recognised stock exchanges, or
open‑ended funds run by
established managers. The Financial Statements are prepared on a
going concern basis.
Longer-term viability statement
In addition to the Statement of Going Concern,
the Directors are also required to make a statement concerning the
longer‑term viability of the
Company. The Directors consider 12 months to be a relatively short
time frame when considering performance and look to the
longer‑term for both the
performance and risks associated with the Company. The Directors
consider a period of five years to be a more representative period,
which aligns with the Portfolio Manager's longer-term horizon. This
period is sufficiently long to manage short-term market volatility
and allow longer-term performance to work through. The Board
continually monitors the Investment Strategy and Investment
Guidelines issued to the Portfolio Manager and directs the
Portfolio Manager to target long-term capital preservation.
Further, whilst the Board has sanctioned the use of gearing, the
facility available to the Portfolio Manager is relatively small
compared to the NAV of the Company. Finally, a number of the more
significant costs in each financial year are contracted to be
calculated on the basis of the underlying NAV of the Company. As
such, in a period of negative portfolio performance, the cost base
should also fall.
Barring unforeseen circumstances and taking
account of the Company's current position, the principal risks, the
longer-term strategy for the portfolio, including a diversified and
liquid asset base and the lack of gearing, the Directors confirm
they have a reasonable expectation that the Company will continue
to operate and meet its liabilities as they fall due for the next
five years.
Governance
The Board of Directors
The Directors who served the Company during the
year to 31 March 2024 are:
Jonathan Davie
Chairman
Jonathan became Chairman of Hansa Investment
Company in June 2019. He was a director of Hansa Trust from January
2013 until its liquidation in November 2021. He is also a partner
of First Avenue Partners, an alternatives advisory
boutique.
Jonathan qualified as a Chartered Accountant and
then joined George M. Hill and Co. and became an authorised dealer
on the London Stock Exchange. The firm was acquired by Wedd
Durlacher Mordaunt and Co. where Jonathan became a partner in 1975.
He was the senior dealing partner of the firm on its acquisition by
Barclays Bank to form BZW in 1986.
Jonathan developed BZW's Fixed Income business
prior to becoming chief executive of the Global Equities Business
in 1991. In 1996 he became deputy chairman of BZW and then vice
chairman of Credit Suisse First Boston (CSFB) in 1998 on their
acquisition of most of BZW's businesses. He focused on the
development of CSFB's Middle Eastern business. He retired from CSFB
in February 2007.
Simona Heidempergher
Remuneration Committee Chair
Simona became a Director of the Company in June
2019. Simona has extensive experience as an executive and
non-executive director in a range of companies, including listed
companies, investment funds and research organisations, across
multiple jurisdictions.
For the past 21 years, she has been a director
of Merifin Capital, an established European privately owned
investment company. Prior to this she had roles as VP Investments
at CDB Web tech, a listed investment vehicle, and as research
associate at Heidrick & Struggles, a leading executive-level
search and leadership consultancy firm and as project coordinator
at Ambrosetti Group, an Italian consulting company. Currently,
Simona is the chair of the board of directors of the Stramongate
Group, a Luxembourg public company, director of The European
Smaller Companies Trust, a Janus Henderson Asset Management
Investment Trust listed on the London Stock Exchange and director
of Industrie Saleri Italo S.p.A. an Italian private company in the
automotive supplier sector.
Following Nadya Wells' decision to not stand for
re-election, with effect from 14 June 2024, the Board has appointed
Simona Heidempergher to chair the Nomination Committee in addition
to her continuing role as Chair of the Remuneration
Committee.
Richard Lightowler
Audit Committee Chairman
Richard became a Director of the Company in June
2019. Richard has 26 years' experience in public accounting being
partner of KPMG in Bermuda for 20 years. He was head of the KPMG
Insurance Group in Bermuda for 15 years, a member of the firm's
Global Insurance Leadership Team and Global Lead Partner for a
number of large international insurance groups listed on the New
York and London Stock Exchanges.
Richard has significant regulatory experience,
previously advising the Bermuda Monetary Authority and working with
clients regulated by the PRA, FRC and FCA, as well as other
international regulators. He also has extensive experience in risk
and corporate governance and significant transaction experience.
Richard is based in Bermuda. Richard also holds non-executive
directorships with Aspen Insurance Holdings, Geneva Re, Oakley
Capital Investments and Phoenix Re Limited.
William Salomon
William became a Director of the Company in June
2019. He was a Director of Hansa Trust from 1999 until its
liquidation in November 2021. He has a significant, long standing,
investment in the Company.
William's experience in investments and finance
is important to the Board in developing and monitoring investments
in special investment themes and in the Company's strategic
investment through Ocean Wilsons Holdings Limited in Wilson
Sons.
William is the senior partner of Hansa Capital
Partners LLP, the Portfolio Manager and Additional Administrative
Services Provider, deputy chairman of Ocean Wilsons Holdings
Limited and a director of its Brazilian listed subsidiary Wilson
Sons Holdings Brasil S.A.. William was formerly the vice chairman
of Close Asset Management Limited and chairman of the merchant bank
Rea Brothers PLC.
Nadya Wells
Nominations Committee Chair and Senior
Independent Director
Nadya became a Director of the Company in June
2019. Nadya has 29 years' experience in emerging and frontier
markets as a long-term investor and corporate governance
specialist. She spent 13 years as portfolio manager with the
Capital Group investing in Global Emerging Markets and prior to
those five years with INVESCO Asset Management Limited, investing
in public and private equity managing a closed ended fund. She
started her career in management consultancy with Ernst &
Young.
She holds a non-executive directorship at Baring
Emerging EMEA Opportunities plc where she is senior independent
director. Nadya is an independent non-executive director on the
boards of various Luxembourg SICAVs managed by large global asset
managers. She also works in academia conducting research and
consulting in the public and private sector on financing in Global
Health. She holds an MBA from INSEAD, France.
You will note from the Chairman's Report that
Nadya has chosen not to stand for re-election as a Director of the
Company at the AGM as a result of additional professional
commitments that she intends to take on. The Board is starting the
process of identifying a director to join the Board in Nadya's
place. Nadya will remain as a Director until the Company's
AGM.
Board members are selected based on their
individual and complementary skills and experience and their
ability to commit sufficient time to drive the Company's success.
All Directors will retire at each AGM and offer themselves for
consideration for re‑election.
The Board recommends the re‑appointment of each of the four Directors who
have put themselves forward, based on their continuing contribution
to the Company and its shareholders. The service contracts between
the Company and each of the Directors do not allow for any
compensation payment in the event of loss of office.
Organisation and objectives
This section explains how the Board has
organised the Company and seeks to deliver its
objectives.
Board committees and roles
The Directors consider that, in order to fulfil
their responsibilities as the Directors of the Company, they should
all be members of every sub-committee where possible. Where a
Director cannot be a member of a committee, they should attend the
meetings unless a conflict exists and it would be inappropriate for
them to be present.
Audit Committee
Richard Lightowler is the Chairman of the Audit
Committee. The Audit Committee consists of all independent
Directors of the Board. The Audit Committee exists to assist the
Board in the financial and narrative reporting of information
relating to the Company, the review of the Internal Controls and
Risk Management systems, the oversight of the Company's annual
audit and assessment of the independence, performance and quality
of Company's external auditor PricewaterhouseCoopers Ltd. The
Committee meets at least twice a year - timed to review the Annual
and Half-Year Financial Statements prior to their approval and
release.
The AIC Code of Corporate Governance ("the AIC
Code") indicates that all independent Directors can be members of
the Audit Committee including, if agreed by the Board, the Chairman
of the Board. The Board is of the opinion that, particularly as the
Company has relatively few Directors, shareholders benefit from the
views of all Directors. Therefore, Jonathan Davie, as Chairman of
the Company, is also a member of this Committee. The Board further
acknowledges that the AIC Code states all Committee members should
be independent. Therefore, William Salomon is not a member of the
Committee although attends as a non-member. The Committee reports
its recommendations to the Board for final approval.
The Audit Committee Report can be
found further ahead in the report.
Nomination Committee
The Committee was chaired by Nadya Wells
throughout the Company's financial year. All independent members of
the Board are members of the Nomination Committee. William Salomon
attends the Committee but is not a member.
The Committee reviews the structure, size and
composition (including the skills, knowledge and experience) of the
Board and makes recommendations to the Board with regard to any
changes, as necessary. It also considers succession planning of
directors, taking into account tenure and performance of board
members as well as challenges and opportunities facing the Company,
and what skills and expertise are, therefore, needed on the Board
in the future. If a skills-gap or pending vacancy is identified,
the Committee is responsible for identifying and nominating
candidates to fill Board vacancies as and when they
arise.
Following Nadya's decision to not stand for
re-election, with effect from 14 June 2024, the Board has appointed
Simona Heidempergher to chair the Nomination Committee, in addition
to her continuing role as Chair of the Remuneration
Committee.
The Nomination Committee Report can be found
further ahead in the report.
Management Engagement Committee
The Committee is chaired by Jonathan Davie. All
independent members of the Board are members of the Management
Engagement Committee. The Committee has two primary roles. Firstly,
to review the functional and operational performance of the
Portfolio Manager with the Company's investment policy. Secondly,
to review annually the performance of any other key service
providers to the Company.
The level of management fees, level of service
provided and the performance of the Portfolio Manager are reviewed
on a regular basis to ensure these remain competitive and in the
best interests of shareholders. The Board, after the annual
recommendation of this Committee, considers whether the engagement
of the Portfolio Manager is in the best interests of the
shareholders. The Committee members also carry out periodic visits
to the key service providers, as well as seeking feedback on the
performance of other service providers from the Portfolio Manager
in its capacity as Additional Administrative Service
Provider.
The Committee reports its recommendations to the
Board for final approval.
Remuneration Committee
The Committee is chaired by Simona
Heidempergher. All independent members of the Board are members of
the Remuneration Committee. William Salomon attends the Committee
but is not a member. The Committee is responsible for the broad
policy for the remuneration of the Company's Chairman and
non-executive Directors pursuant to the Company's Bye-laws. The
Committee takes into account all factors which it deems necessary.
When setting the remuneration policy for Directors, the Committee
reviews remuneration trends across the wider industry, including
the use of external independent surveys, and considers the ongoing
appropriateness and relevance of the remuneration policy. The level
of directors' fees should be set at a level which attracts and
retains high calibre candidates. Fees are monitored against
external benchmarks taking specific note of each Director's duties,
time commitments to properly fulfil all obligations and duties and
also relative to other comparable companies in comparable
jurisdictions. No Director sets their own individual
remuneration.
The Committee reports its recommendations to the
Board for final approval.
The Directors' Remuneration Report can be found
further ahead in the report.
Long-term impact of decisions - ESG
matters
In the natural positive progression of HCP's
commitment to further integrating ESG and climate relevant
considerations within its investment process, the Hanseatic Group,
of which HCP is a member, has become a signatory of the United
Nations supported Principles for Responsible Investment
(UNPRI).
With ever-growing global concerns and
developments surrounding matters such has climate change, social
inequalities and ethical corporate strategy and governance, the
Board believes there is a communal duty for meaningful and
effective action to be taken and are committed to doing so. It is
the Board's belief that responsible investing and a
well‑run sustainable business
model aids in generating superior long‑term returns.
The Board is responsible for the Company's ESG
policy. In 2020, the Board adopted the Portfolio Manager's
Responsible Investment Policy, which is applied to all Company
investments in funds and companies, in both public and private
markets. In line with the evolving nature of ESG's integration
within financial services, the PM continues to review and develop
their policy of responsible investing within their investment
process. This involves ensuring environmental, social and
governance factors are integrated throughout the investment
management process, including within the due diligence,
decision-making and investment monitoring processes.
As long-term investors, HCP has a natural desire
to be a responsible investor and a good corporate citizen. HCP's
approach begins by communicating its expectations to fund and
company investments that they should take ESG issues seriously,
clearly report on them, be responsible owners and to continuously
show positive indicators of aspiring to do the right
thing.
HCP does not operate an exclusionary policy, as
excluding whole sectors or countries is not a sustainable, or
reasonable approach to its investment activities. Each fund manager
or company is assessed as an individual, taking into account the
sector and country within which they operate and their direction of
travel in ESG enhancements.
HCP seeks to ensure that all investee managers
and companies are thinking longer term and that they are also
thinking about their longer-term impacts across the spectrum of
their business. This certainly includes the negatives - such as
understanding how companies are lowering their carbon emissions,
ensuring they are not using forced or child labour in their supply
chains, taking care not to deplete natural resources, or be
involved in deforestation. But it also includes the positive
impacts, for example, knowing if a company is taking advantage of
the opportunities it may have from climate change by developing
greener energies, recycling used clothing, or designing
biodegradable fabrics. HCP's involvement with the managers and
companies is ongoing and pushes them to manage the risks and take
advantage of the opportunities in a tailored and considered manner.
A manner that reaps longer-term benefits for the Company, as well
as the environment and the greater society.
Following the first UNPRI submission by the
Hanseatic Group, made in 2023, we are pleased to report that they
received very positive feedback on both their policies and approach
adopted.
Fund investments
HCP seeks to invest in funds who are responsible
owners of their investee companies, have specific consideration as
to how their investee companies manage their ESG responsibilities
and seek to engage with those company boards, if they are failing
in their duties. Where a manager is not living up to these
standards, HCP will first seek to engage the management team and
encourage improvement. If the managers engagement is weak, or if
the communicated concerns are not sufficiently addressed and their
positive commitment to do so is not apparent, HCP's ultimate action
would be to reduce the current investment, exit, or not invest in
the first place. Whilst HCP does not seek to exclude fund managers
that invest in sectors such as energy or countries such as China,
it would, however, expect such managers to properly articulate how
they operate in such areas and manage the potential ESG
considerations. HCP's investment philosophy favours those fund
managers who are typically long-term in their approach and seeks to
invest in high-quality, well-managed companies that are often
higher-returning. As a result, although we do not set limits, there
is a natural bias away from these companies and sectors that score
less well on ESG metrics.
Company investments
When considering direct equity investments HCP
seeks to ensure that company management teams are responsible
custodians of their businesses, report clearly on ESG metrics and
seek to improve on those areas in which they are
lagging.
Taskforce on Climate-Related Financial
Disclosures
As a closed-ended investment company, HICL is
exempt from the annual reporting requirement to publish statements
in line with the Taskforce on Climate-Related Disclosures' (TCFD)
framework of recommendations and recommended disclosures. However,
considering the Board and the PM's approach to responsible
investing and the Company's core investment objective to generate
superior, but sustainable, medium to long-term growth in
shareholder value, we have elected to provide relevant information
on our approach to the TCFD recommendations.
Governance
Strong corporate governance practices are
intrinsic to how the Board operates. The Board oversees a long-term
and sustainable approach to business strategy of the Company. This
in part is done by adopting a Responsible Investment Policy, which
aims to integrate sustainability, climate-related risks and
opportunities, social responsibility and strong governance into the
Company's investment process. This is consistent with HCP's
approach to its ESG assessment of fund managers and company
investments.
Risk Management
Climate-related risks within the Company's
investments are identified, assessed and managed by HCP as the
Portfolio Manager. As part of the portfolio risk management and
monitoring process, HCP combines long-term and purpose-driven
engagement with underlying fund managers and companies, active
voting and setting a clear escalation framework. This approach aims
to identify and address climate‑related issues and minimise systemic risks that
may impact the assets within the portfolio. Engagement can take
several forms, including regular and ad hoc meetings with
management, formal written correspondence, or the Portfolio Manager
participating in relevant shareholder votes for current
investments.
Strategy
The Company's strategic objective is to grow its
net assets over the medium to long-term by investing in a
diversified and multi-strategy portfolio. In line with this
objective, the Board are responsible for pursuing the growth of
shareholder value. Responsible investment and the integration of
ESG risks and opportunities within the investment process is
aligned with the Company's values and heritage. HCP becoming a
signatory to UNPRI is part of our overall strategy.
Metrics and targets
In relation to the Portfolio Manager's
investment process, a more holistic approach is taken by assessing
an investment by their intent and direction of travel, rather than
purely by specific targeted metrics. The ESG assessment of a fund
manager or company will involve HCP developing a view by utilising
their published ESG reporting, the information received through the
due diligence and engagement processes and other external research.
The Company has no material information to report in relation to
metrics and targets.
Ocean Wilsons Holdings Limited
OWHL has two investments - Ocean Wilsons
Investments Ltd, an investment portfolio and a holding in Wilson
Sons Holdings Brasil S.A., a Brazilian maritime business. From an
ESG standpoint, our Portfolio Manager is also the investment
advisor to the Ocean Wilsons Investments' portfolio. The Board
understands that our Portfolio Manager is engaging with Ocean
Wilsons Investments' board on their Responsible Investing Policy.
As a Board we receive periodic updates from Wilson Sons, an
operating business with several thousand employees, regarding their
business including issues relevant to ESG considerations. Wilsons
Sons is listed on the Novo Mercado ("New Market") B3 listed segment
and is a member of the Carbon Disclosure Project which, in
partnership with companies and governments, aims to build a truly
sustainable economy, by measuring and understanding the
environmental impact. In 2022, Wilson Sons achieved a grade B
performance in the climate change questionnaire for the maritime
transportation segment. This was an improvement from the grade C
performance achieved in 2021, making Wilson Sons in line with 44%
of companies in the maritime sector that publicly disclose their
data to CDP. Wilson Sons continues to be proud of their
focused approach to health & safety, staff wellbeing and the
preservation of the environment and communities they operate in.
This continued focus was awarded through the "Great Place to Work"
certification, which is a standard of excellence for work
environments, and have been ranked in the top quintile of the
S&P Global 2022 Corporate Sustainability Assessment. As in many
heavy industries, there is a focus on safety and improving working
practices to minimise staff injuries. To this end, Wilson Sons has
a non-negotiable commitment to ensuring the health and safety
conditions of all employees, customers and third parties at their
facilities. Their commitment to maintaining an increasingly safe
working environment is reflected by their continuous trend of
reduction in lost-time injuries, which in 2022 was reduced to a
frequency rate of 0.50 incidents per one million hours worked. This
rate exceeds the world-class benchmark. Additionally, the reduction
of Greenhouse Gas emissions remains a focus for Wilson Sons, who
achieved a 5% reduction in their total emissions in 2022, achieved
through the adoption of state-of-the-art technologies, such as
replacing diesel equipment with electrically powered alternatives
at their container ports. Additionally, the company has maintained
its commitment to proactively publish its Greenhouse Gas Emissions
Inventory (GHG) in the public emissions registry, a platform
managed by the Brazilian GHG Protocol Programme. In 2022, Wilson
Sons maintained their gold seal by the programme. Further
information can be seen in their Sustainability Report, published
on their website www.wilsonsons.com.br/en.
Carbon offset and charitable support
Each year, there are a number of flights for
individual Directors to attend Board meetings in Bermuda.
Therefore, the Board has elected to offset the carbon impact of its
travel on behalf of the business though a relationship with
Greenfleet Australia (www.greenfleet.com.au). This year, circa 163
tonnes of carbon dioxide has been offset. Greenfleet Australia runs
a tree planting offset programme.
Additionally, during the year the Board looked
for an environmental cause to sponsor that has direct relevance to
Bermuda, our country of domicile. Given its island status,
Bermudians are more aware than most of the marine environment.
Marine life is under threat from climate change, acidification of
the sea, pollution and invasive species. But these threats are
compounded by overfishing, which strips the ocean of life, and so
reduces its capacity to produce oxygen, absorb carbon dioxide and
regulate the climate. It's estimated that almost 94% of commercial
fish stocks are fully or overexploited and 90% of large, predatory
fish are gone. Overfishing therefore represents a major threat for
the food security of millions and could have devastating
consequences for Earth's climate if these ecosystems fail. Amongst
many worthy organisations, we discovered the Blue Marine
Foundation, an environmental charity dedicated to restoring the
ocean to health by addressing overfishing and supporting marine
conservation projects. The ocean is the world's largest carbon
sink: by combating overfishing and the associated impact on the
wider marine environment, Blue Marine aims to help life in the
ocean perform its vital function of stabilising the Earth's
climate. By partnering with Blue Marine, the Company supports their
work around the world ultimately benefiting us all and, in
particular, maritime communities like Bermuda. The Company has
committed to a charitable gift of £10,000 per annum towards Blue
Marine's work.
Streamlined Energy and Carbon Reporting (SECR)
and Greenhouse Gas Emissions (GGE)
The Company has no direct greenhouse gas
emissions to report from the day-to-day operations of its business.
However, as noted above, the attendance of Directors at Board
meetings in Bermuda means travel related carbon emissions which are
"Scope 3 Indirect Emissions" for the purposes of the SECR. The
Board has further estimated the emissions associated with the
flights to be in the region of 237 tonnes of CO2 in any 'normal'
year.
Social, Community, Human Rights, Employee
Responsibilities Policy
The Company does not have any employees. The
Company has no direct social, community or human rights impact. Its
principal responsibility to shareholders is to ensure the
investment portfolio is properly invested and managed.
Service providers
Service Provider Policy
The Company has no employees and operates
through third party service providers. The Board has contractually
delegated to external organisations the management of the
investment portfolio, the custodial services which include
safeguarding of the assets and the day-to-day accounting and
company secretarial requirements. Each of these contracts is only
entered into after proper consideration of the quality and cost of
services, which are regularly reviewed and monitored.
The key service provider relationship to the
Company is Hansa Capital Partners as the Portfolio Manager and
Additional Administrative Services Provider (AASP) to the
Company.
The Board carries out the following activities
as part of its oversight of third party service
providers:
Monitors performance, costs and commitment to a
successfully implemented controls environment
The Board, at its regular meetings, reviews
reports prepared by both the Portfolio Manager and the
Administrator, which enable it to monitor the performance and costs
of the third-party suppliers to the Company. The Additional
Administrative Services Provider has an ongoing dialogue with each
provider to monitor their processes and systems and, in addition,
members of the Board meet with key providers at least annually to
discuss performance.
Monitors Portfolio Manager
performance
The Board reviews reports prepared by the
Portfolio Manager at its regular meetings, which enables it to
monitor the investment performance, risks and returns. The
Portfolio Manager attends each Board meeting where there is an
active dialogue on performance, process, risks and opportunities
and governance matters.
The Board identifies key controls and regularly
monitors them through compliance reports on control
effectiveness.
Determines investment strategy, guidelines and
restrictions
The Board determines the investment strategy in
conjunction with the Portfolio Manager. The strategy is monitored
regularly with adjustments made as required.
The Board issues formal investment guidelines
and restrictions; compliance with these is reported by the
Portfolio Manager's compliance officer quarterly and is also
monitored independently by the Administrator.
Determines gearing levels and capital
preservation through the use of hedging instruments
The Board, taking account of advice from the
Portfolio Manager, determines the maximum level of borrowings the
Company will undertake. The Company will not invest in derivatives
for speculative gain, but may use derivatives for efficient
portfolio management and hedging purposes.
The providers
Portfolio Manager & Additional
Administrative Services Provider
Hansa Capital Partners LLP is the Portfolio
Manager for the Company. It is responsible for all assets in the
portfolio, other than the Company's investment in OWHL. The Board
is in regular contact with the investment management team at HCP
which is led by Alec Letchfield. Additionally, Alec Letchfield is
invited to quarterly meetings of the Board to formally present
portfolio updates and discuss market trends. The Portfolio
Manager's detailed review of the year can be found further ahead in
the report.
HCP charges a portfolio management fee at an
annual rate of 1% of the net assets of the Company (after any
borrowings) and after deducting the value of the investment in
OWHL, on which no fee is payable. The Portfolio Manager has charged
£2,917,937 for the year ended 31 March 2024 (year ended 31
March 2023: £2,824,000). Hanseatic Asset Management LBG, a company
connected to Hansa Capital Partners and which is also the AIFM,
separately charges an investment management fee to the investment
subsidiary of OWHL.
The terms of the Portfolio Management Agreement
permit either party to terminate the agreement by giving to the
other not less than 12 months' notice, or such shorter period as is
mutually acceptable. There is no agreement between the Company and
the Portfolio Manager concerning compensation in respect to the
termination of the agreement. In its annual assessment of the
Portfolio Manager, the Board concluded that, because of the skills
and experience of the management team it is in the best interest of
shareholders that the Portfolio Manager remains in place under the
present terms. Details of the fees paid to the Portfolio Manager
can be found in Note 3 to the Financial Statements.
HCP also acts as the AASP to the Company. This
role ensures a number of the day-to-day processes for the Company
are carried out, as well as providing oversight of, and a liaison
between, a number of the Company's service providers and the
Company itself. HCP is paid £115,000 per annum for this service
(year ended 31 March 2023: £115,000).
Auditor
The Company's independent Auditor is
PricewaterhouseCoopers Ltd, a Bermudan registered firm. Auditor
independence rules restrict the amount and type of non-audit
related work that can be performed by a company's Auditor. Any
non-audit related work must be pre-approved by the Board. PwC did
not provide any non-audit services in the year.
Company Secretary
The Company has engaged Conyers Corporate
Services (Bermuda) Limited ("Conyers") as its Company Secretary.
During the year to 31 March 2024, Conyers has charged £44,156 (year
ended 31 March 2023: £38,275).
Alternative Investment Fund Manager
As a Bermudan resident, the Company is defined
as a UK Alternative Investment Fund (AIF) under the UK Alternative
Investment Fund Manager's Directive (UK AIFMD). As such, the
Company and the AIFM are subject to a more limited set of UK AIFMD
requirements, which are largely in relation to marketing the
Company's shares into the UK. The Company appointed Hanseatic Asset
Management LBG, with effect from 29 August 2019, to act as its
AIFM, with responsibilities for the Portfolio Management and Risk
Management functions. The AIFM has delegated the provision of
Portfolio Management services to Hansa Capital Partners LLP but
remains responsible for the Risk Management function. The AIFM does
not charge a direct fee for its services, although it does recharge
any third-party fees incurred.
Administrator
The Company has engaged Apex Fund Administration
Services (UK) Ltd as its Administrator. The Administrator has
charged £152,722 for the year ended 31 March 2024 (year ended 31
March 2023: £149,722).
Custodian
The Company has engaged Banque Lombard Odier
& Cie SA as the Company's Custodian. During the year to 31
March 2024, Lombard Odier charged £182,717 for the custodial
service (year ended 31 March 2023: £180,335).
Registrar
During the year, the Company's Registrar was
transferred from Link Market Services (Guernsey) Limited) to
Computershare Investor Services (Bermuda) Limited
("Computershare"). The total Registrar charges were £134,083 for
the year ended 31 March 2024 (year ended 31 March 2023:
£91,728).
Report of the Directors
The Directors have chosen to report on some
items within the body of the Strategic or Governance Reports, while
others remain within the Report of the Directors.
Items included within Strategic or Governance
reports
The following items are listed within the
Strategic or Governance Reports:
Statement of the existence of qualifying
indemnity provisions for Directors.
· Dividend policy
and payments made during the year.
· Names of
Directors, at any time in the year and the Directors' details and
attendance at Company meetings.
· Streamlined
Energy & Carbon Reporting and Greenhouse Gas
Emissions.
· Stakeholder
Engagement - while the Company has no employees, suppliers or
customers, the Directors give regular consideration to the need to
foster the Company's business relationships with its stakeholders,
in particular with shareholders and service providers. The effect
of this consideration upon the principal decisions taken by the
Company during the financial year is set out in further detail in
the Strategic Report.
Items reported within the Directors'
Report
Disclosure to the Auditor of Relevant Audit
Information
The Directors confirm that, so far as they are
aware, having made such enquiries and having taken such steps as
they consider they reasonably ought, they have provided the Auditor
with all the information necessary for it to be able to prepare its
Report. In doing so each Director has made themself aware of any
information relevant to the audit and established that the
Company's Auditor is aware of that information. The Directors are
not aware of any information relevant to the audit of which the
Company's Auditor is unaware.
Board composition and diversity
The Board recognises and is supportive of the
new FCA Listing Rules (LR 9.8.6(9)) which aim to improve
transparency on the diversity of company boards and executive
management teams and was implemented for accounting periods
starting on or after 1 April 2022. Accordingly, boards of UK
incorporated companies are required to report annually on whether
the specific three FCA targets have been met, and if they have not
been met, the reasons why. These three targets are:
(i)
at least 40% of the individuals on its board of directors are
women;
(ii)
at least one of the following senior positions (Chair CEO, Senior
Independent Director, CFO) on its board of directors is held by a
woman; and
(iii)
at least one individual on its board of directors is from a
minority ethnic background;
The tables below set out the gender and ethnic
diversity composition of the Board as at 31 March 2024. The Board
is pleased to report it is compliant with each of the three FCA
targets as at 31 March 2024. Two of the five Directors are women
(40%), one of whom holds the senior position of SID, and one of the
five Directors is from a minority ethnic background. As reported
elsewhere in this Annual Report, Nadya Wells has chosen not to
stand for re-election at the Company's forthcoming AGM. She remains
a Director of the Company at the time of signing of this Annual
Report. The Board is starting the process of identifying a director
to join the Board in Nadya's place and will update Shareholders in
its next Annual Report regarding ongoing board diversity against
the Listing Rule targets.
As per LR 9.8.6(10), numerical data is disclosed
in the tables below, which shows the Company's compliance with
these three FCA targets.
Gender Diversity
|
Number of
Board
members
|
Percentage
of the
Board
|
Number of
senior
positions
on the
Board1
|
Men
|
3
|
60%
|
2
|
Women
|
2
|
40%
|
1
|
Other
|
-
|
-
|
-
|
Not specified/prefer not to say
|
-
|
-
|
-
|
Ethnic Diversity
|
Number of
Board
members
|
Percentage
of the
Board
|
Number of
senior
positions
on the
Board1
|
White British or other White (including
minority-white groups)
|
4
|
80%
|
2
|
Mixed/Multiple Ethnic Groups
|
1
|
20%
|
1
|
Asian/Asian British
|
-
|
-
|
-
|
Black/African/Caribbean/Black British
|
-
|
-
|
-
|
Other ethnic group, including Arab
|
-
|
-
|
-
|
Not specified/ prefer not to say
|
-
|
-
|
-
|
1 Note, the format and information supplied in
the above tables are as prescribed by the FCA's Listing Rules. HICL
is a Bermudan incorporated, externally managed closed-ended
investment company. As such, HICL does not have any employees or
appoint executive board positions. Accordingly, the senior board
positions which the Company defines as applicable are Chairman and
Audit Committee Chairman.
This data was provided by the individual
Directors, at the request of the Committee, asking them to indicate
how the Company should categorise their ethnic background for the
purposes of the FCA requirements of Board
diversity.
Capital Structure
The Company's Capital Structure is described in
the "Shareholder Profile and Engagement" section.
Corporate Governance Report
The Corporate Governance Report, including the
Financial Risk Management Review of the Company, is included in
this Report.
Approval of the Directors
The Directors consider the Annual Report and
Financial Statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy. Further details demonstrating the
Company's performance, business model and strategy have been
included within the Strategic Report.
For and on behalf of the Board
Jonathan Davie
Chairman
14 June 2024
Corporate Governance Report
Corporate Governance Code
Internal Controls
The UK Corporate Governance Code ("UK Code"),
requires the directors of UK listed companies to review the
effectiveness of the company's risk management and system of
internal controls on an annual basis. The Board is committed to
sound corporate governance, robust risk management processes and
effective systems of internal controls. The Board reviews and
considers the effectiveness of internal controls regularly and
review exception reporting at least quarterly. The Directors,
through the procedures outlined below, keep the system of risk
management and internal controls under review.
The Board recognises its ultimate responsibility
for the Company's system of risk management and internal controls
and for monitoring their effectiveness. In order to perform this
responsibility the Board receives regular reports on all aspects of
risk management and internal control from the Company's service
providers (including financial, operational and compliance
controls, risk management and relationships with other service
providers); the Board will instigate necessary action in response
to any significant failings or weaknesses identified by these
reports.
Financial Reporting
The Board has a responsibility to present a
fair, balanced and understandable assessment of annual,
half‑year and other price
sensitive public reports and reports to regulators, as well as to
provide information required to be presented by statutory
requirements. To ensure this responsibility is fulfilled, all such
reports are reviewed and approved by the Board prior to their
issue.
The Board confirms there have been no specific
events since 31 March 2024, of which the Board is aware, which
would have a material impact on the Company.
Compliance with the provisions of the UK
Corporate Governance Code
The Board of Hansa Investment Company has
considered the Principles and Provisions of the AIC Code. The AIC
Code addresses the Principles and Provisions set out in the UK
Code, as well as setting out additional Provisions on issues that
are of specific relevance to the Company.
The Board considers that reporting against the
Principles and Provisions of the AIC Code, which has been endorsed
by the FRC in the UK, provides more relevant information to
shareholders.
The Company has complied with the Principles and
Provisions of the AIC Code.
The AIC Code is available on the AIC website
(www.theaic.co.uk). It includes an explanation of how the AIC Code
adapts the Principles and Provisions set out in the UK Code to make
them relevant for investment companies.
Association of Investment Companies
Code
The AIC Code has 17 principles. The Company sets
out below how it has complied with the Principles and
Provisions:
Board Leadership and Purpose
A.
A successful company is led by an effective board, whose role is to
promote the long-term sustainable success of the company,
generating value for shareholders and contributing to wider
society.
The Board is formed of five Directors with a complementary mix of
skills and experience to lead the Company. Two Directors served on
the board of the Company's predecessor, Hansa Trust, whilst three
Directors were appointed at the formation of HICL. All have
significant and relevant experience. All Directors are focused on
generating long‑term value for
shareholders and there is significant share ownership in the
Company's shares amongst the Directors. The Board engages at least
quarterly with its Portfolio Manager challenging performance,
process, risk, cost and strategy.
B.
The board should establish the company's purpose, values and
strategy, and satisfy itself that these and its culture are
aligned. All directors must act with integrity, lead by example and
promote the desired culture.
The Board believes that the Company's purpose, values and strategy
are clear: to create long‑term
growth of shareholder value. The Board fosters a culture that is
open to new ideas and is able to influence its service providers
through effective challenge and regular robust review of
performance. The Board sets the standard for openness and
professionalism that the Company's key service providers follow. In
particular, there is regular interaction between the Board and the
Company's Portfolio Manager and also the AASP for day to day
liaison with other service providers.
C.
The board should ensure that the necessary resources are in place
for the company to meet its objectives and measure performance
against them. The board should also establish a framework of
prudent and effective controls, which enable risk to be assessed
and managed.
The Board, through the work of its Committees and regular Board
meetings ensures regular measurement against the Company's
objectives. The adequacy and effectiveness of internal controls is
considered at each Board meeting.
D.
In order for the company to meet its responsibilities to
shareholders and stakeholders, the board should ensure effective
engagement with, and encourage participation from, these
parties.
The Board considers its stakeholders to be its shareholders and its
key service providers. The Board is committed to transparent
reporting in all its communications. It actively engages with
shareholders via an annual general meeting, periodic shareholder
presentations, the next of which will be held on 25 September 2024,
quarterly factsheets, website communication and with feedback also
received through outreach programmes by the Company's broker and
Portfolio Manager, as well as direct one-to-one correspondence. The
Board engages with other key service providers through the
operations of its AASP on a day to day basis, as well as via at
least one annual meeting with each to ensure accountability and
value-added performance.
Principle E is omitted by the AIC
Code.
Division of Responsibilities
F.
The chair leads the board and is responsible for its overall
effectiveness in directing the company. They should demonstrate
objective judgement throughout their tenure and promote a culture
of openness and debate. In addition, the chair facilitates
constructive board relations and the effective contribution of all
non-executive directors, and ensures that directors receive
accurate, timely and clear information.
The Chairman is Jonathan Davie. The Chairman promotes and
encourages active participation from all Directors at Board
meetings. Further, whilst adhering to membership guidelines,
sub‑committees also seek to
include as many Directors as possible to ensure a broad range of
views. All Directors receive regular monthly and quarterly
information prepared by the Portfolio Manager and Administrator, as
well as portfolio performance presentations from the Portfolio
Manager.
G.
The board should consist of an appropriate combination of directors
(and, in particular, independent non-executive directors) such that
no one individual or small group of individuals dominates the
board's decision making.
The Board consists of five Directors. All have a financial
background but each also brings individual specialisms and
experience that are complimentary. Their biographies are noted
earlier on in the Report. Four Directors are deemed independent.
The fifth, William Salomon, is the Senior Partner of the Company's
Portfolio Manager and, therefore, is deemed non-independent. All
Directors are actively involved in decisions and committees unless
conflicts exist which preclude this. Accordingly, Mr Salomon does
not participate in the evaluation of the performance of the
Portfolio Manager due to his role as senior partner of that firm.
Nor does he participate in decisions regarding the Company's
largest asset (by value) OWHL, due to him being a director of that
company. Finally, Mr Salomon is not a member of the Audit,
Nominations or Remuneration Committees due to his non-independent
status, although he does attend meetings of those Committees. The
culture of open and honest communication and forthright discussion
means no individual or small group dominate decision
making.
H.
Non-executive directors should have sufficient time to meet their
board responsibilities. They should provide constructive challenge,
strategic guidance, offer specialist advice and hold third party
service providers to account.
The Directors confirm they have sufficient time to meet their
responsibilities. Directors consult with the Company before
accepting other appointments, to confirm capacity to do so and that
no conflict exists. In considering appointments and potential
conflicts of interests the Board considers the available time each
Director has to commit to the Company. A formal calendar exists for
the Board meetings and sub-committees. Ad-hoc meetings may be
arranged without advance materials for time-sensitive matters. The
Portfolio Manager and AASP report to scheduled Board meetings,
giving the Directors the opportunity to challenge performance,
raise issues and offer guidance.
I.
The board, supported by the company secretary, should ensure that
it has the policies, processes, information, time and resources it
needs in order to function effectively and efficiently.
The Company Secretary and AASP support the Board in identifying and
monitoring all governance matters. Additionally, Directors are able
to consult external professional advisors to assist them in the
performance of their duties as and when required. Board reporting
and materials are refined on an ongoing basis.
Composition, succession and
evaluation
J.
Appointments to the board should be subject to a formal, rigorous
and transparent procedure, and an effective succession plan should
be maintained. Both appointments and succession plans should be
based on merit and objective criteria and, within this context,
should promote diversity of gender, social and ethnic backgrounds,
cognitive and personal strengths.
The Board has appointed a Nominations Committee chaired by an
independent director. The Nominations Committee conducts a formal
due diligence process on all appointments and considers annually
the continued suitability and performance of directors. The Company
believes a diverse Board brings many benefits and, as such, there
is no restriction placed on Board membership. Inclusivity,
diversity, variety of experience and personal strengths are all
incorporated in the decision making for director selection and
succession planning.
K.
The board and its committees should have a combination of skills,
experience and knowledge. Consideration should be given to the
length of service of the board as a whole and membership regularly
refreshed.
The Directors have a broad range of backgrounds including
investment management, finance and banking as well as operational
experience. Biographies of all Directors are shown earlier on in
the Report. Each director retires and is subject to re-election at
the AGM. The decision to propose directors for Nomination at the
AGM is made by the Nomination Committee. The Nominations Committee
is tasked with maintaining a broad range of skills and experiences
at times of succession.
L.
Annual evaluation of the board should consider its composition,
diversity and how effectively members work together to achieve
objectives. Individual evaluation should demonstrate whether each
director continues to contribute effectively.
The Nominations Committee is responsible for the ongoing
consideration of Board composition and to identify any skills gap,
now or in the future. The Nomination Committee considers Board
effectiveness annually.
Audit, risk and internal control
M.
The board should establish formal and transparent policies and
procedures to ensure the independence and effectiveness of external
audit functions and satisfy itself on the integrity of financial
and narrative statements.
The Board has specifically delegated the appointment and monitoring
of the Company's external Auditor to its Audit Committee. The
Company's Auditor was formally appointed in November 2019. The
tender process was led by the Chairman of the Audit Committee. The
Audit Committee considers the independence and effectiveness of the
external Auditor at least annually. The Company's Auditor does not
provide other services to the Company. The Company rigorously
follows policy and procedure to ensure effectiveness of the
external audit and integrity of financial reporting. Refer also to
the Audit Committee Report.
N.
The board should present a fair, balanced and understandable
assessment of the company's position and prospects.
The Board considers and approves all relevant shareholder
communications. The Annual and Half-Year Reports are reviewed by
the Board to ensure they present a fair and balanced view including
commentary on going concern and long-term viability. The Audit
Committee considers the fairness of the Financial Statements before
recommending them to the Board for approval.
The Annual and Half-Year Reports provide fair, balanced and
understandable commentary on the Company's performance and
prospects.
O.
The board should establish procedures to manage risk, oversee the
internal control framework, and determine the nature and extent of
the principal risks the company is willing to take in order to
achieve its long-term strategic objectives.
Principal risks are identified by the Board and risk appetite
established against these risks. Day to day risk management is
undertaken by the Portfolio Manager and AASP within the parameters
established by the Board. The Board meets with the Portfolio
Manager at each scheduled Board meeting where there is opportunity
to discuss particular aspects of the portfolio and associated
risks. Operational risk and compliance reporting are also regularly
discussed by the Board. Emerging risks are monitored and
incorporated into the risk appetite framework as they
arise.
Remuneration
P.
Remuneration policies and practices should be designed to support
strategy and promote long-term sustainable success.
The remuneration of Directors is overseen by the Remuneration
Committee, chaired by Simona Heidempergher. The Directors each
receive a fixed annual fee and do not receive any additional
element based on performance of the Company. Additionally,
Directors offer themselves annually for re-election at the
Company's AGM.
Q.
A formal and transparent procedure for developing policy on
remuneration should be established. No director should be involved
in deciding their own remuneration outcome.
The Directors' Remuneration Report notes that each Director is paid
a fixed fee representative of their roles and additional
responsibilities on the Board. This fee level is reviewed by the
Remuneration Committee annually considering performance, time
commitments and market conditions. Recommendations are made to the
Board for approval. Further detail is provided in the Remuneration
Committee Report.
R.
Directors should exercise independent judgement and discretion when
authorising remuneration outcomes, taking account of company and
individual performance, and wider circumstances.
Performance, individual contribution and market conditions are all
considered when setting directors' fees.
Compliance with The Financial Conduct Authority
Listing Rules
The Directors are responsible for ensuring
that:
Adequate accounting records are kept, that are
sufficient to show and explain the Company's transactions and
disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the
Financial Statements are consistent with the relevant requirements
under the UK Companies Act 2006.
The assets of the Company are safeguarded; and
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Report of the Directors and other
information included in the Annual Report is prepared in accordance
with both Company Law in Bermuda and, where required, the UK. The
Directors are also responsible for ensuring the Annual Report
includes information required by the Listing Rules of the
FCA.
The Company has effective internal control
systems, designed to ensure that adequate accounting records are
maintained; and that financial information on which the business
decisions are made, which is issued for publication, is reliable.
Such a system of internal control can provide only reasonable, but
not absolute, assurance against material misstatement or
loss.
The Company Financial Statements for each financial year are
prepared in accordance with International Financial Reporting
Standards (IFRS). IFRS means standards and interpretations issued
(or adopted) by the International Accounting Standards Board
(IASB). The Directors must not approve the Financial Statements
unless they are satisfied they give a true and fair view of the
state of affairs and profit or loss of the Company for that
period.
In preparing these Financial Statements, the
Directors are required to:
· select suitable
accounting policies and apply them consistently;
· make judgements
and estimates that are reasonable and prudent;
· state whether
they have been prepared in accordance with International Financial
Reporting Standards; and
· prepare the
Financial Statements on the going concern basis, unless it is
inappropriate to presume the Company will continue in
business.
Under the FCA Listing Rules and the UK Code, the
Board is responsible for:
· disclosing how it
has applied the principles and complied with the provisions of the
AIC Code and, thereby, the UK Code, or where not, to explain the
reasons for divergence.
· reviewing the
effectiveness of the Company's systems of risk management and
internal controls.
The Directors are responsible for the
maintenance and integrity of the corporate and financial
information included on the Company's website: www.HansaICL.com.
Visitors to the website need to be aware that legislation governing
the preparation and dissemination of the Financial Statements may
differ from legislation in their own jurisdictions.
Responsibility statement
The Directors confirm that:
The Financial Statements are prepared in
accordance with applicable international accounting standards and
present fairly, in all material respects, the financial position of
Hansa Investment Company.
The Strategic Report, including the Chairman's
Statement and the Report of the Directors includes a fair review of
the development and performance of the business and the position of
the Company, together with a description of the principal risks and
uncertainties it faces.
The Directors consider the Annual Report and
Financial Statements, taken as a whole, are fair, balanced and
understandable. Further commentary demonstrating the Company's
performance, business model and strategy has been included within
the Annual Report.
For and on behalf of the Board
Jonathan Davie
14 June 2024
Audit Committee Report
The Audit Committee comprises solely independent
Directors, as required by the AIC Code and endorsed by the FRC. It
is chaired by Richard Lightowler. Given the size of the Board and
the range of experience they bring, all non-committee Directors are
invited to attend the Audit Committee meetings. However, only the
independent member Directors are able to vote. Recommendations of
the Audit Committee are brought before the whole Board for
discussion and ratification.
The Audit Committee ensures fair, balanced and
understandable reporting of Company results.
The principal roles of the Audit Committee are
to ensure that:
· the integrity of
financial reporting within the Annual and Half-Year Reports taken
as a whole are fair, balanced and understandable and provide
information necessary for shareholders to assess the Company's
performance, business model and strategy;
· the independence,
objectivity and effectiveness of the external Auditor is maintained
and monitored. The Committee also reviews the external Auditor
performance in terms of quality and value;
· the financial
reporting internal controls system of the Company are adequate and
effective.
Financial Reporting and Internal
Controls
In discharging its duties and, in particular,
matters relating to the approval of the Annual Report, Half-Year
Report and the review of the Company's internal controls, the
Committee considers reports and presentations made by the Company's
Auditor, Administrator, Company Secretary, Additional
Administrative Services Provider (including those of its Compliance
Officer) and Legal Advisers.
In its review of the Financial Statements, the
Committee pays particular attention to the ownership of assets, the
valuations of the portfolio and recognition of income. In this
regard we receive regular reporting from the Portfolio Manager and
AASP, including reports on the effectiveness of internal controls
in these areas. In addition, the Committee discusses with, and
receives reports from, the Auditor on the nature and scope of work
performed on valuation and ownership of assets and on income
recognition.
The Company's Custodian confirms title of all
assets in its custody. In its consideration of valuations, the
Committee notes that 76% of the Investment Portfolio by value is
held in assets that are either traded or listed on an exchange or
are cash. Further, of the remaining 24% unquoted fund investments,
the majority primarily hold traded securities. Valuations for these
funds are supplied by third party managers. The Audit Committee
recognises that 52% of the total portfolio assets are Level 1 and
45% are Level 2 securities. Given the significant level of
externally valued assets, the Committee is satisfied with the
valuation process. There is very limited management judgement in
determining valuations. The Company holds approximately £8m (1.7%)
in private assets carried at valuations determined by the
investment manager. The Audit Committee considers the work
done by the Portfolio manager, including obtaining audited NAVs and
the work of the external Auditor in its assessment of fair values
reported. Revenue recognition does not involve significant
judgement or the use of estimates.
The Audit Committee also considers the potential
need for an internal audit function on an annual basis, recognising
the FRC guidance on proportionality. The Audit Committee considers
internal compliance testing at the Administrator and Portfolio
Manager to be sufficiently independent and robust to negate the
need for a standalone internal audit function.
No material control weaknesses or incidents of
potential fraud were identified. The Company's service providers
implement clear whistleblowing, anti-bribery and corruption
policies. The Company received direct reporting from service
providers on internal controls and audit reports on their internal
controls.
The Committee is authorised by the Board to
investigate any activity within its terms of reference, to seek any
information it requires from any officer or service provider to the
Company, to obtain outside legal or other independent professional
advice and to secure the attendance of third parties with relevant
experience and expertise if it considers this necessary.
The Chairman of the Audit Committee formally
reports to the Board following each Audit Committee meeting and on
other occasions as requested by the Board.
The Audit Committee confirmed to the Board that
the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy.
Audit: Independence and quality
The Audit Committee considers the external
Auditor's independence, objectivity, scope of work engagement team
experience, compliance with relevant ethical and professional
standards and overall quality of service through a process of
feedback from the Company advisors, including the AASP, the
Portfolio Manager and direct discussion with the Auditor. The
Committee also meets with the Auditor in an executive session at
least annually. The current audit partner is Scott
Watson‑Brown who has led the
audit since the Company's inception in June 2019 and the
appointment of PricewaterhouseCoopers Ltd as its
Auditor.
Auditors' remuneration and terms of engagement
are approved by the Audit Committee. Any non-audit services must be
pre-approved by the Audit Committee to ensure objectivity and
independence of the audit is not compromised. No
non‑audit services are
provided by PricewaterhouseCoopers Ltd to the Company. Further
information on fees paid to the Auditor is contained in "Other
Expenses" within Note 4 of the Financial Statements.
Company Auditor
The Company's independent Auditor is
PricewaterhouseCoopers Ltd, a Bermudan registered firm ("PwC
Bermuda"). PwC Bermuda has audited the Company since our
incorporation in 2019. Their audit has been supported by
PricewaterhouseCoopers LLP of the UK ("PwC UK"). To improve the
efficiency of the audit, the Directors recommend the appointment of
PwC UK as the Company's Auditor for the year ended 31 March 2025.
PwC Bermuda will continue to provide support to PwC UK. The Audit
Committee and Board remain very satisfied with quality of work by
the external auditors. This change in roles is being made for
efficiency purposes only.
For and on behalf of the Audit
Committee.
Richard Lightowler
Audit Committee Chairman
14 June 2024
Directors' Remuneration Report
Annual statement
The Company has five non-executive Directors.
The Board has appointed a Remuneration Committee. The Chairman of
this Committee is Simona Heidempergher. All independent members of
the Board are members of the Remuneration Committee. William
Salomon attends the Committee but is not a member.
Each Director was initially appointed during
June 2019 following the creation of the Company. Each Director
presents themselves for annual re-election at the Company's
AGM.
Policy on Directors' remuneration
The Board's policy is that the remuneration of
non-executive Directors should be a fixed-fee only. This fee should
reflect the experience of each director, time commitment required
to fulfil the role, market conditions, financial and reputational
risks undertaken and additional responsibilities. The remuneration
does not include a performance related element and Directors do not
receive bonuses, share options, pensions or long-term incentive
schemes. The aggregate remuneration of the Board will be kept
within the limits set out in the Company's Bye-laws, as amended
from time to time.
In assessing current and future levels of
director compensation, the Remuneration Committee seeks external
comparative information, such as the use of independent external
surveys. This includes the fees paid by other similar companies
(both industry and jurisdiction), seeking input from recruitment
specialists familiar with the external market, assessing the time
commitment for each of the Directors in their appointed roles and
considering the responsibilities their roles bring. The increasing
demands being placed on all NEDs by shareholders, regulators and
markets are also factored.
The fees for the non-executive Directors are
within the limits (maximum total fee of $600,000) as set out in the
Company's Bye-laws. The maximum is set as a USD amount. The
equivalent is £474,985 if translated at the applicable rate on 31
March 2024.
The Remuneration Committee has reviewed the
Directors' salaries against available comparables during the year.
The Committee concluded that Directors' salaries were to remain
unchanged during the financial year to 31 March 2024 and to
increase by an inflationary amount from 1 April 2024. The new total
salary is $415,000.
Directors' service contracts
It is the Board's policy that every Director has
a service contract. None of the service contracts is for a fixed
term. The terms of appointment provide that a Director shall retire
and be subject to re-election at the first AGM after appointment.
The Board has decided each Director will retire annually at the AGM
and seek re-election as appropriate. The terms also provide that
either party may give three months' notice. In certain
circumstances a Director may be removed without notice and
compensation will not be due on leaving office. There are no
agreements between the Company and its Directors concerning
compensation for loss of office.
Policy for notice periods
The current Directors' service contracts
stipulate three months' written notice to be given by either the
Director or the Company to terminate the services of a Director.
The Board consider this is sufficient notice to ensure an orderly
hand over between the parties.
Shareholders' views on remuneration
policy
The formal views of unconnected shareholders
have not been sought in the preparation of this policy.
Employees
The Company does not have any employees, only
non‑executive
Directors.
Annual report on remuneration
Directors' Emoluments (Audited)
The Company does not have any employees, only
non‑executive Directors who
receive only a basic fee, plus repayment of expenses incurred in
the course of performing their duties. Therefore, the use of the
detailed remuneration table, as prescribed in the legislation, is
not appropriate here. A condensed table showing the information
relevant to the Directors' remuneration is shown in its
place.
The Directors who received fees during the year
received the following emoluments in the form of fees. For clarity,
these amounts are quoted in the currency as per their service
contract. The Director's remuneration is set in USD, as is common
for most Bermudan companies. The following table notes the
Directors current annual fee as at 31 March 2024. It also notes
their fee, in USD, for the current and prior financial years. The
equivalent Sterling fees are shown as converted at the relevant pay
date of each fee:
|
2024
fee
$000
|
2024
fee
£000
|
2023
fee
$000
|
2023
fee
£000
|
Jonathan Davie (Chairman)
|
100
|
79
|
85
|
72
|
Simona Heidempergher
|
80
|
64
|
65
|
55
|
Richard Lightowler
|
90
|
71
|
75
|
63
|
William Salomon3
|
25
|
20
|
25
|
21
|
Nadya Wells
|
80
|
63
|
65
|
55
|
|
375
|
298
|
315
|
266
|
The Company also pays the expenses of the
Directors to attend the Board meetings. Directors' travel costs
incurred during the year were £126,000 (2023: £141,000).
Statement of shareholder voting
Votes in respect of the resolution to approve
the Directors' Remuneration Report at the Company's AGM in August
2023 were cast as follows:
|
No. of
shares
voted
|
% of
votes
cast
|
Votes cast in favour
|
21,435,454
|
98.13
|
Votes cast against
|
409,169
|
1.87
|
Total votes cast
|
21,844,623
|
100.00
|
Votes withheld
|
0
|
|
Directors' interests (audited)
Directors must seek permission from the Chairman
before trading in shares, taking note of any Closed Periods. Other
than that, there are no specific rules on Directors'
shareholdings.
The interests of Directors and their connected
parties in the Company at 31 March 2024 are shown below:
|
Ordinary shares
of 1p each
|
'A' non‑voting ordinary shares
of 1p each
|
Nature of
interest
|
|
2024
|
2023
|
2024
|
2023
|
Jonathan Davie
|
45,000
|
45,000
|
230,000
|
230,000
|
Beneficial
|
William Salomon
|
11,169,345
|
11,169,345
|
3,587,123
|
3,508,723
|
Beneficial
|
Simona Heidempergher
|
6,400
|
6,400
|
-
|
-
|
Beneficial
|
As at 14 June 2024, the date of signing of these
Annual Financial Statements, there were no changes to report to the
Directors' holdings.
William Salomon is the senior partner of Hansa
Capital Partners LLP. Fees payable to Hansa Capital Partners LLP
amounted to £3,065,129 (including Portfolio Management and
AASP functions). The fees outstanding at the year end amounted to
£285,000. During the year, no rights to subscribe for the shares of
the Company were granted to, or exercised by Directors, their
spouses or infant children.
Directors' attendance
The Directors meet as a Board on a quarterly
basis and at other times as necessary and the table below sets out
the number of operational meetings and the attendance at them by
each Director.
|
Board1
|
Strategy
Day
|
Audit
Committee
|
Remuneration Committee
|
Nomination
Committee
|
Management Engagement
Committee3
|
Number of Meetings
|
9
|
2
|
2
|
2
|
1
|
-
|
Jonathan Davie
|
9
|
2
|
2
|
2
|
1
|
-
|
Simona Heidempergher
|
8
|
2
|
2
|
2
|
1
|
-
|
Richard Lightowler
|
9
|
2
|
2
|
2
|
1
|
-
|
William Salomon2
|
5
|
2
|
2
|
2
|
1
|
-
|
Nadya Wells
|
7
|
2
|
2
|
2
|
1
|
-
|
1 "Board" includes full
meetings of the Board, of which there were five held during the
year, as well as periodic 'other' meetings and Board calls to
consider and approve operational requirements for the Company, such
as quarterly dividends. These 'other' meetings are arranged as and
when required and require the meeting to be quorate but not
necessarily attended by all Directors.
2 William Salomon is
deemed to not be independent. Therefore, he attends as an observer
of the Audit and Remuneration Committees but is not a committee
member. Further, he attends the Management Engagement Committee
when the majority of Service Providers are discussed but exempts
himself when the performance of the Portfolio Manager is discussed
due to his position as its Senior Partner.
3 The Management
Engagement Committee column is shows no meetings within the
Financial Year. This is because the meetings were held in Bermuda
in February 2023 and April 2024 - thus missing our financial year
ended 31 March 2024.
On behalf of the Board, I confirm that the above
Report on Directors' Remuneration summarises, as applicable, for
the year ended 31 March 2024:
(a) the major decisions on Directors'
remuneration;
(b) any substantial changes relating to
Directors' remuneration made during the year; and
(c) the context in which those changes
occurred and decisions have been taken.
An Ordinary resolution for the approval of this
Report will be put to shareholders at the forthcoming
AGM.
For and on behalf of the Board
Simona Heidempergher
Chairman of the Remuneration
Committee
14 June 2024
Nominations Committee Report
The Committee was chaired by Nadya Wells
throughout the financial year. All independent members of the Board
are members of the Nomination Committee. William Salomon attends
the Committee but is not a member.
Role
The Committee reviews the structure, size and
composition (including the skills, knowledge and experience) of the
Board and makes recommendations to the Board with regard to any
changes, as necessary. It also considers succession planning of
directors, taking into account tenure and performance of board
members as well as challenges and opportunities facing the Company,
and what skills and expertise are, therefore, needed on the Board
in the future. If a skills-gap or pending vacancy is identified,
the Committee is responsible for identifying and nominating
candidates to fill Board vacancies as and when they
arise.
Appointments are made after consideration of the
skills and experience needed by the Board and against objective
criteria in accordance with the AIC Code. The Board considers it is
of paramount importance to shareholders that, after consideration
of the skills and experience needed by the Board, candidates are
chosen on the basis of their contribution to the Company's needs
and that there should be no discrimination in the choice of
Directors for any reason. The Nominations Committee pays due regard
to the final rules published by the Financial Conduct Authority in
April 2022 in respect of diversity and inclusion on company boards
and executive management. The Company believes a diverse Board
brings many benefits and, as such, there is no restriction placed
on Board membership. Selection and appointment will continue to be
based on merit and against a skills matrix to ensure the overall
composition of the Board has an appropriate balance of knowledge
and experience, whilst remaining cognisant of the relevant
geographic and diversity considerations. The Board has determined
that all Directors will retire and offer themselves for re-election
each year at the AGM and this policy includes any Directors
appointed during the year. The Committee reports its
recommendations to the Board for final approval.
Activities during the year
The Nomination Committee met twice during the
year. The Committee has developed a Skills Matrix to summarise the
knowledge, skills, experience and overall competence of each
Director. This included anonymised feedback from the other Board
members as well as feedback from each individual Director
themselves. The Skills Matrix considers a wide range of relevant
factors when assessing individual and collective competence
including knowledge, skills, experience, diversity, geographic
considerations, other time and business commitments, as well as
their overall performance and contribution during the period in
relation to their specific role. Following its review, and in line
with the small size, structure and nature of the Company, the
Committee concluded that each Director continued to contribute as
required, and the Board continued to operate
effectively.
Following the annual review of Board Skills, the
Nomination Committee was supportive of re-appointing the Directors
to the Board within the 2024 AGM. However, Nadya Wells has chosen
not to stand for re-election at the forthcoming AGM due to
additional professional commitments. Consequently, as of 14 June
2024, Nadya's responsibility as Chair of the Nominations Committee
has passed to Simona Heidempergher.
Succession planning
The current Directors were all originally
appointed in June 2019. Following Nadya's decision, the Board is in
the process of identifying a director to join in Nadya's place. As
part of the Skills Matrix utilised to evaluate Board composition,
the Board notes the number of years each Director has served and
their expected date of retirement. While the Board does not
consider the length of tenure to have a direct negative correlation
to the Directors performance and contribution, the Nomination
Committee remains cognisant of the AIC recommendations and
therefore still considers this element as part of its overall
succession planning.
For and on behalf of the Board
Simona Heidempergher
Chairman of the Nomination Committee
14 June 2024
Financial Statements
Independent auditor's report
To the Board of Directors and Shareholders of
Hansa Investment Company Limited
Report on the audit of the financial
statements
Our opinion
In our opinion, the financial statements present
fairly, in all material respects, the financial position of Hansa
Investment Company Limited (the Company) as at 31 March 2024, and
its financial performance and its cash flows for the year then
ended in accordance with IFRS Accounting Standards.
What we have audited
The Company's financial statements
comprise:
· the balance sheet
as at 31 March 2024;
· the income
statement for the year then ended;
· the statement of
changes in equity for the year then ended;
· the cash flow
statement for the year then ended; and
· the notes to the
financial statements, comprising material accounting policy
information and other explanatory information.
Certain required disclosures have been presented
elsewhere in the Annual Report, rather than in the notes to the
financial statements. These are cross-referenced from the financial
statements and are identified as audited.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (ISAs). Our responsibilities
under those standards are further described in the Auditor's
responsibilities for the audit of the financial statements section
of our report.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Company in accordance
with the International Code of Ethics for Professional Accountants
(including International Independence Standards) issued by the
International Ethics Standards Board for Accountants (IESBA Code)
and the ethical requirements of the Chartered Professional
Accountants of Bermuda Rules of Professional Conduct (CPA Bermuda
Rules) that are relevant to our audit of the financial statements
in Bermuda. We have fulfilled our other ethical responsibilities in
accordance with the IESBA Code and the ethical requirements of the
CPA Bermuda Rules.
Our audit approach
Overview
|
Overall materiality: £4,545,000 based on
approximately 1% of net assets.
|
|
In addition to determining materiality, amongst
other factors, the following were assessed in designing our
audit:
the risk of material misstatement in the
financial statements
significant accounting estimates
the risk of management override of internal
controls
|
|
Valuation and existence of
investments
Accuracy, occurrence and completeness of
investment income
|
Audit scope
As part of designing our audit, the risks of
material misstatement in the financial statements were assessed and
materiality determined. In particular, consideration was given to
where management made subjective judgements; for example, in
respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently
uncertain. As in all of our audits, the risk of management override
of internal controls was addressed, including, among other matters,
consideration of whether there was evidence of bias that
represented a risk of material misstatement due to
fraud.
The scope of our audit was tailored in
order to perform sufficient work to enable us to provide an opinion
on the financial statements as a whole, taking into account the
structure of the Company, the accounting processes and controls,
and the industry in which the Company operates.
Materiality
The scope of our audit was influenced by our
application of materiality. An audit is designed to obtain
reasonable assurance whether the financial statements are free from
material misstatement. Misstatements may arise due to fraud or
error. They are considered material if, individually or in
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
Based on our professional judgement, certain
quantitative thresholds for materiality were determined, including
the overall materiality for the financial statements as a whole as
set out in the table below. These, together with qualitative
considerations, helped to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate
the effect of misstatements, both individually and in aggregate, on
the financial statements as a whole.
Overall materiality
|
£4,545,000
|
How we determined it
|
Approximates 1% of net assets
|
Rationale for the materiality benchmark
applied
|
The benchmark was applied as a generally
accepted audit practice for investment company audits.
|
We agreed with the Audit Committee that we would
report to them misstatements identified during our audit above
£227,000, as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most significance in our audit of
the financial statements of the current period. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key AUDIT MATTER
|
How our audit addressed the key audit
matter
|
Valuation and existence of
investments
Refer to notes 1(c) Non-current investments and
8 Investments held at fair value through profit or loss to the
financial statements for disclosures of related accounting policies
and balances.
The investment portfolio as at 31 March 2024 is
comprised of listed equity investments valued at £325 million (72%)
and unquoted investments valued at £124 million
(28%).
We focused on the valuation and existence of
listed and unquoted investments because the investment portfolio
represents the principal element of net asset value as disclosed in
the Company's balance sheet.
|
Our approach to addressing the matter involved
the following procedures, amongst others:
Listed equity investments:
Tested the existence of the listed investment
portfolio by agreeing the holdings for investments to an
independent custodian confirmation.
Tested the valuation of the listed investments
by agreeing the prices used in the valuation to independent
third-party sources.
Unquoted investments:
Understood and evaluated the controls around the
pricing of unquoted investments including the final approval of the
valuation by the Manager and the Board of Directors.
Obtained direct confirmation of the existence of
investments held and the price from each fund
administrator.
Recalculated 100% of the unquoted portfolio's
fair value as at year end and compared to management's
valuation.
Obtained an understanding of the underlying
methodology applied to each unquoted investment through review of
their most recently available audited financial statements to
evaluate whether it was based on fair value.
Based on the procedures detailed above, we did
not identify any misstatements which required reporting to those
charged with governance.
|
Accuracy, occurrence and completeness of
investment income
Refer to notes 1(e) Investment income and return
of capital and 2 Investment income to the financial statements for
disclosures of related accounting policies and balances.
Investment income consists of dividend income of
£7.8 million.
We focused on the accuracy, occurrence and
completeness of investment income recognition as incomplete or
inaccurate income could have a material impact on the Company's net
asset value and dividend cover.
We also focused on the accounting policy for
income recognition along with its allocation and presentation in
the income statement as set out in the requirements of The
Association of Investment Companies Statement of Recommended
Practice (the "AIC SORP") as incorrect application could indicate a
misstatement in income recognition.
|
Our approach to addressing the matter involved
the following procedures, amongst others:
Assessed the accounting policy for investment
income recognition for compliance with accounting standards and the
AIC SORP and performed testing to evaluate whether income had been
accounted for in accordance with this stated accounting
policy.
Tested the accuracy of dividend receipts by
agreeing the dividend rates from investments to independent market
data.
Tested investment holdings, on a sample basis,
that all related dividends declared in the market had been
recorded.
Tested occurrence by confirming that all
dividends recorded in the period had been declared in the market by
investment holdings.
Tested the allocation and presentation of
investment income between the revenue and capital return columns of
the income statement in line with the requirements set out in the
AIC SORP by assessing management's judgement of the nature, facts
and circumstances in determining the classification of the
distribution.
Based on the procedures detailed above we did
not identify any misstatements which required reporting to those
charged with governance.
|
Other information
Management is responsible for the other
information. The other information comprises the Annual Report (but
does not include the financial statements and our auditor's report
thereon).
Our opinion on the financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We
have nothing to report in this regard.
UK Corporate Governance Code
We have nothing to report in respect of our
responsibility to report when the Directors' statement relating to
the Company's compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified, under
the Listing Rules of the FCA, for review by the
auditors.
Responsibilities of management and those
charged with governance for the financial statements
Management is responsible for the preparation
and fair presentation of the financial statements in accordance
with IFRS Accounting Standards and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements,
management is responsible for assessing the Company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the
Company or to cease operations, or has no realistic alternative but
to do so.
Those charged with governance are responsible
for overseeing the Company's financial reporting
process.
Auditor's responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable
assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and
to issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we
exercise professional judgement and maintain professional
scepticism throughout the audit. We also:
· Identify and
assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
· Obtain an
understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control.
· Evaluate the
appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by
management.
· Conclude on the
appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that
may cast significant doubt on the Company's ability to continue as
a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor's report to the
related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause
the Company to cease to continue as a going concern.
· Evaluate the
overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with
governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance
with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them
all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with those charged
with governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partner on the audit resulting in
this independent auditor's report is Scott Watson-Brown.
PricewaterhouseCoopers Ltd.
Chartered Professional Accountants
Hamilton, Bermuda
14 June 2024
Income Statement
For the year ended 31 March 2024
|
|
Year ended
31 March
2024
|
Year ended
31 March
2023
|
|
Note
|
Revenue
£000
|
Capital
£000
|
Total
£000
|
Revenue
£000
|
Capital
£000
|
Total
£000
|
Gains/(losses) on investments held at fair
value through profit or loss
|
8
|
-
|
88,760
|
88,760
|
-
|
(14,924)
|
(14,924)
|
Foreign Exchange (losses)/gains
|
|
-
|
(492)
|
(492)
|
-
|
327
|
327
|
Income
|
|
|
|
|
|
|
|
Investment income
|
2
|
7,780
|
-
|
7,780
|
6,892
|
-
|
6,892
|
|
|
7,780
|
88,268
|
96,048
|
6,892
|
(14,597)
|
(7,705)
|
Portfolio management fees
|
3
|
(2,950)
|
-
|
(2,950)
|
(2,824)
|
-
|
(2,824)
|
Other expenses
|
4
|
(1,676)
|
-
|
(1,676)
|
(1,527)
|
-
|
(1,527)
|
|
|
(4,626)
|
-
|
(4,626)
|
(4,351)
|
-
|
(4,351)
|
Income/(losses) before finance costs
|
|
3,154
|
88,268
|
91,422
|
2,541
|
(14,597)
|
(12,056)
|
Finance costs
|
5
|
-
|
-
|
-
|
(1)
|
-
|
(1)
|
Income/(losses) for the year
|
|
3,154
|
88,268
|
91,422
|
2,540
|
(14,597)
|
(12,057)
|
Return per Ordinary and 'A' non-voting Ordinary
share
|
7
|
2.6p
|
73.6p
|
76.2p
|
2.1p
|
(12.2)p
|
(10.1)p
|
The Company does not have any income or expense
not included in the above Statement. Accordingly, the
"Income/(losses) for the Year" is also the "Total Comprehensive
Income/(expense) for the Year", as defined in IAS 1 (revised) and
no separate Statement of Comprehensive Income has been
presented.
The total column of this Statement represents
the Income Statement, prepared in accordance with IFRS Accounting
Standards ("IFRS").
All revenue and capital items in the above
Statement derive from continuing operations.
The accompanying notes found further on are an
integral part of this Statement.
Balance Sheet
As at 31 March 2024
|
Note
|
31 March
2024
£000
|
31 March
2023
£000
|
Non-current assets
|
|
|
|
Investments held at fair value through profit
or loss
|
8
|
449,153
|
353,262
|
|
|
449,153
|
353,262
|
Current assets
|
|
|
|
Trade and other receivables
|
10
|
1,463
|
128
|
Cash and cash equivalents
|
11
|
4,352
|
13,987
|
|
|
5,815
|
14,115
|
|
|
|
|
Current liabilities
|
|
|
|
Trade and other payables
|
12
|
(421)
|
(412)
|
Net current assets
|
|
5,394
|
13,703
|
Net assets
|
|
454,547
|
366,965
|
|
|
|
|
Capital and reserves
|
|
|
|
Called up share capital
|
13
|
1,200
|
1,200
|
Contributed surplus
|
14
|
322,839
|
323,799
|
Retained earnings
|
15
|
130,508
|
41,966
|
Total shareholders' funds
|
|
454,547
|
366,965
|
Net asset value per Ordinary and 'A' non-voting
Ordinary share
|
16
|
378.8p
|
305.8p
|
The Financial Statements of Hansa Investment
Company Limited, registered in Bermuda under company number 54752,
were approved by the Board of Directors on 14 June 2024 and were
signed on its behalf by
Jonathan Davie
Chairman
The accompanying notes found further on are an
integral part of this Statement.
Statement of Changes in Equity
For the year ended 31 March 2023
|
Note
|
Share
capital
£000
|
Contributed
surplus
reserve
£000
|
Retained
earnings
£000
|
Total
£000
|
Equity at 1 April 2022
|
|
1,200
|
324,759
|
56,903
|
382,862
|
Loss for the year
|
|
-
|
-
|
(12,057)
|
(12,057)
|
Dividends
|
6
|
-
|
(960)
|
(2,880)
|
(3,840)
|
Equity at 31 March 2023
|
|
1,200
|
323,799
|
41,966
|
366,965
|
The accompanying notes found further on are an
integral part of this Statement.
Cash Flow Statement
For the year ended 31 March 2024
|
Note
|
Year ended
31 March
2024
£000
|
Year ended
31 March
2023
£000
|
Cash flows from operating activities
|
|
|
|
Income / (loss)*
|
|
91,422
|
(12,056)
|
Adjustments for:
|
|
|
|
Realised gains on investments
|
8
|
(6,228)
|
(5,571)
|
Unrealised (gains)/losses on
investments
|
8
|
(82,532)
|
20,495
|
Foreign exchange
|
|
492
|
(327)
|
(Increase)/decrease in trade and other
receivables
|
10
|
(1,335)
|
73
|
Increase in trade and other payables
|
12
|
9
|
44
|
Purchase of non-current investments
|
|
(69,313)
|
(78,568)
|
Sale of non-current investments
|
|
62,182
|
90,368
|
Net cash (outflow)/inflow from operating
activities
|
|
(5,303)
|
14,458
|
Cash flows from financing activities
|
|
|
|
Interest paid on bank loans
|
|
-
|
(1)
|
Dividends paid
|
6
|
(3,840)
|
(3,840)
|
Drawdown/(repayment) of loans
|
|
-
|
-
|
Net cash outflow from financing
activities
|
|
(3,840)
|
(3,841)
|
(Decrease)/increase in cash and cash
equivalents
|
|
(9,143)
|
10,617
|
Cash and cash equivalents at start of financial
year
|
|
13,987
|
3,043
|
Effect of foreign exchange rate
changes
|
|
(492)
|
327
|
Cash and cash equivalents at end of
year
|
11
|
4,352
|
13,987
|
*Includes dividends received of £7,602,000
(2023: £6,810,000) and interest received of nil (2023:
£nil).
The accompanying notes are an integral part of
this Statement.
Notes to the Financial Statements
1 Material accounting policy
information
Hansa Investment
Company Limited is a company limited by shares, registered and
domiciled in Bermuda with its registered office shown on further
on. The principal activity of the Company is an investment
vehicle.
(a) Basis of preparation
The Financial
Statements of the Company have been prepared in accordance with
IFRS Accounting Standards ("IFRS"). IFRS means standards and
interpretations issued (or adopted) by the International Accounting
Standards Board (they comprise: International Reporting Standards,
International Accounting Standards (IAS) and Interpretations
developed by the IFRS Interpretations Committee or the former
Standing Interpretations Committee (SIC)).
These Financial
Statements are presented in sterling because that is the currency
of the primary economic environment in which the Company operates.
The Financial Statements have been prepared on a going concern
basis under the historic cost convention, modified by financial
assets held at fair value through profit or loss with the assertion
of the Board can be found earlier in the report. The Financial
Statements have also been prepared in accordance with the AIC
Statement of Recommended Practice (SORP) for investment trusts,
issued by the AIC in July 2022, to the extent that the SORP does
not conflict with IFRS. The material accounting policy information
adopted is set out below.
(b) Presentation of Income Statement
In order to
better reflect the activities of an investment company and in
accordance with guidance issued by the AIC, supplementary
information which analyses the Income Statement between items of a
revenue and capital nature, has been presented alongside the Income
Statement.
(c) Non-current investments
As the Company's
business is investing in financial assets, with a view to profiting
from their total return in the form of income received and
increases in fair value, investments are classified at fair value
through profit in accordance with IFRS 9. The Company manages and
evaluates the performance of these investments on a fair value
basis, in accordance with its investment strategy and information
about the investments is provided on this basis to the Board of
Directors.
Investments are
recognised and de-recognised on the trade date. For listed
investments fair value is deemed to be bid market prices, or
closing prices for SETS stocks sourced from the London Stock
Exchange. SETS is the London Stock Exchange's electronic trading
service, covering most of the market including all FTSE 100
constituents and most liquid FTSE 250 constituents, along with some
other securities.
Fund investments
are stated at fair value through profit or loss as determined by
using the most recent available valuation which is considered to be
fair value at the Balance Sheet date. In some cases, this will be
by reference to the most recent valuation statement supplied by the
fund's manager. In other cases, values may be available through the
fund being listed on an exchange or via pricing sources such as
Bloomberg.
Private equity
investments are stated at fair value through profit or loss in
accordance with the International Private Equity and Venture
Capital Valuation Guidelines. Private equity investments are
carried at the fair value as reported by the Private Equity Fund
Manager (PEFM). In the absence of a valuation by the PEFM at the
balance sheet date, additional procedures to determine the
reasonableness of the fair value estimate for inclusion in the
Financial Statements are performed. These may include direct
enquiries of the PEFM of the investment to understand, amongst
others, valuation process and techniques used, external experts
used in the valuation process and updated details of the underlying
portfolio. In addition, the Company can obtain external independent
valuation data and benchmarks to validate fair value estimates.
Further, recent arms-length market transactions between
knowledgeable and willing parties where available might also be
considered. Subsequent to the balance sheet date, the
Administrator, will review subsequent valuations released by the
Private Equity fund to look for consistency with the estimations
made as described above.
Unrealised gains
and losses, arising from changes in fair value, are included in net
profit or loss for the period as a capital item in the Income
Statement and are ultimately recognised in the Capital
Reserves.
(d) Cash and cash equivalents
Cash and cash
equivalents comprise cash at bank, short-term deposits and cash
funds with an original maturity of three months or less and are
subject to an insignificant risk of changes in capital
value.
(e) Investment Income and return of
capital
Dividends
receivable on equity shares are recognised on the ex-dividend date.
Where no ex-dividend date is quoted, dividends are recognised when
the Company's right to receive payment is established. Dividends
and Real Estate Investment Trusts' (REIT) income are all stated net
of withholding tax. In many cases, Bermudan companies cannot
recover foreign incurred taxes withheld on dividends and capital
transactions. As a result, any such taxes incurred will be charged
as an expense and included here.
When an investee
company returns capital to the Company, the amount received is
treated as a reduction in the book cost of that investment and is
classified as sale proceeds.
(f) Expenses
All expenses are
accounted for on an accruals basis. Expenses are charged through
the revenue column of the Income Statement except expenses which
are incidental to the acquisition or disposal of an investment
which are charged to the capital column of the Income
Statement.
(g) Taxation
Under Bermuda
law, to the extent the Company remains out of scope of the
Corporate Income Tax Act 2023 (the "CIT Act"), the Company is not
required to pay taxes in Bermuda on either income or capital
gains.
Bermuda enacted
the CIT Act on 27 December 2023. Entities subject to tax under the
CIT Act are the Bermuda constituent entities of multi-national
groups. A multi-national group is defined under the CIT Act as a
group with entities in more than one jurisdiction with consolidated
revenues of at least EUR750mm for two out of the four previous
fiscal years. If Bermuda constituent entities of a multi-national
group are subject to tax under the CIT Act, such tax is charged at
a rate of 15 per cent of the net taxable income of such constituent
entities as determined in accordance with and subject to the
adjustments set out in the CIT Act (including in respect of foreign
tax credits applicable to the Bermuda constituent
entities).
Consolidated
revenues of the Company's group are less than EUR750mm in each
previous fiscal year. On this basis, the Company is not, and
neither is it expected to be, in scope of the CIT Act
regime.
(h) Foreign Currencies
Transactions
denominated in foreign currencies are recorded in the local
currency, at the actual exchange rates as at the date of the
transaction. Assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at the rate of
exchange prevailing at the balance sheet date. Any gains or losses
arising from a change in exchange rates, subsequent to the date of
the transaction, are included as exchange gains or losses in the
capital or revenue column of the Income Statement, depending on
whether the gains or losses are of a capital or revenue nature
respectively.
(i) Retained Earnings
Contributed Surplus
The following
are credited or charged to this reserve via the capital column of
the Income Statement:
gains and losses on the disposal of
investments;
exchange differences of a capital
nature;
expenses charged to the capital column of the
Income Statement in accordance with the above accounting policies;
and
increases and decreases in the valuation of
investments held at the balance sheet date.
Revenue Reserves
The following
are credited or charged to this reserve via the revenue column of
the Income Statement:
net revenue recognised in the revenue column of
the Income Statement.
Under Bermuda
Company Law, Retained Earnings and Contributed Surplus Reserve are
both distributable.
(j) Significant Judgements and
Estimates
The key
significant estimate to report, concerns the Company's valuation of
its holding in DV4 Ltd. DV4 is valued using the most recent
estimated NAV as advised to the Company by DV4, adjusted for any
further drawdowns, distributions or redemptions between the
valuation date and 31 March 2024. The most recent valuation
statement was received on 21 February 2024 stating the value of the
Company's holding as at 31 December 2023. In the absence of a
valuation for 31 March 2024 from DV4, the Company performed
additional procedures to determine the reasonableness of the fair
value estimate for inclusion in the Financial Statements. Direct
enquiries of the manager of DV4 were made in July 2020 to
understand, amongst others, valuation process and techniques used,
external experts used in the valuation process and updated details
of underlying property portfolio. It has been confirmed with DV4's
manager that the valuation procedures discussed in July 2020 are
still the same used now. In addition, the Company has compared the
historic valuation movements of DV4 to the FTSE350 Real Estate
Index. Based on the information obtained and additional analysis
performed the Company is satisfied that DV4 is carried in these
Financial Statements at an amount that represents its best estimate
of fair value at 31 March 2024. It is believed the value of DV4 as
at 31 March 2024 will not be materially different, but this
valuation is based on historic valuations by DV4, does not have a
readily available third party comparator and, as such, is an
estimate. There are no significant judgements.
(k) Adoption of new and revised
standards
At the date of
authorisation of these Financial Statements there were no standards
and amendments to the standards, which have not been applied in
these Financial Statements.
In the current
financial period the Company has applied the following amendments
to standards:
Amendments to IAS1 'Classification of
liabilities as current or non-current' (effective for accounting
periods beginning on or after 1 January 2023).
IFRS 17, 'Insurance contracts' (effective for
accounting periods beginning on or after 1 January
2023).
Amendments to IAS 8 'Definition of Accounting
Estimates' (effective for accounting periods on or after 1 January
2023).
Amendments to IAS 1 and IFRS Practice Statement
2 'Disclosure of Accounting Policies' (effective for accounting
periods on or after 1 January 2023).
Amendments to IAS 12 'Deferred Tax related to
Assets and Liabilities arising from a Single Transaction'
(effective for accounting periods on or after 1 January
2023).
There is no
material impact on the Financial Statements or the amounts reported
from the adoption of these amendments to the standards.
Relevant
International Accounting Standards that have yet to be
adopted:
IAS 1 -
Classification of liabilities as current or non-current (effective
1 January 2024). The IASB has amended IAS 1 Presentation of
Financial Statements to clarify its requirement for the
presentation of liabilities depending on the rights that exist at
the end of the reporting period. The amendment requires liabilities
to be classified as non-current if the entity has a substantive
right to defer settlement for at least 12 months at the end of the
reporting period. The amendment no longer refers to unconditional
rights.
IAS 1 -
Non-current liabilities with covenants (effective 1 January 2024).
The IASB has amended IAS 1 Presentation of Financial Statements to
introduce additional disclosures for liabilities with covenants
within 12 months of the reporting period. The additional
disclosures include the nature of covenants, when the entity is
required to comply with covenants, the carrying amount of related
liabilities and circumstances that may indicate that the entity
will have difficulty complying with the covenants.
(l) Operating Segments
The Company
considers it has one operating segment for the purposes of IFRS
8.
2 Investment income
|
Revenue
Year ended
31 March
2024
£000
|
Revenue
Year ended
31 March
2023
£000
|
Income from quoted investments
|
|
|
Dividends
|
7,780
|
6,892
|
Total income
|
7,780
|
6,892
|
Note: Of the dividend income received during
the financial year, £5.3m was received from the Company's Strategic
Holding in OWHL by way of a dividend received on 15 June 2023. The
remainder was received from holdings within the Global Equity
(direct) & Core Regional silos.
3 Portfolio management
fee
|
Revenue
Year ended
31 March
2024
£000
|
Revenue
Year ended
31 March
2023
£000
|
Portfolio management fee
|
2,950
|
2,824
|
Total management fee
|
2,950
|
2,824
|
As disclosed earlier in the report, the
portfolio management fee is charged at an annual rate of 1% of the
net assets of the Company (after any borrowings), after deducting
the value of the investment in OWHL, on which no fee is
payable.
4 Other expenses
|
Revenue
Year ended
31 March
2024
£000
|
Revenue
Year ended
31 March
2023
£000
|
Administration fees
|
154
|
150
|
Directors' remuneration
|
298
|
262
|
Auditor's remuneration for audit of the
Company's Annual Financial Statements
|
92
|
68
|
Printing fees
|
57
|
36
|
Directors' liability insurance
|
67
|
67
|
Marketing
|
75
|
140
|
Registrar's fees
|
80
|
93
|
Banking charges
|
19
|
38
|
Secretarial services
|
159
|
153
|
Travel expenses
|
126
|
217
|
Broker fees
|
32
|
25
|
Stock Exchange listing fees
|
42
|
50
|
Safe custody fees
|
184
|
180
|
Management fee rebate from GAM
|
(13)
|
(28)
|
Other
|
304
|
76
|
Total other expenses
|
1,676
|
1,527
|
5 Finance costs
|
Revenue
Year ended
31 March
2024
£000
|
Revenue
Year ended
31 March
2023
£000
|
Interest payable
|
-
|
1
|
Total finance costs
|
-
|
1
|
As disclosed earlier in the report, the Company
has an unsecured lending facility through its Custodian, Banque
Lombard Odier & Cie SA ("Lombard Odier"), in the amount of
£30m, subject to there being sufficient value and diversity within
the portfolio to meet the lender's borrowing requirements. The
facility is used periodically for short-term transactional
funding requirements. As a result, the cost incurred in finance
fees are not necessarily consistent between financial
years.
6 Dividends paid
|
Year ended
31 March
2024
£000
|
Year ended
31 March
2023
£000
|
Amounts recognised as distributed to
shareholders in the year are as follows:
|
|
|
Fourth interim dividend for 2023 (paid 26 May
2023): 0.8p (2022: 0.8p)
|
960
|
960
|
First interim dividend for 2024 (paid 25 August
2023): 0.8p (2023: 0.8p)
|
960
|
960
|
Second Interim dividend for 2024 (paid 24
November 2023): 0.8p (2023: 0.8p)
|
960
|
960
|
Third Interim dividend for 2024 (paid 23
February 2024): 0.8p (2023:0.8p)
|
960
|
960
|
Total dividends paid
|
3,840
|
3,840
|
Set out below are the total dividends paid and
proposed in respect of the current financial year. Where there has
been no revenue available for distribution by way of dividend for
the year, dividends have been paid from capital reserves,
specifically contributed surplus which is permitted by Bermudan
company law.
|
Year ended
31 March
2024
£000
|
Year ended
31 March
2023
£000
|
First interim dividend for 2024 (paid 25 August
2023): 0.8p (2023: 0.8p)
|
960
|
960
|
Second Interim dividend for 2024 (paid 24
November 2023): 0.8p (2023: 0.8p)
|
960
|
960
|
Third Interim dividend for 2024 (paid 23
February 2024): 0.8p (2023:0.8p)
|
960
|
960
|
Fourth interim dividend for 2023 (payable 31
May 2024):0.8p 2023 (0.8p)
|
960
|
960
|
Total dividends paid & proposed
|
3,840
|
3,840
|
The Board has announced four interim dividends,
each of 0.8p per Ordinary and 'A' non-voting Ordinary share,
relating to the year ended 31 March 2024. No final dividend is
proposed for the year ended 31 March
2024.
.
7 Return on ordinary shares
(equity)
|
Revenue
year ended
31 March
2024
|
Capital
year ended
31 March
2024
|
Total
year ended
31 March
2024
|
Revenue
year ended
31 March
2023
|
Capital
year ended
31 March
2023
|
Total
year ended
31 March
2023
|
Returns per share
|
2.6p
|
73.6p
|
76.2p
|
2.1p
|
(12.2)p
|
(10.1)p
|
Returns
Revenue return per share is based on the
revenue attributable to equity shareholders of £3,154,000 (2023:
£2,540,000).
Capital return per share is based on the
capital profit attributable to equity shareholders of £88,268,000
(2023: loss of £14,597,000).
Total return per share is based on a
combination of revenue and capital returns attributable to equity
shareholders, amounting to net profit of £91,422,000 (2023: loss of
£12,057,000).
Both revenue and capital return are based on
40,000,000 Ordinary shares and 80,000,000 'A' non-voting Ordinary
shares, in issue throughout the year.
8 Investments held at fair value
through profit or loss
|
Listed
£000
|
Unquoted
£000
|
2024
Total
£000
|
2023
Total
£000
|
Cost at 1 April
|
242,560
|
76,138
|
318,698
|
324,927
|
Investment holding gains at 1 April
|
21,400
|
13,164
|
34,564
|
55,059
|
Valuation as at 1 April
|
263,960
|
89,302
|
353,262
|
379,986
|
Movements in the year:
|
|
|
|
|
Purchases at cost
|
53,016
|
16,297
|
69,313
|
78,568
|
Sales - proceeds
|
(71,652)
|
9,470
|
(62,182)
|
(90,368)
|
Movement in investment holding
Gains/(losses)
|
79,412
|
9,348
|
88,760
|
(14,924)
|
Valuation as at 31 March
|
324,736
|
124,417
|
449,153
|
353,262
|
Cost as at 31 March
|
230,152
|
101,905
|
332,057
|
318,698
|
Investment holding gains
|
94,584
|
22,512
|
117,096
|
34,564
|
Valuation as at 31 March
|
324,736
|
124,417
|
449,153
|
353,262
|
|
|
|
|
|
|
|
|
2024
£000
|
2023
£000
|
Gains on sales
|
|
|
6,228
|
5,571
|
Movement in investment holding
gains/(losses)
|
|
|
82,532
|
(20,495)
|
Gains/(losses) on investments held at fair
value through profit or loss
|
|
|
88,760
|
(14,924)
|
Transaction costs
During the year expenses were incurred in
acquiring and disposing of investments classified as fair value
through profit or loss.
These have been expensed through capital and
are included within gains on investments in the Income Statement.
The total costs were as follows:
|
|
|
2024
£000
|
2023
£000
|
Purchases
|
|
|
13
|
38
|
Sales
|
|
|
11
|
18
|
|
|
|
24
|
56
|
9 Significant holdings
The Company's holdings of 10% or more of any
class of shares in investment companies and 20% or more of any
class of shares in non-investment companies as at 31 March 2024 are
detailed below:
|
|
|
|
Exc. Minority Interest
|
|
Country of incorporation or
registration
|
Class of Capital
|
%
of class
held
|
Latest
available accounts
|
Total
capital and reserves
$000
|
Profit after tax for the period
$000
|
Ocean Wilsons Holdings Limited
|
Bermuda
|
Ordinary
|
26.5
|
31.12.2023
|
601,504
|
67,048
|
Ocean Wilsons Holdings Limited is included as
part of the investment portfolio in accordance with IAS 28 -
Investment in Associates.
10 Trade and other receivables
The Company applies the IFRS 9 simplified
approach to measuring expected credit losses, which uses a lifetime
expected loss allowance for all trade receivables and contract
assets.
|
2024
£000
|
2023
£000
|
Amounts due from brokers
|
1,353
|
-
|
Prepayments and accrued income
|
110
|
128
|
|
1,463
|
128
|
11 Cash and cash equivalents
|
2024
£000
|
2023
£000
|
Cash at bank
|
348
|
13,987
|
Cash funds
|
4,004
|
-
|
|
4,352
|
13,987
|
12 Trade and other payables
|
2024
£000
|
2023
£000
|
Other creditors and accruals
|
421
|
412
|
|
421
|
412
|
13 Called up share capital
|
2024
£000
|
2023
£000
|
40,000,000 Ordinary shares of 1p
|
400
|
400
|
80,000,000 'A' non-voting Ordinary shares of
1p
|
800
|
800
|
|
1,200
|
1,200
|
The 'A' non-voting Ordinary shares do not
entitle the holders to receive notices or to vote, either in person
or by proxy, at any general meeting of the Company, but in all
other respects rank pari passu with the Ordinary shares of the
Company.
14 Contributed surplus
|
2024
£000
|
2023
£000
|
Opening balance at 1 April
|
323,799
|
324,759
|
Dividend paid
|
(960)
|
(960)
|
Closing balance at 31 March
|
322,839
|
323,799
|
15 Retained earnings
|
Revenue
2024
£000
|
Capital - other
2024
£000
|
Capital - investment holding
profit
2024
£000
|
Reserves
Total
retained earnings
2024
£000
|
Revenue
2023
£000
|
Capital - other
2023
£000
|
Capital - investment holding
profit
2023
£000
|
Reserves
Total
retained earnings
2023
£000
|
Opening balance at 1 April
|
(2,364)
|
9,766
|
34,564
|
41,966
|
(2,024)
|
3,868
|
55,059
|
56,903
|
Profit/(loss) for the year
|
3,154
|
5,736
|
82,533
|
91,422
|
2,540
|
5,898
|
(20,495)
|
(12,057)
|
Dividend paid
|
(2,880)
|
-
|
-
|
(2,880)
|
(2,880)
|
-
|
-
|
(2,880)
|
Closing balance at 31 March
|
(2,090)
|
15,502
|
117,097
|
130,508
|
(2,364)
|
9,766
|
34,564
|
41,966
|
16 Net asset value
|
2024
£000
|
2023
£000
|
NAV per Ordinary and 'A' non-voting Ordinary
share
|
378.8p
|
305.8p
|
The NAV per Ordinary and 'A' non-voting
Ordinary share is based on the net assets attributable to equity
shareholders of £454,547,000 (2023: £366,965,000) and on 40,000,000
Ordinary shares (2023: 40,000,000) and 80,000,000 'A' non-voting
Ordinary shares (2023: 80,000,000) in issue at 31 March
2024.
17 Commitments and contingencies
The Company has the following outstanding
commitments as at 31 March 2024 (2023: £2.0m):
|
Outstanding commitment in local
currency
|
GBP
|
BPEA EQT Mid-Market Growth
Partnership
|
1,774,644
|
1,404,879
|
GGV Discovery IV - Asia
|
600,000
|
474,984
|
GGV Discovery IV - US
|
600,000
|
474,984
|
Khosla Ventures VIII
|
1,020,000
|
807,473
|
TA Associates XV
|
3,600,000
|
2,849,905
|
Triton VI
|
1,740,000
|
1,487,561
|
TrueBridge Direct Fund III
|
183,000
|
144,870
|
TrueBridge Capital Partners Fund
VIII
|
864,000
|
683,977
|
|
10,381,644
|
8,328,633
|
18 Financial instruments and associated
risks
The Company's financial instruments comprise
securities, cash balances, debtors and creditors. These assets are
classified in the following measurement categories:
· those to be
measured subsequently at fair value through profit or loss;
and
· those to be
measured at amortised cost.
The financial assets held at amortised cost
include trade and other receivables, cash and cash
equivalents.
Risk Objectives and Policies
The objective of the Company is to achieve
growth of shareholder value commensurate with the risks taken,
bearing in mind that the protection of long-term shareholder value
is paramount. The policy of the Board is to provide a framework
within which the Portfolio Manager can operate and deliver the
objectives of the Company. In pursuing its investment objective,
the Company is exposed to a variety of risks that could result in
either a reduction in the Company's net assets and/or a reduction
of the profits available for dividends.
These risks include those identified by the
accounting standard IFRS 7, being market risk (comprising currency
risk, interest rate risk and other price risk), liquidity risk and
credit risk. The Directors' approach to the management of these is
set out below. The Board, in conjunction with the Portfolio Manager
and Company Secretary, oversees the Company's risk
management.
Foreign currency risk
Foreign currency risks arise in two distinct
areas which affect the valuation of the investment portfolio. 1)
the direct exposure where an investment is denominated and paid for
in a currency other than Sterling; and 2) the indirect exposure
where an investment has substantial non-Sterling underlying
investment and/or cash flows. The Company does not normally hedge
against foreign currency movements affecting the value of the
investment portfolio, but takes account of this risk when making
investment decisions. Some of the fund investments into which the
Company invests will, in part or in whole, hedge some of their
underlying currency risk, but this will be known at the time of
investment and will form part of the investment decision. In those
cases, the hedging will not remove the exposure to the underlying
country or market sector. The Portfolio Manager monitors the effect
of foreign currency fluctuations through the pricing of the
investments by the various markets.
|
Direct
foreign
currency risk
2024
£000
|
No direct
foreign
currency risk
2024
£000
|
Total
2024
£000
|
Direct
foreign
currency risk
2023
£000
|
No direct
foreign
currency risk
2023
£000
|
Total
2023
£000
|
Investments
|
135,145
|
314,008
|
449,153
|
115,139
|
238,123
|
353,262
|
Other receivables including
prepayments
|
34
|
1,319
|
1,353
|
72
|
56
|
128
|
Cash at bank
|
-
|
4,352
|
4,352
|
-
|
13,987
|
13,987
|
Current liabilities
|
(15)
|
(406)
|
(421)
|
-
|
(412)
|
(412)
|
|
135,164
|
319,273
|
454,437
|
115,211
|
251,754
|
366,965
|
Note: Direct foreign currency risk includes
direct exposure to USD and Euro currencies.
Foreign currency sensitivity
The following table illustrates the sensitivity
of the profit/loss for the year and the shareholders' funds in
regard to the Company's financial assets and financial liabilities.
It assumes a 10% depreciation of Sterling against foreign
currencies at 31 March 2024 and 31 March 2023. These percentages
have been determined based on the average market volatility in
exchange rates in the previous 12 months. The sensitivity analysis
is based on the Company's monetary foreign currency financial
instruments held at each balance sheet date.
If sterling had weakened by 10% against the
currencies shown, this would have had the following effect on the
Company:
|
US$
2024
£000
|
Euro
2024
£000
|
Other
2024
£000
|
US$
2023
£000
|
Euro
2023
£000
|
Other
2023
£000
|
Income statement - profit/(loss)
|
687
|
20
|
22
|
918
|
(328)
|
(204)
|
Equity shareholders funds
|
10,670
|
955
|
1,891
|
9,228
|
692
|
1,601
|
|
11,357
|
975
|
1,913
|
10,146
|
364
|
1,397
|
Note: Other includes exposure to foreign
currencies excluding US dollar and Euro.
A 10% strengthening of Sterling against the
above currencies would result in an equal and opposite effect on
the above amounts.
Interest rate risk
Interest rate movements may affect the level of
income receivable on cash deposits and the interest payable on the
Company's variable rate borrowings.
The Company has banking facilities amounting to
£30m (2023: £30m) which are available for the Portfolio Manager to
use in purchasing investments; the costs of which are based on the
prevailing LIBOR rate, plus an agreed margin. The Company does not
normally hedge against interest rate movements affecting the value
of the investment portfolio, but takes account of this risk when an
investment is made utilising the facility. The level of banking
facilities used is monitored by both the Board and the Portfolio
Manager on a regular basis. The impact on the returns and net
assets of the Company for every 1% change in interest rates, based
on the amount drawn down at the Year-End under the facility, would
be £nil (2023: £nil). The level of banking facilities utilised at
31 March 2024 was £nil (2023: £1,000).
Interest rate changes usually impact equity
prices. The level and direction of change in equity prices is
subject to prevailing local and world economic conditions as well
as market sentiment, all of which are very difficult to predict
with any certainty. The Company has floating rate financial assets,
consisting of bank balances and cash funds that have received
average rates of interest during the year of 0% on bank
balances.
|
Cash flow
interest
rate risk
2024
£000
|
No
interest
rate risk
2024
£000
|
Total
2024
£000
|
Cash flow
interest
rate risk
2023
£000
|
No
interest
rate risk
2023
£000
|
Total
2023
£000
|
Investments
|
-
|
449,153
|
449,153
|
-
|
353,262
|
353,262
|
Other receivables including
prepayments
|
-
|
1,463
|
1,463
|
-
|
128
|
128
|
Cash at bank
|
4,352
|
-
|
4,352
|
13,987
|
-
|
13,987
|
Current liabilities
|
-
|
(421)
|
(421)
|
-
|
(412)
|
(412)
|
|
4,352
|
450,195
|
454,547
|
13,987
|
352,978
|
366,965
|
Other price risk
By the nature of its activities, the Company's
investments are exposed to market price fluctuations. NAV is
calculated and reported daily to the London Stock Exchange. The
Portfolio Manager and the Board monitor the portfolio valuation on
a regular basis and consideration is given to hedging the portfolio
against large market movements.
The Company's investment in Ocean Wilsons is
large both in absolute terms, £96.5m as valued at 31 March 2024
(2023: £83.7m) and as a proportion of the NAV, 21.2% (2023: 22.8%).
Shareholders should be aware that if anything of a severe and
untoward nature were to happen to this company, it could result in
a significant impact on the NAV and share price. However, it should
also be noted that the exposure of Hansa Investment Company Limited
to the currency, country and market- based risk exposure of Ocean
Wilsons is, to an extent, mitigated by the diverse nature of the
two investments within Ocean Wilsons. Wilson Sons, corresponding to
61.6% of Ocean Wilsons' NAV, has a direct exposure to the Brazilian
economy, whereas Ocean Wilsons Investments has a diverse Investment
portfolio and corresponds to the other 38.4%. It is an investment
the Board pays close attention to and it should be pointed out that
the risks associated with it are very different from those of the
other companies represented in the portfolio. The Board itself
regularly undertakes a thorough review of its business and
prospects and has determined that its future holds a lot of
promise. As a consequence, the Board believes the risk involved in
the investment is worthwhile.
The performance of the portfolio as a whole is
not designed to correlate with that of any market index. Should the
portfolio of the Company, as detailed earlier in the report, rise
or fall in value by 10% from the year end valuation, the effect on
the Company's profit and equity would be an equal rise or fall of
£44.9m (2023: £35.3m).
Credit risk
The Company only transacts with regulated
institutions on normal market terms, which are trade date plus one
to three days in the case of equities. Fund investment settlement
periods will vary from fund to fund and are defined by the
individual managers. The levels of amounts outstanding from brokers
and fund managers are regularly reviewed by the Portfolio Manager.
The duration of credit risk associated with the investment
transactions is the period between the date the transaction took
place, the trade date, the date the stock and cash were transferred
and the settlement date. The level of risk during the period is the
difference between the value of the original transaction and its
replacement with a new transaction. The amounts due to/(from)
brokers at 31 March 2024 are shown in Note 10 and Note
12.
The Company's maximum exposure to credit risk
on cash is £4.4m (2023: £14.0m) and on cash funds is £nil (2023:
£nil). Surplus cash is on deposit with the
Depositary/Custodian.
Liquidity risk
The liquidity risk to the Company is that it is
unable to meet its obligations as they fall due, as a result of a
lack of available cash and an inability to dispose of investments
in a timely manner. A substantial proportion of the Company's
portfolio is held in liquid quoted investments; however, there is a
large, Strategic, holding in Ocean Wilsons of 21.2% (2023: 22.8%),
unquoted equity investments of 2.6% (2023: 2.6%) and investments
into open-ended investment funds with varying liquidity terms of
58.6% (2023: 58.6%).
The Portfolio Manager takes into consideration
the liquidity of each investment when purchasing and selling, in
order to maximise the returns to shareholders, by placing suitable
transaction levels into the market. Special consideration is given
to investments representing more than 5% of the investee company. A
detailed list of the investments, split by silo, held at 31 March
2024 is shown on earlier on in the report. This can be used broadly
to ascertain the levels of liquidity within the portfolio, although
liquidity will vary with each investment - particularly the
funds.
Capital management
The Company considers its capital to be its
issued share capital and reserves and whilst the Company has access
to loan facilities it is not considered or used as core capital,
but primarily to meet the cash timing requirements of opportunistic
investment strategies and thereby enhance shareholder returns. The
Board regularly monitors its share discount policy and the level of
discounts and whilst it has the option to repurchase shares, it
considers the best means of attaining a good rating for the shares
is to concentrate on good shareholder returns.
However, the Board believes the ability of the
Company to repurchase its own 'A' non-voting Ordinary shares in the
market may potentially enable it to benefit all equity shareholders
of the Company. The repurchase of 'A' non-voting Ordinary shares,
at a discount to the underlying NAV, would enhance the NAV per
share of the remaining equity shares and might also enable the
Company to address more effectively any imbalance between supply
and demand for the Company's 'A' non-voting Ordinary
shares.
19 Fair value hierarchy and financial
liabilities
IFRS 13 'Fair Value Measurement' requires an
entity to classify fair value measurements, using a fair value
hierarchy that reflects the significance of the inputs used in
making the measurements. The fair value hierarchy has the following
levels:
Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities;
Level 2: inputs other than quoted prices
included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
Level 3: inputs for the asset or liability not
based on observable market data (unobservable inputs).
The financial assets and liabilities, measured
at fair value, in the Statement of Financial Position, grouped into
the fair value hierarchy and valued in accordance with the
accounting policies in Note 1, are detailed below:
Year ended 31 March 2024
|
Level 1
£000
|
Level 2
£000
|
Level 3
£000
|
Total
£000
|
Financial assets at fair value through profit
or loss
|
|
|
|
|
Quoted equities
|
192,221
|
-
|
-
|
192,221
|
Unquoted equities
|
-
|
-
|
8,040
|
8,040
|
Fund investments
|
42,692
|
206,200
|
-
|
248,892
|
Fair Value
|
234,913
|
206,200
|
8,040
|
449,153
|
Year ended 31 March 2023
|
Level 1
£000
|
Level 2
£000
|
Level 3
£000
|
Total
£000
|
Financial assets at fair value through profit
or loss
|
|
|
|
|
Quoted equities
|
136,942
|
-
|
-
|
136,942
|
Unquoted equities
|
-
|
-
|
9,132
|
9,132
|
Fund investments
|
37,826
|
169,362
|
-
|
207,188
|
Investment in subsidiary
|
-
|
-
|
-
|
-
|
Fair Value
|
174,768
|
169,362
|
9,132
|
353,262
|
The Company's policy is to recognise transfers
into and out of the different fair value hierarchy levels at the
date of the event or change in circumstances that caused the
transfer to occur.
A reconciliation of fair value measurements in
Level 3 is set out in the following table:
|
31 March
2024
equity
investments
£000
|
31 March
2023
equity
investments
£000
|
Opening Balance
|
9,132
|
8,917
|
Transferred from Level 1
|
-
|
-
|
Purchases
|
367
|
-
|
Sales (Capital Distribution)
|
(402)
|
-
|
Total (losses)/gains included in gains/(losses)
on investments in the Income Statement:
|
|
|
on assets sold
|
-
|
-
|
on assets held at year end
|
(1,057)
|
215
|
Closing Balance
|
8,040
|
9,132
|
As at 31 March 2024, the investment in DV4 has
been classified as Level 3. This is because the investment has been
valued using the most recent estimated NAV as advised to the
Company by DV4, adjusted for any further drawdowns, distributions
or redemptions between the valuation date and 31 March 2024. The
most recent valuation statement was received on 21 February 2024
and relates to the DV4 portfolio at 31 December 2023. Additionally,
the underlying assets of DV4 are all Real Estate in nature and, as
such, there is not a readily comparable market of identical assets
for valuation purposes. In the absence of a valuation for 31 March
2024 from DV4, the Company performed additional procedures to
determine the reasonableness of the fair value estimate for
inclusion in the Financial Statements. Direct enquiries of the
manager of DV4 were made in July 2020 to understand, amongst
others, valuation process and techniques used, external experts
used in the valuation process and updated details of underlying
property portfolio. In addition, the Company has obtained external
independent valuation data and compared the historic valuation
movements of DV4 to that data. It has been confirmed with DV4's
manager that the valuation procedures discussed in July 2020 are
still the same used now. In addition, the Company has compared the
historic valuation movements of DV4 to the FTSE350 Real Estate
Index. Based on the information obtained and additional analysis
performed the Company is satisfied that DV4 is carried in these
Financial Statements at an amount that represents its best estimate
of fair value at 31 March 2024. It is believed the value of DV4 as
at 31 March 2024 will not be materially different, but this
valuation is based on historic valuations by DV4, does not have a
readily available third party comparator and, as such, is an
estimate. If the value of the investment was to increase or
decrease by 10%, while all other variables remained constant, the
return and net assets attributable to shareholders for the year
ended 31 March 2024 would have increased or decreased by £770,000
(2023: £913,000). The Board considers 10% to be a potential
movement between valuation periods borne out by historic valuation
trends. However, this does not preclude the valuation moving a
greater amount than 10% in the future.
20 Related parties and transactions with the
portfolio manager
William Salomon is a Director of the Company
and Senior Partner of the Company's Portfolio Manager. Details of
the relationship between the Company and Hansa Capital Partners
LLP, including amounts paid during the year and owing at 31 March
2024, are disclosed in the Governance Section - Service Providers,
and in Note 3 of the Financial Statements Details of the
relationship between the Company and the Directors, including
amounts paid during the period to 31 March 2024, are disclosed in
the Governance Section - The Board, and also in the Directors'
Remuneration Report.
21 Controlling parties
At 31 March 2024 Victualia Limited Partnership
and Nomolas Ltd each held 25.9% of the issued Ordinary shares.
Additional information is disclosed in the Strategic Review -
Substantial Shareholders.
22 Post balance sheet events
There are no significant events that have
occurred after the end of the reporting year to the date of this
Report which require disclosure.
Additional Information
Notice of the Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General
Meeting of the Members of the Company will be held at the Hamilton
Princess Hotel, 76 Pitts Bay Rd, Pembroke HM 08, Bermuda on Friday
2 August 2024 at 9:00 a.m. (Bermuda time) for the following
purposes:
Agenda
· To appoint a
chairperson of the meeting.
· To confirm
notice.
Resolutions
1. To receive and consider the audited
Financial Statements and the Reports of the Directors and Auditor
for the year ended 31 March 2024.
2. To re-elect Jonathan Davie (a
biography and Board endorsement can be found earlier on in the
report) as a Director of the Company.
3. To re-elect Richard Lightowler (a
biography and Board endorsement can be found earlier on in the
report) as a Director of the Company.
4. To re-elect William Salomon (a
biography and Board endorsement can be found earlier on in the
report) as a Director of the Company.
5. To re-elect Simona Heidempergher (a
biography and Board endorsement can be found earlier on in the
report) as a Director of the Company.
6. To approve the Directors'
Remuneration Report.
7. To approve the Directors'
Remuneration Policy and authorise the Board to determine the
remuneration of the Directors.
8. To approve the Company's Dividend
Policy as can be found earlier on in the Annual Report.
9. To appoint PricewaterhouseCoopers LLP
as Auditor of the Company and to authorise the Directors to
determine the remuneration of the Auditor.
10.
Approval to
repurchase up to 14.99% of the 'A' non‑voting Ordinary shares of 1p each in the issued
shares capital of the Company (the "Shares").
THAT the Company be and hereby is
unconditionally authorised to make market purchases up to an
aggregate of 11,992,000 shares at a price (exclusive of expenses)
which is:
· not less than 1p
per share; and
· not more than the
higher of: i) 5% above the average of the middle-market quotations
(as derived from and calculated by reference to the Daily Official
List of the London Stock Exchange) for 'A' non-voting Ordinary
shares of 1p each in the five business days immediately preceding
the day on which the share is purchased; and ii) the higher of the
last independent trade and the then current highest independent
bid.
AND
THAT the approval conferred by this resolution
shall expire on the date of the next AGM (except in relation to the
purchase of shares, the contract for which was concluded before
such date and which might be executed wholly or partly after such
date) unless the authority is renewed or revoked at any other
general meeting prior to such time.
11.
Special Resolution
That the amended Bye-laws produced to the meeting by the Chair be
adopted as the Bye-laws of the Company in substitution for, and to
the exclusion of, the Company's existing Bye-laws.
Summary of proposed amendments to the
Bye-laws
Set out below is a summary of the principal
amendments which will be made to the Company's existing Bye-laws
through the adoption of the amended Bye-laws proposed at the AGM if
approved by shareholders.
This summary is intended only to highlight the
principal amendments which are likely to be of interest to
shareholders. It is not intended to be comprehensive and cannot be
relied upon to identify all amendments or issues which may be of
interest to all shareholders. This summary is not a substitute for
reviewing the full terms of the amended Bye-laws which will be
available for inspection at the Company's registered office, and
also at the registered office of Hansa Capital Partners LLP being
50 Curzon Street, London, England, W1J 7UW, in each case from the
date of the AGM Notice until the close of the AGM. The amended
Bye-laws will also be available for inspection at the venue of the
AGM from 15 minutes before and during the AGM and on the Company
website
https://www.hansaicl.com/shareholder-information/regulatory-information.aspx19
Method of Payment
This Bye-law has been updated in line with wider
market developments to provide the Company with discretion to
prescribe the manner in which dividends and other monies are paid,
including (in the best interests of members and to take advantage
of greater efficiency, improved security of payments and reduced
costs) for payments to be made exclusively by inter-bank transfer
or other electronic means approved by the Board.
83.3 - Obligations to provide information to
the Company
This Bye-law has been updated to allow the
Company to withhold payment of dividends to any shareholder that
fails to provide requested FATCA/CRS information to the Company
within the period set out in Bye-law 83.1; being 30 days. This
withholding sanction will only be implemented after efforts by the
Company to first obtain the necessary information from the
non-responding shareholder. The withholding of payment of dividends
is intended to be a further mechanism to encourage non-responding
shareholders to provide the required information.
For and on behalf of Conyers Corporate Services
(Bermuda) Limited
Vida Kam
Secretary
14 June 2024
Notes for Shareholders
1
Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001 (as amended), only those members registered in the
register of members of the Company 48 hours before the Annual
General Meeting (i.e. by close of business UK time on 31 July 2024)
(or if the Meeting is adjourned, in the register of members of the
Company 48 hours before the date and time of the adjourned meeting)
(the "Meeting") shall be entitled to attend or vote at the Meeting
in respect of the number of shares registered in their respective
names at that time. Changes to entries on the register of members
after that time will be disregarded in determining the rights of
any person to attend or vote at the Meeting.
2
Registered members of the Company may vote at the Meeting (whether
by show of hands or poll) in person or by proxy or corporate
representative. A member may appoint one or more persons as his
proxy to attend and vote at the Meeting on his behalf. A proxy need
not be a member. Where more than one proxy is appointed the
instrument of proxy must specify the number of shares each proxy is
entitled to vote.
3
The appointment of a proxy will not affect the right of a member to
attend and vote in person at the Meeting or adjourned meeting. A
member that is a corporation may appoint a representative to attend
and vote on its behalf at the Meeting by delivering evidence of
such appointment to the Company's registrar no later than 48 hours
before the time fixed for the Meeting (i.e. by 1:00pm UK time on 31
July 2024) or any adjourned meeting.
4
In order to be valid, the proxy appointment (together with any
power of attorney or other authority (if any) under which it is
signed, or a notarised certified copy of that authority) must be
returned by one of the following methods, in each case so as to
arrive no later than 1:00pm UK time on 31 July 2024 or, in the case
of an adjourned meeting, not less than 48 hours before the time
appointed for holding such adjourned meeting (ignoring for these
purposes non-working days) or (in the case of a poll taken
otherwise than at or on the same day as the Meeting or adjourned
meeting) for the taking of the poll at which it is to be used: via
www.investorcentre.co.uk/eproxy by using the details on your Form
of Proxy; or
in hard copy form by post, by courier or by hand to the Company's
Registrars, Computershare Investor Services (Bermuda) Limited, c/o
The Pavilions, Bridgwater Road, Bristol BS99 6ZY.
If you need help with voting online or need to request a proxy
form, please contact our Registrars, Computershare Investor
Services (Bermuda) Limited on +44 (0370) 702 0000. Calls are
charged at the standard geographic rate and will vary by provider.
Calls outside the UK will be charged at the applicable
international rate. They are open between 09:00 - 17:30, Monday to
Friday excluding public holidays in England and Wales.
Alternatively, Computershare at
WebCorres@computershare.co.uk.
Notes for Depositary Interest
Holders
1
You will not receive a form of direction for the Annual General
Meeting in the post. Depositary interests may be voted through the
CREST Proxy Voting Service in accordance with the procedures set
out in the CREST manual.
In order for a proxy appointment or instruction made using the
CREST service to be valid, the appropriate CREST message (a "CREST
Proxy Instruction") must be properly authenticated in accordance
with Euroclear UK & Ireland Limited's specifications and must
contain the information required for such instruction, as described
in the CREST Manual (available via www.euroclear.com/CREST). The
message, regardless of whether it constitutes the appointment of a
proxy or is an amendment to the instruction given to a previously
appointed proxy must, in order to be valid, be transmitted so as to
be received by the issuer's agent ID 3RA50 by 1:00pm UK time on 30
July 2024. For this purpose, the time of receipt will be taken to
be the time (as determined by the time stamp applied to the message
by the CREST Application Host) from which the issuer's agent is
able to retrieve the message by enquiry to CREST, in the manner
prescribed by CREST. After this time any change of instructions to
proxies appointed through CREST should be communicated to the
appointee through other means. CREST members and, where applicable,
their CREST sponsors, or voting service providers should note that
Euroclear UK & Ireland Limited does not make available special
procedures in CREST for any particular message. Normal system
timings and limitations will, therefore, apply in relation to the
input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST
personal member, or sponsored member, or has appointed a voting
service provider, to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers
are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
2
In the case of Depositary Interest Holders, a form of direction may
be requested and completed in order to instruct Computershare
Company Nominees Limited, the Depositary, to vote on the holder's
behalf at the Meeting by proxy or, if the Meeting is adjourned, at
the adjourned meeting. Requests for a hard copy should be sent to
Computershare Investor Services (Bermuda) Limited, c/o The
Pavilions, Bridgwater Road, Bristol BS99.
3
To be effective, a valid form of direction (and any power of
attorney or other authority under which it is signed) must be
received electronically or delivered to Computershare Investor
Services (Bermuda) Limited, c/o The Pavilions, Bridgwater Road,
Bristol BS99 by no later by 1:00pm UK time on 30 July 2024 or 72
hours before any adjourned Meeting.
4
The Depositary will appoint the Chairman of the meeting as its
proxy to cast your votes. The Chairman may also vote or abstain
from voting as he or she thinks fit on any other business
(including amendments to resolutions) which may properly come
before the meeting.
5
The 'Vote Withheld' option is provided to enable you to abstain
from voting on the resolutions. However, it should be noted that a
'Vote Withheld' is not a vote in law and will not be counted in the
calculation of the proportion of the votes 'For' and 'Against' a
resolution.
6
Depositary Interest holders wishing to attend the meeting should
contact the Depositary at Computershare Investor Services (Bermuda)
Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99 or by
emailing UKALLDITeam2@computershare.co.uk by no later than by
1:00pm UK time on 30 July 2024.
All holders
1
The quorum for the Annual General Meeting shall be two or more
shareholders present in person or by proxy. If within two hours
from the time appointed for the meeting a quorum is not present,
the meeting shall be adjourned to the next business day at the same
time and place or to such other time and place as the Directors may
determine, and if a quorum is not present at any such adjourned
meeting, the meeting shall be dissolved.
2
As of 14 June 2024 the Company's total number of shares in issue is
40,000,000 Ordinary shares of 1p each and 80,000,000 'A' non-voting
Ordinary shares of 1p each in issue. The Ordinary shareholders are
entitled to one vote per Ordinary share held. The 'A' non-voting
Ordinary shares do not entitle the holders to vote or receive
notice of meetings, but in all other respects they have the same
rights as the Company's Ordinary shares.
3
A copy of this notice and other information can be found at
https://www.hansaicl.com/shareholder-information/financial-and-investment-reporting/year-2024.aspx#2024
 
Investor information
Further information about Hansa Investment
Company Limited, including monthly fact sheets, Stock Exchange
announcements and shareholder presentations, can be found on the
Company's website: www.hansaicl.com
Please contact the Portfolio Manager, as below,
if you have any queries concerning the Company's investments or
performance.
Portfolio Manager and additional administrative
services provider
Hansa Capital Partners LLP
50 Curzon Street
London
W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hiclenquiry@hansacap.com
Website: www.hansagrp.com
Please contact the Registrars, as below, if you
have a query about a certificated holding in the Company's
shares.
Registrar
Computershare Investor Services (Bermuda)
Limited
c/o 13 Castle Street
St Helier
Jersey
JE1 1ES
Telephone: +44 (0) 370 707 4040
Email: info@computershare.co.je
Website: www.computershare.com/je
If you have a query, you can call our
Shareholder helpline on +44 (0) 370 707 4040. Calls are charged at
the standard geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at the applicable
international rate. Lines are open between 08:30 - 17:30, Monday to
Friday excluding public holidays in England and Wales.
Register for updates
To receive the latest news and views on the
Company, please register at
www.hansaicl.com
Company information
The Company currently manages its affairs so as
to be a qualifying investment company for ISA purposes, for both
the Ordinary and 'A' non-voting Ordinary shares. It is the present
intention that the Company will conduct its affairs so as to
continue to qualify for ISA products. In addition, the Company
currently conducts its affairs so shares issued by Hansa Investment
Company Limited can be recommended by independent financial
advisers to ordinary retail investors, in accordance with the
Financial Conduct Authority's (FCA) rules in relation to
non-mainstream investment products and intends to continue to do so
for the foreseeable future. The shares are excluded from the FCA's
restrictions which apply to non-mainstream investment products,
because they are excluded securities as defined in the FCA Handbook
Glossary. Finally, Hansa Investment Company Limited is registered
as a Reporting Financial Institution with the US IRS for FATCA
purposes.
Capital structure
The Company has 40,000,000 Ordinary shares of 1p
each and 80,000,000 'A' non-voting Ordinary shares of 1p each in
issue. The Ordinary shareholders are entitled to one vote per
Ordinary share held. The 'A' non-voting Ordinary shares do not
entitle the holders to vote or receive notice of meetings, but in
all other respects they have the same rights as the Company's
Ordinary shares.
Secretary and registered office
Conyers Corporate Services (Bermuda)
Limited
Clarendon House
2 Church Street PO Box HM666
Hamilton HM CX Bermuda
Investor disclosure
AIFMD
Hansa Investment Company Limited's AIFMD
Investor Disclosure document can be found on its website. The
document is a regulatory requirement and summarises key features of
the Company for investors.
Packaged Retail and
Insurance‑based Investment
Products (PRIIPs)
The Company's AIFM, Hanseatic Asset Management
LBG, is responsible for applying the product governance rules
defined under the MiFID II legislation on behalf of Hansa
Investment Company Limited. Therefore, the AIFM is deemed to be the
'Manufacturer' of Hansa Investment Company's two share classes.
Under MiFID II, the Manufacturer must make available Key
Information Documents (KIDs) for investors to review if they so
wish ahead of any purchase of the Company's shares.
Links to these documents can be found on the
Company's website: www.hansaicl.com.
Service providers
Independent Auditor
PricewaterhouseCoopers Ltd
Solicitors - Bermuda
Conyers Dill & Pearman Limited
Solicitors - UK
Dentons UK and Middle East LLP
Custodian
Banque Lombard Odier & Cie SA
Stockbroker
Winterflood Investment Trusts
Administrator
Apex Fund Administration Services (UK)
Ltd
Alternative Investment Fund Manager
Hanseatic Asset Management LBG
Financial calendar
Company year end
31 March
Annual Report sent to shareholders
June
Annual General Meeting
July/August
Announcement of half-year results
November
Half-year Report sent to
shareholders
December
Interim dividend payments
August, November, February and May
Share price listings
The price of your shares can be found on our
website. In addition, share price information for Ordinary shares /
'A' non-voting Ordinary shares can be found via the following
codes:
ISIN
BMG428941162 / BMG428941089
SEDOL
BKLFC18 / BKLFC07
Reuters
HAN.L / HANA.L
Bloomberg
HAN LN / HANA LN
TIDM
HAN / HANA
Legal Entity Identifier
213800RS2PWJXS2QDF66
Glossary of terms
Association of Investment Companies
(AIC)
The Association of Investment Companies is the
UK trade association for closed-ended investment companies
(www.theaic.co.uk). Despite the Company not being UK domiciled, the
Company is UK listed and operates in most ways in a similar manner
to a UK Investment Trust. Therefore, the Company follows the AIC
Code of Corporate Governance and the Board considers that the AIC's
guidance on issues facing the industry remains very relevant to the
operations of the Company.
Alternative Investment Fund Managers
Directive
(AIFMD)
The AIFMD is a regulatory framework for
alternative investment fund managers (AIFMs), including managers of
hedge funds, private equity firms and investment trusts. Its scope
is broad and, with a few exceptions, covers the management,
administration and marketing of alternative investment funds
(AIFs). Its focus is on regulating the AIFM rather than the
AIFs.
Annual Dividend / Dividend
The amount paid by the Company to shareholders
in dividends (cash or otherwise) relating to a specific financial
year of the Company. The Company's dividend policy is to announce
its expected level of dividend payment at the start of each
financial year. Barring unforeseen circumstances, the Company then
expects to make four interim dividend payments each year - at the
end of August, November and February during that financial year and
at the end of May following the end of the financial
year.
Bid Price
The price at which you can sell shares
determined by supply
and demand.
Capital Structure
The stocks and shares that make up a company's
capital i.e. the amount of ordinary and preference shares,
debentures and unsecured loan stock etc. which are in
issue.
Closed‑ended
A company with a fixed number of shares in
issue.
Depositary/Custodian
A financial institution acting as a holder of
securities for safekeeping.
Discount
When the share price is lower than the NAV, it
is referred to as trading at a discount. The discount is expressed
as a percentage of the NAV.
Expense Ratio
An expense ratio is determined through an
annual calculation, where the operating expenses are divided by the
average NAV. Note there is also a description of an additional
PRIIPs KID Ongoing Charges Ratio explained in the Annual
Report.
Five Year Rolling NAV Return (per
annum)
The rate at which, compounded for five years,
will equal the five year NAV total return to end March, assuming
dividends are always reinvested at pay date.
Five Year NAV and Share Price Total
Return
Rebased from 0% at the start of the five year
period, this is the rate at which the Company's NAV and share
prices would have returned at any period from that starting point,
assuming dividends are always reinvested at pay date. The Company
will continue to quote results from its predecessor, Hansa Trust
Ltd,as part of that reporting so shareholders can see the
longer-term performance of the portfolio.
Gearing
Gearing refers to the level of borrowing
related to equity capital.
Hedging
Strategy used to reduce risk of loss from
movements in interest rates, equity markets, share prices or
currency rates.
Issued Share Capital
Issued share capital is the total number of
shares subscribed to by the shareholders.
Key Information Document (KID)
This is a document of a form stipulated under
the PRIIPs Regulations. It provides basic, pre-contractual,
information about the Company and its share classes in a simple and
accessible manner. It is not marketing material. The UK regulatory
authorities have introduced legislation from 1 January 2023 to
amend some of the disclosures in the KID for UK shareholders. The
Company's AIFM will be producing both UK KIDs and European KIDs
going forward.
Key Performance Indicators (KPIs)
A set of quantifiable measures a company uses
to gauge its performance over time. These metrics are used to
determine a company's progress in achieving its strategic and
operational goals and also to compare a company's finances and
performance against other businesses within its industry. In the
case of historic information, the KPIs will be compared against
data of both the Company and, prior to the Company's formation,
from Hansa Trust Ltd.
Market Capitalisation
The market value of a company's shares in
issue. This figure is found by taking the stock price and
multiplying it by the total number of shares
outstanding.
Mid Price
The average of the Bid and Offer Prices of a
particular
traded share.
Net Asset Value (NAV)
The value of the total assets minus liabilities
of a company.
Net Asset Value Total Return
See Total Return.
Offer Price
The price at which you can buy shares
determined by supply
and demand.
Ordinary Shares
Shares representing equity ownership in a
company allowing investors to receive dividends. Ordinary
shareholders have the pro-rata right to a company's residual
profits. In other words, they are entitled to receive dividends if
any are available after payments to financial lenders and dividends
on any preferred shares are paid. They are also entitled to their
share of the residual economic value of the company should the
business unwind.
Hansa Investment Company Limited has two
classes of Ordinary shares - the Ordinary shares (40 million
shares) and the 'A' non-voting Ordinary shares (80 million shares).
Both have the same financial interest in the underlying assets of
the Company and receive the same dividend per share, but differ
only in that only the former shares have voting rights, whereas the
latter do not. They trade separately on the London Stock Exchange,
nominally giving rise to different share prices at any given
time.
Premium
When the share price is higher than the NAV it
is referred to as trading at a premium. The premium is expressed as
a percentage of the NAV.
Packaged Retail and
Insurance‑based Investment
Product (PRIIP)
Packaged retail investment and insurance-based
products (PRIIPs) make up a broad category of financial assets that
are regularly provided to consumers in the European Union. The term
PRIIPs, created by the European Commission to regulate the
underlying market, is defined as any product manufactured by the
financial services industry, to provide investment opportunities to
retail investors, where the amount repayable is subject to
fluctuation because of exposure to reference values, or the
performance of underlying assets not directly purchased by the
retail investor. See also Key Information Document
(KID).
Shareholders' Funds/Equity Shareholders'
Funds
This value equates to the NAV of the Company.
See NAV.
Spread
The difference between the Bid and Ask
price.
Tradable Instrument Display Mnemonics
(TIDM)
A short, unique code used to identify UK-listed
shares. The TIDM code is unique to each class of share and to each
company. It allows the user to ensure they are referring to the
right share. Previously known as EPIC.
Total Return
When measuring performance, the actual rate of
return of an investment or a pool of investments over a given
evaluation period. Total return includes interest, capital gains,
dividends and distributions realised over a given period of
time.
Total Return - Shareholder
The Total Return to a shareholder is a measure
of the performance of the company's share price over time. It
combines share price appreciation/depreciation and dividends paid
to show the total return to the shareholder expressed as an
annualised percentage. In the case of historic information, the
Total Return will include data against data of both the Company
and, prior to the Company's formation, from Hansa Trust
Ltd.