TIDMHAN TIDMHAN TIDMHANA
RNS Number : 8254C
Hansa Investment Company Limited
23 June 2021
Hansa , investing to create long-term growth
Year-End Report
For the Year Ended
31 March 2021
WELCOME
I am pleased to present the second Year-End Report for Hansa
Investment Company Limited to shareholders.
Our financial year has seen some of the greatest social and
economic upheavals of modern times, as the world wrestled with the
impact of the Covid-19 virus. During our year, we have all observed
governments try a variety of strategies to contain the virus and
protect their populations as treatments and vaccines were
developed. It is very encouraging to see the excellent progress
made in many parts of the world in combating the pandemic. I am
pleased to say that, at the end of our year, the fight back is well
and truly underway and, whilst I am sure there will be bumps in the
road, vaccines have been shown to be highly effective.
Unsurprisingly, it has been a very challenging year for the
investment management community, with many finding themselves
caught out, either being invested in the wrong sectors, or selling
just at the wrong time as markets initially fell sharply and then
rebounded almost as quickly. We have been very fortunate that our
Portfolio Manager, Alec Letchfield, invested the Company in sectors
that have proven to be very resilient during this period. Alec has
written a detailed analysis in his Portfolio Manager's Report which
I recommend to you.
I also draw your attention to my Chairman's Report to the
Shareholders. Whilst I have left Alec to cover the wider market and
our portfolio in some detail, in my report I summarise the outcomes
of a strategy review the Board undertook during the year with our
Portfolio Manager and our Broker, Winterflood. The review was to
reconfirm our overall strategy and also to consider options
available to the Board, to try to reduce the stubborn discount that
both of the Company's share classes continue to experience. These
topics were also raised in our most recent online shareholder
presentation. If you missed this event, the slides and audio are
available on our website.
Finally, I remind you that details of our upcoming AGM are at
the back of this Annual Report. Please do take the time to read,
consider and vote if eligible to do so.
Yours sincerely
Jonathan Davie
THIS DOCUMENT IS IMPORTANT and if you are a holder of Ordinary
shares it requires your immediate attention. If you are in doubt as
to the action you should take or the contents of this document, you
should seek advice from an independent financial advisor,
authorised if in the UK under the Financial Services and Markets
Act 2000, or other appropriately authorised financial advisor if
outside of the UK. If you have sold or transferred your Ordinary
shares in the Company, you should send this document, immediately
to the purchaser or transferee; or to the stockbroker, bank or
other agent through whom the sale or transfer was effected for
onward transmission as soon as practicable.
COMPANY REGISTRATION AND NUMBER: The Company is registered in
Bermuda under company number 54752.
Strategic Report
Chairman's Report to the Shareholders
The Board of Directors
The Board
Long-Term Performance
Organisation and Objectives
Portfolio Manager's Report
Portfolio Statement
Shareholder Profile and Engagement
Corporate Governance Reports
Report of the Directors
Corporate Governance Report
Audit Committee Report
Directors' Remuneration Report
Independent Auditor's Report to the Members of Hansa Investment
Company Limited
Financial Statements
Income Statement
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
Pro-Forma Financial Statements
Introduction to the Pro-Forma Financial Statements
Pro-Forma Income Statement (Unaudited) for the combined Hansa
Investment Company Limited Group
Pro-Forma Balance Sheet (Unaudited) for the combined Hansa
Investment Company Limited Group
Pro-Forma Statement of Changes in Equity (Unaudited) for the
combined Hansa Investment Company Limited Group
Pro-Forma Cash Flow Statement (Unaudited) for the combined Hansa
Trust and Hansa Investment Company Limited
Notes to the Condensed Pro-Forma Financial Statements
Notice of the Annual General Meeting
Investor Information
Company Information
Glossary of Terms
Chairman's Report to the Shareholders
Introduction
This is my second Annual Report to shareholders since becoming
Chairman of Hansa Investment Company Limited ("the Company",
"HICL"). I am pleased to be able to say that all your Directors and
the many people who support the Company with various services
continue to be in good health.
It has been a very challenging year for the investment
management community with many being, with the wonderful benefit of
hindsight, either in the wrong sectors at the wrong time, or in
cash because of what the Covid-19 pandemic might do to asset
values. Fortunately, governments and central banks arrived in time
to avoid a depression, albeit at some cost to their GDP/Debt
ratios.
Shareholder Returns
For the year to 31 March 2021, the Net Asset Value ("NAV") has
increased 76.4p per share, from 230.2p per share to 306.6p per
share. During the past 12 months, there has also been a decrease in
the discount, from 43.1% to 35.4% for the Ordinary shares and from
41.2% to 35.3% for the "A" Ordinary shares. More detail on these
and the longer-term performance can be found later in the report,
as well as our Portfolio Manager's detailed review of markets and
portfolio performance in his Report.
Our Portfolio Manager, Alec Letchfield of Hansa Capital Partners
LLP ("Hansa Capital Partners", "HCP") has continued to produce
excellent risk adjusted to shareholders. The funds he manages (the
portfolio excluding Ocean Wilson Holdings Ltd ("OWHL", "Ocean
Wilsons") has seen a total return of 33.7% in the past year, whilst
our investment in OWHL has seen a total return of 38.9% and the
Wilson Sons Ltd share price has increased in Sterling terms by
28.7%, whilst increasing in Brazilian Reals by 56.5%, the
difference being caused by the continuing decline in the Real.
I think it worth noting Alec's performance against that of his
peer group over the past five years and congratulate him on being a
very steady hand on the investment tiller in the past challenging
year, where it has been very easy to panic with resultant poor
investment returns.
Prospects
In my Annual Report last year, I offered the opinion that the
only possible solution to the pandemic was the discovery of a
vaccine, or a time when "herding" succeeded in reducing or
eliminating the virus. I also expressed disappointment at the
"beggar thy neighbour" attitude and lack of coordinated
international effort by governments to meet the challenge head on.
It is very encouraging to see the progress that has been made in
vaccine discovery and distribution across the world in the past
year, although there is inevitably still a long way to go to get
everyone vaccinated and to start to prepare for annual jabs if the
virus does not naturally fade away. The equity and commodity
markets have taken on a very positive tone in the last half of our
financial year, as a result of the vaccination programme and the
anticipated demand from consumers, who have managed to build up
their savings during the lockdowns and now want to come out to
frolic.
Whilst I have no doubt this will happen, the quantum of spending
and its durability are very difficult to forecast and may end in
disappointment for market participants. A number of academic
studies done on the past history of pandemics have shown that the
period after these events tended to be deflationary, although the
demographic distribution may change that with the increase in
retirees in relation to the working population and the reduced
birth rate now taking place.
The concerns about inflation associated with the flood of
liquidity created by central banks and the consequential rise in
interest rates will continue in my view, as the markets show many
signs of rich valuations, whether it is the price of Bitcoin, the
high (by historic comparisons) level of many stock markets, the
rise in nearly all commodity prices and the Reddit/Robin Hood
retail investors pushing some stocks to nosebleed levels.
Regrettably, the economy in Brazil continues to struggle with
the Covid-19 crisis and a surge in inflation for many basic items,
which has resulted in nearly 10% of the population not having
enough food. Unsurprisingly the popularity of President Bolsonaro
has declined sharply and the release of Lula da Silva has added
more uncertainty in regards to the political direction of Brazil.
However, despite the aforementioned challenges Wilson Sons
continues to do well in the present difficult circumstances. In its
recently released quarterly results, Wilson Sons reported increases
in Container Terminal volumes and Towage manoeuvres in Q1 21
compared to the same period one year ago.
I remain concerned about present relations between the USA and
China, which now seems to have developed a more coordinated policy
with its neighbour Russia. It is now totally clear that whichever
party is in power in the USA, the relations with China and Russia
will become more strident and the Taiwan Strait will continue to be
an area of increasing tension and hence market risk.
It all adds up to great uncertainty for the equity markets
generally and underscores the importance of sector and geographic
selection combined with sensible diversification which is our
Company's mantra. I continue to have great faith in Alec
Letchfield's ability to steer us through these choppy waters and
create good risk-adjusted returns.
Strategy
Your Board has spent some time in the past year reviewing key
elements of its strategy with its Portfolio Manager and Broker,
Winterflood. This review was felt to be relevant and important, not
just because of the unprecedented market conditions but also, in
part, considering the relatively wide discount which has continued
since 2006/2007. The review focused upon the various options
available to the Directors to positively influence the discount to
NAV of both share classes in the medium to long-term. A summary of
each of the main themes considered follows below, but a common
theme was that it was important for the Board to explain as clearly
as possible its views on key issues shareholders raise. For
completeness, the review of strategy did not result in any
amendment to the investment mandate given to the Portfolio Manager.
The Board is of the view that the investment portfolio managed by
the Portfolio Manager continues to perform well.
Dividend policy
The Board has held the dividend since the arrival of Alec
Letchfield as CIO of the Portfolio Manager. A number of
shareholders have expressed interest in increasing it, whilst
others do not wish this to happen as it is partially funded from
capital. Our policy is to maintain the present dividend until it is
fully covered by net income and then increase it in line with any
growth in the net income of the Company.
Discount management
The Board recognises that the present discount continues to be
an understandable irritant and frustration to many shareholders,
including your Directors. The Board continues to take the view that
share buybacks offer only a short-term solution. To buy back shares
would require the sale of elements of the more liquid holdings
within our portfolio, which with the benefit of hindsight and as
detailed in the report from our Portfolio Manager, would have been
the wrong thing to have done in recent times. Additionally, share
buybacks would also increase the proportion of the portfolio
invested in Ocean Wilsons. Experience within the UK Investment
Trust community has shown that isolated share buybacks, whilst
having some short-term effect, depending on their size, have little
long--term benefit
Liquidity & Investor Base
The Board has always been of the view that providing
transparency and clarity to investors as well as promoting demand
for the Company's shares, would create a positive impact on the
discount for the medium to longer-term. Following Winterflood's
review and a discussion between the Board and Winterflood, it was
recognised more work was required to reach out to the personal
investor sector. To this end, the Company has begun a marketing
review with Warhorse Partners, a brand and marketing specialist to
the asset management industry, to consider all forms of its
investor messaging and outreach. The project will seek to widen the
shareholder base, as well as review the technologies involved in
keeping interested parties updated on our progress.
Investment in Ocean Wilson Holdings Ltd
As mentioned earlier in this Report, whilst the management of
Wilson Sons have done a really excellent job for shareholders
against a background of a challenging and unhelpful political
environment and Covid-19, they could not escape the reality of the
falling Brazilian Real. The Board notes the continuing activities
of the Wilson Sons' board to create value including the attempt to
sell certain key assets in that company, which unfortunately did
not come to pass. In particular, the Board notes the recent news
that Wilson Sons has proposed a corporate restructuring, which
would result in Wilson Sons moving from being a Bermudan based
parent company to being a Brazilian domiciled entity. The
restructuring does not change the current ownership of Wilson Sons
but it is hoped it will increase stock liquidity and promote a
wider share ownership, especially amongst Brazilians, including
several institutional investors in Brazil currently restricted from
investing. The Board notes that the initial view of the market
appears to have been favourable.
The Board has examined the options relating to the Company's
holding in OWHL, including the possibility of distributing the OWHL
holding to our shareholders. The Board came to the conclusion that
any distribution would have the effect of HICL losing its strategic
influence in OWHL. Whilst such a move may result in a narrowing of
the discount in the short-term, it would not appeal to long-term
shareholders, particularly at a time when the discount is presently
unusually large. Some shareholders may recall that OWHL went from
61.5p in February 2003 to 957.5p in April 2007. However, should a
sale of Wilson Sons come to pass, it could open up a number of
positive opportunities for both OWHL and HICL. The Directors are of
the view that the current holding value of Wilson Sons and,
therefore, OWHL remain significantly below their intrinsic value.
It is for this reason that the Board believes this is a holding in
which significant value remains for the Company.
Share Classes
The present share structure is not strictly a matter for the
Board but for Ordinary shareholders. The current position is that
the majority of Ordinary shareholders do not wish to change the
structure. It is worth remembering that whilst "A" Ordinary
shareholders are not entitled to vote at shareholder meetings, they
otherwise share the same financial risks and rewards as Ordinary
shareholders and also participated in the decision to move the
domicile to Bermuda.
ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE ("ESG")
MATTERS
Henceforth, ESG considerations will play an increasingly
important part in the decision-making processes of funds and their
managers.
Our Portfolio Manager has developed a Responsible Investment
Policy during the last year, incorporating feedback from our Board.
As a Board, we consider it both incorporates the important
responsibilities this Company has, as an investor, with the context
of our long-term growth strategy. We remain of the view that good
returns and well-run sustainable business models will go hand in
hand.
As a significant element of Ocean Wilsons Holdings, the Board
receives regular updates regarding Wilson Sons and, as part of
that, ESG considerations are discussed. I am pleased to report that
Wilsons Sons continues to see a decade-long trend of reduction in
Lost-time Injuries - which is a reflection of their commitment to
create an increasingly safe working environment. In the 10 years
since 2011, there has been a 91% decrease in Lost-time Injuries.
Additionally, Greenhouse Gas emissions have been reduced by 12%
since 2013.
Please see later in this report for more details regarding ESG
matters.
Company Auditor
As of the Company's most recent AGM in July 2020,
PricewaterhouseCoopers Ltd of Bermuda ("PwC") were appointed to
audit the Company.
On behalf of the Board, I should like to extend our well wishes
to you, our shareholders, and your families.
Jonathan Davie
Chairman
22 June 2021
I would draw shareholders' attention to the Glossary of Terms
which can be found at the end of this Year-End Report. I hope it is
helpful in understanding a business, ever more complicated by
regulation and jargon.
The Board of Directors
The Directors who served the Company during the year to 31 March
2021 are:
Jonathan Davie
(Chairman)
Jonathan became a Director and Chairman of the Company in June
2019. He remains a Director of Hansa Trust whilst it is run down,
joining that board in January 2013. 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 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 in 1998 on their acquisition of most of BZW's
businesses. He focused on the development of Credit Suisse's Middle
Eastern business. He retired from Credit Suisse in February
2007.
Richard Lightowler
(Audit Committee Chairman)
Richard became a Director of the Company in June 2019. Richard
has 25 years' experience in public accounting being partner of KPMG
in Bermuda for 19 years. He was head of the KPMG Insurance Group in
Bermuda for 15 years, a member of the firm's Global Insurance
Leadership Team and Global Lead Partner for a number of large
international insurance groups listed on the New York and London
Stock Exchanges.
Richard has significant regulatory experience, 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 including redomiciliations.
Richard is based in Bermuda. Richard also holds directorships with
Geneva Re, Aspen Insurance Holdings and Oakley Capital.
Meetings Total
attended Meetings
Board 5 5
Audit Committee 2 2
Simona Heidempergher
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 18 years, she has been 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 lead
independent non-executive director of Aquafil SpA where she is
chairman of the audit and risk committee. Alongside this, Simona is
chair of the board of directors of the Stramongate Group, a
Luxembourg public company, director of TR European Growth 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.
Meetings Total
attended Meetings
Board 5 5
Audit Committee 2 2
William Salomon
William became a Director of the Company in June 2019. He
remains a Director of Hansa Trust whilst it is run down, having
joined that board in 1999. 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
("Hansa Capital Partners"), the Portfolio Manager and Additional
Administrative Services Provider, deputy chairman of Ocean Wilsons
Holdings Limited and a director of its listed subsidiary Wilson
Sons Limited. He is also a shareholder representative on the
investment advisory committee for DV4 Ltd ("DV4") and chairman of
ScotGems PLC investment trust. William was formerly the vice
chairman of Close Asset Management Limited and chairman of the
merchant bank Rea Brothers PLC.
Meetings Total
attended Meetings
Board 5 5
Audit Committee 2 2
Nadya Wells
Nadya became a Director of the Company in June 2019. Nadya has
26 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 that 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 non-executive directorships at Sberbank of Russia
where she is chair of the audit committee and sits on risk and
strategy committees and at Baring Emerging EMEA Opportunities plc
where she is senior independent director. Nadya is also an
independent non-executive director on the boards of various
Luxembourgish SICAVs managed by Aberdeen Standard Investments
Luxembourg. 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.
Meetings Total
attended Meetings
Board 5 5
Audit Committee 2 2
Note:
The meetings listed above are the main events held during the
year at which all Directors attend. Additionally, there have been
numerous meetings and Board calls to consider and approve
operational requirements for the Company, such as quarterly
dividends. These meetings are arranged as and when required and
require the meeting to be quorate but not necessarily attended by
all directors. These have not been listed above.
The Board normally holds an annual Strategy session in February.
This has been delayed to August 2021 in the hope that the Board
will be able to meet face-to-face.
The Board
Board members are selected based on their individual and
complementary skills and experience and their ability to commit
sufficient time to drive the Company's success. All Directors will
retire at each AGM and offer themselves for consideration for
re--election. The Board recommends the re--appointment of each of
the Directors, based on their continuing contribution to the
Company and its shareholders.
The Board is charged by the shareholders with the responsibility
for looking after the affairs of the Company. It involves the
stewardship of the Company's assets and liabilities and the pursuit
of growth of shareholder value in accordance with the investment
objective. These responsibilities are discharged in many ways and
are explained below.
INVESTMENT OBJECTIVE AND POLICY, STRATEGY
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 will seek 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's portfolio will
typically comprise at least 30 investments.
The Company holds a strategic position in the share capital of
OWHL which represents the Company's largest holding. 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 seeking
investments across four key investment categories, in addition to
its strategic investment in OWHL:
Core - investments, typically through third-party funds, that
the Company can expect to hold throughout the economic cycle;
Thematic - investments, typically through third-party funds,
that reflect key investment themes which 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; and
Global Equities - a diversified portfolio of global equities
identified by the Portfolio Manager as having long-term growth
potential.
Whilst the Company has no set maximum or minimum exposures to
any asset class, geography or sector, the Board nonetheless sets
guidelines which the Portfolio Manager adheres to. These can be
adjusted by mutual agreement. 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 markets. At the year end, and for
the significant majority of the Company's financial year, the Board
had set the following guidelines for each category as a percentage
of the portfolio (including the strategic investment in OWHL):
Core: 0-50%
Thematic: 0-25%
Diversifying Assets: 0-40%
Global Equities: 0-40%
During the year, the Board increased the upper limit for the
Core silo from 45% to 50%.
The Portfolio Manager has a strong focus on seeking undervalued
investments and those not readily available to the general public.
The Company's size and flexible structure also enables it to invest
in unconventional investments, which often cannot be accommodated
by more traditional, larger fund managers, typically less flexible
in their approach. 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, including other listed investments
companies.
Investment Monitoring AND KEY PERFORMANCE INDICATORS
The Company believes this investment strategy may produce
returns not replicated by movements in any market index.
Furthermore, the Board considers that the use of a single benchmark
will not always offer shareholders the relevance and the clarity
needed with regard to the performance of the Company.
The Board's primary goal is for the Company to generate
long-term returns for shareholders and so will compare the
Company's performance against that of a safe return from an
appropriate Government bond - for this the Board has elected to
follow the FTSE Gilts All Stocks TR Index (Bloomberg: FTFIBGT). The
Board's second goal is for the Company to achieve returns that are
higher than inflation and use the UK's CPI (Bloomberg: UKRPCHVJ) as
the KPI for comparison. Finally, the Board compares the Company's
returns with those of its: (i) peer group; and (ii) an appropriate
index - for which the Board has elected to follow the performance
in GBP of the MSCI All Country World Index excluding Frontier
Markets (Bloomberg: NDUEACWF). See further in the report for the
further discussion on the KPIs.
POLICY ON BOARD COMPOSITION
Appointments to the Board are made on merit and against
objective criteria, in accordance with the AIC Corporate Governance
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 merit
only and that there should be no discrimination in the choice of
Directors for any reason.
Long -- Term Performance
TEN YEAR COMPANY PERFORMANCE STATISTICS
Net Asset
Value per
share -
Ordinary Share Price
Year ended Shareholders' and 'A' Annual (Bid) Discount/(Premium)
31 March Funds Ordinary Dividends Ordinary 'A' Ordinary Ordinary 'A' Ordinary
2021 GBP367.9m 306.6p 3.2p 198.0p 198.5p 35.4% 35.3%
2020 GBP276.3m 230.2p 3.2p 130.9p 135.5p 43.1% 41.2%
2019 GBP337.3m 281.1p 3.2p 195.5p 195.0p 30.5% 30.6%
2018 GBP323.1m 269.3p 3.2p 198.5p 195.5p 26.3% 27.4%
2017 GBP307.5m 256.3p 3.2p 173.3p 169.6p 32.4% 33.8%
2016 GBP255.6m 213.0p 3.2p 146.0p 145.1p 31.5% 31.9%
2015 GBP273.3m 227.8p 3.2p 172.0p 165.5p 24.5% 27.3%
2014 GBP287.4m 239.5p 3.2p 175.9p 175.5p 26.6% 26.7%
2013 GBP259.9m 216.6p 3.0p 166.8p 163.0p 23.0% 24.7%
2012 GBP268.2m 223.5p 2.8p 181.0p 178.3p 19.0% 20.2%
2011 GBP264.1m 220.1p 0.7p 194.2p 190.5p 11.8% 13.5%
The table includes information relating to HICL and historic
information relating to Hansa Trust. The years ended 2021-2020
notes HICL information. The historic year ends 2019-2011 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 (Bid)" 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 later in the report.
To 31 March 2021 1 year 3 years 5 years 10 years
Share Price Total
Return
Ordinary shares
(%) 54.2% 5.4% 48.8% 21.5%
'A' non--voting
Ordinary shares
(%) 49.3% 7.4% 50.2% 24.6%
To 31 March 2021 1 year 3 years 5 years 10 years
Net Asset Value Total Return Performance
Net Asset Value
(%) 34.8% 18.3% 53.4% 58.0%
Organisation and Objectives
This section explains how the Board has organised the Company
and seeks to deliver its objectives.
BOARD COMMITTEES
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.
Audit Committee
The Audit Committee, which meets at least twice a year, consists
of all independent Directors of the Board. Richard Lightowler is
the Chairman of the Audit Committee.
The AIC Code of Corporate Governance ("the AIC Code") indicates
that all independent Directors can be members of the Audit
Committee. 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 Code states all Committee members should be
independent. Therefore, William Salomon is not a member of the
Committee. The Committee reports its recommendations to the Board
for final approval.
Nomination Committee
The independent members of the Board fulfil the function of the
Nomination Committee. The Committee is chaired by Nadya Wells.
Appointments are made on merit 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 merit only and that there should be no
discrimination in the choice of directors for any reason. 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.
Management Engagement Committee
The independent members of the Board fulfil the function of the
Management Engagement Committee. The Committee is chaired by
Jonathan Davie. 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 the engagement of the
Portfolio Manager to be in the best interests of the shareholders.
The Committee reports its recommendations to the Board for final
approval.
Remuneration Committee
The independent members of the Board fulfil the function of the
Remuneration Committee. The Committee is chaired by Simona
Heidempergher. The level of Directors' fees is monitored annually
and will be formally reviewed every three years, in the light of
their duties and also relative to other comparable companies. The
Committee reports its recommendations to the Board for final
approval.
Requirements of s172 UK Companies Act
As required by the AIC Code, the Board describes below how it
has met the requirements of s172 of the UK Companies Act as
applicable to your 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 Board has identified the Company's shareholders
and its main service providers as its key stakeholders.
SHAREHOLDER INTERACTION & PROMOTING THE COMPANY
The shareholder base is a mixture of retail investors, wealth
managers, asset managers and private clients across both classes of
the Company's shares. The Board monitors the changes in each
shareholder base at its quarterly Board meetings. The Company
communicates through publication of Year-End and Interim Financial
Statements, through detailed quarterly and monthly factsheets, as
well as through the Company's website. The Company also holds
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 the Board's meetings.
The Company continues to meet shareholders and other interested
parties facilitated by Edison and Winterflood as well as a result
of direct contact.
Investors are also kept informed through detailed factsheets,
Interim and Annual Financial Statements, paid-for editorial pieces
by Edison Research and discussion with media organisations. During
the year, to enable shareholders to meet with the Board and
Portfolio Manager during the Covid-19 pandemic, the Board trialled
the use of online shareholder presentations. 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.
An item raised by several shareholders over recent times through
a variety of forums concerns the size of the discount to NAV of
each of the Company's share classes. The Board has always been of
the view that providing transparency and clarity to investors, as
well as promoting demand for the Company's shares, would create a
positive impact on the discount for the medium to longer-term.
During the year, the Company asked Winterflood to help review the
options available to the Board at the current time to drive the
discount lower. The options considered included suggestions made by
shareholders in recent correspondence. Following Winterflood's
review and a discussion between the Board and Winterflood, it was
recognised more work was to be done to reach out to the
self-selected investor sector. To this end, the Company has begun a
marketing review with Warhorse Partners to consider all forms of
its investor messaging and outreach.
We are working with Link Group, the Company's Registrars, and
Orient Capital, the Company's Register Analyst, to improve our
understanding of our shareholder base and to proactively engage
with key shareholder groups to promote interest.
LONG-TERM IMPACT OF DECISIONS - ESG MATTERS
ESG considerations will play an increasingly important part in
the decision-making processes of funds and their managers the world
over.
Our Portfolio Manager has developed a Responsible Investment
Policy during the last year incorporating feedback from our Board.
As a Board, we consider it both incorporates the important
responsibilities this Company has as an investor, with the context
of our long-term growth strategy. Therefore, the Board has given
its approval for the Portfolio Manager to apply its Responsible
Investment Policy when managing the Company's current and future
investment portfolio.
As a long-term investor, HCP has a natural desire to be a
responsible investor and good corporate citizen. This is reflected
in the belief that such businesses and investments are likely to
generate superior long-term returns and, furthermore, consideration
of such issues is an important element in the assessment of
potential risks. The Responsible Investment Policy seeks to
incorporate ESG factors into investment decision-making. The
Manager is not pursuing an exclusionary policy through negatively
screening potential funds or companies and thereby restricting our
investment universe, but instead will engage with those companies
and funds which they feel are falling short on their
responsibilities. However, there is an expectation that our
existing investments should take ESG issues seriously, to clearly
report on them and to aspire to do the right thing. Where a
portfolio manager or company is not living up to these standards
our Portfolio Manager will engage with them to encourage
improvement with the ultimate sanction being exiting, or not
investing in, a fund or company if their concerns are not
sufficiently addressed
Fund Investments
Whilst our Manager does not seek to exclude fund managers
invested in sectors or geographies with higher ESG risk, they would
also expect such managers to properly articulate how they operate
in such areas and manage the potential ESG considerations. Their
investment philosophy favours those managers who are typically
long-term in their approach and seek to invest in high quality
companies that are well managed and often higher returning. As a
result, many will either not invest in, or have a high hurdle
before they will invest in, those business that are, for example,
focused in the energy, natural resources or commodities, or in
countries with poor corporate governance frameworks. Accordingly,
although we do not set thresholds there is a natural bias away from
those companies and sectors that score less well on ESG
metrics.
Company Investments
When considering our direct equity investments our Manager
considers not just the target company industry and business model,
but also that management teams are responsible custodians of their
businesses, report clearly on ESG metrics and seek to improve on
those areas in which they are failing. Again, as for our fund
selection, our Manager does not necessarily exclude specific
sectors or countries but instead, for those companies where
inherent ESG risk is higher focused on how these companies manage
these issues and their responsibilities.
Over the last 12 months, our Portfolio Manager has participated
in all shareholder votes for our current investments and will
continue to actively engage and participate in all future votes for
all investments.
The full Responsible Investment Policy can be found on the
Portfolio Manager's website with the following link:
www.hansagrp.com//media/Files/H/Hanseatic-Group-V2/hansa-responsible-investing-Dec-2020.pdf
Ocean Wilsons Holdings Ltd
As noted elsewhere within this Report, the Board retains
specific responsibility for the holding in Ocean Wilsons Holdings
Ltd and, with it, the monitoring of its ESG credentials. OWHL is
made up of two investments - Ocean Wilson Investments, an
investment portfolio, and a significant holding in Wilson Sons Ltd,
a Brazilian maritime business. From an ESG standpoint, our
Portfolio Manager is also the investment advisor to the Ocean
Wilsons Investments' portfolio. The Board understand that our
Portfolio Manager is engaging with Ocean Wilsons Investments' board
on their Responsible Investing Policy. As a Board we receive
regular updates from Wilson Sons, an operating business with
several thousand employees, regarding their business including
issues relevant to ESG considerations. Wilson Sons are justifiably
proud of their focused approach to Health & Safety and staff
wellbeing. As in many heavy industries, there is a focus on safety,
improving working practices to minimise staff injuries. They
continue to see a decade-long trend of reduction in Lost-time
Injuries - which is a reflection in an increasingly safe working
environment. In the 10 years since 2011, there has been a 91%
decrease in Lost-time Injuries. Additionally, Greenhouse Gas
emissions have been reduced by 12% since 2013. Wilson Sons has also
taken decisive steps to protect the safety and wellbeing of its
employees during the Covid-19 pandemic. Many of their head-office
staff continue to work mainly from home and, for those who can't,
changes have been instituted to minimise the amount of mixing to
reduce the risk of cross infection.
Carbon Offset
We recognise that, as part of the redomicile of the business to
Bermuda, and in a normal, non-Covid-19, year there will be a number
of individual Director flights to attend Board meetings in Bermuda.
Therefore, as a matter of policy, 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).
Streamlined Energy & 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. The Board has assessed the
emissions associated with these trips to be "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 198 tonnes of CO2 (inclusive of the radiative effect of
high altitude aircraft emissions and contrails) in any 'normal'
year. However, for the year ended 31 March 2021, the Covid-19
pandemic has seen that reduced to almost zero. The Board has
assessed that the Company does not have other Indirect Emissions to
report, as all other emissions will be associated with the
operations of service providers and be reported by them if
appropriate.
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 Board consists entirely of non-executive Directors; it
delegates the day to day implementation of its policies to 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 either by the Board or its
Committees. The Board recognises it is these key service providers
and, importantly, their staff who are critical to the success and
smooth running of your Company.
The Board, in seeking to engage organisations which can provide
the relevant levels of experience and expertise at an acceptable
cost, carries out the following activities:
Monitors third party suppliers, performance and costs
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
("AASP") has an ongoing dialogue with each supplier to monitor its
processes and systems and feedback any concerns that might be
arising. In addition, a Director will seek to meet with key
suppliers once a year (or more frequently as is necessary).
Monitors Portfolio Manager performance
The Board reviews reports prepared by the Portfolio Manager at
its regular meetings, which enables it to monitor the investment
risks and returns. The Portfolio Manager attends each Board meeting
to provide an update on Investment Performance and enable the
Directors to actively question the risks and investment performance
within the portfolio.
Determines investment strategy, guidelines and restrictions
The Board determines the investment strategy in conjunction with
the Portfolio Manager. The strategy is monitored regularly and
refinements are made to it as required, with formal review at the
Board's annual strategy meeting.
The Board issues formal investment guidelines and restrictions,
compliance with these is reported by the Portfolio Manager's
compliance officer on a regular basis 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 at the time of borrowing. Details of the borrowing limits
can be found further on in the report. The Company will not invest
in derivatives but may hold derivatives for efficient portfolio
management and hedging purposes.
The key service provider relationship to the Company is Hansa
Capital Partners as the Portfolio Manager and Additional
Administrative Services Provider to the Company.
THE PROVIDERS
Portfolio Manager & Additional Administrative Services
Provider
Hansa Capital Partners LLP ("HCP") 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 below in the report.
HCP charges an investment management fee at an annual rate of 1%
of the net assets of the Company (after any borrowings) but, after
deducting the value of the investment in OWHL, on which no fee is
payable. The Portfolio Manager has charged GBP2,621,000 for the
year ended 31 March 2021 (for the Combined Group, year ended 31
March 2020: GBP2,441,000). Hanseatic Asset Management LBG, a
company connected to Hansa Capital Partners LLP 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.
HCP also acts as the Additional Administrative Services Provider
("AASP") to the Company. This role ensures a number of the day to
day processes for the Company are carried out as well as providing
oversight of, and a liaison between, a number of the Company's
service providers and the Company itself. HCP is paid GBP115,000
per annum for this service (for the Combined Group, year ended 31
March 2020: GBP119,000). HCP is not the Company Secretary - see
below.
Auditor
The Company's Auditor is PricewaterhouseCoopers Ltd, a Bermudan
registered firm. The Board have developed a strong working
relationship with the Auditor and have been happy with the rigour
and challenge offered. The reappointment of PwC as Auditor to the
Company will be proposed at the forthcoming AGM.
Auditor independence rules restrict the amount and type of
non-audit related work that can be performed by a company's
auditor. Any non-audit related work must be pre-approved by the
Board. Currently, PwC provides only audit services to the Company
(details in Note 4).
Company Secretary
The Company has engaged Conyers Corporate Services (Bermuda) Ltd
("Conyers") as its Company Secretary. During the year to 31 March
2021, the Company Secretary has charged GBP5,919 (for the period
ended 31 March 2020: GBP17,647 although this included a number of
one-off set up fees).
Alternative Investment Fund Manager
As a Bermudan resident, the Company is defined as a non -- EU
Alternative Investment Fund ("AIF") under the EU's Alternative
Investment Fund Manager's Directive ("AIFMD"). As such, the Company
and the AIFM are only subject to the AIFMD rules in a limited way -
specifically in relation to marketing of the Company's shares in
the EU. The Company appointed Hanseatic Asset Management LGB, with
effect from 29 August 2019, to act as its AIFM with
responsibilities for the Portfolio Management and Risk Management.
The AIFM has sub-contracted to Hansa Capital Partners LLP the
provision of Portfolio Management services. The AIFM does not
charge a direct fee for its services, although it does recharge any
third-party fees incurred.
Administrator
The Company has engaged Maitland Administration Services Limited
as its Administrator. The Administrator has charged GBP143,517 for
the year ended 31 March 2021 (for the Combined Group, year ended 31
March 2020: GBP138,214).
Custodian
The Company has engaged Banque Lombard Odier & Cie SA
("Lombard Odier") as the Company's Custodian. During the year to 31
March 2021, Lombard Odier charged GBP163,308 for the custodial
service (period ended 31 March 2020: GBP78,806. Note: this was only
for part of the year to 31 March 2020 as Lombard Odier was not the
Custodian for Hansa Trust).
KEY PERFORMANCE INDICATORS and other measures
The Board, regularly and at least quarterly, reviews the returns
and the performance of the Company, including an analysis using the
KPIs listed below.
The Board considers that the use of a single benchmark will not
always offer shareholders the relevance and the clarity needed with
regard to the performance of their Company against its investment
objective. The overall assessment of the performance of the Company
is given by the Chairman in his Report.
In discussions between the Board and the Portfolio Manager,
returns are compared with a number of measures including the return
of a government bond, using the 10 year UK Gilt Return (FTSE All
Stocks Gilts Total Return Index); to the rate of inflation (real
returns are important to shareholders) and with those of our peer
group and appropriate indices for different elements of the
portfolio.
Additionally, whilst not specifically KPIs, the cost of managing
the Company is monitored against the NAV (the ratio between costs
and NAV is also known as the 'ongoing charges percentage per annum
ratio'); and the discount/premium the shares sell at in relation to
the NAV are likewise monitored.
The Board of Directors monitors the returns made in absolute
(firstly) and relative (secondly) terms against the KPIs
established. The comparisons are made over 1, 3, 5 and 10 year time
horizons.
i) Shareholders - Total Returns
To 31 March 2021 1 year 3 years 5 years 10 years
Share Price Total
Return
Ordinary shares 54.2% 5.4% 48.8% 21.5%
'A' non--voting
Ordinary shares 49.3% 7.4% 50.2% 24.6%
ii) Company - Total Returns
These comparisons are used to determine the effectiveness of the
Investment Strategy and of the Portfolio Management. The KPIs below
should also be noted.
To 31 March 2021 1 year 3 years 5 years 10 years
NAV 34.8% 18.3% 53.4% 58.0%
Relative comparison
Peer group average 46.6% 29.2% 64.8% 124.8%
* See below for peer group members.
iii) Discount/Premium
A comparison is made between the (discount)/premium of the
Company's two classes of shares, those of the Company's peer group
and of the AIC average.
1 year 3 years 5 years 10 years
To 31 March 2021 average average average average
Ordinary shares
(%) (35.9) (31.8) (31.0) (27.5)
'A' non-voting
Ordinary shares
(%) (35.0) (32.6) (32.1) (28.8)
Peer group (%) (8.3) (6.5) (6.8) (6.7)
AIC (%) (6.6)
Note: AIC only produces AIC average for 1 year.
During the year, the Board considered the following investment
companies to be HICL's Peers (noted with their AIC Sector):
Artemis Alpha Trust (UK All Companies)
AVI Global Trust (Global)
Caledonia (Global)
Capital Gearing (Flexible)
Fidelity Special Values (UK All Companies)
Henderson Opportunities (UK All Companies)
Henderson Alternative Strategies (Flexible)
RIT Capital Partners (Flexible)
Ruffer Investment Co (Flexible)
Witan (Global)
iv) Expense ratios
To 31 March 2021 1 year 3 years 5 years 10 years
Ongoing annual
charges (%) 1.0 1.1 1.1 1.0
To comply with the Packaged Retail and Insurance-based
Investment Products Regulation ("PRIIP"), the Company has issued a
PRIIP's Key Information Document ("KID") for each of its two share
classes. In the PRIIPs, 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
2021, the PRIIP KID cost ratio is 2.06% per annum.
v) 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 2021 1 year 3 years 5 years 10 years
NAV 34.8% 18.3% 53.4% 58.0%
FTSE UK Gilts
All Stocks TR
Index (5.5%) 7.7% 15.4% 59.3%
UK CPI Inflation 0.7% 4.2% 9.2% 18.7%
MSCI ACWI NR (GBP) 38.9% 43.0% 94.0% 179.3%
LIMITS
Investment Guidelines
The Portfolio Manager, on behalf of the Company, seeks to build
a multi-strategy portfolio by seeking investments across four key
investment categories under its mandate:
-- Core - investments, typically through third-party funds, that
the Company can expect to hold throughout the cycle;
-- Thematic - investments, typically through third-party funds,
that reflect key investment themes which 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; and
-- Global Equities - a diversified portfolio of global equities
identified by the Portfolio Manager as having long-term growth
potential.
Whilst the Company has no set maximum or minimum exposures to
any asset class, geography or sector, the Board nonetheless sets
guidelines which the Portfolio Manager adheres to. These can be
adjusted by mutual agreement. While the proportion of the portfolio
represented by each of these categories will vary over time, the
Board may set parameters for the Portfolio Manager based on its
view of the global investment markets. At the current time, the
Board has set the following guidelines for each category as a
percentage of the portfolio value (including the strategic
investment in OWHL):
-- Core: 0-50%
-- Thematic: 0-25%
-- Diversifying Assets: 0-40%
-- Global Equities: 0-40%
Borrowing Limits
The Board believes shareholders' returns may be enhanced if the
Company borrows money at appropriate times for the purpose of
investment. The Company has an unsecured lending facility through
its Custodian, Lombard Odier. The Board have agreed to a nominal
maximum loan of GBP30m, subject to there being sufficient value and
diversity within the portfolio to meet the lender's borrowing
requirements. The Portfolio Manager is able to utilise that
facility as required up to the upper limit available.
PRINCIPAL RISKS
The Board reviews the principal risks from the perspective of
the long-term shareholders, the main risk being that over the long
-- term (which we determine to be greater than five years) they do
not make a return from their investment in the Company. The Board
considers and monitors the principal risks facing the Company,
including those that would threaten its business model, future
returns, solvency and liquidity. The Board considers the risks the
Company, and therefore shareholders, face can be divided into
external and internal risks.
External risks
External risks to shareholders and their returns are those that
can severely influence the investment environment within which the
Company operates. These risks include anti-business government
policies, protracted economic recession, declining corporate
profitability, increased taxation, high unemployment and high,
uncontrolled, inflation. The impact of such an environment could
lead to sharp rises in interest rates and a decline in equity and
bond markets. Deflation is also a source of concern in some
countries, but unless deflation accelerated sharply it is not
thought to be a significant impediment to growth. However, it may
lead to negative interest rates which could damage the banking
system's profitability and the levels of savings available for
investment. At their Board meetings and at the annual Strategy
meeting, the Directors and the Management consider long-term risks
that concern them, including:
-- Instability - political and economic - particularly associated with Brazil.
-- Economic, currency and equity declines.
-- Societal and structural changes, regardless of source/reason
but quite possibly triggered by Covid-19, that potentially impact
the Company's investment strategy and its ability to generate
growth over the medium to long -- term.
-- The growth of global debt.
-- Abuse of fiat money creation by Central Banks.
It should be stressed these are the external risks which most
concern the Directors and the Management, not forecasts of future
events. The mitigation of these risks is achieved by sensible stock
and sector diversification and adherence to the Board's investment
restrictions and guidelines.
Internal Risks
Internal and operational risks to shareholders and their returns
are:
-- Portfolio (stock and sector selection and concentration).
-- Balance sheet (gearing).
-- Administrative mismanagement. In respect of the risks
associated with administration, or changes to the current taxation
environment of Bermuda.
The Board also considers the risks to the Company's two share
prices, apart from those mentioned above, which includes the risk
of higher discounts. The Board monitors the discount and seeks to
identify the drivers and manage through transparent communication
and shareholder engagement. However, given the Company's stated
objective of increasing shareholder value over the long-term, the
Board does not consider short -- term NAV or share price volatility
to be a risk to long -- term shareholders.
Details of how the principal risks arising from financial
instruments (as determined by the Financial Reporting Council) are
managed, have been summarised in Note 19 of the Financial
Statements.
Covid-19
The Board focuses on events that damage economies and which may,
as a result, impact the Company's ability to make a return for
shareholders over the medium to long-term. After the rollercoaster
Markets experienced in spring 2020 as the scale of the pandemic
became apparent, Covid-19 continues to disrupt economies and
populations across the globe. However, the Board is of the opinion
that the worst is probably behind us and is optimistic that the
ongoing global vaccine rollout will help limit the future economic
damage from this virus. The Board, with the Portfolio Manager,
continues to focus on the likely future economic impacts as the
world emerges from the pandemic and how these, in turn should
influence our investment approach.
The Board is pleased to report that your Company and its service
providers all were able to continue to work with minimal disruption
during the various lockdowns and restrictions imposed over the last
18 months. The Board wishes to thank the team members at each of
its service providers for their extra efforts to maintain their
high level of service to the Company during this difficult
time.
It is also worth considering some of the more structural
elements of the Company and its service providers at this time of
uncertainty:
-- Gearing: Whilst the Company has access to a loan facility,
that facility is relatively modest compared to the Company's size
and has not been used in the year to 31 March 2021. As a result,
regardless of the valuation fluctuations experienced over the last
18 months, at no time was the Company in a position where it would
be forced to sell assets to manage debt covenants.
-- Discount management: The Company has stated previously that,
whilst it has the ability to buy back shares, it does not believe
doing so is an effective, long-term, method to reduce the discount
for the benefit of all shareholders. With the market sell-off and
the widening of discounts across the industry, the Company's
discount management policy has the benefit of not forcing the sales
of assets to raise cash to adhere to a discount management
mechanism by facilitating share buybacks. Additionally, the
repurchase of the Company's shares would further concentrate our
OWHL exposure and, therefore, our exposure to Brazilian risk.
-- Dividend: The Company announced in April its expected
dividend level and schedule for the year 2021/22, which involved
leaving the level and timing of dividends unchanged from the
previous period. Barring unforeseen circumstances, the Board
expects to continue to follow that guidance regardless of the
amount of income raised from dividends received in any given
period.
-- Liquidity of the portfolio: Cash requirements are monitored
closely. If lower dividend income was to lead to a short-term
cashflow requirement, such as for expenses or dividend payments,
the Company could meet that requirement through a combination of
sales of liquid assets or use of the Company's loan facility for a
short time. A significant proportion of the portfolio (circa 72%)
has daily or weekly liquidity rising to 88% having at least monthly
liquidity. Underlying investments are largely in publicly traded
investments. For the purposes of this analysis, the shares held in
the Company's Strategic Holding, OWHL, are assumed to have daily
liquidity. Whilst the Board would not normally use the holding in
OWHL as a source of funding, if circumstances dictated that it was
necessary, then the Board could do so
The Board is confident the Company is securely positioned
despite the ongoing impact of Covid-19 and equipped to navigate
through as the future becomes clearer.
DIVID POLICY AND DIVID PAYMENTS
Dividend Policy
The Board's dividend policy is to pay four similar interim
dividends each year. The Board will declare the rate of the four
dividends at the beginning of the financial year in question. The
Board anticipates dividends to be paid in August, during the
financial year, followed by November and February, with the fourth
being paid in the May following the end of the financial year. The
Company expects the dividends to grow over time reflecting the
longer -- term returns of the portfolio. If circumstances are such
that the level of cash income generated by the portfolio is
insufficient to meet the dividend commitment, the shortfall may be
made up from the Company's reserves. Under certain one -- off
circumstances an extra and final dividend may be proposed at the
Company's Annual General Meeting.
Dividend Payments
The dividends paid are as follows:
2021
GBP000
Ordinary and 'A' non-voting
Ordinary shares
First interim paid 0.8p (August
2020) per share 960
Second interim paid 0.8p (November
2020) per share 960
Third interim paid 0.8p (February
2021) per share 960
Fourth interim paid 0.8p (May
2021) per share 960
Total dividends 3,840
The Board is not proposing a final dividend per Ordinary and 'A'
non-voting Ordinary share class.
Discount Policy
The objective of HICL is to encourage the demand for the shares,
by ensuring it has an investment policy that is attractive to
investors and which is likely to produce above average returns over
the long-term. Further, we aim to promote the Company and its
prospects, through clear and transparent reporting, so as to
encourage the demand for its shares. The Board has embarked on a
project with Warhorse Partners, a brand and marketing specialist
focused on the asset management industry, to review the Company's
branding and communications strategy with shareholders and
potential shareholders alike. The aim of the project 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 Board does not believe it can manage the discount in the
short-term through a share buyback policy. Furthermore, the Board
does not believe buying in its own shares is in the best long-term
interest of shareholders because:
-- it reduces the number of shares outstanding and therefore the
liquidity of the shares in the market place; less liquidity may
cause a rise in the discount;
-- it means a liquid 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;
-- 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;
and
-- buying back shares treats the symptoms of the problem of lack of demand, not the cause.
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
Report to the Shareholders, the Portfolio Manager's Report and
other elements of the Strategic Report. Additionally, given the
unprecedented times we continue to live through, a section
specifically considering Covid-19 has been added following the risk
analysis.
After due consideration of the Balance Sheet, including the
ongoing global impact of Covid-19 activities of the Company,
estimated liabilities for the 12 months following the signing of
this Report and having made appropriate enquiries, the Directors
have concluded the Company has adequate resources to continue in
operational existence for the foreseeable future. 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. For this reason, they continue to adopt the going concern
basis in preparing the Financial Statements.
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. As stated previously in the wider
Strategic Report, 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 to 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 including the effects over the previous
18 months of the Covid-19 pandemic, 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. Whilst there is still uncertainty relating to Covid-19,
there will be new opportunities arising from changes to people's
lives and it is important we identify those emerging trends for the
long-term growth of the portfolio.
Portfolio Manager's Report
Market Commentary
This time last year markets had just experienced a sudden
collapse, as the global nature of the pandemic and the drastic
impact of the lockdowns enacted by governments to combat it were
becoming clear to investors. There was much uncertainty in the air
and few were predicting the strength of the subsequent rebound that
we have seen in markets. However, during the 12 months since then,
global equities have gained 38.9% and hedge funds are up 20.2%,
while global treasuries have fallen 8.3%. (Sources: MSCI ACWI +
Frontier Markets, HFRI Fund Weighted Composite and Bloomberg
Barclays Global Treasury TR Unhedged GBP.)
In March 2020 stock markets sat at a fork in the road.
Conventionally, when the economy experiences a downturn at the end
of a cycle it takes many months, if not years, to purge the system
of the excesses that have built up and for the credit and interest
rate cycles to normalise and the slow rebuilding process to begin.
This downturn and the speed of the subsequent recovery were very
different. Firstly, it was catalysed by governments locking down
economies to stymie the spread of the disease. It wasn't, as is
normally the case, caused by either structural imbalances or a more
conventional cyclical downturn. Companies and sectors just ceased
to trade or traded at much lower levels. This meant that as
economies exited the lockdown period many companies and sectors
were either able to return, or expected to ultimately return, to
something like normality quite rapidly. Clearly certain parts of
the economy would be more impaired than others, but on the whole
markets were of the view that many companies would return to
something like their pre -- Covid-19 levels within a relatively
short period of time.
The second factor driving the rebound were the actions taken by
governments and central banks. With the Global Financial Crisis
fresh in their minds, central banks and, to a lesser extent,
governments had a playbook as to how to deal with periods of
distress and dislocation. Initially they threw copious amounts of
liquidity at markets, in the form of lower interest rates and
either restarting or increasing quantitative easing programmes.
Governments also stepped up to the plate through massive fiscal
packages which reached levels last seen post the Second World War.
Most importantly they introduced measures to shore up the corporate
credit sector. Recognising the systemic risks posed by widespread
corporate defaults, policymakers instigated a number of packages
which sought to underpin corporate balance sheets. Measures such as
furlough schemes to help employment, loan programmes and extensions
on debt repayments all helped mitigate the risk of widespread
corporate collapse.
Finally, the composition of the stock market aided the rebound.
The current cycle has been dominated by the rise of big tech.
Through a fortuitous blend of different technologies, such as the
internet, computing power, mobile communications and cloud storage,
coming together at the same time we have seen the advent of new
industries such as social media, but also old industries being
disrupted by new technologies, especially in the retail and banking
arena. To a greater or lesser extent all companies and sectors are
undergoing a period of change. As a result, the technology sector
has surged from 19% of the S&P 500 in 2010 to 30% at the
beginning of 2020 (based on the same companies).
Whilst in a conventional cycle one would normally expect those
sectors which drove the market up to lead it down again (as the
inevitable excesses are cleansed from the system, valuations
hitting bubble territory and too much capital being injected into
the sector in question) this cycle was again unique. Rather than
being the catalyst for collapse, the government lockdowns
accelerated many of the trends seen in the technology sector with
adoption rates soaring. With large swathes of the population
working from home we saw a boom in online shopping, a surge in
social media and, in the corporate world, we swapped face-to-face
meetings and travel for Zoom to remain connected. As a result, the
tech sector actually increased in value with the FANMAGs (Facebook,
Amazon, Netflix, Microsoft, Apple and Google) alone now accounting
for some 27% of the S&P 500 Index. Capping the year off, Tesla
entered the S&P 500 with a market capitalisation that
exceed
Hence, whilst in conventional cycles rapid recoveries are rare,
this cycle was unique in that it was able to rebound almost
overnight in what genuinely looked like a V-shaped recovery. From
their lows at the end of March, markets rose in a straight line as
the factors highlighted above came together to enable markets to
climb a wall of fear such that, by the end of October, markets were
flat for the year despite most countries being far from out of the
woods as far as Covid-19 was concerned.
The last couple of months of 2020 looked more precarious, with
many believing markets had risen too far too fast, combined with
some looming event risks. The first risk faced by markets was the
long-awaited US election. Whilst there were a multitude of
potential outcomes investors seemed most concerned that either the
result was inconclusive and that deciding the winner would require
a long, drawn-out legal battle, or that the Democrats would achieve
a landslide victory and feel emboldened to enact some of the more
left-leaning policies, including the breakup of the technology
sector and higher taxation. In the event whilst President Trump
disputed the result the outcome was seen as being something of a
goldilocks scenario for markets with Joe Biden, the newly elected
president, seen as a more stable actor on the global stage, but
equally the modest scale of the win making some of the more extreme
policy measures less likely.
The other event concerning markets was a further round of
lockdowns, with cases of Covid-19 accelerating again as economies
exited the first lockdown and the traditional winter flu season
arrived. Many, including us if we're honest, had thought
governments would be extremely reticent about locking down their
economies again given the already substantial impact of the first
lockdown. This raised the spectre of a double dip recession which
would likely weigh heavily on markets given the extent of their
rebound post the first lockdown. The news on vaccines, however,
trumped these fears. In what is one of the greatest triumphs for
the ingenuity of mankind and a vindication of the biotechnology
sector, we have seen not just one but a host of working vaccines
which exceeded even the most optimistic expectations in terms of
efficacy and safety. With the prospect of a widespread roll-out of
the vaccines, markets were able to look through the impact of the
lockdowns. The first three months of 2021 have seen the roll-out
proceed at an impressive pace in several countries, most notably
the US and UK, and the early signs from these countries regarding
case numbers and hospital admissions have been encouraging.
As a result of the strength of the recovery, stock markets have
experienced remarkably robust performance across the board over the
past year. We have seen rises of 38.9%, 42.5% and 29.0% for the
MSCI World, MSCI North America and MSCI China indices,
respectively. Europe and the UK, up 30.2% and 20.0%, respectively,
have lagged the US. Emerging markets have had a relatively strong
period, rising by 42.3%, but frontier markets have been noticeably
weaker with a gain of 25.1%. At the sector level, the rotation away
from growth stocks and towards more value areas of the market that
we have seen in the last few months has not been strong enough to
stop technology being one of the strongest areas of the market over
the last year, with the MSCI ACWI Information Technology Index
being up 54.3% for the year. Consumer discretionary and materials
have been even stronger than tech over this period, up nearly 60%,
while consumer staples, utilities and real estate have been much
weaker with returns of between 10% and 17%.
Bond markets have had a difficult year. After holding their
value, and even making some gains in the early part of the
recovery, global treasuries began to sell off in the autumn as
yields climbed higher. This process has continued in the early part
of 2021, with the US 10-year yield almost doubling in three months
as it reached 1.74% at the end of March. The Global Treasury Index
has produced a negative return of -8.3% over the last year, while
the FTSE Gilts All Stocks Index has returned -5.5%. Credit markets,
however, performed much better as the health of corporates improved
and the prospect of widespread defaults reduced. Over the year
investment grade debt rose by 0.4% and high yield by 12.6%.
The commodity markets have seen contrasting fortunes. Gold's
defensive attributes, which came to the fore in the depths of the
crisis last year, have since held it back, and metal has declined
by 3.7% over the year. In sharp contrast, oil, which had collapsed
as demand went away has staged a recovery with the prices of both
Brent and WTI up about 160% over the year. In a similar way, the
copper price is 58.7% higher than it was 12 months ago.
Finally, in the alternatives space, while hedge fund returns
were more muted than equities, they have nonetheless provided
strong returns over the last year, with the HFRI Composite Index
gaining 20.5%.
Positioning & Outlook
Having remained resolutely pro-equities throughout the current
cycle, we had entered 2020 feeling modestly optimistic on the
prospects for markets in the year ahead. Whilst we didn't see them
replicating 2019's strong returns, we equally thought the drivers
that had prevailed throughout the cycle (which we'll come to
shortly) remained in place. Clearly this didn't look particularly
clever in the March trough, but we kept a level head, didn't
capitulate and retained our positioning based on a belief that the
actions of central banks and governments in injecting additional
liquidity into markets were extremely supportive of asset prices
and that whilst it would take some time for economies to recover to
their pre-Covid-19 levels, the trough in economies probably
occurred in March or April 2020. Together with our long-term
positive view this suggested sitting tight was the appropriate
course of action. Ultimately this proved to be the correct decision
which, combined with our significant positions in technology and
biotechnology, resulted in a very favourable outcome for the
year.
The year ahead is looking more nuanced. In contrast to our more
positive view on markets for much of the current cycle, many other
commentators have typically had a more negative skew, with our
optimistic stance feeling quite lonely at points! Interestingly,
more recently the consensus seems to have moved much closer to our
position which makes the contrarian in us a little more wary.
So what are the arguments looking ahead?
Well, in many ways they haven't really changed much. The current
cycle has not been about robust growth but rather a liquidity
driven cycle. Time and again central banks have thrown liquidity at
markets to resolve potential problems. This has fed into risk
assets in two key ways. Firstly, the process of pushing interest
rates and bond yields down has forced investors to move up the risk
spectrum in pursuit of returns. With near zero or even negative
yields throughout many of the developed world bond markets there
really was no alternative but for investors to seek solace in
equities. More recently bond yields have risen but equities still
look reasonably attractive on a relative basis. The second driver
is the deployment of the excess capital. Like water in a plumbing
system, capital flowing around the financial markets needs to find
a home and clearly in this cycle it has been one of driving asset
prices higher. Whilst the marginal impact of this liquidity on the
real economy seems to be diminishing, its impact on asset levels
shows no signs of abating.
Hence with liquidity now being boosted, not only by central bank
measures but also by government fiscal packages, stock markets look
to be underpinned, at least in the short--term
2021 should also benefit from an improving economic outlook.
Assuming there is a significant vaccine roll-out, economic growth
should improve dramatically on last year. Whilst something of an
optical illusion, with even a modest rebound producing a
substantial uplift in growth given the low base level, stock
markets typically react well to meaningful uplifts in growth. In
turn this economic growth should feed through to an improving
picture for company earnings, that whilst varying from country to
country is likely to be positive and synchronised.
This growth does however potentially create a very different
intra-market dynamic. As discussed above, one of the features of
the current cycle has been the outperformance of growth stocks over
value due to the dearth of growth on offer. If we do see a rebound
in economic growth in 2021 then it is possible cyclical stocks will
outperform as they can deliver this growth at cheaper valuations.
We have already seen the beginnings of this shift, with value
stocks outperforming growth stocks in recent months. The key
question though is whether this is the beginning of a multi-year
shift into value, or just a temporary phenomenon as markets
normalise from last year? At this point the jury is firmly out
albeit we acknowledge that some broadening of portfolios in the
current year is probably sensible.
At the country level, any rotation towards value will likely
lead to a shift out of US and Chinese equities and into some of the
other more cyclical markets. Europe and the EMs in particular would
be beneficiaries of such a shift, with their economies dominated by
older, more cyclical industries with relatively little exposure to
tech. With the US dollar weakening, this further strengthens the
investment case for EMs which typically prosper in such a
backdrop.
The flip side to such a shift is likely be a move out of
government bonds. Whilst we expect liquidity to remain plentiful
and interest rates low, it seems likely that we have reached peak
liquidity and rates are unlikely to move lower in the next year as
we start the exit process from the challenges faced in 2020.
Combined with an improving growth picture the outlook for bonds
looks relatively unattractive in the coming months.
In contrast commodities look to be better placed being more
pro-cyclical in nature, albeit there are long-term structural
issues as the world shifts towards renewables over the longer --
term.
Risks
The risks to this broadly constructive outlook can be
categorised into shorter-term factors and longer-term, more
structural, challenges.
Starting with the short-term factors, most worrying would be
anything that derails the expected rebound in economic growth.
Whether it be delays in the vaccine roll-out programme or, worse,
that vaccines are found to be ineffective in treating certain
strains of the virus. These outcomes would be extremely damaging to
sentiment, given the already considerable growth expectations built
into asset prices.
Much more material however are the longer-term structural risks.
The current cycle has been driven by a cocktail of low interest
rates, muted inflation and abundant liquidity. Anything that
changes this mix would have significant implications for markets
and market constituents. It is possible that the foundations are
being laid for just such a scenario. In recent times the accepted
wisdom has been one of central banks targeting low, stable
inflation and governments viewing fiscal policy as being of limited
use, especially when debt levels are high. 2020 saw significant
shifts on both fronts. Central banks appear to be shifting to a
policy of inflation targeting through cycles, viewing higher
inflation as a price worth paying in the pursuit of higher growth
and lower unemployment. Similarly, governments have shifted from
their stance of largely ignoring fiscal policy to one of injecting
more fiscal stimulus into the system, despite the fact that debt
levels are already high by historical standards. Whilst central
banks and governments have arguably had little choice given the
unprecedented challenges faced by the global economy over the past
year, it is possible we are at the beginning of a multi-year
structural shift which may ultimately lead to the end of the
current cycle and the dominant trends within it. At this stage it's
probably too early to say this with any conviction but certainly it
is something that is high on our radar.
Perhaps the biggest contrarian risk however is that markets gap
up. Whilst the natural focus of market commentators is to look at
those factors which might derail the current cycle, it is possible
that the bigger risk to many investors is that markets make a leg
up with cash levels still high. As is often the case at the end of
cycles, stock markets do not typically peter out, but instead
explode in a froth of irrational exuberance as retail investors
jump on the bandwagon and the fear of missing out becomes
overwhelming. We're perhaps seeing some tentative signs of this
with, for example, record numbers of SPACs being launched and names
such as Tesla rising exponentially, but not yet to a degree where
we feel the need to step back from markets.
Conclusion
Just when you think you have seen it all, markets have an
uncanny knack of doing something to prove you wrong (and they
certainly delivered on this front in 2020!). Whilst clearly not yet
out of the woods, especially as we sit here writing these comments
in a lockdown of sorts, 2021 is looking more optimistic as the
vaccine roll-out programme continues in earnest. The blend of
better growth together with still abundant liquidity should serve
to underpin risk assets and, as a result, we see little reason to
deviate from our positive stance on equities and more cautious view
on bonds. As articulated above there are clearly risks to this
scenario and, not least, the amount of good news already baked into
markets, which will undoubtedly make them vulnerable to any
disappointments.
The bigger challenge in our mind however is the intra-market
movements and the degree to which stock markets pivot away from
growth, technology and the US and towards some of the more cyclical
names and markets as the year progresses. As discussed above there
are compelling arguments for this to happen, given the cheaper
valuations on offer in these more cyclical markets and we will look
to make some modest shifts in this direction, but at this stage we
would view it as more of a trade than a longer-term trend. For this
to become a long -- term theme we would need to see structural
changes on the interest rate, inflation and liquidity front. Watch
this space.
Portfolio Review and Activity
During what was a very strong 12 months for equity markets, your
Company produced an NAV total return of 34.8% for the financial
year (year to 31 March 2020: -16.9%), after a 2.2% rise in the
final quarter. The key performance indicators for the year were
38.9% for the MSCI ACWI NR Index (in Sterling) (year to 31 March
2020: -7.0%), -5.5% for the FTSE UK Gilts All Stocks TR Index (year
to 31 March 2020: 9.9%) and 0.7% for UK CPI Index (year to 31 March
2020: 1.5%). The UK equity market, as measured by the FTSE All
Share TR Index, rose 26.7%. Ocean Wilsons Holdings has been a
strong contributor to performance for the year, although it was
more muted in the final quarter. The Company's NAV increased from
230.2p per share at the end of March 2020 and 300.9p per share at
the end of December 2020 to 306.6p per share at the end of March
2021.
Core and Thematic Funds
The Core Regional silo finished off the year with an increase of
1.1% in the quarter, while the Thematic silo was a little stronger
with a gain of 4.4%. Both have been strong over the financial year
with the Core Regional silo gaining 37.1% and the Thematic silo a
very impressive 63.5%.
The North American holdings have been an important driver of
performance in the Core Regional silo this year, as the US market
has led most other developed markets. This was again true this
quarter, despite some signs of a rotation away from its dominant
technology sector early in the quarter. Vulcan Value Equity and
Select Equity were up 5.8% and 5.3%, respectively, during the
quarter, taking their returns for the year to 49.9% and 44.2%,
which were both ahead of the North America index. Pershing Square
Holdings had an extremely good year thanks to the deft reinvestment
of proceeds from some lucrative protective CDS trades around the
time that markets began to turn. The holding was up an impressive
77.7% over the year, but only up 0.9% for the quarter. Findlay Park
American Fund has been slightly weaker than the other holdings,
rising 3.3% in the quarter and 29.8% over the year, partly owing to
being underweight technology and having a higher cash weighting
which has been a drag on performance. However, the cash allocation
has been reducing during the past year, reflecting the managers'
confidence in the ability of their portfolio companies to deliver
strong earnings growth in 2021 and it is now at 5.3%, close to its
lowest level for a decade.
While the European holdings have produced positive returns over
the year, they struggled more in the last quarter, with Adelphi
European Select declining 7.7% and BlackRock Strategic Equity Hedge
Fund (the new name for BlackRock European Hedge Fund) falling 3.6%.
These two funds have risen 24.9% and 24.4%, respectively over the
year, while the Vanguard FTSE Developed Europe ex UK tracker fund
is up 33.8%. The Adelphi fund's recent weaker performance has been
driven by some underperformance of stocks in the consumer
discretionary and technology sectors, such as The Hut Group, Just
Eat Takeaway and TeamViewer, as some of the stocks that are
perceived to have benefited from lockdown have been punished.
However, some of the fund's recent purchases, such as AUTO1 Group
and Dr Martens, both acquired at IPO, were strong contributors
during the quarter.
The emerging market holdings have had a good year, despite a
slow start to their recovery after the market falls in early 2020.
Asia has been particularly strong and Schroder Asian Total Return
and NTAsian Discovery Fund have contributed well with gains of
53.5% and 63.2%, respectively over the year and 3.5% and 7.0% over
the quarter. The Schroder fund's 32% exposure to information
technology has benefited it this year, with large holdings such as
TSMC and Samsung Electronics delivering strong gains. NTAsian has
seen strong returns across its portfolio, but several of its
Vietnam holdings have made notable gains as the country seems to
have made a smooth political transition. The shares of Mobile
World, a mobile retailer, FPT, an IT conglomerate and Military
Commercial, a bank, have all more than doubled in price this past
year. Elsewhere, Prince Street DigDec Fund has had an extremely
strong year (up 88.6%) thanks to its focus on companies benefiting
from the digital transition.
GAM Star Disruptive Growth gained 4.1% in the quarter to give it
a 74.8% return over the year, as it benefited from strength in the
technology sector, as well as from owning companies in other
sectors, such as Walt Disney and Boohoo, which are experiencing
strong growth. Healthcare holdings also performed well over the
year and during the quarter, as RA Capital International Healthcare
and BB Biotech gained 8.7% and 5.8%, respectively, taking them to
32.3% and 48.7% returns for the year. Impax Environmental Markets
Fund gained 3.8% in the quarter and 64.8% over the year, as several
of its holdings involved in improving power network and energy
efficiency, such as Generac and PTC, performed very strongly.
Diversifying Funds
The Diversifying silo produced a return of 1.9% over the
quarter, taking its return over the financial year to 8.6%. The
holdings in this silo are designed to dampen volatility and show
lower correlation to the equity market.
Both macro funds have produced positive returns over the year,
with Hudson Bay being particularly strong, up 22.8%, while MKP
Opportunity Fund gained 4.5%. Over the quarter the funds were up
9.0% and 2.1%, respectively. Global Event Partners made a pleasing
recovery from its losses early in 2020 by returning 35.7% over the
financial year and 4.6% in the last quarter.
The two trend-following CTA funds both made gains this quarter,
with the GAM Systematic Core Macro fund rising 7.2% while Schroder
GAIA BlueTrend was up 1.3%. Over the past year these funds have
risen 3.6% and 3.1%, respectively. The BlueTrend fund proved its
defensive worth in the early part of 2020, but has struggled
slightly for direction since, although its positive return over the
year is a reasonable result.
CZ Absolute Alpha , a UK equity market-neutral fund, had a
difficult first half of the year as a result of its long bias to
value stocks, but has since improved its performance and it made a
muted gain of 1.4% this quarter to take it a 14.0% return over the
year. Much of its gain came in the third quarter when its largest
individual position, RSA, was the subject of a takeover approach.
More recently it has benefited from positive moves in the banking
sector and from its holding in International Airlines Group, an
obvious beneficiary of reopening, which has more than doubled in
price since November, as well as from a short position in the
industrial sector.
Keynes Systematic Absolute Return Fund and Apollo Total Return
Fund have both produced solid returns for the year, rising by 10.4%
and 14.0%, respectively. Selwood Liquid Credit Strategy has been
more muted, with a 0.3% rise over the quarter bringing it to a 1.8%
return for the year, while Vanguard US Government Bond Index Fund
has been a victim of rising yields and its 4.1% fall over the
quarter led it to be down 4.7% over the year.
Global Equities
The portfolio was up 48.8% over the course of the year, with the
biggest positive contributors being Samsung, Iridium and Nexon. The
biggest detractors were ViaSat, Orange and Hyve Group.
It has been an interesting 12 months for the Direct Equity silo
to say the least. In our last Annual Report, we broke the group
down into three buckets with respect to how we saw the pandemic
affecting them: Beneficiaries, Long-term Unaffected and Threatened.
We were broadly correct in our assessment as the Beneficiaries
(Interactive Brokers, Hilton Food, Nexon and Dollar General) grew
revenues 26% on average, the Long-term Unaffected (majority of the
Global Equities Silo) saw a 10% revenue decline and the Threatened
(Hyve, C&C and TripAdvisor) saw revenues fall 52%.
Counterintuitively the returns have been the exact opposite over
the past 12 months, starting at close to the lows, with the
holdings in the Threatened bucket the best performing and the
Beneficiaries the worst as the markets began pricing in a potential
recovery.
Over the course of the year we rotated the portfolio as we sold
out of White Mountains, Orange, Hyve and Howard Hughes, as well as
reducing the Covid-19 beneficiaries to fund new positions. These
were businesses we felt would be in a stronger position
post-Covid-19 but which experienced short -- term headwinds. We
used the proceeds to purchase Grupo Catalana Occidente, Coats, Arch
Capital, Marel, Viasat and CTT - Correios De Portugal.
The turnover of holdings was much higher than we would normally
expect in any given period, but it was an exceptional year and the
market offered us some exciting opportunities to upgrade the
portfolio's long-term return potential. The new positions share the
familiar characteristic we look for of either being owner operated
or having a strong founder mentality with four of the six additions
run by the founders or the founding family, while the other two,
having been founded in the 16th and 18th centuries have proven they
have a culture that can stand the test of time.
The importance we place on owner-operator management teams only
increases in times of crises like last year. They can look beyond
the immediate short-term threats and invest for the long-term,
where our time horizons are aligned. As an example, Marel was able
to improve its competitive position with the excellent acquisition
of TREIF and had the presence of mind to buy back shares at an
attractive valuation. CK Hutchison took advantage of the high
valuations available in the telecom tower sector to sell their
towers for a fantastic price and use that money to buy back its
undervalued stock. It was a busy year for Exor who walked away from
the sale of PartnerRE when the acquiror tried to lower the price.
They also successfully concluded the merger of Fiat and Peugeot to
create Stellantis, which was no mean feat with so many interested
stakeholders. The management also found the time to acquire the
Chinese Luxury brand Shang Xia and buy 25% of Christian Louboutin.
There are rumours they are looking to add Giorgio Armani to their
portfolio of luxury brands which are anchored around the crown
jewel, Ferrari. If this was not enough, they have deployed $250m of
venture capital investment since they formed EXOR Seeds in 2017,
the majority of which was invested in the past 12 months.
When we wrote to you a year ago, we attempted to express how
excited we were about the future returns because the portfolio was
trading close to 50% of its intrinsic value. Today the portfolio is
at 73% of intrinsic value yet we are even more excited because the
businesses we own are in a better position than they were
pre-Covid-19. Whether that be through value accretive M&A or
because the business is now much bigger, such as Interactive
Brokers, who have managed to almost double their accounts and
client equity over the past 12 months, or TripAdvisor who may have
finally found a way of monetising their 400m+ user base through a
subscription service. We believe the portfolio is very well --
positioned to benefit as our businesses grow and the market begins
to understand the investments they have been making and their
improved competitive positions.
During the quarter we began building positions in ViaSat and CTT
and added to both Orion Engineered Carbons and Subsea 7. We trimmed
our positions in Nexon and Iridium as they approached our measure
of intrinsic value.
Ocean Wilsons Holdings
Although Brazil has suffered badly during the Covid-19 pandemic
and with the situation sadly not yet showing significant
improvement, Wilson Sons has been able to continue to provide port
and maritime logistics services throughout the crisis. Although the
business had been affected by weaker demand at its ports and in its
oil services division, the company has been able to post robust
results. There have also been some positive developments in the
last year which should be supportive for the company's future. The
Rio Grande terminal was certified in October 2020 with a 15-metre
draft for its navigation channel, allowing the terminal to receive
larger super-post-Panamax vessels, which will help to strengthen
its position as a principal hub port in the southern region of
Brazil. Maritime reforms passed by Congress in December 2020 are
also hoped to stimulate container volumes in the group's ports by
encouraging the transport of cargo by water between domestic ports.
More recently the oil price has made a substantial recovery and
while it is expected this will take some time to filter down to
demand in the oil services division, the business is well --
positioned to profit from an expected recovery in the industry.
The results for Wilson Sons for the fourth quarter of 2020 were
released during the period. They showed earnings (EBITDA) of
$30.7m, 23.7% higher than the prior year. For the year as a whole
EBITDA was roughly flat in dollar terms at $141.6m, which was a
sign of the company's resilience despite the pandemic. During this
time there has been a significant weakening of the Brazilian Real
and in the local currency EBITDA for the year was 31.9% higher than
the previous year.
Container terminal results were impacted by lower import volumes
in the fourth quarter of 2020 as business confidence and Brazilian
economic indicators remained soft. However, transhipment volumes
were up at both terminals over the course of the year and this is
likely to further improve at Rio Grande, as a result of its
navigation channel's new deeper draft.
The towage division reported good results, with revenues up
10.8% over the quarter, while the full year results to December
2020 showed revenues 8.8% higher and EBITDA 12.1% higher than the
previous year. There was an improved revenue mix and higher volumes
and the average deadweight of vessels attended was 15.7% higher in
the quarter, reflecting higher volumes in ports that operate larger
ships. The division's ability to attend these larger ships will be
further boosted over the coming three years by the construction of
six new 80-tonne tugboats that will be delivered by the
shipyard.
With global equity markets continuing their recovery, the
investment portfolio and cash under management increased by $28.5m
over the three months to the end of December 2020, to sit at
$310.3m. The portfolio continues to be biased towards equities,
both public and private, reflecting its long -- term nature, but
also includes some assets which display lower correlation to equity
markets.
After the strength of the previous quarter, the final quarter of
the financial year was more muted for the Ocean Wilsons Holdings
share price, with an increase of just 1.2%. Over the previous 12
months, however, the return has been 38.7%, taking account of the
two dividends paid to the Company in June and November. The Ocean
Wilsons Holdings share price represents a discount to the
look-through NAV of 34.3%, based on the market value of the Wilson
Sons shares, together with the latest valuation of the investment
portfolio. As mentioned in Jonathan Davie's Chairman's Report to
the Shareholders, Wilson Sons has proposed a corporate
restructuring which would result in Wilson Sons moving from being a
Bermudan based parent company to being a Brazilian domiciled
entity. Whilst the restructuring does not immediately change the
current ownership of Wilson Sons, it is expected that it will
increase stock liquidity and promote a wider share ownership
especially amongst Brazilians, including several institutional
investors in Brazil currently restricted from investing because of
its non-Brazilian domicile. The initial view by the market appears
to have been favourable.
Alec Letchfield
May 2021
Portfolio Statement
Fair value Percentage of
Investments GBP000 Net Assets
Core Regional Funds
Findlay Park American Fund 25,474 6.9
Vulcan Value Equity Fund 20,153 5.5
Select Equity Offshore Ltd 18,645 5.1
BlackRock Strategic Hedge Fund 13,696 3.7
Schroder ISF Asian Total Return 12,422 3.4
Adelphi European Select Equity Fund 11,937 3.2
Goodhart Partners: Hanjo Fund 11,712 3.2
Pershing Square Holdings Ltd 8,497 2.3
Indus Japan Long-Only Fund 7,330 2.0
Prince Street Institutional Offshore
Ltd 6,833 1.8
Egerton Long-Short Fund Ltd 6,201 1.7
Vanguard FTSE Developed Europe ex UK
Equity Index Fund 4,304 1.2
Ishares Core EM IMI UCITS ETF 4,298 1.2
BlackRock Frontiers Investment Trust
PLC 3,284 0.9
NTAsian Discovery Fund 3,127 0.8
Total Core Regional Funds 157,913 42.9
Strategic
Wilson Sons (through the holding in
Ocean Wilsons Holdings) * 38,653 10.5
Ocean Wilsons Investments Limited (through
the holding in Ocean Wilsons Holdings)
* 39,910 10.9
Total Strategic 78,563 21.4
Global Equities
Exor NV 4,717 1.3
Interactive Brokers Group Inc 4,113 1.1
Samsung Electronics Co Ltd 3,553 1.0
CK Hutchison 3,084 0.8
Grupo Catalana Occidente SA 2,747 0.7
Orion Engineered Carbons SA 2,659 0.7
Nexon Co. Ltd 2,598 0.7
Subsea 7 2,333 0.6
Arch Capital Group Ltd 2,085 0.6
TripAdvisor Inc 2,066 0.6
Iridium Communications Inc 1,884 0.5
Marel 1,871 0.5
Dollar General 1,769 0.5
Alphabet Inc 1,719 0.5
CVS Health Corp 1,690 0.5
Berkshire Hathaway Inc 1,611 0.4
Hilton Food Group PLC 1,450 0.4
C&C Group PLC 1,150 0.3
Coats Group PLC 994 0.3
Viaset Inc 800 0.2
CTT-Correios de Portugal 718 0.2
Total Global Equities 45,611 12.4
Diversifying
Global Event Partners Ltd 10,253 2.8
DV4 Ltd ** 8,055 2.2
Hudson Bay International Fund Ltd 4,729 1.3
MKP Opportunity Offshore Ltd 3,052 0.8
Vanguard US Govt Bond Index Fund 2,845 0.8
Selwood AM - Liquid Credit Strategy 2,533 0.7
Keynes Systematic Absolute Return Fund 2,447 0.7
Apollo Total Return Fund 2,386 0.6
CZ Absolute Alpha UCITS Fund 1,389 0.4
BioPharma Credit PLC 1,290 0.3
GAM Systematic Core Macro (Cayman)
Fund 1,059 0.3
Schroder GAIA BlueTrend 869 0.2
Total Diversifying 40,907 11.1
Thematic Assets
GAM Star Fund PLC - Disruptive Growth 25,108 6.8
Impax Environment Markets Fund 4,630 1.3
BB Biotech AG 4,009 1.1
RA Capital International Healthcare
Fund 3,211 0.9
SPDR MSCI World Financials UCITS ETF 2,962 0.8
Worldwide Healthcare Trust PLC 2,354 0.6
Total Thematic 42,274 11.5
Total Investments 365,268 99.3
Net Current Liabilities (557) (0.2)
Non-Current Assets 3,179 0.9
Net Assets 367,890 100.0
Note:
* Hansa Investment Company Limited owns 9,352,770 shares in
Ocean Wilsons Holdings Limited. 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)
Ltd ("OWIL"), are shown separately above. The fair value of Hansa
Investment 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 2020
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
2021.
** DV4 Ltd is an unlisted Private Equity holding. As such, its
value is estimated as a Level 3 Asset in Note 20. All other
valuations are either derived from information supplied by listed
sources or from pricing information supplied by third party fund
managers.
Shareholder Profile and Engagement
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.
Shareholder Profile
The Company's shares owned at 31 March 2021 are as follows:
'A' non--voting
Ordinary Ordinary
shares shares
Institutional
& Wealth
Managers 16,146,698 40.37% 72,363,747 90.45%
Directors 11,220,745 28.05% 3,693,223 4.62%
Private Individuals 12,568,864 31.42% 2,812,406 3.52%
Other 63,693 0.16% 1,130,624 1.41%
40,000,000 80,000,000
Substantial Shareholders
As at 31 March 2021, the Directors were aware of the interests
(opposite) in the Ordinary shares of the Company, which exceeded 3%
of the voting issued share capital of that class.
The following information is disclosed in accordance with the
DTR 7.2.6 of the FCA Disclosure Guidance and Transparency
Rules.
The Company's capital structure and voting rights are summarised
above and in Note 14.
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 special rights with regard to control attached
to securities; no agreements between holders of securities
regarding their transfer known to the Company; no agreements which
the Company is party to that affect its control following a
takeover bid; and no agreements between the Company and its
Directors concerning compensation for loss of office.
Notwithstanding the foregoing, the Company may require any holder
of 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. The reallocation mechanism operates where a transfer
of shares or other change in the interests of holders of shares
occurs and would cause the Company to become a close company. In
these circumstances, the voting rights attaching to the affected
shares are reallocated by enhancing the voting rights of the
smallest registered shareholders on a temporary basis pending the
operation of the compulsory transfer provisions referred to
above.
No. of
voting % of voting
shares shares
Nomolas Ltd 10,347,125 25.9%
Victualia Limited Partnership 10,347,125 25.9%
These holdings are correct as of 31 March 2021 and have not
changed as at the signing date of these Financial Statements.
William Salomon 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 below.
As at 22 June 2021, the date of signing of the Year-End
Financial Statements, there have been no disclosures to the Company
of changes of interests under DTR 5.
BOARD AND MANAGEMENT SHAREHOLDINGS
Directors and Directors' Interests
The present members of the Board are shown above in the
report.
The Board's policy is that all Directors retire annually. All
Directors being eligible, at the forthcoming Annual General
Meeting, will retire and seek re-election in accordance with the
Board's policy. The contracts of employment between the Company and
each of the Directors do not allow for any compensation payment in
the event of loss of office.
The interests of Directors and their connected parties in the
Company at 31 March 2021 are shown below:
'A' non--voting
Ordinary shares Ordinary shares Nature
of 1p each of 1p each of interest
2021 % 2021 %
W Salomon 11,169,345 27.92% 3,463,223 4.33% Beneficial
J Davie 45,000 0.11% 230,000 0.29% Beneficial
S Heidempergher 6,400 0.02% 0 0.00% Beneficial
Total 11,220,745 28.05% 3,693,223 4.62%
As at 22 June 2021, the date of signing the Year-End Financial
Statements, there were no changes to report to the Directors'
holdings.
William Salomon is the senior partner of Hansa Capital Partners
LLP. Fees payable to Hansa Capital Partners LLP amounted to
GBP2,621,000 (including Portfolio Management and AASP functions).
The fees outstanding at the year end amounted to GBP245,958. 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 22 June 2021, the date of signing of this Year-End Report,
the management and staff of the Portfolio Manager's group,
excluding the holding of William Salomon, shown above, were
interested in approximately 10.3m shares in the Company - a mixture
of Ordinary and 'A' non-voting Ordinary shares.
Notice Period for General Meetings
The Company's Bye--Laws permit 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
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.
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
Approval of the Directors
The Directors consider the Year-End 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.
For and on behalf of the Board
Jonathan Davie
Chairman
22 June 2021
Report of the Directors
The Directors have chosen to report on some of those items
within the body of the Strategic Report, while others remain within
the Report of the Directors.
ITEMS INCLUDED WITHIN THE STRATEGIC REPORT
The following items are listed within the Strategic Report:
Statement of the existence of qualifying indemnity provisions
for Directors.
Dividend policy and payments made during the year, summarised in
the Organisation & Objectives section.
Names of Directors, at any time in the year - see above for the
Directors' details and attendance at Company meetings.
Greenhouse Gas Emissions.
Policy on Board Composition.
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 himself 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.
Capital Structure
The Company's Capital Structure is described in the "Investor
Information Section".
Corporate Governance Report
The Corporate Governance Report, including the Financial Risk
Management Review of the Company, is included in this document.
Future Developments and Post Balance Sheet Events
The Company does not have any imminent events or post-balance
sheet items to report.
APPROVAL OF THE DIRECTORS
The Directors consider the Year-End 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
22 June 2021
Corporate Governance Report
CORPORATE GOVERNANCE CODE
Internal Controls
The UK Corporate Governance Code ("UK Code") (issued July 2018
Code for accounting periods beginning on or after 1 January 2019),
which can be found on the website of the Financial Reporting
Council ("FRC") (www.frc.org.uk), 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
Directors recognise the importance of sound corporate governance,
robust risk management processes and effective systems of internal
controls. They review the effectiveness of these on at least an
annual basis. The Directors, through the procedures outlined below,
keep the system of risk management and internal controls under
review. The Board has identified risk management controls in the
key areas of business objectives, accounting, compliance,
operations and secretarial as areas to be included in the extended
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. However, it must be noted this system is designed to
manage rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
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 2021, 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 principles are listed below
together with the Board's response as to how it seeks to meet the
principle's recommendation:
Board Leadership and Purpose
A successful company is led by an effective board, whose role is
to promote the long-term sustainable success of the company,
generating value for shareholders and contributing to wider
society.
The Board is formed of five Directors with a complementary mix
of skills and experience to lead the Company. Two Directors served
on the board of the Company's predecessor, Hansa Trust, whilst
three Directors were newly appointed to 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 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 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 AASP for day to day liaison with other
service providers.
The board should ensure that the necessary resources are in
place for the company to meet its objectives and measure
performance against them. The board should also establish a
framework of prudent and effective controls, which enable risk to
be assessed and managed.
The Board receives regular and detailed reports from the
Portfolio Manager regarding investment performance as well as
market trends and views on risks. The Board has set a number of
KPIs against which the performance of elements of the portfolio can
be considered. The Board receives regular risk and compliance
reporting.
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 suppliers. It actively engages with shareholders via an
annual general meeting, shareholder presentations, quarterly
factsheets, website communication and with feedback also received
through outreach programmes such as Edison, as well as direct
one-to-one correspondence. The Board engages with other key
suppliers through the operations of its AASP on a day to day basis,
as well as via an annual meeting with each or more frequently if an
issue arises
Principle E is omitted by the AIC Code.
Division of Responsibilities
The chair leads the board and is responsible for its overall
effectiveness in directing the company. They should demonstrate
objective judgement throughout their tenure and promote a culture
of openness and debate. In addition, the chair facilitates
constructive board relations and the effective contribution of all
non-executive directors, and ensures that directors receive
accurate, timely and clear information.
The Chairman is Jonathan Davie who joined Hansa Trust as a
Director in January 2013 - also serving as its Chair of its Audit
Committee. The Chairman promotes and encourages active
participation from all Directors at Board meetings. Further, whilst
adhering to membership guidelines, sub--committees also seek to
include as many Directors as possible to ensure a broad range of
views. All Directors receive regular monthly and quarterly
information prepared by the Portfolio Manager and Administrator, as
well as portfolio performance presentations from the Portfolio
Manager.
The board should consist of an appropriate combination of
directors (and, in particular, independent non-executive directors)
such that no one individual or small group of individuals dominates
the board's decision making.
The Board consists of five Directors. All have financial
backgrounds but each also brings individual specialisms and
experience that are complimentary. Their biographies are noted
earlier 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 non-executive. All Directors are actively involved in
decisions and committees unless conflicts exist which preclude
this. Therefore, 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 Committee due to his non-independent status,
although he does attend meetings of that Committee.
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 consider 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. A formal timetable exists for the Board
meetings and sub-committees. In considering appointments and
potential conflicts of interests the Board considers the available
time each Director has to commit to the Company. The Portfolio
Manager and AASP report to scheduled Board meetings, giving the
Directors the opportunity to challenge performance, raise issues
and offer guidance.
The board, supported by the company secretary, should ensure
that it has the policies, processes, information, time and
resources it needs in order to function effectively and
efficiently.
The Company Secretary and AASP support the Board in identifying
and monitoring all governance matters. Additionally, Directors are
able to consult external professional advisors to assist them in
the performance of their duties as and when required. Board
reporting and materials are refined on an ongoing basis.
Composition, succession and evaluation
Appointments to the board should be subject to a formal,
rigorous and transparent procedure, and an effective succession
plan should be maintained. Both appointments and succession plans
should be based on merit and objective criteria and, within this
context, should promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
The Board has appointed a Nominations Committee chaired by Nadya
Wells. The Committee meets annually to give full and ongoing
consideration to succession planning. Ahead of any appointment, the
Committee is tasked with evaluating the skills required of a
candidate to ensure the Board retains the range of skills required.
The Company believes a diverse Board brings many benefits and, as
such, there is no restriction placed on Board membership.
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 above. As noted
in J above, the Nominations Committee is tasked with maintaining a
broad range of skills and experiences at times of succession.
Annual evaluation of the board should consider its composition,
diversity and how effectively members work together to achieve
objectives. Individual evaluation should demonstrate whether each
director continues to contribute effectively.
The Nominations Committee is responsible for the ongoing
consideration of Board composition and to identify any skills gap -
now or in the future. The Nomination Committee considers Board
effectiveness at least annually.
Audit, risk and internal control
The board should establish formal and transparent policies and
procedures to ensure the independence and effectiveness of external
audit functions and satisfy itself on the integrity of financial
and narrative statements
The Board has specifically delegated the appointment and
monitoring of the Company's external Auditor to its Audit
Committee. The Company's Auditor was formally appointed in November
2019. The tender process was led by the Chairman of the Audit
Committee. To ensure independence, 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.
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 Year-End Report is reviewed by the Board to
ensure it presents 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 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.
Remuneration
Remuneration policies and practices should be designed to
support strategy and promote long-term sustainable success.
The remuneration of Directors is overseen by the Remuneration
Committee, chaired by Simona Heidempergher. The Directors each
receive a fixed annual fee and do not receive any additional
element based on performance of the Company. Additionally,
Directors offer themselves annually for re-election at the
Company's AGM.
A formal and transparent procedure for developing policy on
remuneration should be established. No director should be involved
in deciding their own remuneration outcome.
The Directors' Remuneration Report notes that each Director is
paid a fixed fee representative of their roles and additional
responsibilities on the Board. This fee level is reviewed by the
Remuneration Committee making use of external evidence before being
recommended to the wider Board.
Directors should exercise independent judgement and discretion
when authorising remuneration outcomes, taking account of company
and individual performance, and wider circumstances
The Directors' Remuneration Report notes that each Director is
paid a fixed fee representative of their roles and additional
responsibilities on the Board. There are no additional
performance-related elements to any Director's remuneration.
COMPLIANCE WITH THE FINANCIAL CONDUCT AUTHORITY UKLA 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 Year-End Report is prepared in accordance with Company Law in
the UK. The Directors are also responsible for ensuring the
Year-End 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") adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union. 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 ("IFRS") adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.; 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 UKLA 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 to the best of their knowledge:
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 Report to the
Shareholders 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 Year-End Report and Financial
Statements, taken as a whole, are fair, balanced and
understandable. Further detail demonstrating the Company's
performance, business model and strategy has been included within
the Strategic Report.
For and on behalf of the Board
Jonathan Davie
22 June 2021
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 terms of reference of the Committee are determined by the
Committee and approved by the Board and include, but are not
restricted to, the following:
-- To consider and make a recommendation to the Board as to the
appointment of the external Auditor, tendering of the external
audit, approval of the annual audit fee and any questions relating
to the resignation or dismissal of the Auditor.
-- To determine with the external Auditor the nature and scope of the audit.
-- To review and monitor the independence of the external
Auditor including pre-approval, of any, non-audit services to the
Company.
-- To consider the performance of the Auditor.
-- To review the Half-Year and Year-End Financial Reports before
submission to the Board, focusing particularly on:
o any changes in accounting policies and practices;
o major judgemental areas;
o significant adjustments resulting from the audit;
o the going concern assumption;
o compliance with Accounting Standards and Governance Codes;
o compliance with FCA Listing Rules and legal requirements;
and
o valuation of unquoted investments.
-- To discuss issues and matters arising from the annual audit with the Auditor.
-- To review the Auditor's audit findings and responses to it,
including holding an executive session with the Auditor.
-- To review and monitor the effectiveness of the Company's
Internal Control and Risk framework prior to endorsement by the
Board.
-- To review service providers' AAF 01/06 or ISAE 3402 reports.
As confirmed at the Company's AGM in July 2020,
PricewaterhouseCoopers Ltd remains as the Company's Independent
Auditor.
In discharging its duties and, in particular, matters relating
to the approval of the Year-End 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, recognition of income and areas of significant
judgement. In this regard we receive regular reporting from the
Portfolio Manager including reports on the effectiveness of
internal controls in these areas. In addition, the Committee
discusses the Auditor's scope of work in these areas.
With regard to the ownership of assets, the Company's Custodian
and Administrator have confirmed the ownership of all assets to the
Audit Committee's satisfaction. With regard to the valuations, the
Audit Committee notes that 76% of the Investment portfolio by value
is held in assets that are either traded or listed on an exchange.
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 the 40% of the total portfolio are Level 1 and 58%
are Level 2 securities. The Committee is satisfied with the
valuation process. With regard to revenue recognition, the Audit
Committee reviewed the external Auditor's approach to the audit
prior to the commencement of the audit. The results of the audit in
this area were discussed with the external Auditor and there were
no significant issues arising in relation to the recognition of
revenue.
The Audit Committee 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.
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.
A separate evaluation of Committee members is not conducted.
Rather, their suitability and effectiveness is considered as part
of the annual Board evaluation process which is described within
the Corporate Governance Report.
The Audit Committee, having considered its responsibilities and
its reporting to the Board, confirms it is not aware of any matter
which it should bring to the attention of either the Board or the
Auditor and considers the Year-End 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.
The Audit Committee considers the external Auditor's
independence, objectivity, scope of work and overall quality as
well as cost effectiveness through a process of feedback from the
Company advisors, including the Company Secretary, AASP, the
Portfolio Manager and discussion with the Auditors. The Committee
also meets with the Auditor in executive session at least annually.
The current audit partner is Scott Watson--Brown who has led the
audit.
The level of non-audit services provided to the Company by the
Auditor is monitored, as is the Auditor's objectivity in providing
such services, to ensure that the independence of the audit team
from the Company is not compromised. No non--audit services are
provided by PricewaterhouseCoopers Ltd to the Company. Further
information on fees paid to the Auditor is contained in "Other
Expenses" within Note 4 of the Financial Statements.
For and on behalf of the Audit Committee.
Richard Lightowler
Audit Committee Chairman
22 June 2021
Directors' Remuneration Report
The Board produces a separate report on the Directors'
Remuneration and, by approving it, confirms its accuracy. There are
elements of the Directors' Remuneration Report that are subject to
audit as disclosures in accordance with "IAS 24 - Related Party
Disclosures" which have been presented here. These are labelled as
"audited", with the Auditor's report included.
Ordinary resolutions for the approval of this Report will be put
to shareholders at the forthcoming AGM.
ANNUAL STATEMENT
The Company has five non-executive Directors. The Board has
appointed a Remuneration Committee. The Chairman of this Committee
is Simona Heidempergher who has signed this Statement on behalf of
the Board.
This is the second year of the Company's operation. Each
Director was 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 include a basic pay level and should reflect the
experience of the Board as a whole, be appropriate for the work
carried out and the responsibilities, financial and reputational
risks undertaken, including additional remuneration for any roles
in addition to the responsibilities of the non-executive director
role - for example, the chairman. The remuneration does not include
a performance related element and Directors do not receive bonuses,
share options, pensions or long-term incentive schemes. The total
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
when assessing the remuneration of existing Directors. This
includes the fees paid by other similar companies (both industry
and jurisdiction) as well as seeking input from recruitment
specialists familiar with the external market.
The fees for the non-executive Directors are within the limits
(maximum total fee of $350,000) as set out in the Company's
Bye-Laws. The maximum is set as a USD amount. The equivalent is
GBP253,623 if translated at the applicable rate on 31 March
2021.
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.
FUTURE POLICY TABLE
All of the Directors are non-executive, whose only remuneration
is a fee. The implementation of the above policy could give rise to
the following increase in fees:
Potential
Current future
total fee total fee
GBP000 GBP000
Non--executive 185* 254**
Director fees
Note:
* This fee represents the current Directors' fees translated
from USD to Sterling for the year ended 31 March 2021. For
information, annual current Director fees are noted in the table
below.
** This amount is the current upper limit of remuneration of
$350,000, converted at the exchange rate to GBP on 31 March
2021.
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 many
Bermudan companies. Therefore, additionally, their current annual
fee is also quoted in Sterling. This conversion has been made at
the relevant exchange rate on 31 March 2021:
Annual 2021 2021 2020 2020
Fee Fee Total Fee Total
$000 GBP000 GBP000 GBP000 GBP000
Jonathan Davie
(Chairman) 70 51 51 33 33
Richard Lightowler 60 43 43 37 37
Simona Heidempergher 50 36 36 31 31
William Salomon 25 18 18 12 12
Nadya Wells 50 36 36 31 31
255 185 185 144 144
The annual fee paid to each Director, in USD, remains unchanged
from the date of their appointments in June 2019. Changes in the
above table between the prior period and the current year are due
to movement in exchange rates (USD to Sterling) and also that the
prior period did not constitute a full year of operation for the
Company.
The Company also pays the expenses of the Directors to attend
the Board meetings, although no fees were incurred during the year
due to Covid-19 travel restrictions (period-ended 31 March 2020:
GBP31,344).
STATEMENT OF SHAREHOLDER VOTING
Votes in respect of the resolution to approve the Directors'
Remuneration Report at the Company's AGM in July 2020 were cast as
follows:
No. of % of
shares votes
voted cast
Votes cast in favour 21,879,450 98.87
Votes cast against 251,070 1.13
Total votes cast 22,130,520 100.00
Votes withheld 727
Votes in respect of the resolution to approve the Directors'
Remuneration Policy at the Company's AGM in July 2020 were cast as
follows:
No. of % of
shares votes
voted cast
Votes cast in favour 21,881,127 99.99
Votes cast against 120 0.01
Total votes cast 22,881,247 100.00
Votes withheld 250,000
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 2021 are shown below:
'A' non--voting
Ordinary Ordinary Nature
shares shares of of
of 1p each 1p each interest
2021 2020 2021 2020
Jonathan
Davie 45,000 45,000 230,000 230,000 Beneficial
William
Salomon 11,169,345 10,959,345 3,463,223 1,935,500 Beneficial
Simona
Heidempergher 6,400 6,400 - - Beneficial
As at 22 June 2021, the date of signing of these Year-End
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 as Portfolio
Manager amounted to GBP2,621,000. The fees outstanding at the year
-- end amounted to GBP245,958. During the year, no rights to
subscribe to the shares of the Company were granted to, or
exercised by Directors, their spouses or infant children.
DIRECTORS' ATTANCE
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.
Audit
Board Committee
Number of meetings
held 5 2
Number of meetings attended:
Jonathan Davie
(Chairman) 5 2
Richard Lightowler 5 2
Simona Heidempergher 5 2
William Salomon 5 2
Nadya Wells 5 2
Notes:
1) The meetings listed above are the main events held during the
year at which all Directors attend. Additionally, there have been
numerous meetings and board calls to consider and approve
operational requirements for the Company, such as quarterly
dividends. These meetings are arranged as and when required and
require the meeting to be quorate but not necessarily attended by
all Directors. These have not been listed above
2) The Board normally holds an annual Strategy session in
February. This has been delayed to August 2021 in the hope that the
Board will be able to meet face to face.
On behalf of the Board, I confirm that the above Report on
Directors' Remuneration summarises, as applicable, for the year
ended 31 March 2021:
(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.
For and on behalf of the Board
Simona Heidempergher
Chairman of the Remuneration Committee
22 June 2021
Independent Auditor 's Report to the Board of Directors and
Shareholders of Hansa Investment Company Limited
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 2021, and its financial performance
and its cash flows for the year then ended in accordance with International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
What we have audited
The Company's financial statements, comprise:
the balance sheet as at 31 March 2021;
the income statement for the year then ended;
the statement of changes in equity for the year then ended;
the cash flow statement for the year then ended; and
the notes to the financial statements, which include significant
accounting policies and other explanatory information.
Certain required disclosures have been presented elsewhere in the
Year-End 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: GBP3,679,000, based on 1% of
Materiality net assets.
--------------------------------------------------------
Audit scope In addition to determining materiality, we also
assessed, amongst other factors, the following in
designing our audit;
- the risk of material misstatement in the financial
statements
- significant accounting estimates
- the risk of management override of internal controls
--------------------------------------------------------
Key audit matters Valuation and existence of investments
Accuracy, occurrence and completeness of investment
income
Consideration of impacts of Covid--19
Audit scope
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we considered 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, we also addressed the risk of management override of
internal controls, including, among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
We tailored the scope of our audit 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, we determined certain
quantitative thresholds for materiality, including the overall
materiality for the financial statements as a whole as set out in
the table below. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures and to evaluate the
effect of misstatements, both individually and in aggregate, on the
financial statements as a whole.
Overall materiality GBP3,679,000
How we determined it 1% of net assets.
Rationale for the materiality We applied this benchmark, which is
benchmark applied generally accepted auditing practice
for investment company audits.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above GBP183,950, 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
judgment, 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 Listed investments: We tested the existence
of investments of the listed investments by agreeing the
Refer to notes 1(d) and holdings for investments to an independent
9 to the financial statements custodian confirmation. No differences were
for disclosures of related identified by our testing which required reporting
accounting policies and to those charged with governance.
balances. We tested the valuation of the listed equity
The investment portfolio investments by agreeing the prices used in
at the year end comprised the valuation to independent third-party sources.
listed investments valued No misstatements were identified by our testing
at GBP277 million (76%) which required reporting to those charged
and unlisted investments with governance.
valued at GBP88 million Unlisted investments: We tested the existence
(24%). We focused on of the unlisted investments by agreeing the
the existence of both holdings for investments to a confirmation
listed and unlisted investments, from each fund administrator. No differences
as listed investments were identified by our testing which required
comprise the majority reporting to those charged with governance.
of the investments balance We understood and evaluated the controls around
and unlisted investments the pricing of unlisted investments including
are, individually and the final approval of the valuation by the
in aggregate, material Portfolio Manager and the Board. We assessed
to the financial statements. the approach used by the Portfolio Manager
We focused on the valuation in valuing these investments, which consisted
of listed investments of obtaining the most recent valuation provided
because listed investments by the fund administrator for each investment
represent the principal at the year end.
element of the net asset We obtained a direct confirmation of the investments
value as disclosed on held and the price from each fund administrator.
the Balance Sheet in We used these two key inputs to recalculate
the financial statements. the valuation applied by management. This
We also focused on the recalculation was performed for 100% of the
valuation of the unlisted unlisted investments.
investments as the valuation We obtained an understanding of the underlying
of these investments methodology applied to each unlisted investment
is material to the net through review of their most recently available
asset value. audited financial statements to evaluate whether
it was based on fair value.
Based on the procedures detailed above, no
misstatements were identified which required
reporting to those charged with governance.
Accuracy, occurrence We assessed the accounting policy for dividend
and completeness of investment income recognition for compliance with accounting
income standards and the AIC SORP and performed testing
Refer to notes 1(f) and to evaluate whether income had been accounted
2 to the financial statements for in accordance with this stated accounting
for disclosures of related policy. We found that the accounting policies
accounting policies and implemented were consistent with accounting
balances. standards and the AIC SORP, and that income
We focused on the accuracy, has been accounted for in accordance with
occurrence and completeness the stated accounting policy.
of dividend income recognition We tested the accuracy of dividend receipts
as incomplete or inaccurate by agreeing the dividend rates from investments
income could have a material to independent market data. No misstatements
impact on the Company's were identified which required reporting to
net asset value and dividend those charged with governance.
cover. We also focused To test for completeness, we tested, for a
on the accounting policy sample of investment holdings in the portfolio,
for income recognition that all dividends declared in the market
and its presentation by investment holdings had been recorded.
in the Income Statement We tested occurrence by testing that all dividends
for compliance with the recorded in the year had been declared in
requirements of The Association the market by investment holdings, and we
of Investment Companies traced a sample of dividends received to bank
Statement of Recommended statements. Our testing did not identify any
Practice (the "AIC SORP") misstatements which required reporting to
as incorrect application those charged with governance.
could result in a misstatement We also tested the allocation and presentation
in income recognition. of dividend income between the revenue and
capital return columns of the Income Statement
in line with the requirements set out in the
AIC SORP by determining reasons behind dividend
distributions. Our procedures did not identify
any misstatements which required reporting
to those charged with governance.
Consideration of impacts We evaluated the Directors' assessment of
of Covid -- 19 the impact of the Covid -- 19 pandemic on
Refer to the Strategic the Company by:
report and note 1(a) Evaluating management's assessment of operational
to the financial statements impacts, considering their consistency with
which disclose the basis other available information and our understanding
of preparation of the of the business and assessing the potential
financial statements impact on the financial statements.
and the impact of the Testing the impact of Covid--19 on the valuation
Covid--19 pandemic. of sampled investments.
The Covid--19 outbreak We obtained and evaluated the Directors' going
has been declared a pandemic concern assessment which reflects conditions
by the World Health Organisation. up to the point of approval of the Year-End
Since the first quarter Report by:
of 2020, it has caused Obtaining evidence to support the key assumptions
significant economic and forecasts driving the Directors' assessment.
uncertainty globally This included reviewing the Directors' assessment
and disruption to supply of the Company's financial position and forecasts,
chains and travel, slowed their assessment of liquidity as well as their
global growth and caused review of the operational resilience of the
volatility in global Company and oversight of key third party service
markets and in exchange providers.
rates. We assessed the disclosures presented in the
The Directors have prepared Year-End Report in relation to Covid -- 19
the financial statements by:
of the Company on a going Reading the other information, including the
concern basis, and believe Principal Risks and Longer-Term Viability
this assumption remains Statement set out in the Strategic Report,
appropriate. This conclusion and assessing its consistency with the financial
is based on the assessment statements and the evidence we obtained in
that, notwithstanding our audit.
the significant market Our conclusions relating to other information
uncertainties, they are are set out in the 'Other information' section
satisfied that the Company of our report.
has adequate resources
to continue in operational
existence for the foreseeable
future and that the Company
and its key third party
service providers have
in place appropriate
business continuity plans
and will be able to maintain
service levels throughout
the Covid -- 19 pandemic.
Other information
Management is responsible for the other information. The other
information comprises Year-End Report (but does not include the
financial statements and our auditor's report thereon).
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information identified above
and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this
regard.
UK Corporate Governance Code
We have nothing to report in respect of our responsibility to
report when the Directors' statement relating to the Company's
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified, under the Listing
Rules of the FCA, for review by the auditors.
Responsibilities of management and those charged with governance
for the financial statements
Management is responsible for the preparation and fair
presentation of the financial statements in accordance with
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Company's financial reporting process.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by management.
-- Conclude on the appropriateness of management's use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or
conditions may cause the Company to cease to continue as a going
concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partner on the audit resulting in this
independent auditor's report is Scott Watson-Brown.
PricewaterhouseCoopers Ltd
Chartered Professional Accountants
Hamilton, Bermuda
22 June 2021
Income Statement
For the year ended 31 March 2021
Year ended 21 June 2019 to
31 March 2021 31 March 2020
Revenue Capital Total Revenue Capital Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gains/(losses) on investments
held at fair value
through profit or loss 9 - 93,032 93,032 - (50,965) (50,965)
Foreign Exchange losses - (181) (181) - (104) (104)
Investment income 2 6,350 - 6,350 1,159* - 1,159
6,350 92,851 99,201 1,159 (51,069) (49,910)
Portfolio management
fees 3 (2,621) - (2,621) (1,441) - (1,441)
Other expenses 4 (1,149) - (1,149) (1,488) - (1,488)
(3,770) - (3,770) (2,929) - (2,929)
Income/(expense) before
finance costs 2,580 92,851 95,431 (1,770) (51,069) (52,839)
Finance costs 5 - - - (1) - (1)
Income/(expense) for
the year 2,580 92,851 95,431 (1,771) (51,069) (52,840)
Return per Ordinary
and 'A' non-voting
Ordinary share 7 2.2p 77.4p 79.6p (1.5p) (42.6p) (44.1p)
The Company does not have any income or expense not included in
the above Statement. Accordingly, the "Income/(expense) for the
Year" is also the "Total Comprehensive Income for the Year", as
defined in IAS 1 (revised) and no separate Statement of
Comprehensive Income has been presented.
*The Investment income in the prior period as denoted by an
asterisk has been restated in line with the modified income
recognition policy as detailed in Note 1(f).
The total column of this statement represents the Company's
Income Statement, prepared in accordance with International
Financial Reporting Standards ("IFRS") adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
The supplementary revenue and capital return columns are both
prepared under guidance published by the AIC.
All revenue and capital items in the above Statement derive from
continuing operations.
Balance Sheet
As at 31 March 2021
2021 2020
Notes GBP000 GBP000
Non-current assets
Investments in subsidiary at fair value
through profit or loss 8 3,179 3,179
Investments held at fair value through profit
or loss 9 365,268 273,264
368,447 276,443
Current assets
Trade and other receivables 11 177 2,503
Cash and cash equivalents 12 2,833 1,066
3,010 3,569
Current liabilities
Trade and other payables 13 (3,567) (3,713)
Net current liabilities (557) (144)
Net assets 367,890 276,299
Capital and reserves
Called up share capital 14 1,200 1,200
Contributed surplus 15 326,019 327,939
Retained earnings/(accumulated losses) 16 40,671 (52,840)
Total equity shareholders' funds 367,890 276,299
Net asset value per Ordinary and 'A' non-voting
Ordinary share 17 306.6p 230.2p
The Financial Statements of Hansa Investment Company Limited,
registered in Bermuda under company number 54752, were approved by
the Board of Directors on 22 June 2021 and were signed on its
behalf by
Jonathan Davie
Chairman
Statement of Changes in Equity
For the year ended 31 March 2021
Contributed
Share surplus Retained
capital reserve earnings Total
2021 2021 2021 2021
Notes GBP000 GBP000 GBP000 GBP000
Net assets at
1 April 2020 1,200 327,939 (52,840) 276,299
Profit for the
year - - 95,431 95,431
Dividends 6 - (1,920) (1,920) (3,840)
Net assets at
31 March 2021 1,200 326,019 40,671 367,890
Statement of Changes in Equity
For the period 21 June 2019 to 31 March 2020
Contributed
Share surplus Accumulated
capital reserve losses Total
2020 2020 2020 2020
Notes GBP000 GBP000 GBP000 GBP000
Net assets at 21 June 2019 - - - -
Issue of share capital 29 August 2019 14 1,200 - - 1,200
Transfer of assets from Hansa Trust 15 - 330,819 - 330,819
Losses for the period - - (52,840) (52,840)
Dividends 6 - (2,880) - (2,880)
Net assets at
31 March 2020 1,200 327,939 (52,840) 276,299
Cash Flow Statement
For the year ended 31 March 2021
21 June
Year ended 2019 to
31 March 31 March
2021 2020
Notes GBP000 GBP000
Cash flows from operating activities
Profit/(loss) before finance costs* 95,431 (52,839)
Adjustments for:
Realised losses/(gains) on investments 9 2,011 (644)
Unrealised (gains)/losses on investments 9 (95,043) 51,609
Foreign exchange 181 104
Decrease/(Increase) in trade and other receivables 11 2,326 (2,503)
(Decrease)/Increase in trade and other payables 13 (146) 534
Purchase of non-current investments (27,416) (17,059)
Sale of non-current investments 28,444 22,980
Net cash inflow from operating activities 5,788 2,182
Cash flows from financing activities
Interest paid on bank loans 5 - (1)
Inter-Company Loan with Hansa Trust - 1,869
Dividends paid 6 (3,840) (2,880)
Net cash outflow from financing activities (3,840) (1,012)
Increase in cash and cash equivalents 1,948 1,170
Cash and cash equivalents at beginning of
financial year (21 June 2019 for comparable
period) 1,066 -
Effect of foreign exchange rate changes (181) (104)
Cash and cash equivalents at end of period 12 2,833 1,066
*Includes dividends received of GBP6,172,000 (2020:
GBP1,042,000) and interest received of GBPnil (2020: GBP1,000).
Notes to the Financial Statements
ACCOUNTING POLICIES
Hansa Investment Company Limited is a company limited by shares,
registered and domiciled in Bermuda with its registered office. The
principal activity of the company is set out in the strategic
report.
Basis of preparation
The Financial Statements of the Company have been prepared in
accordance with International Financial Reporting Standards
("IFRS") adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union. IFRS means standards and
interpretations issued (or adopted) by the International Accounting
Standards Board (IASB) (they comprise: International Financial
Reporting Standards, International Accounting Standards (IAS) and
Interpretations developed by the IFRS Interpretations Committee or
the former Standing Interpretations Committee (SIC)) or IFRS that
have been adopted in the relevant jurisdiction.
These Financial Statements are presented in Sterling because
that is the currency of the primary economic environment in which
the Company operates.
The Financial Statements have been prepared on an historical
cost and going concern basis in line with the assertion of the
Board and also in line with the Board's analysis of the impact of
Covid-19 on the Company except for the valuation of investments.
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 April 2021, to the extent that the
SORP does not conflict with IFRS. The principal accounting policies
adopted are set out below.
Basis of non-consolidation
IFRS 10 stipulates that subsidiaries and associates of
Investment Entities are not consolidated but, rather stated at fair
value unless the conditions for certain exemptions from this
treatment are met. Hansa Investment Company Limited meets all three
characteristics of an Investment Entity as described by IFRS 10.
The Company has one, 100% owned, subsidiary Hansa Trust Ltd. The
Company became the 100% owner of Hansa Trust's shares as part of
the Scheme of Arrangement on 29 August 2019. It is the Intention
for Hansa Trust Ltd to be dissolved now that the legal title of the
portfolio Investments have been transferred to the Company.
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.
Non-current investments
As the Company's business is investing in financial assets, with
a view to profiting from their total return in the form of income
received and increases in fair value, investments are classified at
fair value through profit or loss on initial recognition in
accordance with IFRS 9. The Company manages and evaluates the
performance of these investments on a fair value basis, in
accordance with its investment strategy and information about the
investments is provided on this basis to the Board of
Directors.
Investments are recognised and derecognised 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. In some
cases, this will be by reference to the most recent valuation
statement supplied by the fund's manager. In other cases, values
may be available through the fund being listed on an exchange or
via pricing sources such as Bloomberg.
Private equity investments are stated at fair value through
profit or loss as determined by using various valuation techniques,
in accordance with the International Private Equity and Venture
Capital Valuation Guidelines. In the absence of a valuation at the
balance sheet date, additional procedures to determine the
reasonableness of the fair value estimate for inclusion in the
financial statements may be used. These could include direct
enquiries of the manager of the investment to understand, amongst
others, valuation process and techniques used, external experts
used in the valuation process and updated details of underlying
portfolio. In addition, the Company can obtain external independent
valuation data and compare this to historic valuation movements of
the asset. Further, recent arms-length market transactions between
knowledgeable and willing parties where available might also be
considered. The investment in the Company's subsidiary undertaking
is stated at fair value.
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.
ACCOUNTING POLICIES (CONTINUED)
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.
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. For
clarity, this is a change of accounting policy to that that was in
operation at the end of the prior period in 31 March 2020 when
there was no netting off and taxation was shown as a separate note.
As such, the comparable information has been restated with
GBP205,000 of Irrecoverable Foreign Withholding Tax being netted
off against Dividend Income.
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.
Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the revenue column of the Income Statement
except as follows:
(i) expenses which are incidental to the acquisition or disposal
of an investment are charged to the capital column of the Income
Statement.
Taxation
Under current Bermuda law, the Company is not required to pay
taxes in Bermuda on either income or capital gains. The Company has
received an undertaking from the Bermuda government exempting it
from all local income, withholding and capital gains taxes being
imposed and will be exempted from such taxes until 31 March
2035.
Foreign Currencies
Transactions denominated in foreign currencies are recorded in
the local currency, at the actual exchange rates as at the date of
the transaction. Assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at the rate of
exchange prevailing at the balance sheet date. Any gain or losses
arising from a change in exchange rates, subsequent to the date of
the transaction, is included as an exchange gain or losses in the
capital or revenue column of the Income Statement, depending on
whether the gain or losses is of a capital or revenue nature
respectively.
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.
ACCOUNTING POLICIES (CONTINUED)
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 2021. The most recent valuation
statement was received on 24 February 2021 stating the value of the
Company's holding as at 31 December 2020. The Company has
considered the ongoing impact of Covid-19, the associated financial
impact on certain industries and its potential impact on asset
values. In the absence of a valuation for 31 March 2021 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 2021. It is
believed the value of DV4 as at 31 March 2021 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.
Adoption of new and revised standards
At the date of authorisation of these Financial Statements the
following standards and amendments to standards, which have not
been applied in these Financial Statements, were in issue, but not
yet effective:
-- IFRS 9, IAS 39, IFRS 7, IFRS 16 and IFRS 4: Interest Rate
Benchmark Reform - phase 2 (amended) (effective for accounting
periods beginning on or after 1 January 2021).
-- Amendments to IAS1 'Classification of liabilities as current
or non-current' (effective for accounting periods beginning on or
after 1 January 2023).
The Company does not believe there will be a material impact on
the Financial Statements or the amounts reported from the adoption
of these standards.
In the current financial period the Company has applied to the
following amendments to standards:
-- Amendments to IFRS 3 'Definition of Business' (effective for
accounting periods beginning on or after 1 January 2020).
-- Amendments to IAS 1 & IAS 8 'Definition of Material'
(effective for accounting periods beginning on or after 1 January
2020).
-- Amendments to IFRS 9, IAS 39 and IFRS 7 'Interest Rate
Benchmark Reform' (effective for accounting periods beginning on or
after 1 January 2020).
There is no material impact on the Financial Statements or the
amounts reported from the adoption of these amendments to the
standards.
Intercompany loan
The intercompany loan is recognised at cost, being the fair
value of the consideration receivable. The amounts falling due for
repayment within one year are included under current liabilities in
the Balance Sheet.
Operating Segments
The Company considers it has one operating segment for the
purposes of IFRS8.
INVESTMENT INCOME
Revenue
Revenue 21 June
Year ended 2019 to
31 March 31 March
2021 2020
GBP000 GBP000
Income from quoted investments
Dividends 6,350 1,158
Other income
Interest receivable on AAA rated money market funds - 1
Total income 6,350 1,159
PORTFOLIO MANAGEMENT FEE
Revenue
Revenue 21 June
Year ended 2019 to
31 March 31 March
2021 2020
GBP000 GBP000
Portfolio management fee 2,621 1,441
Total management fee 2,621 1,441
OTHER EXPENSES
Revenue
Revenue 21 June
Year ended 2019 to
31 March 31 March
2021 2020
GBP000 GBP000
Administration fees 143 82
Directors' remuneration 195 144
Auditor's remuneration for:
- audit of the Company's Annual accounts 80 55
Printing fees 36 15
Director's liability insurance 74 38
Marketing 79 39
Registrar's fees 83 119
Banking charges 1 2
Secretarial services 121 85
Travel expenses (4) 74
Legal fees - redomicile project 17 381
Broker fees 21 15
Stock Exchange listing fees 52 247
Safe custody fees 165 99
Other 86 93
Total Other Expenses 1,149 1,488
FINANCE COSTS
Revenue
Revenue 21 June
Year ended 2019 to
31 March 31 March
2021 2020
GBP000 GBP000
Interest payable - 1
Total Finance Costs - 1
DIVIDS PAID
21 June
Year ended 2019 to
31 March 31 March
2021 2020
GBP000 GBP000
Amounts recognised as distributed to shareholders
in the year are as follows:
First and Second interim dividend for 2020 (paid
29 November 2020): 1.6p - 1,920
Fourth interim dividend for 2020 (paid 29 May 2020):
0.8p 960 -
First interim dividend for 2021 (paid 28 August
2020): 0.8p 960 -
Second interim dividend for 2021 (paid 30 November
2020): 0.8p 960 -
Third interim dividend for 2021 (paid 26 February
2021): 0.8p (2020: 0.8p) 960 960
Total Dividends Paid 3,840 2,880
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 contributed surplus which is
permitted by Bermudan company law.
21 June
Year ended 2019 to
31 March 31 March
2021 2020
GBP000 GBP000
First and second interim dividend for 2020 (paid
29 November 2020): 1.6p - 1,920
First interim dividend for 2021 (paid 28 August
2020): 0.8p 960 -
Second interim dividend for 2021 (paid 30 November
2020): 0.8p 960 -
Third interim dividend for 2021 (paid 26 February
2021): 0.8p (2020: 0.8p) 960 960
Fourth interim dividend for 2021 (payable 28 May
2021): 0.8p (2020:0.8p) 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 2021. No final dividend is proposed for the year
ended 31 March 2021.
RETURN ON ORDINARY SHARES (EQUITY)
Total Revenue Capital Total
Revenue Capital Year 21 June 21 June 21 June
Year ended Year ended ended 2019 to 2019 to 2019 to
31 March 31 March 31 March 31 March 31 March 31 March
2021 2021 2021 2020 2020 2020
Returns per share 2.2p 77.4p 79.6p (1.5)p (42.6)p (44.1)p
Returns
Revenue return per share is based on the revenue attributable to
equity shareholders of GBP2,580,000 (2020: GBP(1,771,000)).
Capital return per share is based on the capital profit/(loss)
attributable to equity shareholders of GBP92,851,000 (2020:
GBP(51,069,000)).
Total return per share is based on the combination of revenue
and capital returns attributable to equity shareholders, amounting
to net profit/(loss) of GBP95,431,000 (2020:(GBP52,840,000)).
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/period.
INVESTMENTS IN SUBSIDIARY AT FAIR VALUE THROUGH PROFIT OR
LOSS
As at 31 March 2021, the Company owned 100% of the ordinary
share capital and voting rights of Hansa Trust PLC. formerly an
investment trust, registered and operating in England. The fair
value at 31 March 2021 was GBP3,179,000 (2020: GBP3,179,000). As at
31 March 2021, Hansa Trust PLC was no longer trading and was not
beneficially entitled to any investments except for an intercompany
loan. The intercompany loan was originally created as part of the
Scheme of Redomiciliation in August 2019 to reflect the transfer of
the beneficial title of the portfolio from Hansa Trust PLC to the
Company. There remains a relatively small intercompany balance
between the two entities. At the time of signing of these Financial
Statements, and as part of the process of liquidation, Hansa Trust
PLC had re-registered as Hansa Trust Limited as part of the process
of liquidation. It is anticipated that the remaining intercompany
balance, along with the share capital and other reserves of Hansa
Trust Limited will be reduced and then cancelled when Hansa Trust
Limited is, ultimately, put into liquidation.
INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
2021 2020
Listed Unquoted Total Total
GBP000 GBP000 GBP000 GBP000
Cost at 1 April 2020/(21 June
2019) 225,985 98,888 324,873 -
Investment holding (losses) at 1 April
2020/(21 June 2019) (42,582) (9,027) (51,609) -
Valuation as at 1 April 2020/(21
June 2019) 183,403 89,861 273,264 -
Movements in the year:
Purchases at cost 23,967 3,449 27,416 347,209
Sales - proceeds (24,925) (3,519) (28,444) (22,980)
Transferred from Unquoted to
Listed 23,688 (23,688) - -
Movement in investment holding
gains/(losses) 71,151 21,881 93,032 (50,965)
Valuation as at 31 March 277,284 87,984 365,268 273,264
Cost 246,951 74,883 321,834 324,873
Investment holding gains/(losses) 30,333 13,101 43,434 (51,609)
277,284 87,984 365,268 273,264
2021 2020
GBP000 GBP000
(Losses)/gains on sales (2,011) 644
Movement in investment holding gains/(losses) 95,043 (51,609)
Gains/(losses) on investments held at fair value through
profit or loss 93,032 (50,965)
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:
2021 2020
GBP000 GBP000
Purchases 22 15
Sales 23 15
45 30
SIGNIFICANT HOLDING
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 2021 are detailed
below:
Exc. Minority Interest
Country Total Profit
of Class % of Latest capital after
incorporation of class available and tax for
or registration capital held accounts reserves the period
Ocean Wilsons Holdings
Limited Bermuda Ordinary 26.5 31.12.20 $555,782,000 $38,712,000
Ocean Wilsons Holdings Limited is included as part of the
investment portfolio in accordance with IAS 28 - Investment in
Associates.
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.
2021 2020
GBP000 GBP000
Prepayments and accrued income 177 83
Investments pending settlement - 2,420
177 2,503
CASH AND CASH EQUIVALENTS
2021 2020
GBP000 GBP000
Cash at bank 2,833 1,066
2,833 1,066
TRADE AND OTHER PAYABLES
2021 2020
GBP000 GBP000
Intercompany Loan 3,179 3,179
Other creditors and accruals 388 534
3,567 3,713
CALLED UP SHARE CAPITAL
2021 2020
GBP000 GBP000
40,000,000 Ordinary shares of 1p 400 400
80,000,000 'A' non-voting Ordinary shares of 1p 800 800
1,200 1,200
The 'A' non-voting Ordinary shares do not entitle the holders to
receive notices or to vote, either in person or by proxy, at any
general meeting of the Company, but in all other respects rank pari
passu with the Ordinary shares of the Company.
CONTRIBUTED SURPLUS
2021 2020
GBP000 GBP000
Opening balance at 31 March 2020 (21 June 2019) 327,939 -
Transfer of assets from Hansa Trust - 330,819
Dividend paid (1,920) (2,880)
Balance at 31 March 326,019 327,939
RETAINED EARNINGS
Reserves Reserves
Revenue Capital Capital Total Revenue Capital Capital Total
- Other - Investment retained - Other - Investment retained
holding earnings holding earnings
profits profits
2021 2021 2021 2021 2020 2020 2020 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening balance at
1 April 2020 (21
June 2019) (1,771) 540 (51,609) (52,840) - - - -
Profit/(loss) for
the year 2,580 (2,192) 95,043 95,431 (1,771) 540 (51,609) (52,840)
Dividend paid (1,920) - - (1,920) - - - -
Closing balance at
31 March (1,111) (1,652) 43,434 40,671 (1,771) 540 (51,609) (52,840)
NET ASSET VALUE
2021 2020
NAV per Ordinary and 'A' non-voting Ordinary share 306.6p 230.2p
The NAV per Ordinary and 'A' non-voting Ordinary share is based
on the net assets attributable to equity shareholders of
GBP367,890,000 (2020: GBP276,299,000) and on 40,000,000 Ordinary
shares (2020: 40,000,000) and 80,000,000 'A' non-voting Ordinary
shares (2020: 80,000,000) in issue at 31 March 2021.
COMMITMENTS AND CONTINGENCIES
The Company has no outstanding commitments as at 31 March 2021
and 31 March 2020.
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.
FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued)
Risks Associated with Financial Instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect
the valuation of the investment portfolio. 1) the direct exposure
where an investment is denominated and paid for in a currency other
than Sterling; and 2) the indirect exposure where an investment has
substantial non-Sterling underlying investment and/or cash flows.
The Company does not normally hedge against foreign currency
movements affecting the value of the investment portfolio, but
takes account of this risk when making investment decisions. Some
of the fund investments into which the Company invests will, in
part or in whole, hedge some of their underlying currency risk, but
this will be known at the time of investment and will form part of
the investment decision. In those cases, the hedging will not
remove the exposure to the underlying country or market sector. The
Portfolio Manager monitors the effect of foreign currency
fluctuations through the pricing of the investments by the various
markets.
Direct No direct Direct No direct
foreign foreign foreign foreign
currency currency currency currency
risk risk Total risk risk Total
2021 2021 2021 2020 2020 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Investments 127,772 237,496 365,268 98,846 174,418 273,264
Other receivables including
prepayments 126 51 177 24 2,479 2,503
Cash at bank - 2,833 2,833 - 1,066 1,066
Current liabilities - (388) (388) - (534) (534)
127,898 239,992 367,890 98,870 177,429 276,299
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 2021 and 31 March 2020. These percentages have been
determined based on the average market volatility in exchange rates
in the previous 12 months. The sensitivity analysis is based on the
Company's monetary foreign currency financial instruments held at
each balance sheet date.
US$ Euro Other US$ Euro Other
2021 2021 2021 2020 2020 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
If Sterling had weakened by 10% against the currencies shown, this
would have had the following effect on the Company:
Income statement - profit/(loss) 3,029 509 851 (1,096) (323) (229)
Equity shareholder funds 8,291 2,201 2,297 6,896 1,494 1,741
11,320 2,710 3,148 5,800 1,171 1,512
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.
Note: The disclosure on the sensitivity to Foreign Currency was
not disclosed in prior year.
FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued)
Interest rate risk
Interest rate movements may affect the level of income
receivable on cash deposits and the interest payable on the
Company's variable rate borrowings.
The Company has banking facilities amounting to GBP30m (2020:
GBP30m) 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 GBPnil (2020: GBPnil). The level of banking facilities utilised
at 31 March 2021 was GBPnil (2020: GBPnil).
Interest rate changes usually impact equity prices. The level
and direction of change in equity prices is subject to prevailing
local and world economic conditions as well as market sentiment,
all of which are very difficult to predict with any certainty. The
Company has floating rate financial assets, consisting of bank
balances and cash funds that have received average rates of
interest during the year of 0.0% on bank balances.
Cash flow No Cash flow No
interest interest interest interest
rate rate rate rate
risk risk Total risk risk Total
2021 2021 2021 2020 2020 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Investments - 365,268 365,268 - 273,264 273,264
Other receivables including
prepayments - 177 177 - 2,503 2,503
Cash at bank 2,833 - 2,833 1,066 - 1,066
Current liabilities - (388) (388) - (534) (534)
2,833 365,057 367,890 1,066 275,233 276,299
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, GBP78.6m as valued at 31 March 2021 (2020:
GBP60.8m) and as a proportion of the NAV, 21.4% (2020: 22.0%).
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
49.2% of Ocean Wilsons' NAV, has a direct exposure to the Brazilian
economy, whereas Ocean Wilsons Investments is not exposed to Brazil
and corresponds to the other 50.8%. 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 above 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 GBP36.8m (2020:
GBP27.6m).
FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued)
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 2021 are
shown in Note 11 and Note 13.
The Company's maximum exposure to credit risk on cash is GBP2.8m
(2020: GBP1.1m) and on cash funds is GBPnil (2020: GBPnil). Surplus
cash is on deposit with the Depositary/Custodian.
Liquidity Risk
The liquidity risk to the Company is that it is unable to meet
its obligations as they fall due, as a result of a lack of
available cash and an inability to dispose of investments in a
timely manner. A substantial proportion of the Company's portfolio
is held in liquid quoted investments; however, there is a large,
Strategic, holding in Ocean Wilsons of 21.4% (2020: 22.0%),
unquoted equity investments of 2.2% (2020: 3.4%) and investments
into open-ended investment funds with varying liquidity terms of
59.9% (2020: 53.4%).
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 2021 is shown
earlier 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.
FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Fair Value Hierarchy
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 assets 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).
FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
(continued)
The financial assets and liabilities, measured at fair value, in
the Statement of Financial Position, grouped into the fair value
hierarchy and valued in accordance with the accounting policies in
Note 1, are detailed below:
Level 1 Level 2 Level 3 Total
31 March 2021 GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 136,680 - - 136,680
Unquoted equities - - 8,055 8,055
Fund investments 14,188 206,345 - 220,533
Investment In subsidiary - - 3,179 3,179
Net fair value 150,868 206,345 11,234 368,447
Level 1 Level 2 Level 3 Total
31 March 2020 GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
profit or loss
Quoted equities 116,310 - - 116,310
Unquoted equities - - 9,276 9,276
Fund investments - 147,678 - 147,678
Investment In subsidiary - - 3,179 3,179
Net fair value 116,310 147,678 12,455 276,443
The Company's policy is to recognise transfers into and out of
the different fair value hierarchy levels at the date the event or
change in circumstances that caused the transfer occurred.
A reconciliation of fair value measurements in Level 3 is set
out in the following table:
2021 2020
Equity Equity
investments investments
GBP000 GBP000
Opening Balance 12,455 -
Transferred from Level 1 - -
Purchases (Capital Drawdown) - 9,276
Purchase of Hansa Trust - 332,019
Sales (Capital Distribution) - (328,840)
Total gains or losses included in gains on investments
in the Income Statement:
- on assets held at year end (1,221) -
Closing Balance 11,234 12,455
FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
(continued)
As at 31 March 2021, 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 2021. The most recent
valuation statement was received on 24 February 2021 and relates to
the DV4 portfolio at 31 December 2020. 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. The Company has considered the ongoing impact of
Covid-19, the associated financial impact on certain industries and
its potential impact on asset values. In the absence of a valuation
for 31 March 2021 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 2021. It is
believed the value of DV4 as at 31 March 2021 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 2021 would have
increased or decreased by GBP806,000 (2020: GBP928,000). 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. The subsidiary has been valued taking into account the
latest assets and liabilities remaining In Hansa Trust.
RELATED PARTIES & 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 2021, are
disclosed in the Strategic Report - Shareholder Profile and
Engagement and in Note 3. Details of the relationship between the
Company and the Directors, including amounts paid during the period
to 31 March 2020, are disclosed in the Strategic Report - The Board
and also in the Directors' Remuneration Report.
CONTROLLING PARTIES
At 31 March 2021 Victualia Limited Partnership and Nomolas Ltd
each held 25.9% of the issued Ordinary shares. Additional
information is disclosed in the Strategic Report - Substantial
Shareholders.
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.
Pro-Forma Income Statement (Unaudited) for the combined Hansa
Investment Company Limited Group
For the year ended 31 March 2021
Year ended Year ended/period
31 March 2021 31 March 2020
Hansa
Hansa Combined Hansa Investment Combined
Hansa Investment Group Trust Company Group
Trust Company Year 1 April 21 June Year
Year Year ended 2019 2019 ended
ended ended 31 March to 31 to 31 March
31 March 31 March 2021 March 31 March 2020
2021 2021 Total 2020 2020 Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gains/(losses) on investments held
at fair value through profit or
loss - 93,032 93,032 (7,004) (50,965) (57,969)
Foreign exchange gain/(loss) - (181) (181) 8 (104) (96)
Investment income - 6,350 6,350 5,963 1,159 7,122
- 99,201 99,201 (1,033) (49,910) (50,943)
Portfolio management fees - (2,621) (2,621) (1,000) (1,441) (2,441)
Other expenses - (1,149) (1,149) (1,378) (1,488) (2,866)
- (3,770) (3,770) (2,378) (2,929) (5,307)
Profit/(loss) before finance costs - 95,431 95,431 (3,411) (52,839) (56,250)
Finance costs - - - - (1) (1)
Profit/(loss) for the year - 95,431 95,431 (3,411) (52,840) (56,251)
Return per Ordinary and 'A' non--voting
Ordinary share - 79.6p 79.6p (2.8)p (44.1)p (46.9)p
Pro-Forma Balance Sheet (Unaudited) for the combined Hansa
Investment Company Limited Group
as at 31 March 2021
Combined Combined
Group Group
Year Ended Year Ended
31 March 31 March
2021 2020
GBP000 GBP000
Non-current assets
Investments held at fair value through profit
or loss 365,268 273,264
365,268 273,264
Current assets
Trade and other receivables 177 2,503
Cash and cash equivalents 2,833 1,066
3,010 3,569
Current liabilities
Trade and other payables (388) (534)
Net current assets 2,622 3,035
Net assets 367,890 276,299
Capital and reserves
Called up share capital 1,200 1,200
Contributed surplus reserve 326,019 327,939
Retained earnings / (Accumulated losses) 40,671 (52,840)
Total equity shareholders' funds 367,890 276,299
Net asset value per Ordinary and 'A' non-voting
Ordinary share 306.6p 230.2p
Pro-Forma Statement of Changes in Equity (Unaudited) for the
combined Hansa Investment Company Limited Group
For the year ended 31 March 2021
(Accumulated
Contributed losses)/
Share surplus Retained
capital reserve earnings Total
GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2020 1,200 327,939 (52,840) 276,299
Profit for the year - - 95,431 95,431
Dividends - (1,920) (1,920) (3,840)
Net assets at 31 March 2021 1,200 326,019 40,671 367,890
Pro-Forma Statement of Changes in Equity (Unaudited) for the
combined Hansa Investment Company Limited Group
For the year ended 31 March 2020
(Accumulated
Capital Contributed losses)/
Share redemption surplus Retained
capital reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
Net assets at 1 April 2019 1,200 300 - 335,850 337,350
Hansa Trust loss for year - - - (3,411) (3,411)
Dividends paid by Hansa Trust - - - (1,920) (1,920)
Capital reorganisation as part of the
scheme - (300) 330,819 (330,519) -
Hansa Investment Company Limited loss
for the year - - - (52,840) (52,840)
Dividends paid by Hansa Investment
Company Limited - - (2,880) - (2,880)
As at 31 March 2020 1,200 - 327,939 (52,840) 276,299
Pro-Forma Cash Flow Statement (Unaudited) for the combined Hansa
Trust and Hansa Investment Company Limited
For the year ended 31 March 2021
Combined Combined
Group Group
Year-ended Year-ended
31 March 31 March
2021 2020
GBP000 GBP000
Cash flows from operating activities
Profit/(loss) before finance costs 95,431 (56,250)
Adjustments for:
Realised losses/(gains) on investments 2,011 (3,051)
Unrealised (gains)/losses on investments (95,043) 61,020
Foreign exchange 181 96
Decrease/(increase) in trade and other receivables 2,326 (1,385)
Decrease in trade and other payables (146) (1,499)
Purchase of non-current investments (27,416) (29,984)
Sale of non-current investments 28,444 34,542
Net cash inflow from operating activities 5,788 3,489
Cash flows from financing activities
Interest paid on bank loans - (1)
Dividends paid (3,840) (4,800)
Net cash outflow from financing activities (3,840) (4,801)
Increase/(decrease) in cash and cash equivalents 1,948 (1,312)
Cash and cash equivalents at 1 April 1,066 2,474
Foreign exchange (181) (96)
Cash and cash equivalents at end of year 2,833 1,066
Notes to the Condensed Pro-Forma Financial Statements
(Unaudited)
ACCOUNTING POLICIES
(a) Basis of preparation
The Pro-Forma Financial Statements of the Company have been
prepared under the historical cost convention, except for the
measurement at fair value of investments, and primarily using the
principles of International Financial Reporting Standards ("IFRS")
as adopted by the European Union, with the following significant
departures:
Hansa Investment Company Limited and, as of the implementation
of the Scheme on 29 August 2019, its 100% subsidiary Hansa Trust
together are referred to as the "Group" or "Combined Group" for the
purposes of the Pro-Forma Financial Statements. Under IFRS 10
'Consolidated Financial Statements', from 29 August 2019 onwards,
Hansa Investment Company Limited meets the definition of an
investment entity and as such any subsidiaries, namely Hansa Trust,
are accounted for at fair value through profit or loss in
accordance with IFRS 9 'Financial Instruments'. These Pro-Forma
Financial Statements have been prepared assuming that any
subsidiaries are consolidated, rather than accounted for at fair
value. Prior to 29 August 2019, Hansa Trust was a standalone entity
- itself deemed to be an investment entity.
A consequence of the consolidation of subsidiaries is that these
Pro-Forma Financial Statements are Consolidated Financial
Statements and therefore contain comparative and historical
information which encompasses the whole Group. Practically,
comparative and historical information is derived from Hansa
Trust.
The Group has not presented a Consolidated Income Statement in
accordance with the Guidance Issued by the Association of
Investment Companies with respect to the allocation between Income
and Capital. Income and Capital columns have been combined for each
consolidated entity to simplify the presentation of the statement
itself.
EPS/NAV per share for comparable numbers brought forward from
Hansa Trust have been restated to reflect the new number of Hansa
Investment Company Limited shares in issue. EPS and NAV per share
throughout the Interim Report reflect the number of Hansa
Investment Company Limited shares in issue.
The Directors have adopted the proposed departures as they
believe the results of the Pro-Forma Financial Statements better
enable shareholders to understand the elements of the value of the
Company at the year end as well, as compare to prior years.
These Pro-Forma Financial Statements are presented in Sterling,
the currency of the primary economic environment in which the
Company operates.
INCOME
Hansa
Hansa Investment
Hansa Trust Company
Hansa Investment Combined 1 April 21 June Combined
Trust Company Group 2019 2019 Group
Year ended Year ended Year ended to 31 to 31 Year ended
31 March 31 March 31 March March March 31 March
2021 2021 2021 2020 2020 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Income from quoted investments
Dividends - 6,350 6,350 5,959 1,158 7,117
Other income
Interest receivable on AAA
rated
money market funds - - - 4 1 5
Total income - 6,350 6,350 5,963 1,159 7,122
PORTFOLIO MANAGEMENT FEE
Hansa
Hansa Investment
Hansa Trust Company
Hansa Investment Combined 1 April 21 June Combined
Trust Company Group 2019 2019 Group
Year ended Year ended Year ended to 31 to 31 Year ended
31 March 31 March 31 March March March 31 March
2021 2021 2021 2020 2020 2021
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Portfolio management fee - 2,621 2,621 1,000 1,441 2,441
Total management fee - 2,621 2,621 1,000 1,441 2,441
OTHER EXPENSES
Hansa
Hansa Investment
Hansa Trust Company
Hansa Investment Combined 1 April 21 June Combined
Trust Company Group 2019 2019 Group
Year ended Year ended Year ended to 31 to 31 Year ended
31 March 31 March 31 March March March 31 March
2021 2021 2021 2020 2020 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Administration fees - 143 143 57 82 139
AIFM - - - 54 - 54
Directors' remuneration - 195 195 58 144 202
Auditors' remuneration for:
- audit of the Company's
Year/Period-End Report - 80 80 44 55 99
Fees payable to the Auditor
for other services:
Printing fees - 36 36 32 15 47
Directors' liability insurance - 74 74 19 38 57
Marketing - 79 79 64 39 103
Registrar's fees - 83 83 12 119 131
Banking charges - 1 1 62 2 64
Secretarial services - 121 121 61 85 146
Travel expenses - (4) (4) 14 74 88
Legal fees - redomicile project - 17 17 734 381 1,115
Broker fees - 21 21 19 15 34
Stock Exchange listing fees - 52 52 36 247 283
Safe custody fees - 165 165 49 99 148
Other - 86 86 63 93 156
Total other expenses - 1,149 1,149 1,378 1,488 2,866
DIVIDS PAID & DECLARED
(Unaudited)
Combined (Unaudited)
Group Combined
Year Group
ended Year ended
31 March 31 March
2021 2020
GBP000 GBP000
Second interim dividend for Hansa Trust 2019
(paid May 2019): 1.6p - 1,920
First interim dividend for 2021 (paid August
2020): 0.8p (2020: 0.8p) 960 960
Second interim dividend for 2021 (paid November
2020): 0.8p (2020:0.8p) 960 960
Third interim dividend for 2021 (paid February
2021):0.8p (2020: 0.8p) 960 960
Fourth interim dividend for 2021 (payable May
2021): 0.8p (2020:0.8p) 960 960
3,840 5,760
RETURN PER SHARES
The returns stated below are based on 120,000,000 shares, being
the number of shares in issue at the end of the period for HICL,
with the comparable having been rebased to this number of shares
(Hansa Trust had 24,000,000 shares in issue) for comparison
purposes.
Hansa Investment
Hansa Trust Company Combined Group
Pence Pence Pence
GBP000 per share GBP000 per share GBP000 per share
Year ended 31 March 2021 - - 95,431 79.6 95,431 79.6
Year ended 31 March 2020 (3,411) (2.8) (52,840) (44.1) (56,251) (46.9)
FINANCIAL INFORMATION
The year-end pro-forma financial information was approved by a
committee of the Board of Directors on 22 June 2021.
Notice of the Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the
Members of the Company will be held at Clarendon House, 2 Church
Street, Hamilton, HM 11, Bermuda on Monday 9 August at 11:00 a.m.
(Bermuda time) for the following purposes:
Agenda
To appoint a chairperson of the meeting.
To confirm notice.
Resolutions
To receive and consider the audited Financial Statements and the
Reports of the Directors and Auditor for the year ended 31 March
2021.
To re-elect Jonathan Davie (a biography and Board endorsement
can be found earlier in the report) as a Director of the
Company.
To re-elect Richard Lightowler (a biography and Board
endorsement can be found earlier in the report) as a Director of
the Company.
To re-elect Nadya Wells (a biography and Board endorsement can
be found earlier in the report) as a Director of the Company.
To re-elect William Salomon (a biography and Board endorsement
can be found earlier in the report) as a Director of the
Company.
To re-elect Simona Heidempergher (a biography and Board
endorsement can be found earlier in the report) as a Director of
the Company.
To approve the Directors' Remuneration Report.
To approve the Company's Dividend Policy as can be found earlier
in the Annual Report.
To appoint PricewaterhouseCoopers Ltd as Auditor of the Company
and to authorise the Directors to determine the remuneration of the
Auditor.
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:
a) not less than 1p per share; and
b)
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.
The amendment and full restatement of the Company's bye-laws by
the substitution of Bye -- law 25.4 with the following new Bye-law
25.4 to provide for the delivery to members of information, notices
and documents by making the foregoing available on a website or by
other electronic means notified to the Members from time to
time:
"25.4 The Board may deliver to Members any information, notices
or documents by making such information, notices and documents
available on a website or by other electronic means. The Board may
make available any such information, notices or documents at
www.hansaicl.com or at such other website or by other electronic
means as notified to the Members from time to time. The Board shall
procure that information or documents provided to a Member via such
a website shall be made available until the conclusion of the
meeting to which they relate (if applicable)."
Dated: 22 June 2021
Shane Reynolds
For and on behalf of
Conyers Corporate Services (Bermuda) Limited
Secretary
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 5 August
2021) (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 3:00pm UK time on 9 August 2021) 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 3:00pm UK time on 5 August 2021 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:
a)
via www.signalshares.com by logging on and selecting the 'Proxy
Voting' link. If you have not previously registered for electronic
communications, you will first be asked to register as a new user,
for which you will require your investor code ("IVC"), (which can
be found on your share certificate), family name and postcode (if
resident in the UK); or
b)
in hard copy form by post, by courier or by hand to the
Company's Registrars, Link Group, PXS 1, Central Square, 29
Wellington Street, Leeds, LS1 4DL.
If you need help with voting online or need to request a proxy
form, please contact our Registrars, Link Group, on 0371 664 0300.
Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the UK will be charged at the applicable
international rate. They are open between 09:00 - 17:30, Monday to
Friday excluding public holidays in England and Wales.
Alternatively, you can email Link at
shareholderenquiries@linkgroup.co.uk.
Notes for Depositary Interest Holders
1 You will not receive a form of direction for the Annual
General Meeting in the post. Depositary Interests may be voted
through the CREST Proxy Voting Service in accordance with the
procedures set out in the CREST manual.
In order for a proxy appointment or instruction made using the
CREST service to be valid, the appropriate CREST message (a "CREST
Proxy Instruction") must be properly authenticated in accordance
with Euroclear UK & Ireland Limited's specifications and must
contain the information required for such instruction, as described
in the CREST Manual (available via www.euroclear.com/CREST). The
message, regardless of whether it constitutes the appointment of a
proxy or is an amendment to the instruction given to a previously
appointed proxy must, in order to be valid, be transmitted so as to
be received by the issuer's agent ID RA10 by 3:00pm UK time on 4
August 2021. For this purpose, the time of receipt will be taken to
be the time (as determined by the time stamp applied to the message
by the CREST Application Host) from which the issuer's agent is
able to retrieve the message by enquiry to CREST, in the manner
prescribed by CREST. After this time any change of instructions to
proxies appointed through CREST should be communicated to the
appointee through other means. CREST members and, where applicable,
their CREST sponsors, or voting service providers should note that
Euroclear UK & Ireland Limited does not make available special
procedures in CREST for any particular message. Normal system
timings and limitations will, therefore, apply in relation to the
input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST
personal member, or sponsored member, or has appointed a voting
service provider, to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers
are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of
the CREST system and timings. The Company may treat as invalid a
CREST Proxy Instruction in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001.
2 In the case of Depositary Interest Holders, a form of
direction may be requested and completed in order to instruct Link
Market Services Trustees Limited, the Depositary, to vote on the
holder's behalf at the Meeting by proxy or, if the Meeting is
adjourned, at the adjourned meeting. Requests for a hard copy
should be sent Link Group, PXS 1, Central Square, 29 Wellington
Street, Leeds, LS1 4DL (telephone number: 0871 664 0300 or 0371 664
0300).
3 To be effective, a valid form of direction (and any power of
attorney or other authority under which it is signed) must be
received electronically or delivered to Link Group, PXS 1, Central
Square, 29 Wellington Street, Leeds, LS1 4DL by no later by 3:00pm
UK time on 4 August 2021) or 72 hours before any adjourned
Meeting.
4 The Depositary will appoint the Chairman of the meeting as its
proxy to cast your votes. The Chairman may also vote or abstain
from voting as he or she thinks fit on any other business
(including amendments to resolutions) which may properly come
before the meeting.
5 The 'Vote Withheld' option is provided to enable you to
abstain from voting on the resolutions. However, it should be noted
that a 'Vote Withheld' is not a vote in law and will not be counted
in the calculation of the proportion of the votes 'For' and
'Against' a resolution.
6 Depositary Interest holders wishing to attend the meeting
should contact the Depositary at Link Group, PXS 1, Central Square,
29 Wellington Street, Leeds, LS1 4DL or by email by using
nominee.enquiries@linkgroup.co.uk by no later than by 3:00pm UK
time on 4 August 2021.
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 22 June 2021 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-2021#2021
Investor 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 defined in the FCA
Handbook Glossary. Finally, Hansa Investment Company is registered
as a Reporting Financial Institution with the US IRS for FATCA
purposes.
Investor Disclosure
AIFMD
Hansa Investment Company'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. It can be viewed at:
www.hansaicl.com/shareholder-information/regulatory-information.aspx
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 also be found on
the Company's website for good measure:
www.hansaicl.com/shareholder-information/regulatory-information.aspx
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.
Contact Details
Email: hiclenquiry@hansacap.com
Website: www.hansaicl.com
Company Secretary (and Company's Registered Office)
Conyers Corporate Services (Bermuda) Limited
Clarendon House, 2 Church Street
PO Box HM666, Hamilton HM CX
Bermuda
Phone: +1 441 279 5373
Website: www.conyers.com
Please contact the Portfolio Manager, as below, if you have any
queries concerning the Company's investments or performance.
Portfolio Manager
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
Telephone: +44 (0) 207 647 5750
Email: hiclenquiry@hansacap.com
Website: www.hansagrp.com
The Company's website includes the following:
- Monthly Fact Sheets
- Stock Exchange Announcements
- Details of the Board Statements
- Annual and Interim Reports
- Share Price Data Reports
Please contact the Registrars, as below, if you have a query
about a certificated holding in the Company's shares.
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
If you do not have internet access you can call the Shareholder
Support Centre on 0371 664 0300. Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the UK
will be charged at the applicable international rate.
They are open between 09:00 - 17:30, Monday to Friday excluding
public holidays in England and Wales.
Email: shareholderenquiries@linkgroup.co.uk
www.linkgroup.eu
Share Price Listings
The price of your shares can be found on our website and in the
Financial Times under the heading 'Investment Companies'.
In addition, share price information can be found under the
following:
ISIN Code
Ordinary shares BMG428941162
'A' non-voting Ordinary shares BMG428941089
SEDOL
Ordinary shares BKLFC18
'A' non-voting Ordinary shares BKLFC07
Reuters
Ordinary shares HAN.L
'A' non-voting Ordinary shares HANA.L
Bloomberg
Ordinary shares HAN LN
'A' non-voting Ordinary shares HANA LN
TIDM
Ordinary shares HAN
'A' non-voting Ordinary shares HANA
Legal Entity Identifier: 213800RS2PWJXSZQDF66
Useful Internet Addresses
Association of Investment Companies www.theaic.co.uk
London Stock Exchange www.londonstockexchange.com
TrustNet www.trustnet.com
Interactive Investor www.iii.co.uk
Morningstar www.morningstar.com
Edison www.edisongroup.com
Financial Calendar
Company year end 31 March
Annual Report sent to shareholders 30 June
Annual General Meeting 9 August
Announcement of Half Year results November
Interim Report sent to shareholders December
Interim dividend payments
August, November, February & May
Company Information
Registered in Bermuda company number: 54752
BOARD OF DIRECTORS
Jonathan Davie (Chairman)
Simona Heidempergher
Richard Lightowler
William Salomon
Nadya Wells
SECRETARY AND REGISTERED OFFICE
Conyers Corporate Services (Bermuda) Limited
Clarendon House
2 Church Street
PO Box HM666
Hamilton HM CX
Bermuda
PORTFOLIO MANAGER AND ADDITIONAL ADMINISTRATIVE SERVICES
PROVIDER
Hansa Capital Partners LLP
50 Curzon Street
London W1J 7UW
INDEPENT AUDITOR
PricewaterhouseCoopers Ltd
Washington House
4th Floor, 16 Church Street,
Hamilton HM11,
Bermuda
SOLICITORS
Dentons
1 Fleet Place
London EC4M 7WS
REGISTRAR
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH
CUSTODIAN
Banque Lombard Odier & Cie SA
11 Rue de la Corraterie
1204 Geneva
Switzerland
STOCKBROKER
Winterflood Investment Trusts
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
ADMINISTRATOR
Maitland Administration Services Limited
Hamilton Centre
Rodney Way
Chelmsford
Essex
CM1 3BY
ALTERNATIVE INVESTMENT FUND MANAGER
Hanseatic Asset Management LBG
Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1WD
Glossary of Terms
Association of Investment Companies ("AIC")
The Association of Investment Companies is the UK trade
association for closed-ended investment companies. It represented
Hansa Trust prior to the redomiciliation of the business. 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 AIF.
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 KIDs.
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. As part of the calculation of
the Company's Five Year NAV and Share Price Total Return, the
Company will continue to use and quote results from its
predecessor, Hansa Trust, 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.
Key Performance Indicators ("KPIs")
A set of quantifiable measures that 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 the
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
share. The Ordinary (40m shares) and the 'A' non-voting Ordinary
shares (80m shares). Both have the same financial interest in the
underlying assets of the Company and receive the same dividend, 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.
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. 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.
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.
VIX Index
The VIX, or the CBOE Volatility Index, is a widely used measure
of the implied volatility of the stock market, based on S&P 500
index options. It is calculated and published by the Chicago Board
Options Exchange.
Hansa Investment Company Limited
Clarendon House
2 Church Street
PO Box HM666
Hamilton HM CX
Bermuda
T : +44 (0) 207 647 5750
E : hiclenquiry@hansacap.com
Visit us at
www.hansaicl.com
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END
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