Annual Report 31 March ## 2024 Hansa Investment Company Limited Annual Report 31 March 2024 We are globally diversified, multi-asset class investors who seek to identify compelling investment opportunities in both long funds, hedge funds, direct global equities and private assets. We operate without being constrained by benchmarks, but instead seek to conservatively grow capital over time through investing in a blend of best-in-class public and private equities balanced by more defensive all-weather investments. Long-term, not short-term In an investment world that is increasingly short-term in nature and momentum driven, we seek to invest for the longer-term, playing to our multi-generational roots. Access to the world’s elite, best-in-class managers Our long-term outlook, combined with our desire to form lasting multi-year relationships, makes us an attractive partner to many of the world’s elite funds, many of which are unavailable to large institutions and retail investors. Dare to be different Rather than seeking to replicate indices we look to identify those areas of the market which offer attractive upside, with careful consideration of risks that may incur a permanent impairment of capital, even if this means being unconventional. Importantly, we are nimble and act quickly when needed priding ourselves on being flexible and independently minded, as illustrated by our investment in Ocean Wilsons Holdings Limited. Operating outside the bureaucracies of a large institution By virtue of being a smaller, dedicated fund management group with significant internal investment, we share an alignment of interest and, importantly, are not driven by asset gathering for the sake of profit maximisation. To see more: www.hansaicl.com Hansa Investment Company Limited Registered in Bermuda company number: 54752 ii OVERVIEW ## Contents Overview ii The power of investing differently. 2 Financial summary 3 Chairman’s report 6 Long-term performance Portfolio Manager’s Review 8 Portfolio Manager’s report 27 The portfolio Strategic Review 30 Investment objective, strategy and performance 33 Shareholder profile 35 Stakeholder engagement 39 Principal risks Governance 42 The Board of Directors 44 Organisation and objectives 49 Report of the Directors 51 Corporate Governance Report 55 Audit Committee Report 57 Directors’ Remuneration Report 60 Nominations Committee Report Financial Statements 62 Independent auditor’s report 66 Income Statement 67 Balance Sheet 68 Statement of Changes in Equity 69 Cash Flow Statement 70 Notes to the Financial Statements Additional Information 82 Notice of the Annual General Meeting 85 Investor information 87 Glossary of terms 1 Hansa Investment Company Limited Annual Report 31 March 2024 ## Financial summary As at 31 March 2024 | | ORDINARY SHARES | ‘A’ NON-VOTING ORDINARY SHARES | | --- | --- | --- | | NAV per share | Share price | Share price | | | 210.0p | 204.0p | ## 378.8p Discount Discount Total assets ## 44.6% 46.1% Gross yield Gross yield ## £454.9m ## 1.5% 1.6% Annual dividend payments Five year total return cumulative performance 3.2 50 2.4 1.6 % pence per share 0.8 | 0 | | | -40 | | | | --- | --- | --- | --- | --- | --- | | | | 2020-212019-20 2021-22 2022-23 2023-24 | | | Mar 20Mar 19 Mar 21 Mar 22 Mar 23 Mar 24 | | | 1st interim paid 2nd interim paid 3rd interim paid | | | NAV Cum Income Ordinary Share Price ‘A’ non-voting Ordinary Share Price | | 4th interim paid Payable Predicted Graphs represent the combined results of the Company with Hansa Trust. To that end, prior to August 2019 where historic information relating to Hansa Trust is quoted on a ‘per share’ basis, it has been converted to be consistent with the number of HICL shares in issue. There is no benchmark to disclose. Geographic exposure Sector exposure | North America 41.3% | Industrials 28.4% | | --- | --- | | Latin America 21.8% | Financials 13.9% | | Diversified 9.9% | Information Technology 13.3% | | Developed Europe ex UK 8.6% | Diversified 9.9% | | Asia Pacific ex Japan 7.1 % | Consumer Discretionary 9.2% | | Japan 4.7% | Health Care 7.4% | | UK 4.2% | Materials 4.1% | | Cash/Liquidity Funds 1.2% | Communications Services 3.6% | | Middle East & Africa 0.8% | Real Estate 3.3% | | Emerging Europe 0.3% | Energy 2.9% | Consumer Staples 2.2% Cash/Liquidity Funds 1.2% Utilities 0.7% 2 OVERVIEW ## Chairman’s report ## Dear Shareholder Jonathan Davie Chairman | Shareholder Returns | anticipating it to be approximately 2.5%, | which is continuing to demonstrate | | --- | --- | --- | | It is very pleasing to report an increase of | whilst leading economists such as Larry | strong resilience. The Board awaits | | 14.6% over the year in the value of Hansa | Summers lean towards the number being | further updates, as I am sure do all other | | Investment Company Limited’s (“Hansa”, | 4.5%. I prefer the latter view as if inflation | shareholders. It needs to be borne in mind | | “the Company”, HICL) investment | gets back to 2% then a real rate of 2.5% is | that as stated by Ocean Wilsons, there can | | portfolio. Our Portfolio Manager, Alec | not unusual or unreasonable, particularly | be no certainty as to the outcome of its | | Letchfield and his team at Hansa Capital | with the backdrop of voracious and | deliberations and decisions. | | Partners LLP (HCP, “Hansa Capital | increasing government debt requirements | | Your Board remains vigilant on this very Partners”, “PM”, “the Manager”) have in all parts of the world. important matter for all our shareholders performed well in a very challenging Alec Letchfield and his team at Hansa and continues to review and update market. Additionally, after a period of Capital Partners, supported by the Board potential strategic options. underperformance, it is very gratifying to continue to look for opportunities to report an increase of 55.3% in the value of broaden and diversify the portfolio. This Prospects our holding in Ocean Wilsons Holdings has been most notable with an increasing Stock markets have had a particularly Limited (OWHL, “Ocean Wilsons”). investment in Japan. Our commitment good run in the second half of our financial Overall, the net asset value increased to Private Markets continues to grow as year. Pleasingly, this has continued from 305.8p to 378.8p as at 31 March planned, with our strategy to continue to into May. 2024, generating a 23.9% increase in the commit approximately £10m each year to portfolio. The shareholders also received this sector. Whilst I have been correct on interest dividends totalling 3.2p per share during rates being higher for longer than the the period, implying a total NAV return of As a consequence of our recent rolling market participants anticipated and the 25.1% for the year. commitment to an annual investment oil price remaining firm, I have completely in Private Equity and Venture Capital The Ordinary share price has increased underestimated the continuing high levels opportunities, the Board has decided from 174.0p to 210.0p, whilst the ‘A’ of liquidity in markets, the sudden arrival to include this as one of the four key Ordinary shares increased from 170.5p to of AI and the reasonably dovish comments investment categories. Consequently, 204.0p. Regrettably the discount on the from the Fed about progress towards their the Core and Thematic categories have Ordinary shares increased from 43.1% to 2% inflation target. been combined. 44.6% and the ‘A’ Ordinary shares increased As has been pointed out by some leading from 44.2% to 46.1%. | | Ocean Wilsons Holdings Limited | financial commentators, the relentless | | --- | --- | --- | | More details about our results and | As you will recall Ocean Wilsons | increase in outstanding US debt will | | performance can be found on page | announced on 12 June 2023 that it was | probably become a serious problem at | | 2 and also in our Portfolio Manager’s | undertaking a strategic review involving | some point. This, of course, does not | | detailed review of markets and portfolio | its investment in Wilson Sons and that all | only apply to the US. What is particularly | | performance in his Report starting on | strategic options were being considered. | troubling is the fact there seems no | | page 8. | A further announcement on 15 November | determination to take any action on this. | | | 2023 confirmed that a number of | If anything, the opposite is true, with | | Strategy | indicative non-binding offers had been | increasing amounts of debt being issued | | As memories of near-zero inflation | received, but the process remains ongoing. | to bribe voters and special interest groups. | | and interest rates recede, the debate in | Recent results have been very encouraging, | I can only assume this will continue to | | markets has moved to where the natural | with an excellent performance by both | reduce, to some degree, the speed of the | | rate of interest settles, with markets | Wilson Sons and the investment portfolio, | decline in inflation and interest rates. | 3 Hansa Investment Company Limited Annual Report 31 March 2024 It will be interesting to see if Chairman Company Bye-laws Powell starts to make any comments on As you may recall, one of the resolutions this issue. passed at Hansa’s Annual General Meeting on 27 July 2023 was to ensure that all The recent increase in the price of gold shareholders, if so requested, supply is begging the question of whether it is information relating to their tax residency. signalling problems ahead, or just catching We have engaged Computershare to up with global events of both an economic work with Hansa’s management team and political nature. The ominous increase to try to find and engage shareholders in the price of oil together with events in who have not yet responded to requests Ukraine and the Middle East will need to for information. I am pleased to report be monitored carefully. that some progress is being made on this On a more positive note, it is encouraging issue, although much work remains to be ## Our dividend policy to find Europe getting through the recent done. I will keep shareholders updated winter with little stress on gas prices or on progress. ## will be reviewed after its supply. In fact, stocks of gas seem to ## the Ocean Wilsons indicate a lowering of demand next year Shareholder Event due to present storage reserves. As you may recall, we held an event at the ## board have completed Mayfair Hotel in London on 27 September Discount Management 2023. The presentation was live streamed ## their deliberations on The Board is disappointed and frustrated via our website for those who could not ## the strategic options attend in person. that the discount has widened during a period of good investment performance. ## open to the holding in It is our intention to hold a similar Our present policy of not intervening to meeting on 25 September 2024 which ## Wilson Sons Limited. try to reduce the discount will remain will include presentations from myself, in place until we have learned about the William Salomon and Alec Letchfield and outcome of Ocean Wilsons deliberations the opportunity for attendees, whether in on the options open to Wilson Sons. person or online, to ask questions. At that time the Board will carry out a thorough review of its present discount ESG Matters management policies. The Board remains responsible for the Company’s ESG policy. In 2020, the Board Dividends adopted our Manager’s Responsible The Board has decided to continue with its Investing Policy. HCP continues to existing dividend policy of paying quarterly develop and refine its policy in line with interim payments of 0.8p per share, being the evolving nature of ESG’s integration an annual total of 3.2p per share. The within financial services. As previously present plan will continue until such time reported in 2022, the Hanseatic Group, as the dividend is fully covered by net of which our Manager is a part, became revenue. It will then increase in line with signatories to the UN PRI, a UN-supported any improvement in the net revenue of the network of investors works to promote Company. Currently the income generated sustainable investment. I am pleased to by the portfolio is insufficient to meet this be able to report that they have recently dividend commitment, with the shortfall received a positive response to their first being made up by drawing from Hansa’s annual submission. reserves. In principle, the Board does not believe it to be in the Company’s best Key Performance Indicators interests to use capital as a source from (KPIs) which to pay dividends. As I mentioned in The Board has completed its annual my Half-Year Report, our dividend policy review of our investment KPIs and decided will be reviewed after the Ocean Wilsons to maintain our previous investment board have completed their deliberations stance. However, I should like to direct on the strategic options open to the you to page 30 where we have added holding in Wilson Sons Limited. further colour to our decision to review investment performance versus a range of KPIs as opposed to a single benchmark. 4 OVERVIEW Board composition report certain tax information in relation Nadya Wells has chosen not to stand for to their shareholders. In principle, this re-election as a Director of the Company should only affect a very small number at the AGM as a result of additional of our shareholders who are personally professional commitments that she on our share register. Failure by those intends to take on. The Board is starting shareholders to supply the required the process of identifying a director to join information, will cause the Company the Board in Nadya’s place. to submit incomplete returns, with the consequent risk of penalties or censure Following Nadya’s decision to not by the authorities. This proposed update stand for re-election, with effect from to Bye-law 83 is intended to encourage 14 June 2024, the Board has appointed action from those few shareholders who Simona Heidempergher to chair the fail to provide the information required by ## Nomination Committee in addition We appreciate the withholding the payment of dividends to to her continuing role as Chair of the any non-responding shareholders, until ## support of our Remuneration Committee. such time as the required information is ## received, so as to enable the Company to shareholders, for whom I should like to take this opportunity to satisfy its reporting requirements. We have thank Nadya for her excellent and valuable ## we are all constantly also engaged Computershare to work with contributions to the business of the us to try to find and engage shareholders ## Company and the Board over the period seeking to deliver value who have not yet responded to requests since the Company was formed in 2019 ## for information. I am pleased to report over the longer-term. and the whole Board wishes her well in that some progress is being made on this her future roles. issue, although much work remains to be done. I will keep shareholders updated Annual General Meeting (AGM) on progress. and Amendment to Bye-laws | At the end of these Financial Statements, | Please see page 38 for more detail on the | | --- | --- | | you will find a notice regarding our | proposed changes and the more detailed | | upcoming AGM, to be held on 2 August | reasoning behind the proposals. | 2024 in Bermuda. Within the notice you will find several resolutions that are I should like to thank my fellow Board presented annually. Additionally, you will members, as well as Alec Letchfield and note a further resolution to adopt new his team at Hansa Capital Partners, for Bye-laws, which is to effect two changes to their dedicated hard work during this the Company Bye-laws. past year. We appreciate the support of our shareholders, for whom we are all First, in line with developments in market constantly seeking to deliver value over the and industry practice and to enable longer-term. I believe the Company is in a the Company to promote efficient, very good position to do this, whatever the cost effective and modern methods markets and global economies may have of engagement with shareholders, the in store for us in the future. Company is proposing an update to Bye-law 19 which allows the Board to determine how dividends are paid to Members in the most efficient manner. The Board intends to stop paying cash | dividends by cheque and move toward | Jonathan Davie | | --- | --- | | payment of all dividends to Members by | Chairman | | inter-bank transfer and electronic means. | 14 June 2024 | Secondly, as you may recall, one of the resolutions passed at the Company’s AGM on 27 July 2023 was to ensure that all shareholders, if so requested, supply information relating to their tax residency. To assist the existing process, the Company is proposing an update to Bye-law 83, Globally tax authorities and government agencies require financial institutions, including investment companies, to collect and 5 Hansa Investment Company Limited Annual Report 31 March 2024 # Long-term performance ## Ten year company performance statistics | As at 31 March | Shareholders' Funds | Net Asset Value per share - Ordinary and 'A' Ordinary | Annual dividends | Share price (mid) | | Discount/ (Premium) | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Ordinary | 'A' Ordinary | Ordinary | 'A' Ordinary | | 2024 | £454.6m | 378.8p | 3.2p | 210.0p | 204.0p | 44.6% | 46.1% | | 2023 | £367.0m | 305.8p | 3.2p | 174.0p | 170.5p | 43.1% | 44.2% | | 2022 | £382.9m | 319.1p | 3.2p | 198.5p | 193.0p | 37.8% | 39.5% | | 2021 | £367.9m | 306.6p | 3.2p | 198.0p | 198.5p | 35.4% | 35.3% | | 2020 | £276.3m | 230.2p | 3.2p | 130.9p | 135.5p | 43.1% | 41.2% | | 2019 | £337.3m | 281.1p | 3.2p | 195.5p | 195.0p | 30.5% | 30.6% | | 2018 | £323.1m | 269.3p | 3.2p | 198.5p | 195.5p | 26.3% | 27.4% | | 2017 | £307.5m | 256.3p | 3.2p | 173.3p | 169.6p | 32.4% | 33.8% | | 2016 | £255.6m | 213.0p | 3.2p | 146.0p | 145.1p | 31.5% | 31.9% | | 2015 | £273.3m | 227.8p | 3.2p | 172.0p | 165.5p | 24.5% | 27.3% | | 2014 | £287.4m | 239.5p | 3.2p | 175.9p | 175.5p | 26.6% | 26.7% | The table includes information relating to HICL and historic information relating to Hansa Trust. The years ended 2020–2024 notes HICL information. The historic year ends 2014–2019 all relate to Hansa Trust. So that data is consistent and comparable, the historic data in columns "Net Asset Value per Share", "Annual Dividends" and "Share Price (Mid)" have been restated to reflect that, as part of the redomicile of the business of Hansa Trust to HICL in August 2019, HICL issued five times as many shares in each share class of HICL as there were in Hansa Trust. The Company's KPIs can be found further on in the Report. | To 31 March 2024 | 1 year | 3 years | 5 years | 10 years | | --- | --- | --- | --- | --- | | Total Return (%) | | | | | | Ordinary shares | 22.7% | 11.4% | 17.4% | 43.1% | | 'A' non-voting Ordinary shares | 21.8% | 8.0% | 14.4% | 39.7% | | NAV | 25.1% | 27.4% | 42.6% | 79.0% | 6 PORTFOLIO MANAGER’S REVIEW ## Portfolio ## Manager’s ## Review 7 Hansa Investment Company Limited Annual Report 31 March 2024 ## Portfolio Manager’s report ## Key questions ## for the ## year ahead. 8 PORTFOLIO MANAGER’S REVIEW Alec Letchfield Portfolio Manager Market review elevated if structurally higher inflation Similarly, growth levels have confounded Every year stock markets have their was to be avoided. This in turn was seen the bears with economies mostly avoiding notable features, whether it is bull by many as creating a no-win situation, even modest recessions. Most notably, whereby a recession was seen as an almost despite the much higher interest rates, the markets, the occasional crash or bubbles inevitable side effect of the higher rates. US economy has remained remarkably forming. The last financial year was no robust. Buoyed by both a consumer who exception, but what was of particular note The outcome was very different from is still willing to spend and a corporate was the degree to which it confounded this. Most notably, inflation came rattling sector that seems to be largely unaffected broker forecasts. As we sit here reviewing back. In the US, inflation in March 2023 by the higher borrowing costs, growth the various broker predictions for last was at 5.0% and rapidly fell back to 3.1% stayed in the black. Other economies were year, we struggle to remember a year by the end of November, before slightly a little more mixed, with Germany for when commentators got it so wrong on so increasing to 3.5% in March 2024. Europe example dipping into mild recession, but many fronts. saw inflation fall even more dramatically, overall the outcome was much better than from 6.9% to 2.4% during the financial forecast by most. Whether this means Directionally, with very few exceptions, year, with some regional variations such we have avoided recession completely, or almost all commentators expected muted as Germany where the inflation rate took merely delayed it, is up for debate. | markets and many thought further falls | longer to decline. The UK was the laggard | | | --- | --- | --- | | were on the cards. Following on from the | but even here inflation declined to 3.2% by | An area where forecasters were proved | | challenging 2023 financial year, inflation | March 2024 and even beat Rishi Sunak’s | right was interest rates remaining higher | | was forecast to remain sticky and high, | target levels which looked optimistic only | for longer but, even here, it was for the | | necessitating that interest rates remain | a few months back. | wrong reasons. Central bankers were | Chart 1: Actual inflation in 2024 financial year has been much lower than consensus forecasts. 10.0% 8.0% 6.0% CPI 4.0% 2.0% 0.0% US Europe UK March 2023 March 2024 Dec 2023 Forecast from IMF Oct 2022 Report Source: Bloomberg, IMF Chart 2: Major economies have been surprisingly robust and mostly avoided recessions in the last year. 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 12.0% 7.0% 0.0% Annualised Quarterly GDP Growth -1.0% -2.0% US UK Germany Japan China FY Q1 FY Q2 FY Q3 Source: Bloomberg 9 Hansa Investment Company Limited Annual Report 31 March 2024 Chart 3: Interest rates remain high despite inflation falling sharply. 12.0% Inflation is coming down... 10.0% 8.0% 6.0% 4.0% 2.0% But rates are staying high... 0.0% Jan-2021 Apr-2021 Jul-2021 Oct-2021 Jan-2022 Apr-2022 Jul-2022 Oct-2022 Jan-2023 Apr-2023 Jul-2023 Oct-2023 Jan-2024 US CPI European CPI UK CPI US Interest Rate European Interest Rate UK Interest Rate Source: Bloomberg | initially behind the curve as the sharp | emerging markets, Japan and Europe, to | against the US at your own peril! Rising by | | --- | --- | --- | | rise in inflation in 2022 caught them | outperform the US. Partially, this was a | 26.2% in the year, the US market helped | | somewhat by surprise. They then pivoted | reflection of emerging markets being seen | drag the wider stock market up by 20.5% | | to become inflation hawks and shot up | as having been more prudent in their fiscal | by virtue of it now accounting for a lofty | | rates, quicker and higher than many | and monetary policies, both during and | 63.7% of the World Index. Underlying | | anticipated, in an effort to control the | after COVID, and with many exiting the | this performance were five US mega-cap | | inflationary pressure. Although inflation | tightening phase of their monetary cycles | technology names – Microsoft, Alphabet, | | then started falling sharply as price rises, | last year, whereas developed markets were | Amazon, NVIDIA and Meta – with the | | firstly of goods and then of services, | earlier in their cycles. With the valuation | group surging by 80.7% over the year as | | dropped away, central bankers continued | gap between the US and the rest of the | AI fever grabbed investors’ imaginations. | | in their higher for longer rhetoric, while | world also extreme, largely due to the | Outside of these names however the story | | investors started anticipating multiple | preponderance of technology companies | was less good, with the rest of the S&P 500 | rising by just 16.1%. This concentration rate cuts in 2024. Now, when inflation within the US stock market, almost all created a challenging backdrop for many has slightly increased again in the US commentators were underweight in the active managers with most being not only and investors have dramatically reduced US and overweight in the other regions. underweight in the wider US market but their rate cut expectations, the Fed has Yet again the US confounded the bears. In also underweight in the mega-cap five switched to become modestly dovish, still what is almost certainly one of the largest, names, due to their high valuations and for predicting it will soon be cutting rates. if not the largest, money losing trades of risk management reasons with managers At the country level, the forecasters’ track recent times, the desire to forecast the unwilling to have such a large proportion record was little better. The consensus demise of the US was once again proved of their funds invested in such a small coming into the last financial year was for to be wrong. As we always say, you bet number of names. Chart 4: The performance of S&P 500 and MSCI ACWI in the last year has been driven by a few mega-cap tech names. 30.0% 25.0% 20.0% 15.0% 10.0% FY2024 Performance (GBP) 5.0% 0.0% S&P 500 S&P 500 Equal Weighted MSCI ACWI MSCI ACWI Equal Weighted Source: Bloomberg 10 PORTFOLIO MANAGER’S REVIEW Chart 5: Performance has diverged across the emerging markets. 30.0% 25.0% 20.0% 15.0% Driven by the weak Chinese 10.0% performance FY2024 Performance (GBP) 5.0% 0.0% MSCI Emerging Markets MSCI Emerging Markets MSCI Emerging Asia Index MSCI Emerging Latin Index Europe Index America Index Source: Bloomberg Outside the US the picture was mixed. The levels where they offered a real alternative ## Emerging markets | emerging markets could only manage a | to equities, combined with the prospect of | | | --- | --- | --- | | 5.8% rise, but this was largely a reflection | slowing growth, created a better backdrop | could only manage | | of the poor performance of China which | for bonds (albeit one which was better | | ## a 5.8% rise, but faces challenges on a multitude of fronts. for government bonds and shorter dated Not only has it failed to deliver the post- investment grade debt, than for high ## this was largely a COVID rebound many had hoped for, but yield bonds where spreads remained ## China has also become embroiled in a extremely tight). On the other, a number reflection of the poor wider East versus West struggle. It wasn’t of commentators argued we were entering ## performance of China. | all one-way traffic within the emerging | a more protracted bear market in bonds | | --- | --- | | markets, however, with countries such | that would take many years to play out | | as India and Brazil producing excellent | with the spectre that this might become | | returns. Japan was also notably strong. | disorderly due to the high debt taken | | Despite seeing numerous false dawns, | on in many areas of the economy. The | | the current revival appears to be more | year-end outcome of global government | | persistent with numerous measures | bonds falling by 3.9% suggested a rather | | being put into place by the government | poor backdrop, although global high | | and genuine change happening in the | yield bonds rose by 8.7%. The journey, | | corporate sector. | however, was anything but muted | with the asset class seeing wild swings An area where there was little consensus depending on which camp held sway as was the outlook for bonds. On the one the year progressed. hand, some believed yields being back at Chart 6: US Treasuries have been muted overall in the last year but the journey has been volatile. Bloomberg US Long Treasury Total Return Index 5000 Fed rate increases from 0.25% to 0.5% Fed rate increases from 5.25% to 5.5% 4500 Fed rate increases from 1.0% to 1.75% US CPI falls to 3.1% and 4000 Jerome Powell indicates Fed rate increases from 3.25% to 4.0% rate cuts in 2024 Fed rate stays low regardless of 3500 increasing inflation 35.0% 3000 CPI US CPI increases from Fed rate increases from 4.0% to 4.5% drops to 2500 1.4% to 5% over a few Fed rate increases from 1.75% to 2.5% 3.2% months CPI ticks up from 3.1% to 3.4% 2000 Jan-2021 Apr-2021 Jul-2021 Oct-2021 Jan-2022 Apr-2022 Jul-2022 Oct-2022 Jan-2023 Apr-2023 Jul-2023 Oct-2023 Jan-2024 Source: Bloomberg 11 Hansa Investment Company Limited Annual Report 31 March 2024 Chart 7: Private markets lagged in FY 2024 following good relative performance in FY 2023 (in USD). 10.0% Private Equity was more 5.0% robust in FY 2023... 0.0% USD Performance ... although has had more muted -5.0% performance in FY 2024 -10.0% FY 2023 FY 2024 (to end Dec 2023) Private Equity MSCI ACWI Source: Preqin | In contrast to the excitement seen in | the underperformance. However, we do | Understanding what these drivers are and | | --- | --- | --- | | bonds, alternative investments were more | note one or two worrying signs in the form | where the consensus stands on them is | | muted over the past year. Private Equity | of PE firms being built on a model of cheap | key to constructing portfolios. Often there | | (PE), which was one of the bright spots in | debt and a number of managers engaging | are a number of likely outcomes and our | | the 2023 financial year bear market, was | in activities such as continuation funds, | aim is to create all-weather portfolios that | | more muted in the 2024 financial year. | which smells a little like the can being | can thrive in these different scenarios. | | Whilst the final year numbers are yet to | kicked down the road. | | Hence, as we enter the 2025 financial year, fully come through, the returns to the we view the following as being key to the end of December 2023 were a rise of 4.1%. Key questions for the year ahead success of markets in the year ahead: This relative underperformance versus Despite our scepticism on broker public markets is unsurprising with the forecasts, it doesn’t mean we disregard 1. Has the battle against inflation been sector typically lagging public market them entirely. Instead, we believe markets won and are we returning to a low performance by six to nine months. are faced with just a handful of important inflation environment? Hopefully this represents the full extent of drivers and questions at any one time. Chart 8: Performance of equity markets by country, global bonds, commodities and currencies. 30% 20% 10% 40% % Return (GBP) 0% -10% -20% -30% UK | 15.0% | Japan | | Brazil | India | China | | Gold | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Europe | | | | | | Copper | | | | | | | | | | | | | | | | USD/EUR | USD/GBP | USD/BRL | | | | | | | | EMBI Global | | | WTI Cushing | | | | North America Frontier Markets Global Treasury Emerging Markets Global High Yield Developed Markets Global Markets (DM/EM/FM) Bloomberg Commodity Index Global Aggregate Corporate Bond EM Local Currency Government Bonds Source: Bloomberg 12 PORTFOLIO MANAGER’S REVIEW Chart 9: The Fed’s dot plot indicates rate cuts in 2024. Fed policymakers’ projections for the midpoint of US interest rates (%) 7.0 6.0 ******************* ** * * 5.0 ***** * ****** **** * * 4.0 * **** * *** * ** ***** * ** **** 3.0 * * **** * * **** * * ******** * *** *** 2.0 1.0 0.0 2023 2024 2025 2026 Longer Term Source: The Federal Reserve. The dots represent the Fed members’ projections for interest rates. | 2. Is a recession inevitable in the next year? | There is, however, an alternative view | 2. Is a recession inevitable in the next | | --- | --- | --- | | 3. Is it too early to buy bonds? | to which we are becoming increasingly | year? | | 4. Contrasting Asian fortunes – Japan | sympathetic. For much of the post- | One would think that if we are seeing the | | versus China. | COVID period commentators have been | last remnants of COVID passing their | | 5. What are the tail risks in the | trying to overlay conventional economic | way through the system, with inflation | | year ahead? | cycle analysis in what is, in practice, a | beaten and rate cuts on the cards, this | | | completely unique backdrop. This played | would remove the threat of recession. | | 1. Has the battle against inflation | out in the form of revenge buying, as | Unfortunately, the reality is not quite as | | been won and are we returning to a | consumers exited COVID lockdowns with | simple. The challenge with inflation and | | low inflation environment? | supply unable to meet demand. We then | rates is that inflation is backward looking, | | As discussed previously, 2023 was notable | had service sector and wage inflation | whereas rates are instruments that impact | | for the extent to which inflation fell back | | economies in the future. It would appear | as certain sectors were hit by labour from the extremes of 2022. The headline that central bankers would rather err on shortages due to people retiring early or forecasts are, however, still above central the side of caution and ensure inflation is making lifestyle choices favouring their bank targets raising the question as to completely eradicated from the system, quality of life over work. Increasingly, whether it is only a matter of time before before they risk loosening monetary policy however, these factors are proving to be this final inflation is eradicated, or if the and avoid running the risk that they need temporary and we are seeing a return to low hanging fruit has been had and this to pivot by moving too early. No central pre-COVID norms. On the goods side, last element of inflation will prove to be banker wants to be remembered as the demand has fallen away and supply has stickier and ultimately necessitate central one who caused deep, entrenched, long- caught up (and in some places overtaken bankers to remain hawkish for longer. term inflation and would rather keep rates demand). On the service side, which higher for longer even if this catalysed initially looked to be stickier, we are Initially, the consensus was that a recession. | COVID had caused a reset in the world | seeing signs that important components | | | --- | --- | --- | | inflationary order and a number of | of service inflation, such as shelter costs | Our hope, and view, is that the data | | the factors that had caused persistent | and wage inflation, are normalising. | continues to indicate that the inflationary | | deflation over the past 10 years, such | Hence, whilst the jury remains out, we | battle is won and central bankers will | | as globalisation and the power of the | are increasingly optimistic that inflation | stay true to their word of being driven | | corporate sector over the labour force, | is not structurally very high, albeit we | by the data. Encouragingly more recent | | were coming to an end. Hence, whilst the | equally do not see markets moving back | comments from the Federal Reserve | | base effect from the supernormal inflation | to a deflationary backdrop anytime soon. | governors have been saying just this with | | of 2022 meant that inflation appeared | This could prove positive for interest | even more hawkish members, such as | | to be dropping sharply, inflation is now | rates, markets and long duration assets | Governor Waller, sounding more dovish | | structurally higher. | in general. | in their comments. Reinforcing this | 13 Hansa Investment Company Limited Annual Report 31 March 2024 Chart 10: The IMF is forecasting positive real GDP growth for 2024. 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% UK Japan Euro Area US China Source: IMF | position is the prospect of a US election. | then the rally we saw in the latter part of | 4. Contrasting Asian fortunes – Japan | | --- | --- | --- | | Despite claims of independence, central | the year is likely to continue. | versus China | | bankers are increasingly driven by political | | One of the most notable features of the | Regardless of which scenario plays out, pressure, and the pressure on them to past 12 months has been the starkly the rise in yields seen over the past 18 shore up the economy in an election year diverging fortunes of China and Japan. months has seen bonds shift from a will be powerful. Hence, we would argue As highlighted above, China faced position of having deeply unattractive that without a significant policy misstep, a challenges within its important real estate risk/reward characteristics, with zero recession should be avoided, and, at worst, sector, from geopolitical pressure and yields, zero inflation and zero rates any recession will be a soft one. from a sluggish post-COVID rebound, making them extremely vulnerable to any whereas Japan was enjoying the benefits disappointment, to one where they now 3. Is it too early to buy bonds? of government measures encouraging have historically more normal yields with Interlinked with the outlook for interest corporates to become more competitive positive real yields and for the first time in rates and inflation is the outlook for and, to some degree, its economy many years providing a genuine alternative bonds. Depending on which side wins to equities. Whilst we would avoid high benefiting at the expense of China. through, bonds will rise or fall accordingly. yield bonds, given their sensitivity to If inflation does in fact remain persistent, The key question for the year ahead is recession, and with spreads not offering necessitating that rates have to go higher whether to expect more of the same or a sufficient margin of safety, we do think and potentially catalysing a recession in if a contrarian view is the way forward? that short and mid duration bonds can the process, this will likely weigh heavily Typically, we would tend to favour the be bought and, if held to maturity, should on bond prices in 2024. Conversely, if the contrarian view. Japan has a long history provide attractive returns. disinflation we saw in 2023 continues of grabbing failure from the jaws of success bringing forward the prospect of rate cuts, as efforts to change eventually peter Chart 11: Yields have significantly increased over the last two years. 8.0% 6.0% 10.0% 4.0% 2.0% 0.0% -2.0% 2-Yr US Treasury 10-Yr US Treasury 30-Yr US Treasury Global Investment Global High Yield US Tips EM Sovereigns EM Aggregate Grade 31 Mar 2022 31 Mar 2024 Source: Bloomberg 14 PORTFOLIO MANAGER’S REVIEW Chart 12: Japan has outperformed China by over 35% in the last 12 months. 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% 12m GBP Performance to 31 Mar 2024 -15.0% -20.0% MSCI Japan MSCI China Source: Bloomberg | out, often due to political instability and | Why then would we not view the current | starting to evolve. Instead, we remain | | --- | --- | --- | | institutional inertia. This time around | situation in China as being another | content to leave it to our specialist Asian | | though we are feeling more optimistic. | opportunity to buy? Well, it possibly does | managers to invest in China on a tactical | | Politically, Japan is looking unusually | represent a tactical buying opportunity, | basis as they see fit and not to view | | stable at the governmental level (although | but our main concern at this juncture | the current situation as a time to add a | | political manoeuvring is always going | is that we see several significant binary | structural stake to our portfolios. | | on within the Liberal Democratic Party) | risks. Following his coronation as | | | and, even without this stability, there is | president for life, Xi Jinping has shown | 5. What are the tail risks in the year | | cross-party acceptance that Japan has to | his hand on two counts. One, he is an | ahead? | | be more ambitious in its actions if it is to | unashamed communist leader who will | As long-term investors, tail risks always | | compensate for the structural challenges | unilaterally move the goal posts in the | remain at the forefront of our minds, as it | | it faces. With an aging population and the | pursuit of his goals. Whether it is the | is often these that catalyse more extreme | | Chinese powerhouse breathing down its | overnight regulation of the education | pullbacks in stock markets. Worryingly | | neck, Japan increasingly recognises radical | sector or installing government officials | the current environment looks especially | | action is needed and productivity growth | into the big Chinese tech companies, this | vulnerable to such risks. Structural shifts, | | is a necessity if it is not to slide into | changing backdrop makes investing very | as we are seeing at present, often place | | oblivion. This recognition, combined with | difficult. Two, the growing wedge between | considerable stress on those areas of | | Japan’s starting point of low valuations and | the East and the West is creating a | the market that have been built on the | | deeply inefficient balance sheets, creates | potentially significant risk to stock prices. | continuation of the status quo. | | huge opportunities for investors, especially | In particular we would highlight the | | Top of the list is the step change in rates given the herd-like mentality of corporate situation with Taiwan. Whilst one would and bond yields. As we have discussed in Japan – if one does it, others tend to follow hope that the fate of Russia following its the past, a number of sectors built their to avoid losing face. invasion of Ukraine would put Xi off from business models on rates remaining low, forcibly taking control of Taiwan, the Clearly, this change in direction is not gorging themselves on free money and unification of Taiwan and China is Xi’s without risks. Time and again, Japan has boosting their returns in the process. ultimate aspiration and the one thing you Commercial real estate and private equity failed to deliver and even if it is successful, can say about Xi is that he always follows are particularly notable on this front. Both we would expect it to be a slow and rather through on his word. How the West and sectors took on more and more debt and tortuous journey but, even so, we remain the US would react to such a move is open saw their fund sizes ramp up on the back significantly overweight in Japanese to debate, but one would not want to be of the often-illusory high returns they equities at this juncture. a holder of Chinese assets at that point. generated. Already, the speed with which Whilst we do not think China will invade Conversely, China’s history has been one of yields have risen has placed pressure on a Taiwan imminently, it represents a binary substantial structural gains interspersed number of players. Commercial real estate risk that we feel is not well compensated by the occasional missteps which have has been at the forefront of this with the at this point. | typically represented excellent buying | | funding issues coming at a time when | | --- | --- | --- | | opportunities. Whether it was Tiananmen | A couple of years back we had pondered | the demand for real estate has dropped | | Square in 1989, when China faced | whether we should be adding a structural | sharply, due to the trend towards working | | significant sanctions from the developed | position in China, reflecting its growing | from home post-COVID. PE has been | | world, or the aftershocks of the Asian | economic power and importance on the | more immune, but it is possible that a | | crisis in the early 2000s, these in fact | world stage. Ultimately, we decided not to | slower-motion crash may be in motion. | | represented excellent entry points. | as we saw the negatives discussed above | Currently the PE firms have been kicking | 15 Hansa Investment Company Limited Annual Report 31 March 2024 the can down the road, by slowing their likely to start investing more into domestic realisations and avoiding taking any losses bonds on the back of higher yields, as it through the use of structures such as moves away from its Yield Curve Control continuation funds. Ultimately, they are measures, while China is trying to wean gambling markets will normalise and they itself off buying US Treasuries to reduce its will have avoided the need to sell at more dependence on the US market, in light of distressed levels. Time will tell. the sanctions the West put on Russia post its invasion of Ukraine. This slow-motion crash may also be the ## US debt levels have key story for other sectors in the year At this stage we have a watching brief on ahead. The next couple of years will be a the situation and do not anticipate an ## risen significantly in much more active period for the rollover imminent collapse in the US government ## recent years, rising of debt and it will be interesting to see bond market. Partly this reflects the lack which companies and sectors have been of options for global investors, with the ## from $10 trillion in 2000 swimming naked. At this point we’re US bond markets remaining the only real not overly worried about the broader viable option to absorb global liquidity, but ## to $33 trillion in 2023, corporate sector, with companies typically also the US has the luxury of being able to ## at a time when funding managing themselves more prudently post print money to ultimately fund this debt. the financial crisis, with lower levels of Nonetheless, we will be monitoring the ## costs are becoming debt and generally longer maturity profiles, situation closely and we hope that debt but it will be an area to watch closely, is ultimately reduced to lower and more ## more expensive and especially if economies dip into recession. sustainable levels and doesn’t become a ## the demand for US source of global market volatility. Perhaps more worrying is the debt that | bonds is diminishing. | has been accumulated in the government | The other tail risk we watch closely is | | --- | --- | --- | | | sector. Crises rarely strike the same area | geopolitical. For many years we have | | | twice and, whereas corporates were the | had relative geopolitical harmony with | | | main victims in the Global Financial | the US hegemony creating a favourable | | | Crisis (GFC), government debt is looking | backdrop for global stock markets and | | | more vulnerable this time around. | with the US’s influence encouraging the | | | Typically, governments, in particular | adoption of capitalist models based on the | | | developed market governments, are seen | rule of law, with the desire to do business | | | as possessing more prudent finances | being at the heart of the US mantra. | | | and often have the luxury that they are | Increasingly, however, the combination | | | perceived as the safest form of debt and | of the rising power of the East with the | | | hence are able to fund their debt come | unholy undemocratic alliance between | | | whatever. Government debt levels have, | China, Russia and India, and to some | | | however, been rising sharply over recent | extent the US stepping back from its | | | years and dangerously so in many cases. | role as the global policeman, is creating | | | Having spent their way out of the GFC, | a less stable and more volatile global | | | governments then embarked on a second | backdrop. Already we have seen this with | | | round of major spending to dampen the | Russia’s invasion of Ukraine and now the | | | impact of COVID. This pushed borrowing | conflict in the Middle East. Dictators and | | | up to precariously high levels and could | undemocratic actors around the world are | | | result in a disorderly sell-off if confidence | increasingly seeing the model established | | | is lost. We have seen a mini version of | by the East as a real alternative to the one | | | this already with the Truss/Kwarteng | pushed forward by the US and the West | | | debacle in late 2022, resulting in a collapse | for several decades. | in gilt prices on the back of imprudent Unfortunately, we fear future years will policy measures. see geopolitics becoming an even greater | Despite the challenges faced in the UK, | problem and whilst one would have | | --- | --- | | it is in practice a sideshow with the real | hoped that the events in Ukraine and | | danger lying in the US. US debt levels | the Middle East would have solidified | | have risen significantly in recent years, | the world against tyranny, they have in | | rising from $10 trillion in 2000 to $33 | fact polarised the world into competing | | trillion in 2023, at a time when funding | factions. Hence, whilst we have typically | | costs are becoming more expensive and | ignored geopolitical risk in the past, often | | the demand for US bonds is diminishing. | viewing it as an entry point into markets, | | Importantly, both China and Japan, who | we are increasingly having to factor these | | have historically been important marginal | risks into our investment rationales, which | | buyers of US government bonds, are | is particularly challenging given the binary | | increasingly looking elsewhere. Japan is | nature of the outcomes. | 16 PORTFOLIO MANAGER’S REVIEW Rising geopolitical tensions: I’ve made clear with We have to stop being Western countries led Insofar as Canada is They chose to attack President Xi that we naive about the threat by the United States concerned, they have us and undermine seek competition, we face from China. have contained and consistently given space us with a scale of not conflict. We no longer have the suppressed us in an all- to anti-India extremists misinformation and luxury of time. We need round way, which has and violence. disinformation in their Joe Biden on China to act now to get ahead brought unprecedented media that was comical. Indian foreign ministry of this threat. severe challenges to Justin Trudeau on India our development. Mike Rogers, Republican House Armed Services Xi Jinping Committee chairman | Conclusion | This backdrop should create a reasonable | over the year, with investors pushing back | | --- | --- | --- | | Almost invariably the drivers of stock | environment for global stock markets | their forecasts for interest rate cuts as | | market returns can be distilled down | with falling inflation, peak rates and a soft | inflation fell more slowly than some had | | to two or three key factors. The last | landing good for both equities and bonds. | hoped. The UK CPI rose 3.2% over the year. | | financial year was all about inflation, with | Volatility is however likely to remain a | | The portfolio performed very well during few market participants predicting the feature. The inflationary journey will in all the year with the Company’s NAV total extent to which it would pullback which probability be a mixed one and certainly return outperforming the global market, set-off a domino effect of missed growth not linear. As alluded to above, there is with a gain of 25.1%. As well as being targets, interest rates remaining high and the real risk of policy misstep by central ahead of all three KPIs, this return is surprisingly strong equity markets. banks who are not as independent as also strongly ahead of the performance many believe them to be. Similarly, we do of a traditional 60:40 equities and bonds Inflation is also likely to play an important not think we are returning to the backdrop portfolio (up 12.0% over the financial year). role in the year ahead, with the focus now we saw in the 2010s. As we have discussed on whether inflation can be brought back in the past, we view this period as being The Company’s position in Ocean Wilsons to central bank targets, freeing up central something of an anomaly and think it was a strong contributor during the | bankers to start cutting rates and avoiding | unlikely we will return to an environment | financial year, with a return of 64.8%. | | --- | --- | --- | | a hard landing. Previously we had been | dominated by low volatility, deflation | | | more in the camp that the low hanging | | The Company’s net asset value per share | and zero rates any time soon. Hence, rose from 305.0p at the end of March 2023 fruit had been had with this last slice of whilst remaining broadly pro-risk as we to 378.6p at the end of March 2024; with inflation proving more challenging to enter the 2025 financial year, we have 3.2p per share having been paid out in remove, creating scope for disappointment introduced more balance into portfolios dividends during that time. as rates stay higher for longer. More both at the country level, including a recently, however, we had become more meaningful overweight to Japan, but also Core and Thematic Funds sympathetic to this rump inflation also across asset classes with bonds becoming The Core Regional and Thematic silo dropping out as important inflationary a genuine alternative to equities. We returned 19.2% for the financial year. components such as shelter inflation and have also blended styles through owning wages become less problematic. Recent value and growth rather than the rather The Company’s North American holdings data has indicated that inflation has unidirectional portfolios we ran over the were amongst the strongest performers | ticked back up in early 2024 leading to | last cycle. We remain vigilant and think | largely keeping up with the regional index. | | --- | --- | --- | | the possibility of delays in global rate cuts | active management will be even more | Pershing Square Holdings delivered a | | which may well disappoint markets, who | important for the period ahead. | return of 46.4% over the financial year. The | | seemed to think inflation had been beaten. | | manager’s decision to initiate a position | | We are still of the view that inflation is | Portfolio Review and Activity | in Alphabet in early 2023 proved to be an | | on the downward trajectory, even if the | Global equity markets performed very | excellent one with the company strongly | | journey is not as linear as markets had | strongly over the course of the financial | contributing to performance throughout | | hoped it would be, although there is a risk | year, with the MSCI ACWI NR Index (GBP) | the year. A position in Chipotle Mexican | | that central banks will cut too much, too | rising 20.6%. Bonds struggled, with the | Grill also increased significantly in value | | fast due to political pressure. | FTSE UK Gilts All Stocks TR Index flat | following very strong results, which | 17 Hansa Investment Company Limited Annual Report 31 March 2024 18 PORTFOLIO MANAGER’S REVIEW US commercial real estate has been a huge beneficiary of low interest rates. The current higher rate world is now testing many business models. | showed traffic growth accelerating and | which led to a large operating loss in | | --- | --- | | successful new product launches. The | the year ending March 2024. For Alma, | | company continues to grow its restaurant | Mitsubishi Heavy Industries was a strong | | count at 10% a year in North America | performer benefiting from the thematic | | and is now increasing investment in its | drivers of increasing defence expenditure | | international expansion. Findlay Park | and the energy transition. The Japanese | | American gained 28.9%, while Select | government has been investing heavily to | | Equity increased by 23.4%, with Select | improve their defensive capabilities in the | | slightly lagging due to its lower exposure | face of a more assertive China following | | to large cap technology stocks. Beutel | decades of relative calm. Indus Japan | | Goodman US Value did well considering | gained 9.8% over the year, while Simplex | | its value bias with a return over the last | Value Up has been more muted, up 4.5%, | | year of 17.2%. | as its small/mid-cap bias and benchmark | agnostic strategy meant it benefited less In Japan, two new positions, Arcus Japan from the broad market upswell. and Alma Eikoh Japan Large Cap, were | added in November and they have since | Within our emerging and frontier | | --- | --- | | performed well with returns of 15.4% and | market holdings, BlackRock Frontier | | 11.2%, respectively, since purchase. Arcus’ | Investment Trust continued its strong | | largest holding, IHI Corp, performed very | run with a return over the last 12 months | | strongly in February and March 2024 as | of 19.5%, compared to the MSCI FM Index | | investors forecasted the company would | which gained 11.5%. Much of the trust’s | Once again BlackRock Frontier Investment post record operating profits for the financial services exposure performed Trust was a strong contributor to year ahead. The company had suffered well, with Bank of Georgia seeing a performance, returning 19.5% over the last with an issue in its aero engines division significant increase in its share price twelve months. Saudi IT company Elm was that has now largely been contained, following its acquisition of Armenian the trust’s top performer. 19 Hansa Investment Company Limited Annual Report 31 March 2024 20 PORTFOLIO MANAGER’S REVIEW After many years of stagnation, Japan is starting to benefit from a more dynamic corporate sector, driven in part by government-induced change. The question with Japan, as ever, is whether the changes are persistent. | bank Ameriabank, which allowed the | underweight to China, the manager’s | | --- | --- | | company to access the fast-growing | holdings in the semiconductor producers, | | Armenian market. The manager also | TSMC and Samsung Electronics, | | added to its position in Bank Central Asia | performed strongly as they benefited from | | in Indonesia given its relatively stronger | the surge in interest in AI. These were the | | funding franchise, though performance | fund’s largest two holdings accounting for | | has been volatile since. E-commerce | c.18% of the fund at the end of March 2024. | | company Kaspi performed well after | NTAsian Discovery delivered an annual | | announcing net profit numbers that were | return of 7.7%. | up 60% from the previous year, with strong There were some exceptional growth in all areas of the business. In performances in the thematic holdings, the last quarter we sold KLS Corinium with RA Capital International Emerging Markets Equity following poor Healthcare gaining 42.7%. The fund has performance and a rapid decline in assets seen several of its portfolio companies under management and added Redwheel being acquired over the last six months. Next Generation Emerging Markets Icosavax was acquired by AstraZeneca at Equity, which we feel is better placed to slightly above the IPO price, representing succeed going forward. a gain of over 160% over the last year. Schroder Asian Total Return benefited Carmot Therapeutics was acquired by from its significant underweight to China Roche for $2.7bn upfront reflecting a 3.5x RA Capital International Healthcare’s | throughout the year, gaining 8.7% over the | uplift from the company’s last valuation, | +42.7% gain was helped in part by | | --- | --- | --- | | whole year, while the MSCI AC Asia Pacific | with an additional $400m if certain | AstraZeneca’s $1.1 billion acquisition of | | ex Japan Index was up just 5.3% over the | milestones are met. The company has a | respiratory vaccine developer Icosavax. | | last 12 months. Aside from the structural | series of promising treatments for type | Photo courtesy of AstraZeneca. | 21 Hansa Investment Company Limited Annual Report 31 March 2024 | 2 diabetes and obesity, areas which have | market continues to be strong with many | | --- | --- | | seen a surge in investor interest over the | companies producing significantly higher | | last year. Worldwide Healthcare Trust | profits off the back of it. | made a return of 8.3% over 12 months, while BB Biotech was down 6.9% over Diversifying Funds the year. The diversifying holdings are intended to provide an alternative source of Both technology funds had strong years returns, whilst dampening volatility and with Polar Capital Global Technology displaying low beta to the equity market. gaining 26.8% and GAM Star Disruptive It is pleasing that they have contributed Growth increasing 33.7%. The Polar positively over the longer-term, especially fund has leant into AI with a significant when compared to the strongly negative amount of its holdings positioned to returns from bonds in that period. The directly benefit from the increased Diversifying silo returned 5.3% over the investor interest in the area. Its top 10 year, while the FTSE All Stocks Gilts Index holdings include five of the Magnificent was flat. Over three years, the diversifying Seven (NVIDIA, Microsoft, Meta, Alphabet silo has returned 13.0%, far ahead of the and Apple) with Amazon also being a 20.6% loss of the Gilts Index. large position for much of the last year. | | The fund is also significantly overweight | Some of the portfolio’s alternative hedge | | --- | --- | --- | | | semiconductors with Advanced Micro | funds have performed especially strongly. | | | Devices, TSMC and Samsung Electronics | Prana Absolute Return made an | | | all in the portfolio (alongside NVIDIA) | impressive 17.2% over the year. The fund is | | | over the course of the year. GAM is slightly | an equity market neutral long/short fund | | | different with the manager being more | specialising in investing in the financials | | | cautious on AI with a smaller weighting to | and business services sectors. The strategy | | As well as a leaning into AI, Polar Capital | semiconductors and more investments in | focuses on trying to hit singles rather | | Global Technology is significantly | small and mid-cap technology companies. | than home runs, meaning that no one | | overweight semiconductors, with Advanced | Polar Capital Global Insurance has | | particular trade was a big winner for the Micro Devices, TSMC, Samsung Electronics also performed well, gaining 21.3% fund, but more the team got the general and NVIDIA all in its portfolio. over the year. Pricing in the insurance direction of travel of the market correct. Photo courtesy of TSMC. 22 PORTFOLIO MANAGER’S REVIEW | Some long positioning in the insurance | performed well during the period we have | | --- | --- | | industry contributed positively with some | held it, but we took the decision to reduce | | banking positions benefiting from higher | its position size at the end of the year after | | interest rates as well. The two trend- | the manager changed the liquidity terms | | following CTA funds, GAM Systematic | and increased the amount of costs charged | | Core Macro and Schroder GAIA | to investors as fund expenses. MKP | | BlueTrend, also performed strongly over | Opportunity Fund made a small loss over | | the year with returns of 7.6% and 13.6%, | the year, being down 0.2%. | respectively. BlueTrend has benefited The portfolio’s diversifying fixed income from being more trend focused while holdings mostly managed to deliver the GAM strategy, which has a value positive performance over the year, despite model alongside its trend model, has not gilts being flat over that period. Selwood been quite as strong although it has still Liquid Credit Strategy was the strongest, performed well. gaining 14.5%. The fund sells credit default swaps to investors looking for protection Nephila Iron Catastrophe Fund, a against potential defaults of investment specialist strategy investing in catastrophe grade debt. Demand has remained robust bonds and other insurance-related as rising rates have made some investors securities, also continued to perform nervous about whether companies will be well and is now up 24.2% since purchase able to refinance their debt piles. Apollo in May 2023. We believe these strong Total Return also performed well, being returns reflect the extremely strong pricing up 8.4% over the year. BioPharma Credit environment in the space and will have had a poor first six months but was been boosted by the relatively low US stronger in the latter part of the year and hurricane activity during the 2023 season. delivered a return of 1.6% over 12 months. Pricing continues to look attractive for The company had a difficult period in the 2024 season, remaining at similar mid-2023 when a loan to LumiraDx looked levels to the previous year, with only a in danger of default. However, the manager limited amount of new capital entering the took a very active role in the situation and Nephila Iron Catastrophe Fund benefited market. The macro trading fund Hudson forced the company to sell itself to Roche from a strong pricing environment and a Bay rose 5.6% over the year. The fund has relatively low level of US hurricane activity. 23 Hansa Investment Company Limited Annual Report 31 March 2024 | in January 2024, in a deal which will return | the year ahead and we will continue to be | | --- | --- | | the majority of the manager’s invested | prudent about which funds we commit | | capital. The market reacted positively to | to. Such investing requires a long-term | | this development, making up the earlier | mindset that we think sits well with the | | losses and vindicating the protection the | portfolio’s structure. | manager wrote into their loan agreement which allowed them to force the sale. Global Equities (direct) The portfolio rose 14.7% over the past | Private Equity | year, with the biggest contributors | | --- | --- | | As we look to add an element of private | being Interactive Brokers, Subsea 7 | | equity exposure to the portfolio, we made | and Bergman & Beving. The biggest | | four commitments during the financial | detractors were CK Hutchison, Orion and | | year. These were to BPEA EQT Mid- | Dollar General. | Market Growth Partnership, Triton 6, It’s been an exciting journey over the TrueBridge Capital Partners Fund VIII past seven years as we transitioned the and TrueBridge Direct Fund III. These portfolio from UK equities to a global now sit alongside prior commitments equity portfolio. During this time, we’ve to TA XV, Khosla Ventures VIII, GGV achieved an annualized return of 10%. Discovery IV-US and GGV Discovery IV- Asia. All are Limited Partnership vehicles Last year, our portfolio exceeded that will draw down capital over several expectations, achieving a remarkable 20% years as the managers identify investment earnings growth, surpassing our initial opportunities. We feel we are putting projection of 10%. Despite this exceptional together a very high-quality group of funds performance, we think the intrinsic values in the private equity arena that will add should grow by 10% in the next year, in Bergman & Beving, the Swedish-listed differentiated exposures to the portfolio. line with consensus analyst forecasts. group specialising in acquiring and It can take several years to build a private developing niche companies in the equity portfolio and it is important not What’s truly compelling is the potential industrial and construction industries, was a to rush to reach a target allocation and for further performance improvement. significant contributor to performance. We overcommit. While private equity markets Despite the impressive growth, our added to our holding during the year. have been more sedate over the last year, businesses continue to be undervalued, Photo courtesy of Bergman & Beving we anticipate activity picking up during trading at just 70% of our growing 24 PORTFOLIO MANAGER’S REVIEW | intrinsic value. Our portfolio’s current P/E | Despite the stubbornly low valuation | towage division were particularly strong, | | --- | --- | --- | | ratio of 10.9x 2024 earnings may appear | the shares have returned 80% since our | with higher volumes and an increase in | | conservative compared to the market’s | investment, as GCO has produced robust | average revenue per manoeuvre, combined | | 18x, but the quality of our businesses | earnings growth and dividends. We | with the launch of two new tugboats. | | remains underappreciated. Should | estimate the business’s intrinsic value at | In the container terminal division, | | the market recognise this quality and | €54 per share today, with the potential | operational growth has been mainly driven | | revalue our holdings, we’re positioned to | to reach €92 in the next 4-5 years if they | by a surge in volume at the Rio Grande | | compound at even higher rates. | maintain their low teens ROE, offering | terminal (+21.9%). The number of vessel | | | us an enhanced margin of safety at the | turnarounds in the offshore support bases | GCO embodies the qualities we prize current price of €35. were 37.6% higher than the previous year, in our investments: a high-quality thanks to markedly higher demand for the business with sustainable growth, led by In summary, GCO epitomises the type company’s offshore energy-linked services. a management team that’s both aligned of investment opportunity we actively and accomplished. Yet, despite these seek—combining quality, growth, sound The investment portfolio shares many remarkable attributes, GCO remains management and attractive valuation—a characteristics with the portfolio held underappreciated, affording us the recipe for sustainable long-term directly within Hansa Investment opportunity to own it with a significant value creation. Company, with a preference for funds margin of safety. with clearly defined strategies run by Overall, we remain optimistic about the managers with skin in the game. The Let’s delve into the pillars of our future prospects of our portfolio and are portfolio delivered a return of 10.1% for investment thesis: excited about the opportunities that lie the 2023 calendar year, with particularly ahead. We look forward to continuing our strong performance coming from its core Quality: With a rich 160-year history, journey of delivering strong returns for our regional exposures later in the year. The GCO stands as a stalwart in the insurance investors, while carefully managing risk most recent valuation for the investment industry, offering credit insurance and maintaining our focus on long-term portfolio was $310.9m as at the end of alongside traditional homeowner and value creation. December 2023. Performance has been auto coverage. Despite the perceived risk helped by thematic exposures to the in credit insurance, GCO’s disciplined During the year as well as initiating a technology and insurance sectors. Several underwriting practices and the market’s position in Eurowag, we added to our of the technology holdings have benefited oligopolistic nature have ensured positions in Bergman & Beving, Subsea significantly from the surge in investor consistent profitability and high margins. 7, Interactive Brokers, GCO, Glencore interest in AI, while the insurance industry and CTT, reduced our positions in Growth: Over the past two decades, GCO has seen elevated pricing continue into EXOR, CK Hutchison and Arch and has delivered impressive growth, boasting 2024. Some of the largest private equity sold our positions in ViaSat, CVS and a 15.6% CAGR in book value per share, far positions include venture capital funds Dollar General. outpacing global peers. With a promising of funds managed by Stepstone, US outlook for continued growth, fuelled by buyout and growth funds managed by Ocean Wilsons Holdings its excess capital of €1.3 bn for strategic KKR and TA Associates and a financials- As the largest integrated provider of acquisitions, GCO is primed to sustain its focused fund managed by Reverence port and maritime logistics in Brazil, the trajectory of double-digit growth in book Capital. Dividends totalling $9.1m, in four Ocean Wilsons subsidiary, Wilson Sons, value and EPS. tranches, were paid to the parent company has a strong competitive position. It is from the portfolio throughout the year. Management: The Serra family’s majority the leading provider of towage services The board of Ocean Wilsons Holdings has ownership spanning over 75 years in Brazil with the largest and most proposed increasing the annual dividend underscores their prudent stewardship modern fleet, as well as operating major payment to shareholders from 70p to 85p of GCO. Their conservative management container terminals in the north and per share from 14 June 2024. | style, characterised by a long-term | south of the country: Salvador and Rio | | | --- | --- | --- | | horizon and strategic capital allocation, | Grande. The company is benefiting from | Following its 12 June 2023 announcement | | resonates with our investment philosophy. | the continuing recovery in global trade, | regarding the strategic review of the | | Instead of chasing short-term gains, | as well as a rebounding demand for its | OWHL’s investment in Wilson Sons, the | | they prioritise value creation through | offshore energy-linked services, which | board of OWHL updated investors on 15 | | counter-cyclical capital deployment and | should provide the basis for improved | November 2023 to state they have engaged | | astute acquisitions. | performance of the firm’s assets. | Banco BTG Pactual S.A. as an advisor. The | board also confirmed they have received Valuation: Despite its sterling Wilson Sons operational results have a number of indicative non-binding offers. fundamentals, GCO’s valuation remains shown strong growth across the business The board has previously stated that the compelling. While our initial investment in during 2023 and the fourth quarter results review will consider all potential strategic 2020 was made at 9.5x P/E and 0.8x book (released in March 2024) reflected this. options and there can be no certainty as to value, GCO’s current trading multiples of There was strong revenue growth over its outcome. We will report on any further 7x P/E and 0.8x book represent an even the course of the year (10.6% higher than developments as they are made known. | wider discount to historical and peer | the prior year), driven by excellent towage | | | --- | --- | --- | | averages. The valuation remaining low has | results, operational growth in container | Alec Letchfield | | worked to our advantage as we were able | terminals and a strong recovery in offshore | Chief Investment Officer | | to add to our holding at attractive prices. | energy-linked services. Results in the | March 2024 | 25 Hansa Investment Company Limited Annual Report 31 March 2024 A New Panamax container vessel enters the port of Santos, supported by Wilson Sons tugboats. New Panamax ships can carry up to 13,000 twenty-foot cargo units and weigh up to 120,000 tonnes. 26 PORTFOLIO MANAGER'S REVIEW # The portfolio As at 31 March 2024 | Investments | Fair value £000 | % of net assets | | --- | --- | --- | | **Core Regional Funds / Thematic Assets** | | | | Findlay Park American Fund | 31,578 | 6.9 | | iShares Core S&P 500 UCITS EFT | 27,202 | 6.0 | | Select Equity Offshore Ltd | 22,690 | 5.0 | | Blackrock European Hedge | 17,387 | 3.8 | | Pershing Square Holdings Ltd | 13,482 | 3.0 | | Schroder ISF Asian Total Return | 11,516 | 2.5 | | Polar Capital Global Technology | 10,056 | 2.2 | | BA Beutel Goodman US Value Fund | 9,338 | 2.1 | | iShares Core MSCI Europe UCITS ETF | 9,331 | 2.1 | | Schroder ISF Global Recovery | 8,817 | 1.9 | | Polar Capital Insurance Fund | 8,349 | 1.9 | | Indus Japan Long-Only Fund | 7,878 | 1.7 | | Armistice Capital Offshore Fund Ltd | 6,592 | 1.5 | | Simplex Value UP Master Fund | 5,735 | 1.3 | | GAM Star Fund PLC – Disruptive Growth | 5,502 | 1.2 | | Redwheel Next Generation | 4,855 | 1.0 | | iShares Core EM IMI UCITS ETF | 4,408 | 0.9 | | NTAsian Discovery Fund | 4,385 | 1.0 | | BlackRock Frontiers Investment Trust PLC | 4,051 | 0.9 | | RA Capital International Healthcare Fund | 3,769 | 0.8 | | Impax Environmental Markets Fund | 3,662 | 0.8 | | Ishares MSCI World Energy Sector UCITS ETF | 3,250 | 0.7 | | Ishares MSCI Global Markets & Mining Prods ETF | 1,751 | 0.4 | | Arcus Japan | 1,731 | 0.4 | | BB Biotech AG | 1,699 | 0.4 | | Alma Capital | 1,668 | 0.4 | | | **230,682** | **50.8** | ## Strategic | Ocean Wilsons Holdings Limited | 130,004 | 28.6 | | --- | --- | --- | | Wilson Sons | 96,263 | 21.2 | | Ocean Wilsons (Investments) Limited | 33,741 | 7.4 | | | **130,004** | **28.6** | Continued > 27 Hansa Investment Company Limited Annual Report 31 March 2024 | Investments | Fair value £000 | % of net assets | | --- | --- | --- | | **Diversifying** | | | | Global Event Partners Ltd | 8,269 | 1.8 | | DV4 Ltd^{1} | 7,697 | 1.7 | | Hudson Bay International Fund Ltd | 4,061 | 0.9 | | Selwood AM - Liquid Credit Strategy | 3,889 | 0.9 | | GAM Systematic Core Macro (Cayman) Fund | 3,361 | 0.6 | | MKP Opportunity Offshore Ltd | 3,328 | 0.7 | | Schroder GAIA BlueTrend | 3,277 | 0.7 | | Nephila Iron Catastrophe Fund Ltd | 3,141 | 0.7 | | Apollo Total Return Fund | 2,618 | 0.6 | | Keynes Systematic Absolute Return Fund | 2,542 | 0.6 | | Prana Absolute Return Fund | 2,178 | 0.5 | | BH Absolute Return Government Bond | 1,820 | 0.4 | | Vanguard US Govt Bond Index Fund | 1,492 | 0.3 | | BioPharma Credit PLC | 1,259 | 0.3 | | Lazard Convertible Global | 717 | 0.2 | | | **49,649** | **10.9** | #### Global Equities (direct) | Interactive Brokers Group Inc | 6,365 | 1.4 | | --- | --- | --- | | Grupo Catalana Occidente SA | 4,691 | 1.0 | | Subsea 7 | 4,598 | 1.0 | | Orion Engineered Carbons SA | 3,902 | 0.9 | | Arch Capital Group Ltd | 3,896 | 0.9 | | Exor NV | 3,302 | 0.7 | | Bergman & Beving | 3,104 | 0.7 | | Coats Group PLC | 2,778 | 0.6 | | Glencore PLC | 1,719 | 0.4 | | CK Hutchison | 1,630 | 0.4 | | CTT-Correios de Portugal | 1,553 | 0.3 | | Eurowag | 938 | 0.2 | | | **38,476** | **8.5** | #### Private Assets | Khosla Ventures VIII | 135 | 0.0 | | --- | --- | --- | | BPEA Equity Mid-Market Growth Partnership | 99 | 0.0 | | Truebridge Direct VIII | 80 | 0.0 | | Truebridge Capital VIII | 28 | 0.0 | | | **342** | **0.0** | | **Total investments** | **449,153** | **98.8** | | --- | --- | --- | | Net current liabilities | (421) | (0.1) | | Net current assets | 5,815 | 1.3 | | **Net assets** | **454,547** | **100.0** | $^{1}$ Hansa Investment Company Ltd owns 9,352,770 shares in Ocean Wilsons Holdings Limited (OWHL). In order to better reflect Hansa Investment Company's exposure to different market silos, the two subsidiaries of OWHL, Wilson Sons and Ocean Wilsons (Investments) Limited (OWIL), are shown separately above. The fair value of the Company's holding in OWHL has been apportioned across the two subsidiaries in the ratio of the latest reported NAV of OWIL, that being the NAV of OWIL shown per the 31 December 2023 OWHL Financial Statements, to the market value of OWHL's holding in Wilson Sons, that being the bid share price of Wilson Sons multiplied by the number of shares held by OWHL at 31 March 2024. $^{2}$ The holdings within the private assets silo, as well as DV4 Ltd are unlisted Private Equity holdings. As such, their value is estimated as a Level 3 Asset in note 19. All other valuations are either derived from information supplied by listed sources, or from pricing information supplied by third party fund managers. 28 STRATEGIC REVIEW ## Strategic ## Review 2929 Hansa Investment Company Limited Annual Report 31 March 2024 ## Investment objective, strategy and performance Investment objective policy The Company objective is to grow the net assets of the Company over the medium to long-term by investing in a diversified and multi-strategy portfolio. The Company seeks to achieve its investment objective by investing in third-party funds, global equities and other international financial securities. The Company may invest in quoted and unquoted securities. The Company currently holds a strategic position in the share capital of OWHL. The Company will not make further investments into OWHL. The Company has no set maximum or minimum exposures to any asset class, geography or sector and will seek to achieve an appropriate spread of risk by investing in a diversified global portfolio of securities and other assets. Investment strategy The Portfolio Manager, engaged by and acting on behalf of the Company, seeks to build a multi-strategy portfolio by selecting investments across four key investment categories, in addition to the strategic investment in OWHL: • Core / Thematic – investments, typically through third-party funds, selected by the Portfolio Manager to provide appropriate regional and thematic exposures. • Thematic – investments, typically through third-party funds, that reflect key investment themes the Portfolio Manager believes will generate excess returns. • Diversifying Assets – investments, typically through third-party funds and directly, that create asset diversification within the portfolio. • Global Equities (direct) – a diversified portfolio of global equities identified by the Portfolio Manager as having long-term growth potential. Although the Company has no set maximum or minimum exposures to any asset class, geography or sector, the Board establishes set guidelines which the Portfolio Manager adheres to. These can be adjusted by the Board. While the proportion of the portfolio represented by each of these categories will vary over time, the Board establishes parameters for the Portfolio Manager, based on its view of the global investment environment. The Board has set the following guidelines for each category as a percentage of the portfolio (including the strategic investment in OWHL): • Core / Thematic: 0-75% • Diversifying Assets: 0-40% • Global Equities: 0-40% • Private Assets: 0-15% The Portfolio Manager has a strong focus on identifying investments with excellent fundamentals, taking a long-term approach to investing, good alignment and not seeking to replicate a benchmark. These investments range from those sectors benefiting from structurally higher growth, such as technology, to assets which the Company believes stand on unwarranted discounts to their intrinsic value. During the year, further commitments to limited partnerships have been made as part of the build-out of a private equity programme. This follows the prior year’s agreement between the Portfolio Manager and the Board to add an allocation to Private Equity and Venture Capital to the Portfolio. This is expected to be a multi-year programme, which will develop access to investments that are not available in public markets. The long-term nature of private equity aligns well with the long-term investment horizon of the Company, and the Board believes this new exposure will be seen as very attractive by existing and potential future shareholders. Borrowing limits The Board considers whether returns may be enhanced if the Company introduces leverage at appropriate times. The Company has an unsecured lending facility through its Custodian, Banque Lombard Odier & Cie SA (“Lombard Odier”), in the amount of £30m, subject to there being sufficient value and diversity within the portfolio to meet the lender’s borrowing requirements. The Portfolio Manager is able to utilise this facility as required up to the upper limit available. No amounts have been drawn from this facility during the year. Investment monitoring and key performance indicators (KPIs) We recognise that measuring the performance of portfolios is essential to both determining if they are meeting their return targets and the risks taken in achieving these returns. However, we also passionately believe that the benchmarks and/or comparators against which portfolios are measured should be appropriate for achieving the end objectives, with poorly chosen benchmarks often encouraging short-term actions which more often than not are damaging to meeting the longer-term aspirations. 30 STRATEGIC REVIEW It is for this reason that we believe it right to adopt a handful of KPIs rather than a single benchmark. As long-term multi-asset class investors we are seeking to both preserve and grow the real spending power of our capital over time through the dynamic selection of different countries, assets and sectors. No one benchmark captures this approach and, indeed, the adoption of a single benchmark may result in the fund deviating from its longer-term goals in the pursuit of short-term returns. Instead, the Board believes that considering the portfolio performance against the following KPIs will provide a more informed understanding of the performance of the portfolio and if it is meeting its longer-term objectives: | Objective | KPI | Indices used | | --- | --- | --- | | Safe return | UK Government bonds | FTSE Gilts All Stocks TR Index | | Growing the real spending power of money through time | Achieve returns that are higher than inflation | UK CPI | | Long-term capital growth | Equity market performance | MSCI All Country World Index (both market cap weighted and equally weighted to remove the distorting effect of the Magnificent 7) | The Board regularly, and at least quarterly, reviews the returns and the performance of the Company with the Portfolio Manager, including an analysis using the KPIs. Additionally, whilst not specifically a KPI, the cost of managing the Company is monitored against the NAV (the ratio between costs and the NAV is also known as the 'ongoing charges percentage per annum ratio'); and the discount/premium the shares sell at in relation to the NAV are likewise monitored. The Board of Directors monitors the returns made in absolute and relative terms against the KPIs established. The comparisons are made over 1, 3, 5 and 10 year time horizons. ### i) Shareholders and company – total returns | To 31 March 2024 | 1 year | 3 years | 5 years | 10 years | | --- | --- | --- | --- | --- | | **Share price total return** | | | | | | Ordinary shares | 22.7% | 11.4% | 17.4% | 43.3% | | 'A' non voting Ordinary shares | 21.8% | 8.0% | 14.4% | 39.7% | | Portfolio NAV | 25.1% | 27.4% | 42.6% | 79.0% | ### ii) Discount/premium A comparison is made between the (discount)/premium of the Company's two classes of shares and of the AIC average. | To 31 March 2024 | 1 year average | 3 years average | 5 years average | 10 years average | | --- | --- | --- | --- | --- | | **Share price total return** | | | | | | Ordinary shares | (41.4%) | (38.4%) | (36.9%) | (31.9%) | | 'A' non voting Ordinary shares | (42.9%) | (39.4%) | (37.3%) | (33.2%) | | AIC (%) | (12.3%) | (8.7%) | (7.6%) | (5.4%) | Note: AIC only produces an AIC average for one year. Whilst there are investment trusts that exhibit one or more similarities to the Company, the Board does not consider the Company to have any direct peers. 31 Hansa Investment Company Limited Annual Report 31 March 2024 # **iii) Key performance indicators** The following are the KPIs the Board uses to assess the returns of elements of the portfolio and of the Company as a whole. | To 31 March 2024 | 1 year | 3 years | 5 years | 10 years | | --- | --- | --- | --- | --- | | NAV Total Return | 25.1% | 27.4% | 42.6% | 79.0% | | NAV Total Return (Ex OWHL) | 14.0% | 10.6% | 37.0% | 71.8% | | FTSE UK Gilts All Stocks TR Index | 0.0% | -20.6% | -17.5% | 7.8% | | UK CPI Inflation | 3.2% | 21.6% | 24.3% | 33.4% | | MSCI ACWI NR (GBP) | 20.6% | 33.8% | 73.9% | 203.3% | # **iv) Expense ratios** | To 31 March 2024 | 1 year | 3 years | 5 years | 10 years | | --- | --- | --- | --- | --- | | Ongoing annual charges (%) | 1.0 | 1.1 | 1.1 | 1.1 | To comply with the Packaged Retail and Insurance-based Investment Products Regulation (PRIIP), the Company has issued a PRIIPs Key Information Document (KID) for each of its two share classes. In the PRIIP, KID regulations are very prescriptive as to how costs are calculated and presented. In particular, in addition to the costs of the Company itself noted above, the PRIIP calculation also incorporates the costs of the directly held fund investment vehicles themselves, but not those for directly held equities. Based upon the financial results for the year to 31 March 2023, the PRIIP KID cost ratio is 1.78% per annum. 32 STRATEGIC REVIEW # Shareholder profile ## Capital structure The Company has 40,000,000 Ordinary shares of 1p (1/3 of the total capital) and 80,000,000 'A' non-voting Ordinary shares of 1p (2/3 of the total capital) each in issue. The Ordinary shareholders are entitled to one vote per Ordinary share held. The 'A' non-voting Ordinary shares do not entitle the holders to vote or receive notice of meetings, but in all other respects they have the same rights as the Company's Ordinary shares. See also Note 13 in the Notes to the Financial Statements. ## Shareholder profile The Company's shares owned at 31 March 2024 are as follows: | | Ordinary shares | | 'A' non-voting ordinary shares | | | --- | --- | --- | --- | --- | | Institutional and wealth managers | 16,326,624 | 40.82% | 72,605,306 | 90.76% | | Directors | 11,220,745 | 28.05% | 3,817,123 | 4.77% | | Private individuals | 12,423,589 | 31.06% | 3,348,753 | 4.19% | | Other | 29,042 | 0.07% | 228,818 | 0.29% | | | **40,000,000** | | **80,000,000** | | ## Substantial shareholders As at 31 March 2024, the Directors were aware of the following interests in the Ordinary shares of the Company, which exceeded 3% of the voting issued share capital of that class. | | No. of voting shares | % of voting shares | | --- | --- | --- | | Nomolas Ltd | 10,347,125 | 25.87% | | Victualia Limited Partnership | 10,347,125 | 25.87% | | Sky Hill Limited | 1,730,000 | 4.33% | These holdings are correct as of 31 March 2024 and have not changed as at the signing date of these Financial Statements. Hansa Investment Company traces its origins back to 1912 when the Alto Paraná Development Company was launched to develop forestry in Brazil. Having become an investment trust company in the late-1940s, the Company became closely associated with the Salomon Family, initially through Sir Walter Salomon, whose family trusts became substantial shareholders. The late-1950s also saw the acquisition of a significant shareholding of Ocean Wilsons Holdings Limited through the issuance of the 'A' non-voting Ordinary shares by the Company's predecessor, Hansa Trust. Over the following decades, the Salomon family helped to build the publicly-owned and independently run investment company we know today, with its focus on delivering reliable long-term asset growth for shareholders. The wider Salomon family remain significant investors in the Company. William Salomon, Sir Walter's son, a director of HICL and Senior Partner of the Company's Portfolio Manager, is interested in 10,347,125 of the shares held by Victualia Limited Partnership, representing 25.9% of the voting share capital. In addition, William Salomon has further interests in the Company's shares; the total interest is detailed in the Directors' Interests section. Other members of the wider Salomon family, who are also descendants of Sir Walter, are interested in a further 12m shares in the Company. ## Restrictions associated within the share classes The giving of powers to issue or buy back the Company's shares requires an appropriate resolution to be passed by shareholders. Proposals for the renewal of the Board's powers to buy back shares are set out in the Notice of the Annual General Meeting. There are: no restrictions concerning the transfer of securities in the Company; no agreements between holders of securities regarding their transfer known to the Company; and no agreements between the Company and its Directors concerning compensation for loss of office. Notwithstanding the foregoing, the Company can require any holder of the Ordinary voting shares to transfer some or all of its shares (or otherwise refuse to register any transfer of shares) to avoid the Company, if the Company were a company which was resident for tax purposes in the UK, being regarded as a 'close company' as defined in s.414 of the UK Income and Corporation Taxes Act 1988, to another person whose holding of such shares, in the sole and conclusive determination of the Board, would not cause the Company to be a close company. Additionally, the Company's Bye-Laws provide for the voting rights of Ordinary shares to be automatically reallocated to other shareholders to prevent the Company becoming a close company. 33 Hansa Investment Company Limited Annual Report 31 March 2024 As at 14 June 2024, the date of signing of the Annual Financial Statements, there have been no disclosures to the Company of changes of interests under DTR 5. ## Board and management shareholdings ### Directors' Interests The interests of Directors and their connected parties in the Company at 31 March 2024 are shown below: | | Ordinary shares of 1p each | | 'A' non-voting ordinary shares of 1p each | | Nature of interest | | --- | --- | --- | --- | --- | --- | | W Salomon | 11,169,345 | 27.92% | 3,587,123 | 4.48% | Beneficial | | J Davie | 45,000 | 0.11% | 230,000 | 0.29% | Beneficial | | S Heidemperger | 6,400 | 0.02% | – | – | Beneficial | | **Total** | **11,220,745** | **28.05%** | **3,817,123** | **4.77%** | | As at 14 June 2024, the date of signing the Annual Financial Statements, there were no changes to report to the Directors' holdings. William Salomon is the senior partner of Hansa Capital Partners LLP. Fees payable to Hansa Capital Partners LLP amounted to £3,065,129 (including Portfolio Management and Additional Administrative Services Provider (AASP) functions). The fees outstanding at the year end amounted to £285,000. During the year, no rights to subscribe for the shares of the Company were granted to, or exercised by Directors, their spouses or infant children. ### Portfolio Manager's interests As at 14 June 2024, the date of signing of this Annual Report, the management and staff of the wider Portfolio Manager's group (Hanseatic Asset Management LBG, an Investment Manager and AIFM located and regulated in Guernsey), excluding the holding of William Salomon, shown above, were interested in circa 10.3m shares in the Company – a mixture of Ordinary and 'A' non-voting Ordinary shares. 34 STRATEGIC REVIEW ## Stakeholder engagement Requirements of Section 172 UK Companies Act As required by the AIC Code, the Board describes below how it has met the requirements of Section 172 of the UK Companies Act, as applicable to the Company. This includes an explanation of how the Board has sought to promote the Company for the benefit of its members, how it has taken into account the likely long-term consequences of decisions and how it fosters relationships with stakeholders. The Company is an investment company with an appointed Portfolio Manager. As a result, it has no direct employees or customers. The Board has identified the Company’s shareholders, its Portfolio Manager (as well as the Additional Administrative Services Provider, “AASP”), its other key service providers as its key stakeholders. STAKEHOLDER INTERACTION Shareholders The shareholder base is a mixture of private investors, wealth managers and asset managers across both classes of the Company’s shares. The Board monitors changes in the shareholder base at its Board meetings. The Company communicates through the publication of Annual and Half-Year Financial Statements, through detailed quarterly and monthly factsheets, as well as through the Company’s website. The Company also holds periodic shareholder presentations incorporating presentations by the Board and key service providers to keep shareholders informed. The Board seeks to understand the opinions of a wide variety of shareholders. The Company maintains a dedicated email address for shareholders to contact the Board (HICLenquiry@hansacap.com) and shareholder correspondence and feedback is a regular item of discussion at Board meetings. The Company continues to meet shareholders and other interested parties facilitated by its broker, as well as through direct contact. The Portfolio Manager also runs an outreach programme in conjunction with an investor relations specialist. Investors are also kept informed through paid-for editorial pieces and discussion with media organisations. The Board uses online shareholder presentations to enable shareholders to meet with the Board and Portfolio Manager. Whilst the Board believes there is still a place for face-to-face shareholder updates, the strong attendance at the online events encourages the Board that these online events will remain a feature of the Company’s shareholder outreach. The next shareholder event is planned for 25 September 2024 as a hybrid online and physical meeting. Portfolio Manager The Board’s main working relationship is with the staff of HCP as the Portfolio Manager and the AASP. and AASP HCP is responsible for the Company’s portfolio management (including asset allocation, stock and sector selection in accordance with guidelines established by the Board). It is also responsible for administrative and operational functions including day-to-day oversight of the other key service providers (Administrators, Custodians, Registrar and Company Secretarial). Successful management of shareholders’ assets by the Portfolio Manager is crucial to enable the Company to deliver its investment strategy and meet its objective. The AASP also assists with the preparation of the Annual and Half-Year Financial Statements as well as Factsheets and website updates. The Board works closely with the AASP to approve disclosures made via these publications. Other key service Key service providers are the Company’s Administrator (Apex Fund Administration Services (UK) Ltd), providers Custodian (Lombard Odier) and Registrar (Computershare Investor Services (Bermuda) Limited). Whilst the Board looks to the Portfolio Manager and the AASP to keep a day-to-day oversight of these providers, they are contracted directly to the Company. As such, the Board retains ultimate responsibility for their roles. The AASP reports regularly on operational matters. The Board seeks to visit each provider at least annually for a face-to-face meeting to discuss service levels, operations and future developments. 35 Hansa Investment Company Limited Annual Report 31 March 2024 Main areas of engagement KEY AREA TOPIC ENGAGEMENT AND OUTCOMES Investment strategy The Investment Strategy incorporates The Board has engaged with the Portfolio Manager and and ESG matters appropriate ESG considerations. For clarity, encouraged them to develop a responsible investment the Company does not purport to be a “Green” policy. The Board notes that the Hanseatic Group, of fund. However, through its ESG disclosures and which the Portfolio Manager is a member, is a signatory reporting the actions of its Portfolio Manager, to the UNPRI. The Board wholeheartedly supports this it seeks to give clarity to the processes around policy. See page 45 for further information. assessing the Environmental, Social and/or Governance aspects to its investment decisions and ongoing monitoring. Discount It is a great frustration to the Board that the The Board is mindful of, and regularly considers, the management and discount has not tightened over the past share price compared to the NAV and related discount. share buybacks year. It is also noted that there has been The Board is of the view that providing transparency general widening of investment trust spreads and clarity to investors, as well as promoting demand due to market volatility and declining retail for the Company’s shares, should create a positive participation in the markets. impact on the discount for the medium to longer-term. To this end, the Board has redeveloped the Company’s website, its Annual and Half-Year Financial Statements and its factsheets and quarterly reviews. The Board continues to develop the Company’s branding and communications strategy with shareholders and potential shareholders alike. The aim is to enhance and broaden the understanding of the Company, with the ultimate objective of widening the shareholder base and deepening the market for shares. The primary objective of the Company is to generate a good economic return over the medium to long- term and create a compelling investment proposition for private investors, enabling them to gain access to investments not readily available. This in due course should increase demand for the Company’s shares. Each investment company must consider its own particular circumstances and objectives in assessing what is in the best interests at any particular point in time for the company and its shareholders. Your Board continues to focus on the construction of a portfolio to create long-term value and it is in the light of this that it decided to build an allocation to Private Equity. The Board has considered a share buy-back policy but does not consider this would have a significant effect on the discount, at which the shares trade. In the opinion of the Board: • it reduces the number of shares outstanding and therefore the liquidity of the shares in the marketplace; reduced liquidity may, in fact, cause a rise in the discount; • it means a liquid investment portfolio needs to be maintained, compromising the ability to have a portfolio of special situations; the maintenance of the long-term investment policy and its portfolio takes precedence over the short-term discount policy; and • the holding in OWHL would represent an even greater percentage of the portfolio and buying back shares would raise the relative exposure to Brazil, which the Board does not wish to do, giving preference to the return generation potential and benefits of diversification generated by the investment portfolio. 36 STRATEGIC REVIEW Capital structure The Company has two separate share classes, The current position of Ordinary and ‘A’ Ordinary share both of which are traded on the LSE. The classes remains unchanged as the majority of Ordinary Ordinary shareholders are entitled to one vote shareholders have informed the Board they do not wish per Ordinary share held. The ‘A’ non-voting to alter the present structure at the present time. Ordinary shares do not entitle the holders to vote or receive notice of meetings, but in all other respects they have the same rights as the Company’s Ordinary shares. Consideration has been given to whether the two share classes could be merged in some way. Dividends The Board continues to support maintaining The portfolio held by the Company is currently the dividend at 3.2p until it is fully covered by constructed for long-term capital appreciation rather net income. At that time it plans to increase it than income generation. As a result, the income in line with any increase in the net income of generated by the portfolio is insufficient to meet this the Company. dividend commitment and the shortfall is made up from the Company’s reserves. In principle, your Board does not believe it to be in the Company’s best interests to use capital as a source from which to pay dividends. Maintaining levels The Company does not have direct employees. The independent members of the Board annually of service from Rather, its operations are conducted by several review the performance of the Portfolio Manager. service providers key service providers. The Company enters into Additionally, the day-to-day performance of other service-level agreements with each provider. key service providers (Administrator, Custodian and The Board oversees these services to ensure Registrar) are monitored by the AASP on behalf of the best practice is followed and that the Company Board. In addition, there is an annual review of service is receiving a comprehensive service and value providers' annual Controls Audit Reports. Members of for money. the Board also visit each key service provider annually to review performance and understand any changes in their businesses. Notice period for general meetings The Company’s Bye-Laws permit that the Company’s general meetings (other than AGMs) may be held on 14 days’ notice. Annual General Meeting The Company’s Notice of Annual General Meeting is included in this Report. Authority to repurchase ‘A’ non-voting Ordinary shares A resolution will be proposed at the forthcoming AGM, seeking shareholder approval for the renewal of the authority for the Company to repurchase its own ‘A’ non-voting Ordinary shares. The Board believes the ability of the Company to repurchase its own ‘A’ non-voting Ordinary shares in the market could potentially benefit all equity shareholders of the Company in the long-term. The Company’s Bye-laws are drafted in such a way that the Company may from time to time purchase and cancel its own shares. However, the Company requires that shareholders’ approval to repurchase shares be sought. At the AGM the Company will therefore seek the authority to purchase up to 11,992,000 ‘A’ non-voting Ordinary shares (representing 14.99% of the Company’s issued ‘A’ non- voting Ordinary share capital, the maximum permitted under the FCA Listing Rules), at a price not less than 1p per share (the nominal value of each share) and not more than 5% above the average of the middle-market quotations for the five business days preceding the day of purchase or, where a series of transactions have taken place the higher of the last independent trade and current highest independent bid on the trading venue where the purchase(s) will be carried out. The authority being sought, the full text of which can be found in the Notice of Meeting, will last until the date of the next AGM. The Company is seeking authority to use its realised capital reserve to allow repurchase of shares in the market. The decision as to whether the Company repurchases any shares will be at the absolute discretion of the Board. Any shares purchased will be cancelled. The Directors consider that all the resolutions to be proposed at the forthcoming AGM, as set out in the Notice of AGM, are in the best interests of shareholders as a whole and unanimously recommend all shareholders to vote in favour. Guidance on how to vote at the AGM can be found in the notes to the Notice of AGM. If the Board considers a significant proportion of votes have been cast against a resolution at the AGM, the Company will explain, when announcing the results of voting, what action it intends to take to understand the reasons behind the results of the vote. 37 Hansa Investment Company Limited Annual Report 31 March 2024 Bye-laws shareholders. Where the Company’s shareholders fail to provide The Company seeks shareholder approval to amend its Bye- the required information (“Non-Responders”), the Company’s laws. The resolution will be proposed as a special resolution. The reporting is deficient, and the Company may be subject to proposed amendments are being introduced in the Bye-laws negative intervention from the authorities in Bermuda, including primarily to: finding itself subject to financial penalties. There are a small number of shareholders who do not respond to requests for • provide the Company with a more modern, efficient and cost- information. In order to resolve this, the Company’s Bye-laws were effective approach to paying dividends to shareholders; and updated in 2023 to put in place a mechanism (under Bye-law 83) to obtain the required information or remove the Non-Responders • encourage action from the very small number of shareholders from the Company’s register of members. who fail to provide information required by the Company to enable it to meet its reporting obligations under the Foreign As a further effort by the Company to encourage Non-Responders Account Tax Compliance Act (FATCA), the Common Reporting to provide the required information, the Company has proposed Standard (CRS) or any similar law or regulation. updates to Bye-law 83.3 to allow the Company to withhold payment of dividends to Non-Responders until they provide the In more detail, the key proposed changes are as follows: required FATCA/CRS information to the Company. To the extent a) Method of Payment of Dividends – Bye-law 19 exercised, this withholding sanction will only be implemented after efforts by the Company to first obtain the necessary Bye-law 19 has been updated to provide the Company with information from the Non-Responder. discretion to prescribe the manner in which dividends and other monies are paid. Currently the Company pays dividends by Please also see set out in the AGM Notice on page 82 a cheque or electronic payment. The use of cheques has reduced summary of the two proposed amendments to the Bye-laws. in recent years, while development of new payment methods (that offer greater efficiency, improved security of payments and reduced costs) has steadily increased. There has therefore been a move by companies across the market to re-evaluate their dividend payment processes and allow their Boards to determine the most efficient manner to pay dividends to shareholders, including that it is in the best interests of members for payments to be made exclusively by inter-bank transfer or other electronic means approved by the Board. The updates to Bye-law 19 will provide the Company with the same discretions, and the ability to apply different methods of payments or different combinations of methods to different shareholders or groups of shareholders. Where payment of the dividend or other monies cannot be made by the Company to a Member in the method prescribed by the Board using the information that member has provided, or the member has not provided the Company with the required information, account or address details necessary in order for the Company to make the payment, a new Bye-law 19.3 has been included to provide that such dividend or other monies will be treated as unclaimed until the Member can provide the required details to the Company. b) Withholding payment of dividends from shareholders who refuse to provide FATCA or CRS information to the Company - Bye-law 83. The FATCA rules which require certain non-US financial institutions to report information about shareholders and other “account holders” are underpinned by a special US withholding tax, which applies to both the income and gross proceeds of sale derived from US investments. To avoid the withholding tax, a financial institution must comply with its FATCA due diligence and reporting obligations, whether imposed under a direct agreement between the financial institution and the IRS, or under the domestic law of the jurisdiction in which the financial institution is established. In addition, the financial institution may be subject to financial penalties under its domestic law if it fails to comply with the relevant due diligence and reporting obligations. In order to meet its reporting obligations under FATCA, the Common Reporting Standard, or any similar law or regulation, the Company must collect and provide certain information on its 38 STRATEGIC REVIEW ## Principal risks The Company has risk management processes in place which enables the Board to identify, assess and manage the principal risks faced by the Company. Consistent with the AIC Code and UK Corporate Governance Code, these risks are considered to have the potential to threaten the Company’s business model, future performance/returns, solvency, liquidity, reputation, or regulatory status. An integral part of this process is the maintenance and ongoing evaluation of the Company’s Risk Assessment & Controls (RAC) Matrix, which identifies both the risks and associated controls operating within the Company and relevant third-party service providers. To ensure emerging risks are assessed on an ongoing basis, the Board reviews the RAC Matrix at each Board meeting, considering HICL’s current and future anticipated risk environment. The Board also receives updates at each meeting from the Portfolio Manager and the AASP on operational risk matters. Additionally, as part of the risk management processes, the Company also annually reviews the Custodian, Administrator and Registrar assurance reports of their internal controls (e.g. AAF 01/06, AAF 01/20, ISAE 3402). The impact of any exceptions are considered by the Board. Consideration of the Company’s principal risks and uncertainties, is made in the context of the Company’s stated objective of generating superior, but sustainable, long-term growth in shareholder value. The main risk being that over the long-term (determined as greater than five years), shareholders do not make a return from investing in the Company. The Company’s closed-ended fund structure is also considered to be in alignment with its stated objective, especially within extremely volatile market conditions. This is due to the portfolio not having to be managed and maintained to manage potential significant redemptions or short-term liquidity needs as open-ended funds would. Additionally, the closed-ended structure can take advantage of less liquid market opportunities as part of its portfolio holdings. The principal risks and uncertainties identified and associated controls in place to manage these risks are described below: PRINCIPAL RISKS  EXTERNAL CONTROLS TO MITIGATE RISKS Market risk – long-term The Board: company share performance • has appointed an appropriate PM whose performance for the Company is reviewed and Market risk includes interest rate, challenged on a quarterly basis; currency, equity, credit, inflation, • has set investment guidelines and restrictions, which are reported against by the PM on a concentration, liquidity and macro monthly basis; geopolitical risks. • operates an asset allocation model, which is regularly reviewed and discussed with the PM; and • monitors and discusses portfolio construct and performance quarterly. Performance risk, share The Board: price, liquidity and discount • regularly reviews the share price, discount level and portfolio performance; monitoring • maintains periodic oversight on shareholder-base; Low market trading volumes of • actively seeks feedback both directly from shareholders and indirectly through the Company’s Company shares and the discount Broker or specific outreach programmes involving the Portfolio Manager; to the NAV becoming inherent in • has the ability to buy-back non-voting shares of the Company; and the share price. • initiates strategies to reduce discount over the medium term. Tax, accounting, legal and The Board: regulatory risks • obtains regular updates and advice from relevant professional advisers; Adverse outcomes resulting from • maintains oversight and receives regular reporting on the legislative and regulatory changes, legislative changes to tax, legal and which impact HICL, as monitored by the PM; regulatory requirements. Adverse • maintains the Company’s membership with the Association of Investment Companies; outcomes from not meeting ESG • has adopted the PM’s responsible investing policy; expectations. • has set explicit expectations on the integration of ESG considerations within the investment process; • continues to develop ESG disclosures in compliance with reporting regulations; and • receives documented confirmation of the PM’s adherence to relevant regulatory requirements and emerging sanction risks. Reputational risk The Company: Negative behaviours, publications • requires the annual selection of Board members, all of whom must have a commitment or market sentiment impacting the to governance; reputation of the Company. • has direct oversight of PM; • communicates with investors and the public in a clear and transparent manner; and • has set pre-approval procedures for accuracy and reliability of such information. 39 Hansa Investment Company Limited Annual Report 31 March 2024 PRINCIPAL RISKS  INTERNAL CONTROLS TO MITIGATE RISKS Operational risk • Pre-approval processes are in place prior to the publication of any financial information. Risks associated with process, • Identification and certification of key controls by AASP compliance team. system and control failures • Due diligence is undertaken prior to appointing all service providers. Regular performance including those associated with reviews of third-party providers are made and, where relevant, the Company annually requests the Company’s third-party service independent service provider assurance reports on the operating effectiveness of their providers. internal controls. • An overdraft facility provides a contingency for any short-term liquidity shortfall. A pre-approval Operational areas considered payment process is in place as part of an overall cash management process. includes Liquidity, Safeguarding • An independent Custodian is appointed to safeguard the Company’s assets. This Custodian is of Assets and Reliability of bound by regulatory and legal contractual obligations and liabilities. Regular reconciliations Financial Reporting. are undertaken to ensure accuracy of records. Gearing/balance sheet risk • A maximum limit on the overdraft facility is in place. Risk of over-gearing the balance • Any increase in overdraft or credit facility requires Board pre-approval. sheet and creating financial stress on the Company. Insurance The Company through its Bye-laws has indemnified its Directors and Officers to the fullest extent permissible by law. During the year the Company also purchased and maintained liability insurance for its Directors and Officers. Going concern The Company’s business activities, together with the factors likely to affect its future development, performance and position, including its financial position, are set out in the Chairman’s Statement and the Portfolio Manager’s Report within this Annual Report. After due consideration of the Balance Sheet, estimated liabilities for the 12 months following the signing of this Report and having made appropriate enquiries, the Directors have concluded the Company is a going concern and has adequate resources to continue in operational existence for at least 12 months. Assets of the Company consist of securities, the majority of which are traded on recognised stock exchanges, or open-ended funds run by established managers. The Financial Statements are prepared on a going concern basis. Longer-term viability statement In addition to the Statement of Going Concern, the Directors are also required to make a statement concerning the longer-term viability of the Company. The Directors consider 12 months to be a relatively short time frame when considering performance and look to the longer-term for both the performance and risks associated with the Company. The Directors consider a period of five years to be a more representative period, which aligns with the Portfolio Manager’s longer-term horizon. This period is sufficiently long to manage short- term market volatility and allow longer-term performance to work through. The Board continually monitors the Investment Strategy and Investment Guidelines issued to the Portfolio Manager and directs the Portfolio Manager to target long-term capital preservation. Further, whilst the Board has sanctioned the use of gearing, the facility available to the Portfolio Manager is relatively small compared to the NAV of the Company. Finally, a number of the more significant costs in each financial year are contracted to be calculated on the basis of the underlying NAV of the Company. As such, in a period of negative portfolio performance, the cost base should also fall. Barring unforeseen circumstances and taking account of the Company’s current position, the principal risks, the longer-term strategy for the portfolio, including a diversified and liquid asset base and the lack of gearing, the Directors confirm they have a reasonable expectation that the Company will continue to operate and meet its liabilities as they fall due for the next five years. 40 GOVERNANCE ## Governance 41 41 Hansa Investment Company Limited Annual Report 31 March 2024 ## The Board of Directors The Directors who served the Company during the year to 31 March 2024 are: Jonathan Davie Simona Heidempergher Richard Lightowler Chairman Remuneration Committee Chair Audit Committee Chairman | Jonathan became Chairman of Hansa | Simona became a Director of the Company | Richard became a Director of the | | --- | --- | --- | | Investment Company in June 2019. He was | in June 2019. Simona has extensive | Company in June 2019. Richard has 26 | | a director of Hansa Trust from January | experience as an executive and non- | years’ experience in public accounting | | 2013 until its liquidation in November | executive director in a range of companies, | being partner of KPMG in Bermuda for 20 | | 2021. He is also a partner of First Avenue | including listed companies, investment | years. He was head of the KPMG Insurance | | Partners, an alternatives advisory | funds and research organisations, across | Group in Bermuda for 15 years, a member | | boutique. | multiple jurisdictions. | of the firm’s Global Insurance Leadership | Team and Global Lead Partner for a Jonathan qualified as a Chartered For the past 21 years, she has been number of large international insurance Accountant and then joined George M. a director of Merifin Capital, an groups listed on the New York and London Hill and Co. and became an authorised established European privately owned Stock Exchanges. | dealer on the London Stock Exchange. | investment company. Prior to this she | | | --- | --- | --- | | The firm was acquired by Wedd Durlacher | had roles as VP Investments at CDB | Richard has significant regulatory | | Mordaunt and Co. where Jonathan | Web tech, a listed investment vehicle, | experience, previously advising the | | became a partner in 1975. He was the | and as research associate at Heidrick | Bermuda Monetary Authority and | | senior dealing partner of the firm on its | & Struggles, a leading executive-level | working with clients regulated by the | | acquisition by Barclays Bank to form BZW | search and leadership consultancy firm | PRA, FRC and FCA, as well as other | | in 1986. | and as project coordinator at Ambrosetti | international regulators. He also has | | | Group, an Italian consulting company. | extensive experience in risk and corporate | Jonathan developed BZW’s Fixed Income Currently, Simona is the chair of the governance and significant transaction business prior to becoming chief executive board of directors of the Stramongate experience. Richard is based in Bermuda. of the Global Equities Business in 1991. Group, a Luxembourg public company, Richard also holds non-executive In 1996 he became deputy chairman of director of The European Smaller directorships with Aspen Insurance BZW and then vice chairman of Credit Companies Trust, a Janus Henderson Holdings, Geneva Re, Oakley Capital Suisse First Boston (CSFB) in 1998 on their Asset Management Investment Trust Investments and Phoenix Re Limited. acquisition of most of BZW’s businesses. listed on the London Stock Exchange and He focused on the development of CSFB’s director of Industrie Saleri Italo S.p.A. an Middle Eastern business. He retired from Italian private company in the automotive CSFB in February 2007. supplier sector. Following Nadya Wells’ decision to not stand for re-election, with effect from 14 June 2024, the Board has appointed Simona Heidempergher to chair the Nomination Committee in addition to her continuing role as Chair of the Remuneration Committee. 42 GOVERNANCE 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 William Salomon Nadya Wells re‑appointment of each of the four Nominations Committee Chair and Directors who have put themselves Senior Independent Director forward, based on their continuing | William became a Director of the | Nadya became a Director of the Company | contribution to the Company | | --- | --- | --- | | Company in June 2019. He was a Director | in June 2019. Nadya has 29 years’ | and its shareholders. The service | | of Hansa Trust from 1999 until its | experience in emerging and frontier | | contracts between the Company liquidation in November 2021. He has a markets as a long-term investor and and each of the Directors do not significant, long standing, investment in corporate governance specialist. She the Company. spent 13 years as portfolio manager with allow for any compensation payment the Capital Group investing in Global in the event of loss of office. William’s experience in investments and Emerging Markets and prior to those five finance is important to the Board in years with INVESCO Asset Management developing and monitoring investments Limited, investing in public and private in special investment themes and in the equity managing a closed ended fund. Company’s strategic investment through She started her career in management Ocean Wilsons Holdings Limited in consultancy with Ernst & Young. Wilson Sons. She holds a non-executive directorship William is the senior partner of Hansa at Baring Emerging EMEA Opportunities Capital Partners LLP, the Portfolio plc where she is senior independent Manager and Additional Administrative director. Nadya is an independent non- Services Provider, deputy chairman of executive director on the boards of various Ocean Wilsons Holdings Limited and a Luxembourg SICAVs managed by large director of its Brazilian listed subsidiary global asset managers. She also works Wilson Sons Holdings Brasil S.A.. William in academia conducting research and was formerly the vice chairman of Close consulting in the public and private sector Asset Management Limited and chairman on financing in Global Health. She holds of the merchant bank Rea Brothers PLC. an MBA from INSEAD, France. You will note from the Chairman’s Report that Nadya has chosen not to stand for re-election as a Director of the Company at the AGM as a result of additional professional commitments that she intends to take on. The Board is starting the process of identifying a director to join the Board in Nadya’s place. Nadya will remain as a Director until the Company’s AGM. 43 Hansa Investment Company Limited Annual Report 31 March 2024 ## Organisation and objectives This section explains how the Board has organised the Company Following Nadya’s decision to not stand for re-election, with and seeks to deliver its objectives. effect from 14 June 2024, the Board has appointed Simona Heidempergher to chair the Nomination Committee, in addition Board committees and roles to her continuing role as Chair of the Remuneration Committee. The Directors consider that, in order to fulfil their responsibilities See page 60 for the Nomination Committee Report. as the Directors of the Company, they should all be members of every sub-committee where possible. Where a Director cannot Management Engagement Committee be a member of a committee, they should attend the meetings The Committee is chaired by Jonathan Davie. All independent unless a conflict exists and it would be inappropriate for them to members of the Board are members of the Management be present. Engagement Committee. The Committee has two primary roles. Firstly, to review the functional and operational performance of Audit Committee the Portfolio Manager with the Company’s investment policy. Richard Lightowler is the Chairman of the Audit Committee. Secondly, to review annually the performance of any other key The Audit Committee consists of all independent Directors of service providers to the Company. the Board. The Audit Committee exists to assist the Board in the financial and narrative reporting of information relating The level of management fees, level of service provided and the to the Company, the review of the Internal Controls and Risk performance of the Portfolio Manager are reviewed on a regular Management systems, the oversight of the Company’s annual basis to ensure these remain competitive and in the best interests audit and assessment of the independence, performance and of shareholders. The Board, after the annual recommendation quality of Company’s external auditor PricewaterhouseCoopers of this Committee, considers whether the engagement of the Ltd. The Committee meets at least twice a year – timed to review Portfolio Manager is in the best interests of the shareholders. the Annual and Half-Year Financial Statements prior to their The Committee members also carry out periodic visits to the key approval and release. service providers, as well as seeking feedback on the performance of other service providers from the Portfolio Manager in its The AIC Code of Corporate Governance (“the AIC Code”) capacity as Additional Administrative Service Provider. indicates that all independent Directors can be members of the Audit Committee including, if agreed by the Board, the Chairman The Committee reports its recommendations to the Board for of the Board. The Board is of the opinion that, particularly as the final approval. Company has relatively few Directors, shareholders benefit from the views of all Directors. Therefore, Jonathan Davie, as Chairman Remuneration Committee of the Company, is also a member of this Committee. The Board The Committee is chaired by Simona Heidempergher. All further acknowledges that the AIC Code states all Committee independent members of the Board are members of the members should be independent. Therefore, William Salomon Remuneration Committee. William Salomon attends the is not a member of the Committee although attends as a non- Committee but is not a member. The Committee is responsible for member. The Committee reports its recommendations to the the broad policy for the remuneration of the Company’s Chairman Board for final approval. and non-executive Directors pursuant to the Company’s Bye-laws. The Committee takes into account all factors which it deems See page 55 for the Audit Committee Report necessary. When setting the remuneration policy for Directors, the Committee reviews remuneration trends across the wider Nomination Committee industry, including the use of external independent surveys, and The Committee was chaired by Nadya Wells throughout the considers the ongoing appropriateness and relevance of the Company’s financial year. All independent members of the Board remuneration policy. The level of directors’ fees should be set at are members of the Nomination Committee. William Salomon a level which attracts and retains high calibre candidates. Fees attends the Committee but is not a member. are monitored against external benchmarks taking specific note The Committee reviews the structure, size and composition of each Director’s duties, time commitments to properly fulfil (including the skills, knowledge and experience) of the Board and all obligations and duties and also relative to other comparable makes recommendations to the Board with regard to any changes, companies in comparable jurisdictions. No Director sets their own as necessary. It also considers succession planning of directors, individual remuneration. taking into account tenure and performance of board members The Committee reports its recommendations to the Board for as well as challenges and opportunities facing the Company, and final approval. what skills and expertise are, therefore, needed on the Board in the future. If a skills-gap or pending vacancy is identified, See page 57 for the Directors’ Remuneration Report. the Committee is responsible for identifying and nominating candidates to fill Board vacancies as and when they arise. 44 GOVERNANCE Long-term impact of decisions – ESG matters Fund investments In the natural positive progression of HCP’s commitment to HCP seeks to invest in funds who are responsible owners of their further integrating ESG and climate relevant considerations investee companies, have specific consideration as to how their within its investment process, the Hanseatic Group, of which investee companies manage their ESG responsibilities and seek HCP is a member, has become a signatory of the United Nations to engage with those company boards, if they are failing in their supported Principles for Responsible Investment (UNPRI). duties. Where a manager is not living up to these standards, HCP will first seek to engage the management team and encourage With ever-growing global concerns and developments improvement. If the managers engagement is weak, or if the surrounding matters such has climate change, social inequalities communicated concerns are not sufficiently addressed and their and ethical corporate strategy and governance, the Board believes positive commitment to do so is not apparent, HCP’s ultimate there is a communal duty for meaningful and effective action to action would be to reduce the current investment, exit, or not be taken and are committed to doing so. It is the Board’s belief invest in the first place. Whilst HCP does not seek to exclude that responsible investing and a well-run sustainable business fund managers that invest in sectors such as energy or countries model aids in generating superior long-term returns. such as China, it would, however, expect such managers to properly articulate how they operate in such areas and manage The Board is responsible for the Company’s ESG policy. In the potential ESG considerations. HCP’s investment philosophy 2020, the Board adopted the Portfolio Manager’s Responsible favours those fund managers who are typically long-term in Investment Policy, which is applied to all Company investments their approach and seeks to invest in high-quality, well-managed in funds and companies, in both public and private markets. companies that are often higher-returning. As a result, although In line with the evolving nature of ESG’s integration within we do not set limits, there is a natural bias away from these financial services, the PM continues to review and develop their companies and sectors that score less well on ESG metrics. policy of responsible investing within their investment process. This involves ensuring environmental, social and governance Company investments factors are integrated throughout the investment management When considering direct equity investments HCP seeks to ensure process, including within the due diligence, decision-making and that company management teams are responsible custodians investment monitoring processes. of their businesses, report clearly on ESG metrics and seek to As long-term investors, HCP has a natural desire to be a improve on those areas in which they are lagging. responsible investor and a good corporate citizen. HCP’s approach begins by communicating its expectations to fund and company Taskforce on Climate-Related Financial Disclosures investments that they should take ESG issues seriously, clearly As a closed-ended investment company, HICL is exempt from the report on them, be responsible owners and to continuously show annual reporting requirement to publish statements in line with positive indicators of aspiring to do the right thing. the Taskforce on Climate-Related Disclosures’ (TCFD) framework of recommendations and recommended disclosures. However, HCP does not operate an exclusionary policy, as excluding whole considering the Board and the PM’s approach to responsible sectors or countries is not a sustainable, or reasonable approach investing and the Company’s core investment objective to to its investment activities. Each fund manager or company is generate superior, but sustainable, medium to long-term growth assessed as an individual, taking into account the sector and in shareholder value, we have elected to provide relevant country within which they operate and their direction of travel in information on our approach to the TCFD recommendations. ESG enhancements. Governance HCP seeks to ensure that all investee managers and companies Strong corporate governance practices are intrinsic to how the are thinking longer term and that they are also thinking about Board operates. The Board oversees a long-term and sustainable their longer-term impacts across the spectrum of their business. approach to business strategy of the Company. This in part is This certainly includes the negatives – such as understanding how done by adopting a Responsible Investment Policy, which aims to companies are lowering their carbon emissions, ensuring they are integrate sustainability, climate-related risks and opportunities, not using forced or child labour in their supply chains, taking care social responsibility and strong governance into the Company’s not to deplete natural resources, or be involved in deforestation. investment process. This is consistent with HCP’s approach to its But it also includes the positive impacts, for example, knowing ESG assessment of fund managers and company investments. if a company is taking advantage of the opportunities it may have from climate change by developing greener energies, recycling used clothing, or designing biodegradable fabrics. HCP’s Risk Management involvement with the managers and companies is ongoing and Climate-related risks within the Company’s investments are pushes them to manage the risks and take advantage of the identified, assessed and managed by HCP as the Portfolio opportunities in a tailored and considered manner. A manner Manager. As part of the portfolio risk management and that reaps longer-term benefits for the Company, as well as the monitoring process, HCP combines long-term and purpose-driven environment and the greater society. engagement with underlying fund managers and companies, active voting and setting a clear escalation framework. This Following the first UNPRI submission by the Hanseatic Group, approach aims to identify and address climate-related issues made in 2023, we are pleased to report that they received very and minimise systemic risks that may impact the assets within positive feedback on both their policies and approach adopted. the portfolio. Engagement can take several forms, including regular and ad hoc meetings with management, formal written correspondence, or the Portfolio Manager participating in relevant 45 Hansa Investment Company Limited Annual Report 31 March 2024 shareholder votes for current investments. total emissions in 2022, achieved through the adoption of state- of-the-art technologies, such as replacing diesel equipment Strategy with electrically powered alternatives at their container ports. The Company’s strategic objective is to grow its net assets Additionally, the company has maintained its commitment to over the medium to long-term by investing in a diversified and proactively publish its Greenhouse Gas Emissions Inventory multi-strategy portfolio. In line with this objective, the Board (GHG) in the public emissions registry, a platform managed by are responsible for pursuing the growth of shareholder value. the Brazilian GHG Protocol Programme. In 2022, Wilson Sons Responsible investment and the integration of ESG risks and maintained their gold seal by the programme. Further information opportunities within the investment process is aligned with the can be seen in their Sustainability Report, published on their Company’s values and heritage. HCP becoming a signatory to website www.wilsonsons.com.br/en. UNPRI is part of our overall strategy. Carbon offset and charitable support Metrics and targets Each year, there are a number of flights for individual Directors In relation to the Portfolio Manager’s investment process, a to attend Board meetings in Bermuda. Therefore, the Board more holistic approach is taken by assessing an investment by has elected to offset the carbon impact of its travel on behalf their intent and direction of travel, rather than purely by specific of the business though a relationship with Greenfleet Australia targeted metrics. The ESG assessment of a fund manager or (www.greenfleet.com.au). This year, circa 163 tonnes of carbon company will involve HCP developing a view by utilising their dioxide has been offset. Greenfleet Australia runs a tree planting published ESG reporting, the information received through the offset programme. due diligence and engagement processes and other external Additionally, during the year the Board looked for an research. The Company has no material information to report in environmental cause to sponsor that has direct relevance to relation to metrics and targets. Bermuda, our country of domicile. Given its island status, Bermudians are more aware than most of the marine Ocean Wilsons Holdings Limited environment. Marine life is under threat from climate change, OWHL has two investments – Ocean Wilsons Investments Ltd, an acidification of the sea, pollution and invasive species. But these investment portfolio and a holding in Wilson Sons Holdings Brasil threats are compounded by overfishing, which strips the ocean of S.A., a Brazilian maritime business. From an ESG standpoint, our life, and so reduces its capacity to produce oxygen, absorb carbon Portfolio Manager is also the investment advisor to the Ocean dioxide and regulate the climate. It’s estimated that almost 94% of Wilsons Investments’ portfolio. The Board understands that our commercial fish stocks are fully or overexploited and 90% of large, Portfolio Manager is engaging with Ocean Wilsons Investments’ predatory fish are gone. Overfishing therefore represents a major board on their Responsible Investing Policy. As a Board we threat for the food security of millions and could have devastating receive periodic updates from Wilson Sons, an operating business consequences for Earth’s climate if these ecosystems fail. Amongst with several thousand employees, regarding their business many worthy organisations, we discovered the Blue Marine including issues relevant to ESG considerations. Wilsons Sons Foundation, an environmental charity dedicated to restoring is listed on the Novo Mercado (“New Market”) B3 listed segment the ocean to health by addressing overfishing and supporting and is a member of the Carbon Disclosure Project which, in marine conservation projects. The ocean is the world’s largest partnership with companies and governments, aims to build a carbon sink: by combating overfishing and the associated impact truly sustainable economy, by measuring and understanding the on the wider marine environment, Blue Marine aims to help life environmental impact. In 2022, Wilson Sons achieved a grade B in the ocean perform its vital function of stabilising the Earth’s performance in the climate change questionnaire for the maritime climate. By partnering with Blue Marine, the Company supports transportation segment. This was an improvement from the their work around the world ultimately benefiting us all and, in grade C performance achieved in 2021, making Wilson Sons in particular, maritime communities like Bermuda. The Company line with 44% of companies in the maritime sector that publicly has committed to a charitable gift of £10,000 per annum towards disclose their data to CDP. Wilson Sons continues to be proud of their focused approach to health & safety, staff wellbeing and the Blue Marine’s work. preservation of the environment and communities they operate in. This continued focus was awarded through the “Great Place Streamlined Energy and Carbon Reporting (SECR) and to Work” certification, which is a standard of excellence for work Greenhouse Gas Emissions (GGE) environments, and have been ranked in the top quintile of the The Company has no direct greenhouse gas emissions to report S&P Global 2022 Corporate Sustainability Assessment. As in from the day-to-day operations of its business. However, as noted many heavy industries, there is a focus on safety and improving above, the attendance of Directors at Board meetings in Bermuda working practices to minimise staff injuries. To this end, Wilson means travel related carbon emissions which are “Scope 3 Indirect Sons has a non-negotiable commitment to ensuring the health Emissions” for the purposes of the SECR. The Board has further and safety conditions of all employees, customers and third estimated the emissions associated with the flights to be in the parties at their facilities. Their commitment to maintaining region of 237 tonnes of CO2 in any ‘normal’ year. an increasingly safe working environment is reflected by their continuous trend of reduction in lost-time injuries, which in 2022 Social, Community, Human Rights, Employee was reduced to a frequency rate of 0.50 incidents per one million Responsibilities Policy hours worked. This rate exceeds the world-class benchmark. The Company does not have any employees. The Company has Additionally, the reduction of Greenhouse Gas emissions remains no direct social, community or human rights impact. Its principal a focus for Wilson Sons, who achieved a 5% reduction in their responsibility to shareholders is to ensure the investment portfolio is properly invested and managed. 46 GOVERNANCE ## Service providers ### Service Provider Policy The Company has no employees and operates through third party service providers. The Board has contractually delegated to external organisations the management of the investment portfolio, the custodial services which include safeguarding of the assets and the day-to-day accounting and company secretarial requirements. Each of these contracts is only entered into after proper consideration of the quality and cost of services, which are regularly reviewed and monitored. The key service provider relationship to the Company is Hansa Capital Partners as the Portfolio Manager and Additional Administrative Services Provider (AASP) to the Company. The Board carries out the following activities as part of its oversight of third party service providers: #### *Monitors performance, costs and commitment to a successfully implemented controls environment* The Board, at its regular meetings, reviews reports prepared by both the Portfolio Manager and the Administrator, which enable it to monitor the performance and costs of the third-party suppliers to the Company. The Additional Administrative Services Provider has an ongoing dialogue with each provider to monitor their processes and systems and, in addition, members of the Board meet with key providers at least annually to discuss performance. #### *Monitors Portfolio Manager performance* The Board reviews reports prepared by the Portfolio Manager at its regular meetings, which enables it to monitor the investment performance, risks and returns. The Portfolio Manager attends each Board meeting where there is an active dialogue on performance, process, risks and opportunities and governance matters. The Board identifies key controls and regularly monitors them through compliance reports on control effectiveness. #### *Determines investment strategy, guidelines and restrictions* The Board determines the investment strategy in conjunction with the Portfolio Manager. The strategy is monitored regularly with adjustments made as required. The Board issues formal investment guidelines and restrictions; compliance with these is reported by the Portfolio Manager's compliance officer quarterly and is also monitored independently by the Administrator. #### *Determines gearing levels and capital preservation through the use of hedging instruments* The Board, taking account of advice from the Portfolio Manager, determines the maximum level of borrowings the Company will undertake. The Company will not invest in derivatives for speculative gain, but may use derivatives for efficient portfolio management and hedging purposes. ## The providers ### Portfolio Manager & Additional Administrative Services Provider Hansa Capital Partners LLP is the Portfolio Manager for the Company. It is responsible for all assets in the portfolio, other than the Company's investment in OWHL. The Board is in regular contact with the investment management team at HCP which is led by Alec Letchfield. Additionally, Alec Letchfield is invited to quarterly meetings of the Board to formally present portfolio updates and discuss market trends. The Portfolio Manager's detailed review of the year can be found on page 8. HCP charges a portfolio management fee at an annual rate of 1% of the net assets of the Company (after any borrowings) and after deducting the value of the investment in OWHL, on which no fee is payable. The Portfolio Manager has charged £2,917,937 for the year ended 31 March 2024 (year ended 31 March 2023: £2,824,000). Hanseatic Asset Management LBG, a company connected to Hansa Capital Partners and which is also the AIFM, separately charges an investment management fee to the investment subsidiary of OWHL. The terms of the Portfolio Management Agreement permit either party to terminate the agreement by giving to the other not less than 12 months' notice, or such shorter period as is mutually acceptable. There is no agreement between the Company and the Portfolio Manager concerning compensation in respect to the termination of the agreement. In its annual assessment of the Portfolio Manager, the Board concluded that, because of the skills and experience of the management team it is in the best interest of shareholders that the Portfolio Manager remains in place under the present terms. Details of the fees paid to the Portfolio Manager can be found in Note 3 to the Financial Statements. HCP also acts as the AASP to the Company. This role ensures a number of the day-to-day processes for the Company are carried out, as well as providing oversight of, and a liaison between, a number of the Company's service providers and the Company itself. HCP is paid £115,000 per annum for this service (year ended 31 March 2023: £115,000). ### Auditor The Company's independent Auditor is PricewaterhouseCoopers Ltd, a Bermudan registered firm. Auditor independence rules restrict the amount and type of non-audit related work that can be performed by a company's Auditor. Any non-audit related work must be pre-approved by the Board. PwC did not provide any non-audit services in the year. ### Company Secretary The Company has engaged Conyers Corporate Services (Bermuda) Limited ("Conyers") as its Company Secretary. During the year to 31 March 2024, Conyers has charged £44,156 (year ended 31 March 2023: £38,275). ### Alternative Investment Fund Manager As a Bermudan resident, the Company is defined as a UK Alternative Investment Fund (AIF) under the UK Alternative Investment Fund Manager's Directive (UK AIFMD). As such, the Company and the AIFM are subject to a more limited set of UK AIFMD requirements, which are largely in relation to marketing the Company's shares into the UK. The Company appointed Hanseatic Asset Management LBG, with effect from 29 August 2019, to act as its AIFM, with responsibilities for the Portfolio Management and Risk Management functions. The AIFM has delegated the provision of Portfolio Management services to Hansa Capital Partners LLP but remains responsible for the Risk Management function. The AIFM does not charge a direct 47 Hansa Investment Company Limited Annual Report 31 March 2024 fee for its services, although it does recharge any third-party fees incurred. #### **Administrator** The Company has engaged Apex Fund Administration Services (UK) Ltd as its Administrator. The Administrator has charged £152,722 for the year ended 31 March 2024 (year ended 31 March 2023: £149,722). #### **Custodian** The Company has engaged Banque Lombard Odier & Cie SA as the Company's Custodian. During the year to 31 March 2024, Lombard Odier charged £182,717 for the custodial service (year ended 31 March 2023: £180,335). #### **Registrar** During the year, the Company's Registrar was transferred from Link Market Services (Guernsey) Limited to Computershare Investor Services (Bermuda) Limited ("Computershare"). The total Registrar charges were £134,083 for the year ended 31 March 2024 (year ended 31 March 2023: £91,728). 48 GOVERNANCE ## Report of the Directors The Directors have chosen to report on some items within the body of the Strategic or Governance Reports, while others remain within the Report of the Directors. Items included within Strategic or Governance reports The following items are listed within the Strategic or Governance Reports: • Statement of the existence of qualifying indemnity provisions for Directors. • Dividend policy and payments made during the year. • Names of Directors, at any time in the year and the Directors’ details and attendance at Company meetings. • Streamlined Energy & Carbon Reporting and Greenhouse Gas Emissions. • Stakeholder Engagement – while the Company has no employees, suppliers or customers, the Directors give regular consideration to the need to foster the Company’s business relationships with its stakeholders, in particular with shareholders and service providers. The effect of this consideration upon the principal decisions taken by the Company during the financial year is set out in further detail in the Strategic Report. Items reported within the Directors’ Report Disclosure to the Auditor of Relevant Audit Information The Directors confirm that, so far as they are aware, having made such enquiries and having taken such steps as they consider they reasonably ought, they have provided the Auditor with all the information necessary for it to be able to prepare its Report. In doing so each Director has made themself aware of any information relevant to the audit and established that the Company’s Auditor is aware of that information. The Directors are not aware of any information relevant to the audit of which the Company’s Auditor is unaware. Board composition and diversity The Board recognises and is supportive of the new FCA Listing Rules (LR 9.8.6(9)) which aim to improve transparency on the diversity of company boards and executive management teams and was implemented for accounting periods starting on or after 1 April 2022. Accordingly, boards of UK incorporated companies are required to report annually on whether the specific three FCA targets have been met, and if they have not been met, the reasons why. These three targets are: (i) at least 40% of the individuals on its board of directors are women; (ii) at least one of the following senior positions (Chair CEO, Senior Independent Director, CFO) on its board of directors is held by a woman; and (iii) at least one individual on its board of directors is from a minority ethnic background; The tables below set out the gender and ethnic diversity composition of the Board as at 31 March 2024. The Board is pleased to report it is compliant with each of the three FCA targets as at 31 March 2024. Two of the five Directors are women (40%), one of whom holds the senior position of SID, and one of the five Directors is from a minority ethnic background. As reported elsewhere in this Annual Report, Nadya Wells has chosen not to stand for re-election at the Company’s forthcoming AGM. She remains a Director of the Company at the time of signing of this Annual Report. The Board is starting the process of identifying a director to join the Board in Nadya’s place and will update Shareholders in its next Annual Report regarding ongoing board diversity against the Listing Rule targets. As per LR 9.8.6(10), numerical data is disclosed in the tables below, which shows the Company’s compliance with these three FCA targets. Number of senior Number of Percentage positions Board of the on the 1 Gender Diversity members Board Board Men 3 60% 2 Women 2 40% 1 Other - - - Not specified/prefer not to say - - - 49 Hansa Investment Company Limited Annual Report 31 March 2024 Number of senior Number of Percentage positions Board of the on the 1 Ethnic Diversity members Board Board White British or other White (including minority-white groups) 4 80% 2 Mixed/Multiple Ethnic Groups 1 20% 1 Asian/Asian British - - - Black/African/Caribbean/Black British - - - Other ethnic group, including Arab - - - Not specified/ prefer not to say - - - 1 Note, the format and information supplied in the above tables are as prescribed by the FCA’s Listing Rules. HICL is a Bermudan incorporated, externally managed closed-ended investment company. As such, HICL does not have any employees or appoint executive board positions. Accordingly, the senior board positions which the Company defines as applicable are Chairman and Audit Committee Chairman. This data was provided by the individual Directors, at the request of the Committee, asking them to indicate how the Company should categorise their ethnic background for the purposes of the FCA requirements of Board diversity. Capital Structure The Company’s Capital Structure is described in the “Shareholder Profile and Engagement” section. Corporate Governance Report The Corporate Governance Report, including the Financial Risk Management Review of the Company, is included in this Report. Approval of the Directors The Directors consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. Further details demonstrating the Company’s performance, business model and strategy have been included within the Strategic Report. For and on behalf of the Board Jonathan Davie Chairman 14 June 2024 50 GOVERNANCE ## Corporate Governance Report Corporate Governance Code Association of Investment Companies Code The AIC Code has 17 principles. The Company sets out below how Internal Controls it has complied with the Principles and Provisions: The UK Corporate Governance Code (“UK Code”), requires the directors of UK listed companies to review the effectiveness of Board Leadership and Purpose the company’s risk management and system of internal controls on an annual basis. The Board is committed to sound corporate A. A successful company is led by an effective board, whose governance, robust risk management processes and effective role is to promote the long-term sustainable success systems of internal controls. The Board reviews and considers the of the company, generating value for shareholders and effectiveness of internal controls regularly and review exception contributing to wider society. reporting at least quarterly. The Directors, through the procedures The Board is formed of five Directors with a complementary outlined below, keep the system of risk management and internal mix of skills and experience to lead the Company. Two controls under review. Directors served on the board of the Company’s predecessor, Hansa Trust, whilst three Directors were appointed at The Board recognises its ultimate responsibility for the the formation of HICL. All have significant and relevant Company’s system of risk management and internal controls experience. All Directors are focused on generating long-term and for monitoring their effectiveness. In order to perform this value for shareholders and there is significant share ownership responsibility the Board receives regular reports on all aspects in the Company’s shares amongst the Directors. The Board of risk management and internal control from the Company’s engages at least quarterly with its Portfolio Manager service providers (including financial, operational and compliance challenging performance, process, risk, cost and strategy. controls, risk management and relationships with other service providers); the Board will instigate necessary action in response to B. The board should establish the company’s purpose, values any significant failings or weaknesses identified by these reports. and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by Financial Reporting example and promote the desired culture. The Board has a responsibility to present a fair, balanced and The Board believes that the Company’s purpose, values and understandable assessment of annual, half-year and other price strategy are clear: to create long-term growth of shareholder sensitive public reports and reports to regulators, as well as value. The Board fosters a culture that is open to new ideas to provide information required to be presented by statutory and is able to influence its service providers through effective requirements. To ensure this responsibility is fulfilled, all challenge and regular robust review of performance. The such reports are reviewed and approved by the Board prior to Board sets the standard for openness and professionalism their issue. that the Company’s key service providers follow. In particular, The Board confirms there have been no specific events since 31 there is regular interaction between the Board and the March 2024, of which the Board is aware, which would have a Company’s Portfolio Manager and also the AASP for day to material impact on the Company. day liaison with other service providers. Compliance with the provisions of the UK C. The board should ensure that the necessary resources Corporate Governance Code are in place for the company to meet its objectives and The Board of Hansa Investment Company has considered measure performance against them. The board should the Principles and Provisions of the AIC Code. The AIC Code also establish a framework of prudent and effective addresses the Principles and Provisions set out in the UK Code, controls, which enable risk to be assessed and managed. as well as setting out additional Provisions on issues that are of The Board, through the work of its Committees and regular specific relevance to the Company. Board meetings ensures regular measurement against the Company’s objectives. The adequacy and effectiveness of The Board considers that reporting against the Principles and internal controls is considered at each Board meeting. Provisions of the AIC Code, which has been endorsed by the FRC in the UK, provides more relevant information to shareholders. D. In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure The Company has complied with the Principles and Provisions of effective engagement with, and encourage participation the AIC Code. from, these parties. The AIC Code is available on the AIC website (www.theaic. The Board considers its stakeholders to be its shareholders co.uk). It includes an explanation of how the AIC Code adapts the and its key service providers. The Board is committed to Principles and Provisions set out in the UK Code to make them transparent reporting in all its communications. It actively relevant for investment companies. engages with shareholders via an annual general meeting, periodic shareholder presentations, the next of which will be held on 25 September 2024, quarterly factsheets, website 51 Hansa Investment Company Limited Annual Report 31 March 2024 communication and with feedback also received through the available time each Director has to commit to the outreach programmes by the Company’s broker and Portfolio Company. A formal calendar exists for the Board meetings Manager, as well as direct one-to-one correspondence. The and sub-committees. Ad-hoc meetings may be arranged Board engages with other key service providers through the without advance materials for time-sensitive matters. The operations of its AASP on a day to day basis, as well as via at Portfolio Manager and AASP report to scheduled Board least one annual meeting with each to ensure accountability meetings, giving the Directors the opportunity to challenge and value-added performance. performance, raise issues and offer guidance. Principle E is omitted by the AIC Code. I. The board, supported by the company secretary, should ensure that it has the policies, processes, information, Division of Responsibilities time and resources it needs in order to function effectively F. The chair leads the board and is responsible for its and efficiently. overall effectiveness in directing the company. They The Company Secretary and AASP support the Board should demonstrate objective judgement throughout their in identifying and monitoring all governance matters. tenure and promote a culture of openness and debate. In Additionally, Directors are able to consult external addition, the chair facilitates constructive board relations professional advisors to assist them in the performance and the effective contribution of all non-executive of their duties as and when required. Board reporting and directors, and ensures that directors receive accurate, materials are refined on an ongoing basis. timely and clear information. The Chairman is Jonathan Davie. The Chairman promotes and Composition, succession and evaluation encourages active participation from all Directors at Board J. Appointments to the board should be subject to a formal, meetings. Further, whilst adhering to membership guidelines, rigorous and transparent procedure, and an effective sub-committees also seek to include as many Directors as succession plan should be maintained. Both appointments possible to ensure a broad range of views. All Directors receive and succession plans should be based on merit and regular monthly and quarterly information prepared by the objective criteria and, within this context, should promote Portfolio Manager and Administrator, as well as portfolio diversity of gender, social and ethnic backgrounds, performance presentations from the Portfolio Manager. cognitive and personal strengths. The Board has appointed a Nominations Committee chaired G. The board should consist of an appropriate combination by an independent director. The Nominations Committee of directors (and, in particular, independent non-executive conducts a formal due diligence process on all appointments directors) such that no one individual or small group of and considers annually the continued suitability and individuals dominates the board’s decision making. performance of directors. The Company believes a diverse The Board consists of five Directors. All have a financial Board brings many benefits and, as such, there is no background but each also brings individual specialisms and restriction placed on Board membership. Inclusivity, experience that are complimentary. Their biographies are diversity, variety of experience and personal strengths are all noted earlier on in the Report. Four Directors are deemed incorporated in the decision making for director selection and independent. The fifth, William Salomon, is the Senior succession planning. Partner of the Company’s Portfolio Manager and, therefore, is deemed non-independent. All Directors are actively involved K. The board and its committees should have a combination in decisions and committees unless conflicts exist which of skills, experience and knowledge. Consideration should preclude this. Accordingly, Mr Salomon does not participate be given to the length of service of the board as a whole in the evaluation of the performance of the Portfolio and membership regularly refreshed. Manager due to his role as senior partner of that firm. Nor The Directors have a broad range of backgrounds including does he participate in decisions regarding the Company’s investment management, finance and banking as well as largest asset (by value) OWHL, due to him being a director operational experience. Biographies of all Directors are shown of that company. Finally, Mr Salomon is not a member of earlier on in the Report. Each director retires and is subject the Audit, Nominations or Remuneration Committees due to re-election at the AGM. The decision to propose directors to his non-independent status, although he does attend for Nomination at the AGM is made by the Nomination meetings of those Committees. The culture of open and Committee. The Nominations Committee is tasked with honest communication and forthright discussion means no maintaining a broad range of skills and experiences at times individual or small group dominate decision making. of succession. H. Non-executive directors should have sufficient time to L. Annual evaluation of the board should consider its meet their board responsibilities. They should provide composition, diversity and how effectively members constructive challenge, strategic guidance, offer specialist work together to achieve objectives. Individual evaluation advice and hold third party service providers to account. should demonstrate whether each director continues to The Directors confirm they have sufficient time to meet their contribute effectively. responsibilities. Directors consult with the Company before The Nominations Committee is responsible for the ongoing accepting other appointments, to confirm capacity to do consideration of Board composition and to identify any so and that no conflict exists. In considering appointments skills gap, now or in the future. The Nomination Committee and potential conflicts of interests the Board considers considers Board effectiveness annually. 52 GOVERNANCE Audit, risk and internal control Q. A formal and transparent procedure for developing policy on remuneration should be established. No director should M. The board should establish formal and transparent be involved in deciding their own remuneration outcome. policies and procedures to ensure the independence and The Directors’ Remuneration Report notes that each effectiveness of external audit functions and satisfy itself Director is paid a fixed fee representative of their roles on the integrity of financial and narrative statements. and additional responsibilities on the Board. This fee level The Board has specifically delegated the appointment and is reviewed by the Remuneration Committee annually monitoring of the Company’s external Auditor to its Audit considering performance, time commitments and market Committee. The Company’s Auditor was formally appointed in conditions. Recommendations are made to the Board for November 2019. The tender process was led by the Chairman approval. Further detail is provided in the Remuneration of the Audit Committee. The Audit Committee considers the Committee Report. independence and effectiveness of the external Auditor at least annually. The Company’s Auditor does not provide other R. Directors should exercise independent judgement and services to the Company. The Company rigorously follows discretion when authorising remuneration outcomes, policy and procedure to ensure effectiveness of the external taking account of company and individual performance, audit and integrity of financial reporting. Refer also to the and wider circumstances. Audit Committee Report. Performance, individual contribution and market conditions are all considered when setting directors’ fees. N. The board should present a fair, balanced and understandable assessment of the company’s position Compliance with The Financial Conduct Authority and prospects. Listing Rules The Board considers and approves all relevant shareholder The Directors are responsible for ensuring that: communications. The Annual and Half-Year Reports are reviewed by the Board to ensure they present a fair and • Adequate accounting records are kept, that are sufficient to balanced view including commentary on going concern show and explain the Company’s transactions and disclose and long-term viability. The Audit Committee considers the with reasonable accuracy at any time the financial position fairness of the Financial Statements before recommending of the Company and enable them to ensure that the Financial them to the Board for approval. Statements are consistent with the relevant requirements under the UK Companies Act 2006. The Annual and Half-Year Reports provide fair, balanced and • The assets of the Company are safeguarded; and for taking understandable commentary on the Company’s performance reasonable steps for the prevention and detection of fraud and and prospects. other irregularities. • The Report of the Directors and other information included O. The board should establish procedures to manage risk, in the Annual Report is prepared in accordance with both oversee the internal control framework, and determine Company Law in Bermuda and, where required, the UK. The the nature and extent of the principal risks the company Directors are also responsible for ensuring the Annual Report is willing to take in order to achieve its long-term strategic includes information required by the Listing Rules of the FCA. objectives. • The Company has effective internal control systems, designed Principal risks are identified by the Board and risk appetite to ensure that adequate accounting records are maintained; and established against these risks. Day to day risk management that financial information on which the business decisions are is undertaken by the Portfolio Manager and AASP within made, which is issued for publication, is reliable. Such a system the parameters established by the Board. The Board meets of internal control can provide only reasonable, but not absolute, with the Portfolio Manager at each scheduled Board meeting assurance against material misstatement or loss. where there is opportunity to discuss particular aspects • The Company Financial Statements for each financial year are of the portfolio and associated risks. Operational risk and prepared in accordance with International Financial Reporting compliance reporting are also regularly discussed by the Standards (IFRS). IFRS means standards and interpretations Board. Emerging risks are monitored and incorporated into issued (or adopted) by the International Accounting Standards the risk appetite framework as they arise. Board (IASB). The Directors must not approve the Financial Statements unless they are satisfied they give a true and fair Remuneration view of the state of affairs and profit or loss of the Company for P. Remuneration policies and practices should be designed that period. to support strategy and promote long-term sustainable In preparing these Financial Statements, the Directors are success. required to: The remuneration of Directors is overseen by the Remuneration Committee, chaired by Simona Heidempergher. • select suitable accounting policies and apply them consistently; The Directors each receive a fixed annual fee and do not • make judgements and estimates that are reasonable receive any additional element based on performance of the and prudent; Company. Additionally, Directors offer themselves annually for • state whether they have been prepared in accordance with re-election at the Company’s AGM. International Financial Reporting Standards; and • prepare the Financial Statements on the going concern basis, unless it is inappropriate to presume the Company will continue in business. 53 Hansa Investment Company Limited Annual Report 31 March 2024 Under the FCA Listing Rules and the UK Code, the Board is Responsibility statement responsible for: The Directors confirm that: • disclosing how it has applied the principles and complied with • The Financial Statements are prepared in accordance with the provisions of the AIC Code and, thereby, the UK Code, or applicable international accounting standards and present where not, to explain the reasons for divergence. fairly, in all material respects, the financial position of Hansa • reviewing the effectiveness of the Company’s systems of risk Investment Company. management and internal controls. • The Strategic Report, including the Chairman’s Statement and the Report of the Directors includes a fair review of the The Directors are responsible for the maintenance and integrity development and performance of the business and the position of the corporate and financial information included on the of the Company, together with a description of the principal Company’s website: www.HansaICL.com. Visitors to the website risks and uncertainties it faces. need to be aware that legislation governing the preparation and dissemination of the Financial Statements may differ from The Directors consider the Annual Report and Financial legislation in their own jurisdictions. Statements, taken as a whole, are fair, balanced and understandable. Further commentary demonstrating the Company’s performance, business model and strategy has been included within the Annual Report. For and on behalf of the Board Jonathan Davie 14 June 2024 54 GOVERNANCE ## Audit Committee Report The Audit Committee comprises solely independent Directors, as required by the AIC Code and endorsed by the FRC. It is chaired by Richard Lightowler. Given the size of the Board and the range of experience they bring, all non-committee Directors are invited to attend the Audit Committee meetings. However, only the independent member Directors are able to vote. Recommendations of the Audit Committee are brought before the whole Board for discussion and ratification. The Audit Committee ensures fair, balanced and understandable reporting of Company results. The principal roles of the Audit Committee are to ensure that: • the integrity of financial reporting within the Annual and Half-Year Reports taken as a whole are fair, balanced and understandable and provide information necessary for shareholders to assess the Company’s performance, business model and strategy; • the independence, objectivity and effectiveness of the external Auditor is maintained and monitored. The Committee also reviews the external Auditor performance in terms of quality and value; • the financial reporting internal controls system of the Company are adequate and effective. Financial Reporting and Internal Controls In discharging its duties and, in particular, matters relating to the approval of the Annual Report, Half-Year Report and the review of the Company’s internal controls, the Committee considers reports and presentations made by the Company’s Auditor, Administrator, Company Secretary, Additional Administrative Services Provider (including those of its Compliance Officer) and Legal Advisers. In its review of the Financial Statements, the Committee pays particular attention to the ownership of assets, the valuations of the portfolio and recognition of income. In this regard we receive regular reporting from the Portfolio Manager and AASP, including reports on the effectiveness of internal controls in these areas. In addition, the Committee discusses with, and receives reports from, the Auditor on the nature and scope of work performed on valuation and ownership of assets and on income recognition. The Company’s Custodian confirms title of all assets in its custody. In its consideration of valuations, the Committee notes that 76% of the Investment Portfolio by value is held in assets that are either traded or listed on an exchange or are cash. Further, of the remaining 24% unquoted fund investments, the majority primarily hold traded securities. Valuations for these funds are supplied by third party managers. The Audit Committee recognises that 52% of the total portfolio assets are Level 1 and 45% are Level 2 securities. Given the significant level of externally valued assets, the Committee is satisfied with the valuation process. There is very limited management judgement in determining valuations. The Company holds approximately £8m (1.7%) in private assets carried at valuations determined by the investment manager. The Audit Committee considers the work done by the Portfolio manager, including obtaining audited NAVs and the work of the external Auditor in its assessment of fair values reported. Revenue recognition does not involve significant judgement or the use of estimates. The Audit Committee also considers the potential need for an internal audit function on an annual basis, recognising the FRC guidance on proportionality. The Audit Committee considers internal compliance testing at the Administrator and Portfolio Manager to be sufficiently independent and robust to negate the need for a standalone internal audit function. No material control weaknesses or incidents of potential fraud were identified. The Company’s service providers implement clear whistleblowing, anti-bribery and corruption policies. The Company received direct reporting from service providers on internal controls and audit reports on their internal controls. The Committee is authorised by the Board to investigate any activity within its terms of reference, to seek any information it requires from any officer or service provider to the Company, to obtain outside legal or other independent professional advice and to secure the attendance of third parties with relevant experience and expertise if it considers this necessary. The Chairman of the Audit Committee formally reports to the Board following each Audit Committee meeting and on other occasions as requested by the Board. The Audit Committee confirmed to the Board that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. Audit: Independence and quality The Audit Committee considers the external Auditor’s independence, objectivity, scope of work engagement team experience, compliance with relevant ethical and professional standards and overall quality of service through a process of feedback from the Company advisors, including the AASP, the Portfolio Manager and direct discussion with the Auditor. The Committee also meets with the Auditor in an executive session at least annually. The current audit partner is Scott Watson-Brown who has led the audit since the Company’s inception in June 2019 and the appointment of PricewaterhouseCoopers Ltd as its Auditor. 55 Hansa Investment Company Limited Annual Report 31 March 2024 Auditors’ remuneration and terms of engagement are approved by the Audit Committee. Any non-audit services must be pre-approved by the Audit Committee to ensure objectivity and independence of the audit is not compromised. No non-audit services are provided by PricewaterhouseCoopers Ltd to the Company. Further information on fees paid to the Auditor is contained in “Other Expenses” within Note 4 of the Financial Statements. Company Auditor The Company’s independent Auditor is PricewaterhouseCoopers Ltd, a Bermudan registered firm (“PwC Bermuda”). PwC Bermuda has audited the Company since our incorporation in 2019. Their audit has been supported by PricewaterhouseCoopers LLP of the UK (“PwC UK”). To improve the efficiency of the audit, the Directors recommend the appointment of PwC UK as the Company’s Auditor for the year ended 31 March 2025. PwC Bermuda will continue to provide support to PwC UK. The Audit Committee and Board remain very satisfied with quality of work by the external auditors. This change in roles is being made for efficiency purposes only. For and on behalf of the Audit Committee. Richard Lightowler Audit Committee Chairman 14 June 2024 56 GOVERNANCE ## Directors’ Remuneration Report Annual statement The Company has five non-executive Directors. The Board has appointed a Remuneration Committee. The Chairman of this Committee is Simona Heidempergher. All independent members of the Board are members of the Remuneration Committee. William Salomon attends the Committee but is not a member. Each Director was initially appointed during June 2019 following the creation of the Company. Each Director presents themselves for annual re-election at the Company’s AGM. Policy on Directors’ remuneration The Board’s policy is that the remuneration of non-executive Directors should be a fixed-fee only. This fee should reflect the experience of each director, time commitment required to fulfil the role, market conditions, financial and reputational risks undertaken and additional responsibilities. The remuneration does not include a performance related element and Directors do not receive bonuses, share options, pensions or long-term incentive schemes. The aggregate remuneration of the Board will be kept within the limits set out in the Company’s Bye-laws, as amended from time to time. In assessing current and future levels of director compensation, the Remuneration Committee seeks external comparative information, such as the use of independent external surveys. This includes the fees paid by other similar companies (both industry and jurisdiction), seeking input from recruitment specialists familiar with the external market, assessing the time commitment for each of the Directors in their appointed roles and considering the responsibilities their roles bring. The increasing demands being placed on all NEDs by shareholders, regulators and markets are also factored. The fees for the non-executive Directors are within the limits (maximum total fee of $600,000) as set out in the Company’s Bye-laws. The maximum is set as a USD amount. The equivalent is £474,985 if translated at the applicable rate on 31 March 2024. The Remuneration Committee has reviewed the Directors’ salaries against available comparables during the year. The Committee concluded that Directors’ salaries were to remain unchanged during the financial year to 31 March 2024 and to increase by an inflationary amount from 1 April 2024. The new total salary is $415,000. Directors’ service contracts It is the Board’s policy that every Director has a service contract. None of the service contracts is for a fixed term. The terms of appointment provide that a Director shall retire and be subject to re-election at the first AGM after appointment. The Board has decided each Director will retire annually at the AGM and seek re-election as appropriate. The terms also provide that either party may give three months’ notice. In certain circumstances a Director may be removed without notice and compensation will not be due on leaving office. There are no agreements between the Company and its Directors concerning compensation for loss of office. Policy for notice periods The current Directors’ service contracts stipulate three months’ written notice to be given by either the Director or the Company to terminate the services of a Director. The Board consider this is sufficient notice to ensure an orderly hand over between the parties. Shareholders’ views on remuneration policy The formal views of unconnected shareholders have not been sought in the preparation of this policy. Employees The Company does not have any employees, only non-executive Directors. Annual report on remuneration Directors’ Emoluments (Audited) The Company does not have any employees, only non-executive Directors who receive only a basic fee, plus repayment of expenses incurred in the course of performing their duties. Therefore, the use of the detailed remuneration table, as prescribed in the legislation, is not appropriate here. A condensed table showing the information relevant to the Directors’ remuneration is shown in its place. The Directors who received fees during the year received the following emoluments in the form of fees. For clarity, these amounts are quoted in the currency as per their service contract. The Director’s remuneration is set in USD, as is common for most Bermudan companies. The following table notes the Directors current annual fee as at 31 March 2024. It also notes their fee, in USD, for the current and prior financial years. The equivalent Sterling fees are shown as converted at the relevant pay date of each fee: 57 Hansa Investment Company Limited Annual Report 31 March 2024 | 2024 | 2024 | 2023 | 2023 | | --- | --- | --- | --- | | fee | fee | fee | fee | | $000 | £000 | $000 | £000 | Jonathan Davie (Chairman) 100 79 85 72 Simona Heidempergher 80 64 65 55 Richard Lightowler 90 71 75 63 3 William Salomon 25 20 25 21 Nadya Wells 80 63 65 55 375 298 315 266 The Company also pays the expenses of the Directors to attend the Board meetings. Directors’ travel costs incurred during the year were £126,000 (2023: £141,000). Statement of shareholder voting Votes in respect of the resolution to approve the Directors’ Remuneration Report at the Company’s AGM in August 2023 were cast as follows: No. of % of shares votes voted cast Votes cast in favour 21,435,454 98.13 Votes cast against 40 9,169 1.87 Total votes cast 21,844,623 100.00 Votes withheld 0 Directors’ interests (audited) Directors must seek permission from the Chairman before trading in shares, taking note of any Closed Periods. Other than that, there are no specific rules on Directors’ shareholdings. The interests of Directors and their connected parties in the Company at 31 March 2024 are shown below: Ordinary shares ‘A’ non-voting ordinary shares of 1p each of 1p each Nature of interest2024 2023 2024 2023 Jonathan Davie 45,000 45,000 230,000 230,000 Beneficial William Salomon 11,1 69,34 5 11,169,3 45 3,587,123 3,508,723 Beneficial Simona Heidempergher 6,400 6,400 – – Beneficial As at 14 June 2024, the date of signing of these Annual Financial Statements, there were no changes to report to the Directors’ holdings. William Salomon is the senior partner of Hansa Capital Partners LLP. Fees payable to Hansa Capital Partners LLP amounted to £3,065,129 (including Portfolio Management and AASP functions). The fees outstanding at the year end amounted to £285,000. During the year, no rights to subscribe for the shares of the Company were granted to, or exercised by Directors, their spouses or infant children. 58 GOVERNANCE Your Company’s performance The graph below shows the ten-year cumulative total return to shareholders: 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 NAV Cum Income TR Ord Share TR A Ord Share TR Directors’ attendance The Directors meet as a Board on a quarterly basis and at other times as necessary and the table below sets out the number of operational meetings and the attendance at them by each Director. Management | | | Strategy | | | Audit | Remuneration | | Nomination | Engagement | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 1 | | | | | | | | | 3 | | Board | | | Day | Committee | | | Committee | Committee | Committee | | Number of Meetings 9 2 2 2 1 - Jonathan Davie 9 2 2 2 1 - Simona Heidempergher 8 2 2 2 1 - Richard Lightowler 9 2 2 2 1 - 2 William Salomon 5 2 2 2 1 - Nadya Wells 7 2 2 2 1 - 1 “Board” includes full meetings of the Board, of which there were five held during the year, as well as periodic ‘other’ meetings and Board calls to consider and approve operational requirements for the Company, such as quarterly dividends. These ‘other’ meetings are arranged as and when required and require the meeting to be quorate but not necessarily attended by all Directors. 2 William Salomon is deemed to not be independent. Therefore, he attends as an observer of the Audit and Remuneration Committees but is not a committee member. Further, he attends the Management Engagement Committee when the majority of Service Providers are discussed but exempts himself when the performance of the Portfolio Manager is discussed due to his position as its Senior Partner. 3 The Management Engagement Committee column is shows no meetings within the Financial Year. This is because the meetings were held in Bermuda in February 2023 and April 2024 – thus missing our financial year ended 31 March 2024. On behalf of the Board, I confirm that the above Report on Directors’ Remuneration summarises, as applicable, for the year ended 31 March 2024: (a) the major decisions on Directors’ remuneration; (b) any substantial changes relating to Directors’ remuneration made during the year; and (c) the context in which those changes occurred and decisions have been taken. An Ordinary resolution for the approval of this Report will be put to shareholders at the forthcoming AGM. For and on behalf of the Board Simona Heidempergher Chairman of the Remuneration Committee 14 June 2024 59 Hansa Investment Company Limited Annual Report 31 March 2024 ## Nominations Committee Report The Committee was chaired by Nadya Wells throughout the financial year. All independent members of the Board are members of the Nomination Committee. William Salomon attends the Committee but is not a member. Role The Committee reviews the structure, size and composition (including the skills, knowledge and experience) of the Board and makes recommendations to the Board with regard to any changes, as necessary. It also considers succession planning of directors, taking into account tenure and performance of board members as well as challenges and opportunities facing the Company, and what skills and expertise are, therefore, needed on the Board in the future. If a skills-gap or pending vacancy is identified, the Committee is responsible for identifying and nominating candidates to fill Board vacancies as and when they arise. Appointments are made after consideration of the skills and experience needed by the Board and against objective criteria in accordance with the AIC Code. The Board considers it is of paramount importance to shareholders that, after consideration of the skills and experience needed by the Board, candidates are chosen on the basis of their contribution to the Company’s needs and that there should be no discrimination in the choice of Directors for any reason. The Nominations Committee pays due regard to the final rules published by the Financial Conduct Authority in April 2022 in respect of diversity and inclusion on company boards and executive management. The Company believes a diverse Board brings many benefits and, as such, there is no restriction placed on Board membership. Selection and appointment will continue to be based on merit and against a skills matrix to ensure the overall composition of the Board has an appropriate balance of knowledge and experience, whilst remaining cognisant of the relevant geographic and diversity considerations. The Board has determined that all Directors will retire and offer themselves for re-election each year at the AGM and this policy includes any Directors appointed during the year. The Committee reports its recommendations to the Board for final approval. Activities during the year The Nomination Committee met twice during the year. The Committee has developed a Skills Matrix to summarise the knowledge, skills, experience and overall competence of each Director. This included anonymised feedback from the other Board members as well as feedback from each individual Director themselves. The Skills Matrix considers a wide range of relevant factors when assessing individual and collective competence including knowledge, skills, experience, diversity, geographic considerations, other time and business commitments, as well as their overall performance and contribution during the period in relation to their specific role. Following its review, and in line with the small size, structure and nature of the Company, the Committee concluded that each Director continued to contribute as required, and the Board continued to operate effectively. Following the annual review of Board Skills, the Nomination Committee was supportive of re-appointing the Directors to the Board within the 2024 AGM. However, Nadya Wells has chosen not to stand for re-election at the forthcoming AGM due to additional professional commitments. Consequently, as of 14 June 2024, Nadya’s responsibility as Chair of the Nominations Committee has passed to Simona Heidempergher. Succession planning The current Directors were all originally appointed in June 2019. Following Nadya’s decision, the Board is in the process of identifying a director to join in Nadya’s place. As part of the Skills Matrix utilised to evaluate Board composition, the Board notes the number of years each Director has served and their expected date of retirement. While the Board does not consider the length of tenure to have a direct negative correlation to the Directors performance and contribution, the Nomination Committee remains cognisant of the AIC recommendations and therefore still considers this element as part of its overall succession planning. For and on behalf of the Board Simona Heidempergher Chairman of the Nomination Committee 14 June 2024 60 FINANCIAL STATEMENTS ## Financial ## Statements 61 61 Hansa Investment Company Limited Annual Report 31 March 2024 ## Independent auditor’s report To the Board of Directors and Shareholders of Hansa Investment Company Limited REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Hansa Investment Company Limited (the Company) as at 31 March 2024, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards. What we have audited The Company’s financial statements comprise: • the balance sheet as at 31 March 2024; • the income statement for the year then ended; • the statement of changes in equity for the year then ended; • the cash flow statement for the year then ended; and • the notes to the financial statements, comprising material accounting policy information and other explanatory information. Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) and the ethical requirements of the Chartered Professional Accountants of Bermuda Rules of Professional Conduct (CPA Bermuda Rules) that are relevant to our audit of the financial statements in Bermuda. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the ethical requirements of the CPA Bermuda Rules. Our audit approach Overview Overall materiality: £4,545,000 based on approximately 1% of net assets. Materiality In addition to determining materiality, amongst other factors, the following were assessed in designing our audit: Audit • the risk of material misstatement in the financial statements • significant accounting estimates scope • the risk of management override of internal controls • Valuation and existence of investments • Accuracy, occurrence and completeness of investment income Key audit matters 62 FINANCIAL STATEMENTS Audit scope As part of designing our audit, the risks of material misstatement in the financial statements were assessed and materiality determined. In particular, consideration was given to where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, the risk of management override of internal controls was addressed, including, among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. The scope of our audit was tailored in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the industry in which the Company operates. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, certain quantitative thresholds for materiality were determined, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Overall materiality £4,545,000 How we determined it Approximates 1% of net assets The benchmark was applied as a generally accepted audit practice for Rationale for the materiality benchmark applied investment company audits. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £227,000, as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER Valuation and existence of investments Our approach to addressing the matter involved the following procedures, amongst others: Refer to notes 1(c) Non-current investments and 8 Listed equity investments: Investments held at fair value through profit or loss to the financial statements for disclosures of related • Tested the existence of the listed investment portfolio by agreeing the accounting policies and balances. holdings for investments to an independent custodian confirmation. • Tested the valuation of the listed investments by agreeing the prices The investment portfolio as at 31 March 2024 is comprised used in the valuation to independent third-party sources. of listed equity investments valued at £325 million (72%) Unquoted investments: and unquoted investments valued at £124 million (28%). • Understood and evaluated the controls around the pricing of unquoted We focused on the valuation and existence of listed and investments including the final approval of the valuation by the unquoted investments because the investment portfolio Manager and the Board of Directors. represents the principal element of net asset value as • Obtained direct confirmation of the existence of investments held and disclosed in the Company’s balance sheet. the price from each fund administrator. • Recalculated 100% of the unquoted portfolio’s fair value as at year end and compared to management’s valuation. • Obtained an understanding of the underlying methodology applied to each unquoted investment through review of their most recently available audited financial statements to evaluate whether it was based on fair value. Based on the procedures detailed above, we did not identify any misstatements which required reporting to those charged with governance. 63 Hansa Investment Company Limited Annual Report 31 March 2024 KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER Accuracy, occurrence and completeness of Our approach to addressing the matter involved the following investment income procedures, amongst others: • Assessed the accounting policy for investment income recognition Refer to notes 1(e) Investment income and return for compliance with accounting standards and the AIC SORP and of capital and 2 Investment income to the financial performed testing to evaluate whether income had been accounted for statements for disclosures of related accounting in accordance with this stated accounting policy. policies and balances. • Tested the accuracy of dividend receipts by agreeing the dividend rates Investment income consists of dividend income of from investments to independent market data. £7.8 million. • Tested investment holdings, on a sample basis, that all related dividends declared in the market had been recorded. We focused on the accuracy, occurrence and completeness • Tested occurrence by confirming that all dividends recorded in the of investment income recognition as incomplete or period had been declared in the market by investment holdings. inaccurate income could have a material impact on the • Tested the allocation and presentation of investment income between Company’s net asset value and dividend cover. the revenue and capital return columns of the income statement in line with the requirements set out in the AIC SORP by assessing We also focused on the accounting policy for income management’s judgement of the nature, facts and circumstances in recognition along with its allocation and presentation determining the classification of the distribution. in the income statement as set out in the requirements of The Association of Investment Companies Statement Based on the procedures detailed above we did not identify of Recommended Practice (the “AIC SORP”) as any misstatements which required reporting to those charged incorrect application could indicate a misstatement in with governance. income recognition. Other information Management is responsible for the other information. The other information comprises the Annual Report (but does not include the financial statements and our auditor’s report thereon). Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. UK Corporate Governance Code We have nothing to report in respect of our responsibility to report when the Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified, under the Listing Rules of the FCA, for review by the auditors. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 64 FINANCIAL STATEMENTS As part of an audit in accordance with ISAs, we exercise We communicate with those charged with governance regarding, professional judgement and maintain professional scepticism among other matters, the planned scope and timing of the throughout the audit. We also: audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design We also provide those charged with governance with a statement and perform audit procedures responsive to those risks, and that we have complied with relevant ethical requirements obtain audit evidence that is sufficient and appropriate to regarding independence, and to communicate with them all provide a basis for our opinion. The risk of not detecting a relationships and other matters that may reasonably be thought material misstatement resulting from fraud is higher than for to bear on our independence, and where applicable, actions taken one resulting from error, as fraud may involve collusion, forgery, to eliminate threats or safeguards applied. intentional omissions, misrepresentations, or the override of From the matters communicated with those charged with internal control. governance, we determine those matters that were of most • Obtain an understanding of internal control relevant to the significance in the audit of the financial statements of the current audit in order to design audit procedures that are appropriate period and are therefore the key audit matters. We describe these in the circumstances, but not for the purpose of expressing an matters in our auditor’s report unless law or regulation precludes opinion on the effectiveness of the Company’s internal control. public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be • Evaluate the appropriateness of accounting policies used communicated in our report because the adverse consequences and the reasonableness of accounting estimates and related of doing so would reasonably be expected to outweigh the public disclosures made by management. interest benefits of such communication. • Conclude on the appropriateness of management’s use of the The engagement partner on the audit resulting in this going concern basis of accounting and, based on the audit independent auditor’s report is Scott Watson-Brown. 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 PricewaterhouseCoopers Ltd. on the audit evidence obtained up to the date of our auditor’s Chartered Professional Accountants report. However, future events or conditions may cause the Hamilton, Bermuda Company to cease to continue as a going concern. 14 June 2024 • 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. 65 Hansa Investment Company Limited Annual Report 31 March 2024 ## Income Statement For the year ended 31 March 2024 | | | | | Year ended | | | | | Year ended | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 31 March | | | | | 31 March | | | | | | | | 2024 | | | | | 2023 | | | Revenue | | Capital | | Total | Revenue | | Capital | | Total | | Note | | £000 | £000 | | £000 | | £000 | £000 | | £000 | Gains/(losses) on investments held at fair value through profit or loss 8 - 88,760 88,760 - (14,924) (14,924) Foreign Exchange (losses)/gains - (492) (492) - 327 327 Income Investment income 2 7,780 - 7,780 6,892 - 6,892 7,7 80 88,268 96,048 6,892 (14,597) ( 7,7 05) Portfolio management fees 3 (2,950) - (2,950) (2,824) - (2,824) Other expenses 4 (1,676) - (1,676) (1,527) - (1,527) (4,626) - (4,626) (4,351) - (4,351) Income/(losses) before finance costs 3,15 4 88,268 91,422 2,541 (14,597) (12,056) Finance costs 5 - - - (1) - (1) Income/(losses) for the year 3,1 54 88,268 91,422 2,540 (14,597) (12,057) Return per Ordinary and ‘A’ non-voting Ordinary share 7 2.6p 73.6p 76.2p 2 .1p (12.2)p (10.1)p The Company does not have any income or expense not included in the above Statement. Accordingly, the “Income/(losses) for the Year” is also the “Total Comprehensive Income/(expense) for the Year”, as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented. The total column of this Statement represents the Income Statement, prepared in accordance with IFRS Accounting Standards (“IFRS”). All revenue and capital items in the above Statement derive from continuing operations. The accompanying notes on pages 70 to 80 are an integral part of this Statement. 66 FINANCIAL STATEMENTS ## Balance Sheet As at 31 March 2024 | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2024 | | 2023 | | Note | | £000 | | £000 | Non-current assets Investments held at fair value through profit or loss 8 449,153 353,262 4 49,1 53 353,262 Current assets Trade and other receivables 10 1,463 128 Cash and cash equivalents 11 4,352 13,987 5,815 14,115 Current liabilities Trade and other payables 12 (421) (412) Net current assets 5,394 13,703 Net assets 454,547 366,965 Capital and reserves Called up share capital 13 1,200 1,200 Contributed surplus 14 322,839 323,799 Retained earnings 15 130,508 41,966 Total shareholders’ funds 454,547 366,965 Net asset value per Ordinary and ‘A’ non-voting Ordinary share 16 378.8p 305.8p The Financial Statements of Hansa Investment Company Limited, registered in Bermuda under company number 54752, set out on pages 66 to 69 were approved by the Board of Directors on 14 June 2024 and were signed on its behalf by Jonathan Davie Chairman The accompanying notes on pages 70 to 80 are an integral part of this Statement. 67 Hansa Investment Company Limited Annual Report 31 March 2024 ## Statement of Changes in Equity Contributed | | Share | surplus | Retained | | | | --- | --- | --- | --- | --- | --- | | | capital | reserve | earnings | | Total | | For the year ended 31 March 2024 Note | £000 | £000 | | £000 | £000 | Equity at 1 April 2023 1,200 323,799 41,966 366,965 Profit for the year - - 91,422 91,422 Dividends 6 - (960) (2,880) (3,840) Equity at 31 March 2024 1,200 322,839 130,508 454,547 Contributed | | Share | surplus | Retained | | | | --- | --- | --- | --- | --- | --- | | | capital | reserve | earnings | | Total | | For the year ended 31 March 2023 Note | £000 | £000 | | £000 | £000 | Equity at 1 April 2022 1,200 324,759 56,903 382,862 Loss for the year - - (12,057) (12,057) Dividends 6 - (960) (2,880) (3,840) Equity at 31 March 2023 1,200 323,799 41,966 366,965 The accompanying notes on pages 70 to 80 are an integral part of this Statement. 68 FINANCIAL STATEMENTS ## Cash Flow Statement For the year ended 31 March 2024 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2024 | | 2023 | | Note | | £000 | | £000 | Cash flows from operating activities Income / (loss)* 91,422 (12,056) Adjustments for: Realised gains on investments 8 (6,228) (5,571) Unrealised (gains)/losses on investments 8 (82,532) 20,495 Foreign exchange 492 (327) (Increase)/decrease in trade and other receivables 10 (1,335) 73 Increase in trade and other payables 12 9 44 Purchase of non-current investments (69,313) (78,568) Sale of non-current investments 62,182 90,368 Net cash (outflow)/inflow from operating activities (5,303) 14,458 Cash flows from financing activities Interest paid on bank loans - (1) Dividends paid 6 (3,840) (3,840) Drawdown/(repayment) of loans - - Net cash outflow from financing activities (3,840) (3,841) (Decrease)/increase in cash and cash equivalents (9,1 43) 10,617 Cash and cash equivalents at start of financial year 13,987 3,043 Effect of foreign exchange rate changes (492) 327 Cash and cash equivalents at end of year 11 4,352 13,987 *Includes dividends received of £7,602,000 (2023: £6,810,000) and interest received of nil (2023: £nil). The accompanying notes on pages 70 to 80 are an integral part of this Statement. 69 Hansa Investment Company Limited Annual Report 31 March 2024 ## Notes to the Financial Statements 1 Material accounting policy information Private equity investments are stated at fair value through profit or loss in accordance with the International Private Equity and Hansa Investment Company Limited is a company limited by Venture Capital Valuation Guidelines. Private equity investments shares, registered and domiciled in Bermuda with its registered are carried at the fair value as reported by the Private Equity office shown on page 85. The principal activity of the Fund Manager (PEFM). In the absence of a valuation by the Company is an investment vehicle. PEFM at the balance sheet date, additional procedures to determine the reasonableness of the fair value estimate for (a) Basis of preparation inclusion in the Financial Statements are performed. These The Financial Statements of the Company have been prepared may include direct enquiries of the PEFM of the investment to in accordance with IFRS Accounting Standards (“IFRS”). IFRS understand, amongst others, valuation process and techniques means standards and interpretations issued (or adopted) used, external experts used in the valuation process and by the International Accounting Standards Board (they updated details of the underlying portfolio. In addition, the comprise: International Reporting Standards, International Company can obtain external independent valuation data and Accounting Standards (IAS) and Interpretations developed by benchmarks to validate fair value estimates. Further, recent the IFRS Interpretations Committee or the former Standing arms-length market transactions between knowledgeable Interpretations Committee (SIC)). and willing parties where available might also be considered. These Financial Statements are presented in sterling because Subsequent to the balance sheet date, the Administrator, will that is the currency of the primary economic environment in review subsequent valuations released by the Private Equity which the Company operates. The Financial Statements have fund to look for consistency with the estimations made as been prepared on a going concern basis under the historic described above. cost convention, modified by financial assets held at fair value Unrealised gains and losses, arising from changes in fair value, through profit or loss with the assertion of the Board on page are included in net profit or loss for the period as a capital item 40. The Financial Statements have also been prepared in in the Income Statement and are ultimately recognised in the accordance with the AIC Statement of Recommended Practice Capital Reserves. (SORP) for investment trusts, issued by the AIC in July 2022, to the extent that the SORP does not conflict with IFRS. The (d) Cash and cash equivalents material accounting policy information adopted is set out below. Cash and cash equivalents comprise cash at bank, short- term deposits and cash funds with an original maturity of (b) Presentation of Income Statement three months or less and are subject to an insignificant risk of In order to better reflect the activities of an investment changes in capital value. company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income (e) Investment Income and return of capital Statement between items of a revenue and capital nature, has Dividends receivable on equity shares are recognised on been presented alongside the Income Statement. the ex-dividend date. Where no ex-dividend date is quoted, dividends are recognised when the Company’s right to receive (c) Non-current investments payment is established. Dividends and Real Estate Investment As the Company’s business is investing in financial assets, Trusts’ (REIT) income are all stated net of withholding tax. In with a view to profiting from their total return in the form of many cases, Bermudan companies cannot recover foreign income received and increases in fair value, investments are incurred taxes withheld on dividends and capital transactions. classified at fair value through profit in accordance with IFRS As a result, any such taxes incurred will be charged as an 9. The Company manages and evaluates the performance of expense and included here. these investments on a fair value basis, in accordance with its investment strategy and information about the investments is When an investee company returns capital to the Company, the provided on this basis to the Board of Directors. amount received is treated as a reduction in the book cost of that investment and is classified as sale proceeds. Investments are recognised and de-recognised on the trade date. For listed investments fair value is deemed to be bid (f) Expenses market prices, or closing prices for SETS stocks sourced All expenses are accounted for on an accruals basis. Expenses from the London Stock Exchange. SETS is the London Stock are charged through the revenue column of the Income Exchange’s electronic trading service, covering most of the Statement except expenses which are incidental to the market including all FTSE 100 constituents and most liquid acquisition or disposal of an investment which are charged to FTSE 250 constituents, along with some other securities. the capital column of the Income Statement. Fund investments are stated at fair value through profit or loss (g) Taxation as determined by using the most recent available valuation Under Bermuda law, to the extent the Company remains out which is considered to be fair value at the Balance Sheet date. of scope of the Corporate Income Tax Act 2023 (the “CIT Act”), In some cases, this will be by reference to the most recent the Company is not required to pay taxes in Bermuda on either valuation statement supplied by the fund’s manager. In other income or capital gains. cases, values may be available through the fund being listed on an exchange or via pricing sources such as Bloomberg. Bermuda enacted the CIT Act on 27 December 2023. Entities 70 FINANCIAL STATEMENTS subject to tax under the CIT Act are the Bermuda constituent entities of multi-national groups. A multi-national group is defined under the CIT Act as a group with entities in more than one jurisdiction with consolidated revenues of at least EUR750mm for two out of the four previous fiscal years. If Bermuda constituent entities of a multi-national group are subject to tax under the CIT Act, such tax is charged at a rate of 15 per cent of the net taxable income of such constituent entities as determined in accordance with and subject to the adjustments set out in the CIT Act (including in respect of foreign tax credits applicable to the Bermuda constituent entities). Consolidated revenues of the Company's group are less than EUR750mm in each previous fiscal year. On this basis, the Company is not, and neither is it expected to be, in scope of the CIT Act regime. # (h) Foreign Currencies Transactions denominated in foreign currencies are recorded in the local currency, at the actual exchange rates as at the date of the transaction. Assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rate of exchange prevailing at the balance sheet date. Any gains or losses arising from a change in exchange rates, subsequent to the date of the transaction, are included as exchange gains or losses in the capital or revenue column of the Income Statement, depending on whether the gains or losses are of a capital or revenue nature respectively. # (i) Retained Earnings # Contributed Surplus The following are credited or charged to this reserve via the capital column of the Income Statement: - gains and losses on the disposal of investments; - exchange differences of a capital nature; - expenses charged to the capital column of the Income Statement in accordance with the above accounting policies; and - increases and decreases in the valuation of investments held at the balance sheet date. # Revenue Reserves The following are credited or charged to this reserve via the revenue column of the Income Statement: - net revenue recognised in the revenue column of the Income Statement. Under Bermuda Company Law, Retained Earnings and Contributed Surplus Reserve are both distributable. # (j) Significant Judgements and Estimates The key significant estimate to report, concerns the Company's valuation of its holding in DV4 Ltd. DV4 is valued using the most recent estimated NAV as advised to the Company by DV4, adjusted for any further drawdowns, distributions or redemptions between the valuation date and 31 March 2024. The most recent valuation statement was received on 21 February 2024 stating the value of the Company's holding as at 31 December 2023. In the absence of a valuation for 31 March 2024 from DV4, the Company performed additional procedures to determine the reasonableness of the fair value estimate for inclusion in the Financial Statements. Direct enquiries of the manager of DV4 were made in July 2020 to understand, amongst others, valuation process and techniques used, external experts used in the valuation process and updated details of underlying property portfolio. It has been confirmed with DV4's manager that the valuation procedures discussed in July 2020 are still the same used now. In addition, the Company has compared the historic valuation movements of DV4 to the FTSE350 Real Estate Index. Based on the information obtained and additional analysis performed the Company is satisfied that DV4 is carried in these Financial Statements at an amount that represents its best estimate of fair value at 31 March 2024. It is believed the value of DV4 as at 31 March 2024 will not be materially different, but this valuation is based on historic valuations by DV4, does not have a readily available third party comparator and, as such, is an estimate. There are no significant judgements. # (k) Adoption of new and revised standards At the date of authorisation of these Financial Statements there were no standards and amendments to the standards, which have not been applied in these Financial Statements. In the current financial period the Company has applied the following amendments to standards: - Amendments to IAS1 'Classification of liabilities as current or non-current' (effective for accounting periods beginning on or after 1 January 2023). - IFRS 17, 'Insurance contracts' (effective for accounting periods beginning on or after 1 January 2023). - Amendments to IAS 8 'Definition of Accounting Estimates' (effective for accounting periods on or after 1 January 2023). - Amendments to IAS 1 and IFRS Practice Statement 2 'Disclosure of Accounting Policies' (effective for accounting periods on or after 1 January 2023). - Amendments to IAS 12 'Deferred Tax related to Assets and Liabilities arising from a Single Transaction' (effective for accounting periods on or after 1 January 2023). There is no material impact on the Financial Statements or the amounts reported from the adoption of these amendments to the standards. Relevant International Accounting Standards that have yet to be adopted: IAS 1 – Classification of liabilities as current or non-current (effective 1 January 2024). The IASB has amended IAS 1 Presentation of Financial Statements to clarify its requirement for the presentation of liabilities depending on the rights that exist at the end of the reporting period. The amendment requires liabilities to be classified as non-current if the entity has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendment no longer refers to unconditional rights. IAS 1 – Non-current liabilities with covenants (effective 1 January 2024). The IASB has amended IAS 1 Presentation of Financial Statements to introduce additional disclosures for liabilities with covenants within 12 months of the reporting period. The additional disclosures include the nature of covenants, when the entity is required to comply with covenants, the carrying amount of related liabilities and circumstances that may indicate that the entity will have difficulty complying with the covenants. # (l) Operating Segments The Company considers it has one operating segment for the purposes of IFRS 8. 71 Hansa Investment Company Limited Annual Report 31 March 2024 2 Investment income | Revenue | | Revenue | | | --- | --- | --- | --- | | Year ended | | Year ended | | | 31 March | | 31 March | | | | 2024 | | 2023 | | | £000 | | £000 | Income from quoted investments Dividends 7,780 6,892 Total income 7,7 80 6,892 Note: Of the dividend income received during the financial year, £5.3m was received from the Company’s Strategic Holding in OWHL by way of a dividend received on 15 June 2023. The remainder was received from holdings within the Global Equity (direct) & Core Regional silos. 3 Portfolio management fee | Revenue | | Revenue | | | --- | --- | --- | --- | | Year ended | | Year ended | | | 31 March | | 31 March | | | | 2024 | | 2023 | | | £000 | | £000 | Portfolio management fee 2,950 2,824 Total management fee 2,950 2,824 As disclosed on page 47, the portfolio management fee is charged at an annual rate of 1% of the net assets of the Company (after any borrowings), after deducting the value of the investment in OWHL, on which no fee is payable. 4 Other expenses | Revenue | | Revenue | | | --- | --- | --- | --- | | Year ended | | Year ended | | | 31 March | | 31 March | | | | 2024 | | 2023 | | | £000 | | £000 | Administration fees 154 150 Directors' remuneration 298 262 Auditor's remuneration for audit of the Company’s Annual Financial Statements 92 68 Printing fees 57 36 Directors' liability insurance 67 67 Marketing 75 140 Registrar's fees 80 93 Banking charges 19 38 Secretarial services 159 153 Travel expenses 126 217 Broker fees 32 25 Stock Exchange listing fees 42 50 Safe custody fees 184 180 Management fee rebate from GAM (13) (28) Other 304 76 Total other expenses 1,676 1,527 72 FINANCIAL STATEMENTS 5 Finance costs | Revenue | | Revenue | | | --- | --- | --- | --- | | Year ended | | Year ended | | | 31 March | | 31 March | | | | 2024 | | 2023 | | | £000 | | £000 | Interest payable - 1 Total finance costs - 1 As disclosed on page 30, the Company has an unsecured lending facility through its Custodian, Banque Lombard Odier & Cie SA (“Lombard Odier”), in the amount of £30m, subject to there being sufficient value and diversity within the portfolio to meet the lender’s borrowing requirements. The facility is used periodically for short-term transactional funding requirements. As a result, the cost incurred in finance fees are not necessarily consistent between financial years. 6 Dividends paid | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2024 | | 2023 | | | £000 | | £000 | Amounts recognised as distributed to shareholders in the year are as follows: Fourth interim dividend for 2023 (paid 26 May 2023): 0.8p (2022: 0.8p) 960 960 First interim dividend for 2024 (paid 25 August 2023): 0.8p (2023: 0.8p) 960 960 Second Interim dividend for 2024 (paid 24 November 2023): 0.8p (2023: 0.8p) 960 960 Third Interim dividend for 2024 (paid 23 February 2024): 0.8p (2023:0.8p) 960 960 Total dividends paid 3,840 3,840 Set out below are the total dividends paid and proposed in respect of the current financial year. Where there has been no revenue available for distribution by way of dividend for the year, dividends have been paid from capital reserves, specifically contributed surplus which is permitted by Bermudan company law. | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2024 | | 2023 | | | £000 | | £000 | First interim dividend for 2024 (paid 25 August 2023): 0.8p (2023: 0.8p) 960 960 Second Interim dividend for 2024 (paid 24 November 2023): 0.8p (2023: 0.8p) 960 960 Third Interim dividend for 2024 (paid 23 February 2024): 0.8p (2023:0.8p) 960 960 Fourth interim dividend for 2023 (payable 31 May 2024):0.8p 2023 (0.8p) 960 960 Total dividends paid & proposed 3,840 3,840 The Board has announced four interim dividends, each of 0.8p per Ordinary and ‘A’ non-voting Ordinary share, relating to the year ended 31 March 2024. No final dividend is proposed for the year ended 31 March 2024. . 7 Return on ordinary shares (equity) | Revenue | | | Capital | | Total | Revenue | | | Capital | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | year ended | | year ended | | year ended | | year ended | | year ended | | year ended | | | 31 March | | | 31 March | 31 March | | 31 March | | | 31 March | 31 March | | | | 2024 | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 | Returns per share 2.6p 73.6p 76.2p 2.1p (12.2)p (10.1)p 73 Hansa Investment Company Limited Annual Report 31 March 2024 Returns Revenue return per share is based on the revenue attributable to equity shareholders of £3,154,000 (2023: £2,540,000). Capital return per share is based on the capital profit attributable to equity shareholders of £88,268,000 (2023: loss of £14,597,000). Total return per share is based on a combination of revenue and capital returns attributable to equity shareholders, amounting to net profit of £91,422,000 (2023: loss of £12,057,000). Both revenue and capital return are based on 40,000,000 Ordinary shares and 80,000,000 ‘A’ non-voting Ordinary shares, in issue throughout the year. 8 Investments held at fair value through profit or loss | | | | 2024 | 2023 | | --- | --- | --- | --- | --- | | Listed | Unquoted | | Total | Total | | £000 | | £000 | £000 | £000 | Cost at 1 April 242,560 76,138 318,698 324,927 Investment holding gains at 1 April 21,400 13,1 64 34,564 55,059 Valuation as at 1 April 263,960 89,302 353,262 379,986 Movements in the year: Purchases at cost 53,016 16,297 69,313 78,568 Sales – proceeds (71,652) 9,470 (62,182) (90,368) Movement in investment holding Gains/(losses) 79,412 9,348 88,760 (14,924) Valuation as at 31 March 324,736 124,417 4 49,15 3 353,262 Cost as at 31 March 230,152 101,905 332,057 318,698 Investment holding gains 94,584 22,512 11 7,0 96 34,564 Valuation as at 31 March 324,736 124,417 4 49,15 3 353,262 2024 2023 £000 £000 Gains on sales 6,228 5,571 Movement in investment holding gains/(losses) 82,532 (20,495) Gains/(losses) on investments held at fair value through profit or loss 88,760 (14,924) Transaction costs During the year expenses were incurred in acquiring and disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows: 2024 2023 £000 £000 Purchases 13 38 Sales 11 18 24 56 74 FINANCIAL STATEMENTS 9 Significant holdings The Company‘s holdings of 10% or more of any class of shares in investment companies and 20% or more of any class of shares in non-investment companies as at 31 March 2024 are detailed below: Exc. Minority Interest | Country of | | | | | | | Total | Profit after | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | incorporation | | | | % | Latest | capital and | | tax for the | | | | or | Class of | of class | | available | reserves | | | period | | registration | | Capital | | held | accounts | | $000 | | $000 | Ocean Wilsons Holdings Limited Bermuda Ordinary 26.5 31.12.2023 601,504 6 7,0 4 8 Ocean Wilsons Holdings Limited is included as part of the investment portfolio in accordance with IAS 28 - Investment in Associates. 10 Trade and other receivables The Company applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade receivables and contract assets. 2024 2023 £000 £000 Amounts due from brokers 1,353 - Prepayments and accrued income 110 128 1,463 128 11 Cash and cash equivalents 2024 2023 £000 £000 Cash at bank 348 13,987 Cash funds 4,004 - 4,352 13,987 12 Trade and other payables 2024 2023 £000 £000 Other creditors and accruals 421 412 421 412 13 Called up share capital 2024 2023 £000 £000 40,000,000 Ordinary shares of 1p 400 400 80,000,000 'A' non-voting Ordinary shares of 1p 800 800 1,200 1,200 The ‘A’ non-voting Ordinary shares do not entitle the holders to receive notices or to vote, either in person or by proxy, at any general meeting of the Company, but in all other respects rank pari passu with the Ordinary shares of the Company. 75 Hansa Investment Company Limited Annual Report 31 March 2024 14 Contributed surplus 2024 2023 £000 £000 Opening balance at 1 April 323,799 324,759 Dividend paid (960) (960) Closing balance at 31 March 322,839 323,799 15 Retained earnings | | | | | | | Reserves | | | | | | | | Reserves | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Capital – | | | | | | | | Capital – | | | | | | | | | investment | | | Total | | | | | investment | | | Total | | | | Capital – | | holding | | retained | | | | Capital – | | holding | | retained | | | Revenue | | | other | | profit | earnings | | Revenue | | | other | | profit | earnings | | | | 2024 | | 2024 | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 | | 2023 | | | £000 | | £000 | | £000 | | £000 | | £000 | | £000 | | £000 | | £000 | Opening balance at 1 April (2,364) 9,766 34,564 41,966 (2,024) 3,868 55,059 56,903 Profit/(loss) for the year 3,154 5,736 82,533 91,422 2,540 5,898 (20,495) (12,057) Dividend paid (2,880) - - (2,880) (2,880) - - (2,880) Closing balance at 31 March (2,090) 15,502 11 7,0 97 130,508 (2,364) 9,766 34,564 41,966 16 Net asset value 2024 2023 £000 £000 NAV per Ordinary and ‘A’ non-voting Ordinary share 378.8p 305.8p The NAV per Ordinary and ‘A’ non-voting Ordinary share is based on the net assets attributable to equity shareholders of £454,547,000 (2023: £366,965,000) and on 40,000,000 Ordinary shares (2023: 40,000,000) and 80,000,000 ‘A’ non-voting Ordinary shares (2023: 80,000,000) in issue at 31 March 2024. 17 Commitments and contingencies The Company has the following outstanding commitments as at 31 March 2024 (2023: £2.0m): Outstanding commitment in local currency GBP BPEA EQT Mid-Market Growth Partnership 1,7 74,644 1,404,879 GGV Discovery IV - Asia 600,000 474,984 GGV Discovery IV - US 600,000 474,984 Khosla Ventures VIII 1,020,000 80 7,4 73 TA Associates XV 3,600,000 2,849,905 Triton VI 1,740,000 1,4 8 7,5 61 TrueBridge Direct Fund III 183,000 144,870 TrueBridge Capital Partners Fund VIII 864,000 683,977 10,381,644 8,328,633 76 FINANCIAL STATEMENTS 18 Financial instruments and associated risks The Company’s financial instruments comprise securities, cash balances, debtors and creditors. These assets are classified in the following measurement categories: • those to be measured subsequently at fair value through profit or loss; and • those to be measured at amortised cost. The financial assets held at amortised cost include trade and other receivables, cash and cash equivalents. Risk Objectives and Policies The objective of the Company is to achieve growth of shareholder value commensurate with the risks taken, bearing in mind that the protection of long-term shareholder value is paramount. The policy of the Board is to provide a framework within which the Portfolio Manager can operate and deliver the objectives of the Company. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company’s net assets and/or a reduction of the profits available for dividends. These risks include those identified by the accounting standard IFRS 7, being market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Directors’ approach to the management of these is set out below. The Board, in conjunction with the Portfolio Manager and Company Secretary, oversees the Company’s risk management. Foreign currency risk Foreign currency risks arise in two distinct areas which affect the valuation of the investment portfolio. 1) the direct exposure where an investment is denominated and paid for in a currency other than Sterling; and 2) the indirect exposure where an investment has substantial non-Sterling underlying investment and/or cash flows. The Company does not normally hedge against foreign currency movements affecting the value of the investment portfolio, but takes account of this risk when making investment decisions. Some of the fund investments into which the Company invests will, in part or in whole, hedge some of their underlying currency risk, but this will be known at the time of investment and will form part of the investment decision. In those cases, the hedging will not remove the exposure to the underlying country or market sector. The Portfolio Manager monitors the effect of foreign currency fluctuations through the pricing of the investments by the various markets. | | Direct | | No direct | | | | Direct | | No direct | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | foreign | | foreign | | | | foreign | | foreign | | | | currency risk | | currency risk | | | Total | currency risk | | currency risk | | | Total | | | 2024 | | | 2024 | 2024 | | 2023 | | | 2023 | 2023 | | | £000 | | | £000 | £000 | | £000 | | | £000 | £000 | Investments 135,145 314,008 449,153 115,139 238,123 353,262 Other receivables including prepayments 34 1,319 1,353 72 56 128 Cash at bank - 4,352 4,352 - 13,987 13,987 Current liabilities (15) (406) (421) - (412) (412) 135,1 64 319,273 454,437 115,211 251,754 366,965 Note: Direct foreign currency risk includes direct exposure to USD and Euro currencies. Foreign currency sensitivity The following table illustrates the sensitivity of the profit/loss for the year and the shareholders’ funds in regard to the Company’s financial assets and financial liabilities. It assumes a 10% depreciation of Sterling against foreign currencies at 31 March 2024 and 31 March 2023. These percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Company’s monetary foreign currency financial instruments held at each balance sheet date. | If sterling had weakened by 10% against the | US$ | Euro | Other | US$ | Euro | Other | | --- | --- | --- | --- | --- | --- | --- | | currencies shown, this would have had the | 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | | following effect on the Company: | £000 | £000 | £000 | £000 | £000 | £000 | Income statement - profit/(loss) 687 20 22 918 (328) (204) Equity shareholders funds 10,670 955 1,891 9,228 692 1,601 11,357 975 1,913 10,146 364 1,397 Note: Other includes exposure to foreign currencies excluding US dollar and Euro. A 10% strengthening of Sterling against the above currencies would result in an equal and opposite effect on the above amounts. 77 Hansa Investment Company Limited Annual Report 31 March 2024 Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits and the interest payable on the Company’s variable rate borrowings. The Company has banking facilities amounting to £30m (2023: £30m) which are available for the Portfolio Manager to use in purchasing investments; the costs of which are based on the prevailing LIBOR rate, plus an agreed margin. The Company does not normally hedge against interest rate movements affecting the value of the investment portfolio, but takes account of this risk when an investment is made utilising the facility. The level of banking facilities used is monitored by both the Board and the Portfolio Manager on a regular basis. The impact on the returns and net assets of the Company for every 1% change in interest rates, based on the amount drawn down at the Year-End under the facility, would be £nil (2023: £nil). The level of banking facilities utilised at 31 March 2024 was £nil (2023: £1,000). Interest rate changes usually impact equity prices. The level and direction of change in equity prices is subject to prevailing local and world economic conditions as well as market sentiment, all of which are very difficult to predict with any certainty. The Company has floating rate financial assets, consisting of bank balances and cash funds that have received average rates of interest during the year of 0% on bank balances. | Cash flow | | | No | | Cash flow | | | No | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | interest | | interest | | | interest | | interest | | | | rate risk | | rate risk | | Total | rate risk | | rate risk | | Total | | | 2024 | | 2024 | 2024 | | 2023 | | 2023 | 2023 | | | £000 | | £000 | £000 | | £000 | | £000 | £000 | Investments - 449,153 449,153 - 353,262 353,262 Other receivables including prepayments - 1,463 1,463 - 128 128 Cash at bank 4,352 - 4,352 13,987 - 13,987 Current liabilities - (421) (421) - (412) (412) 4,352 450,195 454,547 13,987 352,978 366,965 Other price risk By the nature of its activities, the Company’s investments are exposed to market price fluctuations. NAV is calculated and reported daily to the London Stock Exchange. The Portfolio Manager and the Board monitor the portfolio valuation on a regular basis and consideration is given to hedging the portfolio against large market movements. The Company’s investment in Ocean Wilsons is large both in absolute terms, £96.5m as valued at 31 March 2024 (2023: £83.7m) and as a proportion of the NAV, 21.2% (2023: 22.8%). Shareholders should be aware that if anything of a severe and untoward nature were to happen to this company, it could result in a significant impact on the NAV and share price. However, it should also be noted that the exposure of Hansa Investment Company Limited to the currency, country and market- based risk exposure of Ocean Wilsons is, to an extent, mitigated by the diverse nature of the two investments within Ocean Wilsons. Wilson Sons, corresponding to 61.6% of Ocean Wilsons’ NAV, has a direct exposure to the Brazilian economy, whereas Ocean Wilsons Investments has a diverse Investment portfolio and corresponds to the other 38.4%. It is an investment the Board pays close attention to and it should be pointed out that the risks associated with it are very different from those of the other companies represented in the portfolio. The Board itself regularly undertakes a thorough review of its business and prospects and has determined that its future holds a lot of promise. As a consequence, the Board believes the risk involved in the investment is worthwhile. The performance of the portfolio as a whole is not designed to correlate with that of any market index. Should the portfolio of the Company, as detailed on pages 27 and 28, rise or fall in value by 10% from the year end valuation, the effect on the Company’s profit and equity would be an equal rise or fall of £44.9m (2023: £35.3m). Credit risk The Company only transacts with regulated institutions on normal market terms, which are trade date plus one to three days in the case of equities. Fund investment settlement periods will vary from fund to fund and are defined by the individual managers. The levels of amounts outstanding from brokers and fund managers are regularly reviewed by the Portfolio Manager. The duration of credit risk associated with the investment transactions is the period between the date the transaction took place, the trade date, the date the stock and cash were transferred and the settlement date. The level of risk during the period is the difference between the value of the original transaction and its replacement with a new transaction. The amounts due to/(from) brokers at 31 March 2024 are shown in Note 10 and Note 12 on page 75. The Company’s maximum exposure to credit risk on cash is £4.4m (2023: £14.0m) and on cash funds is £nil (2023: £nil). Surplus cash is on deposit with the Depositary/Custodian. 78 FINANCIAL STATEMENTS # **Liquidity risk** The liquidity risk to the Company is that it is unable to meet its obligations as they fall due, as a result of a lack of available cash and an inability to dispose of investments in a timely manner. A substantial proportion of the Company's portfolio is held in liquid quoted investments; however, there is a large, Strategic, holding in Ocean Wilsons of 21.2% (2023: 22.8%), unquoted equity investments of 2.6% (2023: 2.6%) and investments into open-ended investment funds with varying liquidity terms of 58.6% (2023: 58.6%). The Portfolio Manager takes into consideration the liquidity of each investment when purchasing and selling, in order to maximise the returns to shareholders, by placing suitable transaction levels into the market. Special consideration is given to investments representing more than 5% of the investee company. A detailed list of the investments, split by silo, held at 31 March 2024 is shown on pages 27 and 28. This can be used broadly to ascertain the levels of liquidity within the portfolio, although liquidity will vary with each investment – particularly the funds. # **Capital management** The Company considers its capital to be its issued share capital and reserves and whilst the Company has access to loan facilities it is not considered or used as core capital, but primarily to meet the cash timing requirements of opportunistic investment strategies and thereby enhance shareholder returns. The Board regularly monitors its share discount policy and the level of discounts and whilst it has the option to repurchase shares, it considers the best means of attaining a good rating for the shares is to concentrate on good shareholder returns. However, the Board believes the ability of the Company to repurchase its own 'A' non-voting Ordinary shares in the market may potentially enable it to benefit all equity shareholders of the Company. The repurchase of 'A' non-voting Ordinary shares, at a discount to the underlying NAV, would enhance the NAV per share of the remaining equity shares and might also enable the Company to address more effectively any imbalance between supply and demand for the Company's 'A' non-voting Ordinary shares. # **19 Fair value hierarchy and financial liabilities** IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: inputs for the asset or liability not based on observable market data (unobservable inputs). The financial assets and liabilities, measured at fair value, in the Statement of Financial Position, grouped into the fair value hierarchy and valued in accordance with the accounting policies in Note 1, are detailed below: | | Level 1 £000 | Level 2 £000 | Level 3 £000 | Total £000 | | --- | --- | --- | --- | --- | | **Year ended 31 March 2024** | | | | | | Financial assets at fair value through profit or loss | | | | | | Quoted equities | 192,221 | - | - | 192,221 | | Unquoted equities | - | - | 8,040 | 8,040 | | Fund investments | 42,692 | 206,200 | - | 248,892 | | **Fair Value** | **234,913** | **206,200** | **8,040** | **449,153** | | **Year ended 31 March 2023** | | | | | | Financial assets at fair value through profit or loss | | | | | | Quoted equities | 136,942 | - | - | 136,942 | | Unquoted equities | - | - | 9,132 | 9,132 | | Fund investments | 37,826 | 169,362 | - | 207,188 | | Investment in subsidiary | - | - | - | - | | **Fair Value** | **174,768** | **169,362** | **9,132** | **353,262** | The Company's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date of the event or change in circumstances that caused the transfer to occur. 79 Hansa Investment Company Limited Annual Report 31 March 2024 A reconciliation of fair value measurements in Level 3 is set out in the following table: | | 31 March | | | 31 March | | | --- | --- | --- | --- | --- | --- | | | | 2024 | | | 2023 | | | | equity | | | equity | | investments | | | investments | | | | | | £000 | | | £000 | Opening Balance 9,132 8,917 Transferred from Level 1 - - Purchases 367 - Sales (Capital Distribution) (402) - Total (losses)/gains included in gains/(losses) on investments in the Income Statement: on assets sold - - on assets held at year end (1,057) 215 Closing Balance 8,040 9,132 As at 31 March 2024, the investment in DV4 has been classified as Level 3. This is because the investment has been valued using the most recent estimated NAV as advised to the Company by DV4, adjusted for any further drawdowns, distributions or redemptions between the valuation date and 31 March 2024. The most recent valuation statement was received on 21 February 2024 and relates to the DV4 portfolio at 31 December 2023. Additionally, the underlying assets of DV4 are all Real Estate in nature and, as such, there is not a readily comparable market of identical assets for valuation purposes. In the absence of a valuation for 31 March 2024 from DV4, the Company performed additional procedures to determine the reasonableness of the fair value estimate for inclusion in the Financial Statements. Direct enquiries of the manager of DV4 were made in July 2020 to understand, amongst others, valuation process and techniques used, external experts used in the valuation process and updated details of underlying property portfolio. In addition, the Company has obtained external independent valuation data and compared the historic valuation movements of DV4 to that data. It has been confirmed with DV4’s manager that the valuation procedures discussed in July 2020 are still the same used now. In addition, the Company has compared the historic valuation movements of DV4 to the FTSE350 Real Estate Index. Based on the information obtained and additional analysis performed the Company is satisfied that DV4 is carried in these Financial Statements at an amount that represents its best estimate of fair value at 31 March 2024. It is believed the value of DV4 as at 31 March 2024 will not be materially different, but this valuation is based on historic valuations by DV4, does not have a readily available third party comparator and, as such, is an estimate. If the value of the investment was to increase or decrease by 10%, while all other variables remained constant, the return and net assets attributable to shareholders for the year ended 31 March 2024 would have increased or decreased by £770,000 (2023: £913,000). The Board considers 10% to be a potential movement between valuation periods borne out by historic valuation trends. However, this does not preclude the valuation moving a greater amount than 10% in the future. 20 Related parties and transactions with the portfolio manager William Salomon is a Director of the Company and Senior Partner of the Company’s Portfolio Manager. Details of the relationship between the Company and Hansa Capital Partners LLP, including amounts paid during the year and owing at 31 March 2024, are disclosed in the Governance Section – Service Providers on pages 47 to 48 and in Note 3 on page 72. Details of the relationship between the Company and the Directors, including amounts paid during the period to 31 March 2024, are disclosed in the Governance Section – The Board on page 42 and also in the Directors’ Remuneration Report on pages 57 to 59. 21 Controlling parties At 31 March 2024 Victualia Limited Partnership and Nomolas Ltd each held 25.9% of the issued Ordinary shares. Additional information is disclosed in the Strategic Review – Substantial Shareholders on page 33. 22 Post balance sheet events There are no significant events that have occurred after the end of the reporting year to the date of this Report which require disclosure. 80 ADDITIONAL INFORMATION ## Additional ## Information 81 81 Hansa Investment Company Limited Annual Report 31 March 2024 ## Notice of the Annual General Meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting authority is renewed or revoked at any other general meeting prior of the Members of the Company will be held at the Hamilton to such time. Princess Hotel, 76 Pitts Bay Rd, Pembroke HM 08, Bermuda 11. Special Resolution on Friday 2 August 2024 at 9:00 a.m. (Bermuda time) for the following purposes: That the amended Bye-laws produced to the meeting by the Chair be adopted as the Bye-laws of the Company in Agenda substitution for, and to the exclusion of, the Company’s • To appoint a chairperson of the meeting. existing Bye-laws. • To confirm notice. Summary of proposed amendments to the Bye-laws Resolutions Set out below is a summary of the principal amendments which 1. To receive and consider the audited Financial Statements and will be made to the Company’s existing Bye-laws through the the Reports of the Directors and Auditor for the year ended 31 adoption of the amended Bye-laws proposed at the AGM if March 2024. approved by shareholders. 2. To re-elect Jonathan Davie (a biography and Board This summary is intended only to highlight the principal endorsement can be found earlier on in the report) as a amendments which are likely to be of interest to shareholders. It Director of the Company. is not intended to be comprehensive and cannot be relied upon 3. To re-elect Richard Lightowler (a biography and Board to identify all amendments or issues which may be of interest to endorsement can be found earlier on in the report) as a all shareholders. This summary is not a substitute for reviewing Director of the Company. the full terms of the amended Bye-laws which will be available 4. To re-elect William Salomon (a biography and Board for inspection at the Company’s registered office, and also at the endorsement can be found earlier on in the report) as a registered office of Hansa Capital Partners LLP being 50 Curzon Director of the Company. Street, London, England, W1J 7UW, in each case from the date of 5. To re-elect Simona Heidempergher (a biography and Board the AGM Notice until the close of the AGM. The amended Bye- endorsement can be found earlier on in the report) as a laws will also be available for inspection at the venue of the AGM Director of the Company. from 15 minutes before and during the AGM and on the Company 6. To approve the Directors’ Remuneration Report. website https://www.hansaicl.com/shareholder-information/ 7. To approve the Directors’ Remuneration Policy and authorise regulatory-information.aspx19 the Board to determine the remuneration of the Directors. 8. To approve the Company’s Dividend Policy as can be found Method of Payment earlier on in the Annual Report. This Bye-law has been updated in line with wider market 9. To appoint PricewaterhouseCoopers LLP as Auditor of the developments to provide the Company with discretion to Company and to authorise the Directors to determine the prescribe the manner in which dividends and other monies are remuneration of the Auditor. paid, including (in the best interests of members and to take 10. Approval to repurchase up to 14.99% of the ‘A’ non-voting advantage of greater efficiency, improved security of payments Ordinary shares of 1p each in the issued shares capital of the and reduced costs) for payments to be made exclusively by inter- Company (the “Shares”). bank transfer or other electronic means approved by the Board. THAT the Company be and hereby is unconditionally authorised to make market purchases up to an aggregate of 11,992,000 shares 83.3 – Obligations to provide information to the Company at a price (exclusive of expenses) which is: This Bye-law has been updated to allow the Company to withhold payment of dividends to any shareholder that fails to provide • not less than 1p per share; and requested FATCA/CRS information to the Company within the • not more than the higher of: i) 5% above the average of the period set out in Bye-law 83.1; being 30 days. This withholding middle-market quotations (as derived from and calculated sanction will only be implemented after efforts by the Company by reference to the Daily Official List of the London Stock to first obtain the necessary information from the non-responding Exchange) for ‘A’ non-voting Ordinary shares of 1p each in the shareholder. The withholding of payment of dividends is intended five business days immediately preceding the day on which the to be a further mechanism to encourage non-responding share is purchased; and ii) the higher of the last independent shareholders to provide the required information. trade and the then current highest independent bid. For and on behalf of Conyers Corporate Services (Bermuda) AND Limited THAT the approval conferred by this resolution shall expire on the Vida Kam date of the next AGM (except in relation to the purchase of shares, Secretary the contract for which was concluded before such date and which 14 June 2024 might be executed wholly or partly after such date) unless the 82 ADDITIONAL INFORMATION Notes for Shareholders Notes for Depositary Interest Holders 1 Pursuant to Regulation 41 of the Uncertificated Securities 1 You will not receive a form of direction for the Annual General Regulations 2001 (as amended), only those members Meeting in the post. Depositary interests may be voted registered in the register of members of the Company 48 hours through the CREST Proxy Voting Service in accordance with before the Annual General Meeting (i.e. by close of business the procedures set out in the CREST manual. UK time on 31 July 2024) (or if the Meeting is adjourned, in In order for a proxy appointment or instruction made using the register of members of the Company 48 hours before the the CREST service to be valid, the appropriate CREST date and time of the adjourned meeting) (the “Meeting”) shall message (a “CREST Proxy Instruction”) must be properly be entitled to attend or vote at the Meeting in respect of the authenticated in accordance with Euroclear UK & Ireland number of shares registered in their respective names at that Limited’s specifications and must contain the information time. Changes to entries on the register of members after required for such instruction, as described in the CREST that time will be disregarded in determining the rights of any Manual (available via www.euroclear.com/CREST). The person to attend or vote at the Meeting. message, regardless of whether it constitutes the appointment 2 Registered members of the Company may vote at the Meeting of a proxy or is an amendment to the instruction given to (whether by show of hands or poll) in person or by proxy or a previously appointed proxy must, in order to be valid, be corporate representative. A member may appoint one or more transmitted so as to be received by the issuer’s agent ID 3RA50 persons as his proxy to attend and vote at the Meeting on his by 1:00pm UK time on 30 July 2024. For this purpose, the time behalf. A proxy need not be a member. Where more than one of receipt will be taken to be the time (as determined by the proxy is appointed the instrument of proxy must specify the time stamp applied to the message by the CREST Application number of shares each proxy is entitled to vote. Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST, in the manner prescribed by 3 The appointment of a proxy will not affect the right of a CREST. After this time any change of instructions to proxies member to attend and vote in person at the Meeting or appointed through CREST should be communicated to adjourned meeting. A member that is a corporation may the appointee through other means. CREST members and, appoint a representative to attend and vote on its behalf at where applicable, their CREST sponsors, or voting service the Meeting by delivering evidence of such appointment to providers should note that Euroclear UK & Ireland Limited the Company’s registrar no later than 48 hours before the time does not make available special procedures in CREST for any fixed for the Meeting (i.e. by 1:00pm UK time on 31 July 2024) particular message. Normal system timings and limitations or any adjourned meeting. will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member 4 In order to be valid, the proxy appointment (together with any concerned to take (or, if the CREST member is a CREST power of attorney or other authority (if any) under which it is personal member, or sponsored member, or has appointed a signed, or a notarised certified copy of that authority) must voting service provider, to procure that his CREST sponsor be returned by one of the following methods, in each case so or voting service provider(s) take(s)) such action as shall as to arrive no later than 1:00pm UK time on 31 July 2024 or, be necessary to ensure that a message is transmitted by in the case of an adjourned meeting, not less than 48 hours means of the CREST system by any particular time. In this before the time appointed for holding such adjourned meeting connection, CREST members and, where applicable, their (ignoring for these purposes non-working days) or (in the case CREST sponsors or voting system providers are referred, in of a poll taken otherwise than at or on the same day as the particular, to those sections of the CREST Manual concerning Meeting or adjourned meeting) for the taking of the poll at practical limitations of the CREST system and timings. The which it is to be used: via www.investorcentre.co.uk/eproxy by Company may treat as invalid a CREST Proxy Instruction using the details on your Form of Proxy; or in the circumstances set out in Regulation 35(5)(a) of the in hard copy form by post, by courier or by hand to the Uncertificated Securities Regulations 2001. Company’s Registrars, Computershare Investor Services 2 In the case of Depositary Interest Holders, a form of direction (Bermuda) Limited, c/o The Pavilions, Bridgwater Road, may be requested and completed in order to instruct Bristol BS99 6ZY. Computershare Company Nominees Limited, the Depositary, If you need help with voting online or need to request a to vote on the holder’s behalf at the Meeting by proxy or, if proxy form, please contact our Registrars, Computershare the Meeting is adjourned, at the adjourned meeting. Requests Investor Services (Bermuda) Limited on +44 (0370) 702 for a hard copy should be sent to Computershare Investor 0000. Calls are charged at the standard geographic rate and Services (Bermuda) Limited, c/o The Pavilions, Bridgwater will vary by provider. Calls outside the UK will be charged Road, Bristol BS99. at the applicable international rate. They are open between 3 To be effective, a valid form of direction (and any power of 09:00 – 17:30, Monday to Friday excluding public holidays attorney or other authority under which it is signed) must be in England and Wales. Alternatively, Computershare received electronically or delivered to Computershare Investor at WebCorres@computershare.co.uk. Services (Bermuda) Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99 by no later by 1:00pm UK time on 30 July 2024 or 72 hours before any adjourned Meeting. 4 The Depositary will appoint the Chairman of the meeting as its proxy to cast your votes. The Chairman may also vote 83 Hansa Investment Company Limited Annual Report 31 March 2024 or abstain from voting as he or she thinks fit on any other All holders business (including amendments to resolutions) which may 1 The quorum for the Annual General Meeting shall be two or properly come before the meeting. more shareholders present in person or by proxy. If within two hours from the time appointed for the meeting a quorum 5 The ‘Vote Withheld’ option is provided to enable you to is not present, the meeting shall be adjourned to the next abstain from voting on the resolutions. However, it should be business day at the same time and place or to such other time noted that a ‘Vote Withheld’ is not a vote in law and will not and place as the Directors may determine, and if a quorum is be counted in the calculation of the proportion of the votes not present at any such adjourned meeting, the meeting shall ‘For’ and ‘Against’ a resolution. be dissolved. 6 Depositary Interest holders wishing to attend the meeting 2 As of 14 June 2024 the Company’s total number of shares in should contact the Depositary at Computershare Investor issue is 40,000,000 Ordinary shares of 1p each and 80,000,000 Services (Bermuda) Limited, c/o The Pavilions, Bridgwater ‘A’ non-voting Ordinary shares of 1p each in issue. The Road, Bristol BS99 or by emailing UKALLDITeam2@ Ordinary shareholders are entitled to one vote per Ordinary computershare.co.uk by no later than by 1:00pm UK time on share held. The ‘A’ non-voting Ordinary shares do not entitle 30 July 2024. the holders to vote or receive notice of meetings, but in all other respects they have the same rights as the Company’s Ordinary shares. 3 A copy of this notice and other information can be found at https://www.hansaicl.com/shareholder-information/ financial-and-investment-reporting/year-2024.aspx#2024 84 ADDITIONAL INFORMATION ## Investor information Company information The Company currently manages its affairs so as to be a qualifying Further information about Hansa Investment investment company for ISA purposes, for both the Ordinary and Company Limited, including monthly fact ‘A’ non-voting Ordinary shares. It is the present intention that the sheets, Stock Exchange announcements and Company will conduct its affairs so as to continue to qualify for ISA shareholder presentations, can be found on the products. In addition, the Company currently conducts its affairs Company’s website: www.hansaicl.com 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 Please contact the Portfolio Manager, as and intends to continue to do so for the foreseeable future. The below, if you have any queries concerning the shares are excluded from the FCA’s restrictions which apply to Company’s investments or performance. non-mainstream investment products, because they are excluded securities as defined in the FCA Handbook Glossary. Finally, Portfolio Manager and additional administrative Hansa Investment Company Limited is registered as a Reporting services provider Financial Institution with the US IRS for FATCA purposes. Hansa Capital Partners LLP 50 Curzon Street Capital structure London The Company has 40,000,000 Ordinary shares of 1p each and W1J 7UW 80,000,000 ‘A’ non-voting Ordinary shares of 1p each in issue. The Telephone: +44 (0) 207 647 5750 Ordinary shareholders are entitled to one vote per Ordinary share Email: hiclenquiry@hansacap.com held. The ‘A’ non-voting Ordinary shares do not entitle the holders Website: www.hansagrp.com to vote or receive notice of meetings, but in all other respects they have the same rights as the Company’s Ordinary shares. Secretary and registered office | Please contact the Registrars, as below, if you | Conyers Corporate Services (Bermuda) Limited | | --- | --- | | have a query about a certificated holding in the | Clarendon House | | Company’s shares. | 2 Church Street PO Box HM666 | Hamilton HM CX Bermuda Registrar Computershare Investor Services (Bermuda) Limited c/o 13 Castle Street St Helier Jersey JE1 1ES Telephone: +44 (0) 370 707 4040 Email: info@computershare.co.je Website: www.computershare.com/je If you have a query, you can call our Shareholder helpline on +44 (0) 370 707 4040. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 08:30 - 17:30, Monday to Friday excluding public holidays in England and Wales. Register for updates To receive the latest news and views on the Company, please register at www.hansaicl.com 85 Hansa Investment Company Limited Annual Report 31 March 2024 | Investor disclosure | Financial calendar | | --- | --- | | AIFMD | Company year end | | Hansa Investment Company Limited’s AIFMD Investor Disclosure | 31 March | document can be found on its website. The document is a regulatory requirement and summarises key features of the Annual Report sent to shareholders Company for investors. June Packaged Retail and Insurance-based Investment Annual General Meeting Products (PRIIPs) July/August The Company’s AIFM, Hanseatic Asset Management LBG, is responsible for applying the product governance rules defined Announcement of half-year results under the MiFID II legislation on behalf of Hansa Investment November Company Limited. Therefore, the AIFM is deemed to be the ‘Manufacturer’ of Hansa Investment Company’s two share classes. Half-year Report sent to shareholders Under MiFID II, the Manufacturer must make available Key December Information Documents (KIDs) for investors to review if they so wish ahead of any purchase of the Company’s shares. Interim dividend payments August, November, February and May Links to these documents can be found on the Company’s website: www.hansaicl.com. Share price listings Service providers The price of your shares can be found on our website. In addition, share price information for Ordinary shares / ‘A’ non-voting Independent Auditor Ordinary shares can be found via the following codes: PricewaterhouseCoopers Ltd ISIN Solicitors – Bermuda BMG428941162 / BMG428941089 Conyers Dill & Pearman Limited SEDOL Solicitors – UK BKLFC18 / BKLFC07 Dentons UK and Middle East LLP Reuters Custodian HAN.L / HANA.L Banque Lombard Odier & Cie SA Bloomberg Stockbroker HAN LN / HANA LN Winterflood Investment Trusts TIDM Administrator HAN / HANA Apex Fund Administration Services (UK) Ltd Legal Entity Identifier Alternative Investment Fund Manager 213800RS2PWJXS2QDF66 Hanseatic Asset Management LBG 86 ADDITIONAL INFORMATION ## Glossary of terms Association of Investment Companies (AIC) Expense Ratio The Association of Investment Companies is the UK trade An expense ratio is determined through an annual calculation, association for closed-ended investment companies (www. where the operating expenses are divided by the average NAV. theaic.co.uk). Despite the Company not being UK domiciled, the Note there is also a description of an additional PRIIPs KID Company is UK listed and operates in most ways in a similar Ongoing Charges Ratio explained in the Annual Report. manner to a UK Investment Trust. Therefore, the Company follows the AIC Code of Corporate Governance and the Board Five Year Rolling NAV Return (per annum) considers that the AIC’s guidance on issues facing the industry The rate at which, compounded for five years, will equal the five remains very relevant to the operations of the Company. year NAV total return to end March, assuming dividends are always reinvested at pay date. Alternative Investment Fund Managers Directive (AIFMD) Five Year NAV and Share Price Total Return The AIFMD is a regulatory framework for alternative investment Rebased from 0% at the start of the five year period, this is fund managers (AIFMs), including managers of hedge funds, the rate at which the Company’s NAV and share prices would private equity firms and investment trusts. Its scope is broad and, have returned at any period from that starting point, assuming with a few exceptions, covers the management, administration dividends are always reinvested at pay date. The Company will and marketing of alternative investment funds (AIFs). Its focus is continue to quote results from its predecessor, Hansa Trust Ltd,as on regulating the AIFM rather than the AIFs. part of that reporting so shareholders can see the longer-term performance of the portfolio. Annual Dividend / Dividend The amount paid by the Company to shareholders in dividends Gearing (cash or otherwise) relating to a specific financial year of the Gearing refers to the level of borrowing related to equity capital. Company. The Company’s dividend policy is to announce its expected level of dividend payment at the start of each financial Hedging year. Barring unforeseen circumstances, the Company then Strategy used to reduce risk of loss from movements in interest expects to make four interim dividend payments each year – at rates, equity markets, share prices or currency rates. the end of August, November and February during that financial year and at the end of May following the end of the financial year. Issued Share Capital Issued share capital is the total number of shares subscribed to by Bid Price the shareholders. The price at which you can sell shares determined by supply and demand. Key Information Document (KID) This is a document of a form stipulated under the PRIIPs Capital Structure Regulations. It provides basic, pre-contractual, information about The stocks and shares that make up a company’s capital i.e. the Company and its share classes in a simple and accessible the amount of ordinary and preference shares, debentures and manner. It is not marketing material. The UK regulatory unsecured loan stock etc. which are in issue. authorities have introduced legislation from 1 January 2023 to amend some of the disclosures in the KID for UK shareholders. Closed-ended The Company’s AIFM will be producing both UK KIDs and A company with a fixed number of shares in issue. European KIDs going forward. Depositary/Custodian Key Performance Indicators (KPIs) A financial institution acting as a holder of securities A set of quantifiable measures a company uses to gauge its for safekeeping. performance over time. These metrics are used to determine a company’s progress in achieving its strategic and operational Discount goals and also to compare a company’s finances and performance When the share price is lower than the NAV, it is referred to as against other businesses within its industry. In the case of historic trading at a discount. The discount is expressed as a percentage of information, the KPIs will be compared against data of both the t h e N AV. Company and, prior to the Company’s formation, from Hansa Trust Ltd. 87 Hansa Investment Company Limited Annual Report 31 March 2024 Market Capitalisation Packaged Retail and Insurance-based Investment Product The market value of a company’s shares in issue. This figure is (PRIIP) found by taking the stock price and multiplying it by the total Packaged retail investment and insurance-based products (PRIIPs) number of shares outstanding. make up a broad category of financial assets that are regularly provided to consumers in the European Union. The term PRIIPs, Mid Price created by the European Commission to regulate the underlying The average of the Bid and Offer Prices of a particular market, is defined as any product manufactured by the financial traded share. services industry, to provide investment opportunities to retail investors, where the amount repayable is subject to fluctuation Net Asset Value (NAV) because of exposure to reference values, or the performance of The value of the total assets minus liabilities of a company. underlying assets not directly purchased by the retail investor. See also Key Information Document (KID). Net Asset Value Total Return See Total Return. Shareholders’ Funds/Equity Shareholders’ Funds This value equates to the NAV of the Company. See NAV. Offer Price The price at which you can buy shares determined by supply Spread and demand. The difference between the Bid and Ask price. Ordinary Shares Tradable Instrument Display Mnemonics (TIDM) Shares representing equity ownership in a company allowing A short, unique code used to identify UK-listed shares. The TIDM investors to receive dividends. Ordinary shareholders have the code is unique to each class of share and to each company. It pro-rata right to a company’s residual profits. In other words, they allows the user to ensure they are referring to the right share. are entitled to receive dividends if any are available after payments Previously known as EPIC. to financial lenders and dividends on any preferred shares are paid. They are also entitled to their share of the residual economic value Total Return of the company should the business unwind. When measuring performance, the actual rate of return of an investment or a pool of investments over a given evaluation Hansa Investment Company Limited has two classes of Ordinary period. Total return includes interest, capital gains, dividends and shares – the Ordinary shares (40 million shares) and the ‘A’ non- distributions realised over a given period of time. voting Ordinary shares (80 million shares). Both have the same financial interest in the underlying assets of the Company and Total Return – Shareholder receive the same dividend per share, but differ only in that only the The Total Return to a shareholder is a measure of the performance former shares have voting rights, whereas the latter do not. They of the company’s share price over time. It combines share price trade separately on the London Stock Exchange, nominally giving appreciation/depreciation and dividends paid to show the total rise to different share prices at any given time. return to the shareholder expressed as an annualised percentage. In the case of historic information, the Total Return will include Premium data against data of both the Company and, prior to the Company’s When the share price is higher than the NAV it is referred to as formation, from Hansa Trust Ltd. trading at a premium. The premium is expressed as a percentage of t h e N AV. 88 OVERVIEW 89 Hansa Investment Company Ltd Clarendon House 2 Church Street PO Box HM666 Hamilton HM CX Bermuda +44 (0) 207 647 5750 hiclenquiry@hansacap.com www.hansaicl.com