Key Matters Q&A

What is Company policy with regard to the shares trading at a discount to NAV?

The Hansa Investment Company Limited Board is aware that the Company’s discount to NAV for both share classes is in excess of 40%. The Board has listened to shareholder feedback and discusses this topic at Board meetings to consider what appropriate steps it could take up to help reduce the discount over the medium and long term.

The Board has considered a share buy-back policy but does not consider this would have a significant effect on the discount, at which the shares trade. In the opinion of the Board:

  • it reduces the number of shares outstanding and therefore the liquidity of the shares in the marketplace; reduced liquidity may, in fact, cause a rise in the discount;
  • it means a liquid investment portfolio needs to be maintained, compromising the ability to have a portfolio of
  • special situations; the maintenance of the long-term investment policy and its portfolio takes precedence over the short-term discount policy; and
  • the holding in OWHL would represent an even greater percentage of the portfolio and buying back shares would raise the relative exposure to Brazil, which the Board does not wish to do, giving preference to the return generation potential and benefits of diversification generated by the investment portfolio.

The primary objective of the Company is to generate a good economic return over the medium to long-term and create a compelling investment proposition for private investors, enabling them to gain access to investments not otherwise readily available. This, in due course, should increase demand for the Company’s shares. Each Investment Trust must consider its own particular circumstances and objectives in assessing what is in the best interests at any particular point in time for the Company and its shareholders. The 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. We also aim to promote the Company and its prospects through clear and transparent reporting to encourage demand for shares, particularly amongst private shareholders, thereby widening the shareholder base.

The Board has also considered whether the stubborn level of discount reflects a lack of understanding of the quality and liquidity of the portfolio and, therefore, the integrity of the NAV. It may be helpful to consider:

  • 47.6% of the value of the portfolio at year end was derived from securities which are tradeable on an Exchange and as such, their value is based upon their respective market listed share prices. This includes the holding in Ocean Wilsons (traded on the London Stock Exchange) which accounts for 22.8% of the portfolio.
  • 46.2% of the value of the portfolio at year end was derived from third party fund vehicles, whose value is based on prices received directly from the funds themselves, the price at which HICL’s units could be sold for at that point in time.
  • 3.7% was held in cash at the most recent year end.
  • Only 2.5% was held in illiquid vehicles (DV4, an evergreen holding).

Of the above, 91.3% of the total NAV has a pricing frequency of at least monthly, with 73.6% being daily or multiple times a day. Further, even if the Strategic holding in OWHL were considered illiquid, 68.5% of the total portfolio can be exited within a month, with 50.8% being daily. For these reasons, the Board considers that the values of the diverse investment portfolio are robust and do not reflect ‘stale’ values in a period of market volatility.

What is the Company’s dividend policy?

The Company’s dividend policy is to pay four similar interim dividends at the rate of 3.2p until it is fully covered by net revenue income and then increase it in line with any increase in the net revenue income of the Company. Currently the income generated by the portfolio is insufficient to meet this dividend commitment and the shortfall is made up from the Company’s reserves. In principle, the Board does not believe it to be in the Company’s best interests to use capital as a source from which to pay dividends.

How is the Company increasing liquidity and the investor base?

The Board continues to work with our broker and Alec Letchfield to promulgate the Hansa Investment Company story and investment opportunity. We are also continuing to enhance transparent and timely communication.

What are the Company’s plans around its investment in Ocean Wilsons Holdings Limited?

The Board continues to focus on the investment in Ocean Wilsons. Ocean Wilsons itself has two assets. An investment portfolio, held through its subsidiary Ocean Wilsons (Investments) Limited and a circa 56% holding in their main asset Wilson Sons Holdings Brasil SA (“Wilson Sons”), an established and respected Brazilian shipping and maritime business. Encouragingly, Wilson Sons performed well in 2022 in Brazilian Real terms with a 6.2% increase in revenue and a 9.3% uplift in EBITDA. All this despite the continuing challenges of global supply chain bottlenecks in the early part of the year. During the year to 31 December 2022, the investment portfolio returned -13.8%, which was better than the MSCI ACWI & Frontier Markets Index which, in US$ terms was -18.4% for the same period.

The Board notes that, on 12 June 2023, OWHL announced it was undertaking a strategic review involving its investment in Wilson Sons and that it will consider all potential strategic options. The Board will follow the process with interest but notes from OWHL’s announcement that it is currently at an early stage with no certainty as to its outcome.

What is the Company’s policy regarding share classes?

The current position of Ordinary and ‘A’ Ordinary share classes remains unchanged as the majority of Ordinary shareholders have informed the Board they do not wish to alter the present structure at this time.