Hansard Global Plc
Annual Report 2023

Plain-text annual report

a n n u a l r e p o r t a n d a c c o u n t s 2 0 2 3 Hansard is a specialist long-term savings provider that has been providing innovative financial solutions for international clients since 1987. We focus on helping financial advisors and institutions to provide their clients (individual and corporate investors) with saving and investment products in secure life assurance wrappers to meet long-term savings and investment objectives. We administer assets in excess of £1 billion for just under 40,000 client accounts located in up to 155 countries. Hansard Global plc Report and Accounts For the year ended 30 June 2023 Chairman’s Statement The Chairman reviews our performance, and the relevant issues affecting our business and how we operate. Chairman’s Statement Strategic Report A narrative review of the Group’s performance that includes an overview from the Chief Executive and details of our business. You can also find out about our approach to risk management. Governance Information In this section you can find out more on our Directors’ background and experience, their specific responsibilities in relation to the Annual Report and Accounts, the key parts of our governance framework and how it was implemented during the year as well as reports from the various Board committees. Financial Information The Group’s IFRS financial statements which include detailed analysis of the Group’s performance, assets and liabilities. You will also find the Company financial statements in this section. Group Chief Executive Officer’s Overview Our Business Model and Strategy Key Performance Indicators Business and Financial Review Risk Management and Internal Control Board of Directors Directors’ Report Directors’ Responsibilities Corporate Governance Report Hansard Global plc Climate-Related Financial Disclosures Report 2023 Report of the Audit & Risk Committee Report of the Nominations Committee Report of the Remuneration Committee Independent Auditor’s Report Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Balance Sheet Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements Parent Company Statement of Changes in Equity Parent Company Balance Sheet Parent Company Cash Flow Statement Notes to the Parent Company Financial Statements Shareholder Information Further information for shareholders such as our financial calendar and how to get in touch. Other Information Glossary Financial Calendar Contacts and Advisors 2 4 8 11 12 20 30 32 37 38 46 62 64 66 73 80 81 82 83 84 107 108 109 110 115 117 119 120 1 Hansard Global plc Report and Accounts 2023Chairman’s Statement Philip Kay I am pleased to present the Group’s annual report for the financial year ended 30 June 2023. During the year we strengthened our board composition with the addition of Christine Theodorovics and Thomas Morfett, who both bring highly relevant skills and experience. In turn, following his departure, I would like to thank Tim Davies for his contribution and commitment to the Group. Hansard, like many other businesses, has continued to experience a challenging external environment as we navigate our way through ongoing challenges in the global economy, including the effects of the Russia/Ukraine conflict. While new business was lower than the prior year comparative, the business has remained resilient, with our systems and client services functions fully operational at all times. The Board and I remain confident in the future opportunities for the business. We are operationally ready to launch our innovative new product in Japan and continue to make progress with distribution opportunities. We have also made significant progress with the project to replace our policy administration systems. This will provide an advanced, modern platform that will benefit our policyholders, distribution partners and Group performance through enhanced operational efficiency, increased scalability, and cost savings. 2 Hansard Global plc Report and Accounts 2023The Group remains well capitalised to meet the requirements of regulators, contract holders, intermediaries and other stakeholders. The dividend is subject to approval at the Annual General Meeting. If approved, this will represent total dividends for the financial year of 4.45p per share (2022: 4.45p). Upon approval, the final dividend will be paid on 16 November 2023. The ex-dividend date will be 5 October 2023 and the record date will be 6 October 2023. Philip Kay Chairman 27 September 2023 Financial Performance Our IFRS profit before tax for the year was £5.9m compared to £3.8m in 2022. Fees and commissions were down £3.1m to £45.7m for the year (2022: £48.8m), reflecting lower transactional income within Hansard International and the continuing run-off of Hansard Europe. Returns on group investments improved to £3.5m for the year (2022: £0.1m) as a result of increasing interest rates as a counter to inflationary pressures, with the Group managing its cash position to take advantage of improving yields wherever possible. Administrative and other expenses were £29.0m for the year, compared to £29.8m in 2022. The 2022 result incorporated a £1.0m provision for fees and other balances that were deemed likely to be irrecoverable from a set of legacy funds in the process of liquidation. The Group maintained tight control over general overheads and expenses. Further detail and analysis are contained in the Business and Financial Review on pages 12 to 19. New Business New business for the 2023 financial year was £85.7m (using the PVNBP metric), down 28.9% from £120.5m in 2022. New business levels were impacted by economic uncertainty, geopolitical developments, and a general hesitancy by clients to commit to long- term savings products, particularly those with contractual regular premiums. Initiatives are underway to improve new business levels and are further outlined in the Business and Financial Review. Capitalisation and Solvency The Group remains well capitalised to meet the requirements of regulators, contract holders, intermediaries and other stakeholders. On a risk-based capital basis, total Group Free Assets in excess of the Solvency Capital Requirements of the Group were £44.6m (2022: £50.7m), a coverage of 156% (2022: 165%). We have maintained our prudent investment policy for shareholder assets, which minimises market risk and has provided a stable and resilient solvency position over many years and economic cycles. Dividends The Board has resolved to pay a final dividend of 2.65p per share (2022: 2.65p). In making this decision, the Board has carefully considered its current and future cash flows, the risks and potential impact of the global economic situation, the outlook for future growth and profitability and the views of key stakeholders, including shareholders and regulators. T N E M E T A T S S N A M R A H C ’ I 3 Hansard Global plc Report and Accounts 2023 Group Chief Executive Officer’s Overview Graham Sheward Despite a challenging economic environment adversely influencing new business sentiment in our savings and investment target markets, I’m pleased to present this strong set of key financial results as testament to the resilience of the Hansard Group over many years. Organisational improvements and key person hires – including Thomas Morfett as our new CFO and John Whitehouse promoted to a newly created COO role – have enabled us to tighten focus on cost control and maximise returns on Group cash whilst building our refreshed product pipeline to improve new business revenue. Focus over the past financial year has been on creating and leveraging capacity in our Commercial team, to explore alternative distribution channels for our Japan proposition, and to refresh our existing product portfolio to reflect changing investor trends. A pipeline of improved products will begin to be offered from the end of this calendar year, to address declining sales volumes in our traditional markets. In addition, we’ve continued to make positive progress with our major technology project to replace our policy administration and associated systems, which will yield tangible cost savings and efficiency gains in the near future. Despite macro-economic double-digit inflationary pressure, tight cost control has reduced the impact to less than 1% of our prior year cost base, reflecting an increase of £0.2m excluding litigation costs and provision for bad debts which remain closely managed. These actions have enabled us to pay a consistent dividend yield to shareholders with minimal impact on reserves, whilst building opportunities to improve top-line growth now and for the future. The range of activities within the Group referred to above has required colleagues across the business to manage multiple priorities at pace, and I would like to take this opportunity to thank my executive team and all Hansard Group colleagues for their commitment and hard work. In addition, Hansard colleagues were delighted to be recognised for their commitment to servicing the needs of advisors and their clients, picking up awards for Excellence in Client Service and Excellence in Fintech at the October 2022 International Investment awards. Our Culture Change Programme has entered its third year and we were pleased to measure our progress via a recent Colleague Engagement Survey which evidenced 70% of “engaged colleagues”, up from 40% in early 2021. We will continue to strive to ensure that Hansard is a company that colleagues are proud to work in. This has been an important year of making significant progress across all our major strategic priorities, and I fully appreciate that we must now deliver on these well-developed plans to ensure Hansard remains a relevant, innovative, and sustainable business for all stakeholders. 4 Hansard Global plc Report and Accounts 2023Results for the Year Under Review We believe that the following areas are fundamental for the continued success of the Group: l l l Proposition enhancement, product improvement and diversification of our distribution channels to enable generation of significant flows of new business from identified target markets. Completing our technology change project to deliver meaningful cost savings in the near and medium term. Proactively managing our cash flows through the cycle to fund the appropriate balance of investment in new business and dividends. l Managing and mitigating our exposure to business risks; and l Positioning ourselves to incorporate increasing levels of regulation into our business model. I draw your attention to the following items below. Additional information is contained in the Business and Financial Review on pages 12 to 19. 1. New Business Distribution New business for the 2023 financial year was £85.7m (using the PVNBP metric), down 28.9% from £120.5m in FY 2022. New business levels were impacted by economic uncertainty, geopolitical developments, and a general hesitancy by clients to commit to long- term savings products, both regular and single premium. Activities in train to progress new business levels are further outlined in the Business and Financial Review. 2. Operational, Business and Financial Risks Our business model involves the acceptance of a number of risks on a managed and controlled basis. The Group’s Enterprise Risk Management (“ERM”) Framework continues to provide for the identification, assessment, management, control and reporting of current and emerging risks, recognising that systems of internal control can only provide reasonable and not absolute assurance against material misstatement or loss. The Group’s internal control and risk management processes have operated satisfactorily throughout the year under review, with the benefit of iterative enhancements as we continue to embed our approach and benefit from the relative maturity of the ERM Framework. 2.1 Litigation Risk As explained more fully in the Business and Financial Review, on pages 12 to 19, we continue to manage complaints and litigation arising from our closed book, Hansard Europe, where the assets linked to contracts written before 2014 have fallen in value or become illiquid. Hansard does not and did not give investment advice and were not therefore party to the selection of policy assets, and maintain that such claims have no merit against Hansard. As at 30 June 2023, the Group had been served with cumulative writs with a net exposure totalling €26.1m, or £22.4m in sterling terms (30 June 2022: €24.6m / £21.2m) arising from contract holder complaints and other asset performance-related issues. In this financial year we successfully defended 15 cases with net exposures of approximately £1.9m, 14 of which may be appealed by the plaintiffs. These successes continue to affirm the Group’s legal stance. 3. Hansard OnLine Our award-winning IT systems and online customer platform are key aspects of our proposition. Hansard OnLine is a powerful sales and business administration tool that is used by independent financial advisors (“IFAs”) and clients the world over. It is an integral part of the Group’s operating model and allows us to better service IFAs and clients, embed process efficiencies and be flexible in operational deployment. Hansard OnLine provides IFAs and clients with a reliable online self- service model which they can access 24/7 from anywhere around the world with an internet connection. It provides an important foundation to our strategic goal of the delivery of excellent customer service. As noted in previous reports, we have embarked on a project to replace our core administration systems and ensure our infrastructure is future-proofed for our next generation of products and strategic developments. Additional information concerning Hansard OnLine is set out in the Business and Financial Review on pages 12 to 19. 4. Operating Cash Flows and Dividends The Group generates operating cash flows to fund investment in operating systems, new business origination and to support dividend payments. As outlined in the Cash Flow analysis section of the Business and Financial Review, the Group generated £1.6m in overall net cash outflows before dividends (2022: inflows of £5.3m), after commission and other new business acquisition costs of £8.5m (2022: £11.5m) and the investment of £6.6m (2022: £4.5m) in IT software and equipment expenditure. Dividends of £5.9m were paid in the financial year (2022: £6.1m). A final dividend of 2.65p per share has been proposed by the Board and will be considered at the Annual General Meeting on 8 November 2023. If approved, this will represent total dividends for the financial year of 4.45p per share (2022: 4.45p). 5 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTGroup Chief Executive Officer’s Overview continued Graham Sheward Financial Performance Results for the Year Financial performance is summarised as follows. A detailed review of performance is set out in the Business and Financial Review that follows this report. New business sales – PVNBP IFRS profit before tax Underlying IFRS profit 2023 2022 £m £m 85.7 120.5 5.9 7.4 3.8 5.9 Assets under Administration 1,101.5 1,092.3 Value of In-Force (regulatory basis) 122.9 128.5 IFRS Results IFRS profit before tax for the year was £5.9m, up from £3.8m in 2022. After eliminating litigation and non-recurring items, as shown on page 13, the underlying IFRS profit (a non-GAAP metric) was £7.4m, up from £5.9m in 2022. Fees and commissions were £45.7m for the year (2022: £48.8m). Fees from Hansard International and Hansard Worldwide were down £2.7m to £43.6m from 2022, reflecting lower transactional based income and lower new business generally. Income from our closed book, Hansard Europe, has continued to fall as expected, and was £0.5m down on the prior year. Returns on group investments increased to £3.5m (2022: £0.1m) as central banks sought to counter inflation with higher interest rates, leading to higher yields on the Group’s bank deposits. Administrative and other expenses were £29.0m for the year, compared to £29.8m in 2022. The 2022 result incorporated a £1.0m provision for fees and other balances that were deemed likely to be irrecoverable from a set of legacy funds in the process of liquidation. The Group maintained tight control over general overheads and expenses. Origination costs to acquire new business of £16.2m is in line with the 2022 result. Origination costs in respect of new business decreased to £11.5m (2022: £13.6m). The amortisation of deferred origination costs increased to £4.7m (2022: £2.6m). Further details and analysis are contained in the Business and Financial Review on pages 12 to 19. requirements of regulators, contract holders, intermediaries and shareholders. The Group continues to be well capitalised. Under risk-based capital methodologies, total Group Free Assets in excess of the Solvency Capital Requirements of the Group were £44.6m (2022: £50.7m), a coverage of 156% (2022: 165%). Shareholder assets are typically held in a wide range of deposit institutions, investment grade corporate bonds, and highly rated money market liquidity funds. This prudent investment policy for shareholder assets minimises market risk and has provided a stable and resilient solvency position over recent years. Global Economic Situation The financial year began with a slow return to pre-pandemic business practice, and we were able to start reconnecting face-to- face with our broker community, particularly in our core markets in the Middle East and Latin America. Following the escalation of the Russia-Ukraine conflict in February 2022, the challenges to the rest of the world are becoming clearer as energy and food prices spiked leading to higher inflation. The direct impacts to our business as a result are now expected to be three-fold. Firstly, it has exacerbated hesitancy amongst our target clients in investing in long term savings plans and this has impacted our 2023 new business results. Secondly, we can expect cost pressures within our business in our 2024 financial year as energy costs increase, suppliers and professional advisors increase their charges and inflationary pressure is felt across our workforce. And lastly, stock market and foreign exchange volatility will continue to have a direct impact on income. We will seek to manage these challenges. We aim to build on our existing markets by opening new channels and developing new product opportunities and we will continue to target cost savings to help mitigate inflationary pressures elsewhere. Our People Our people are critical to our success and I would like to recognise and reiterate my thanks to each of my colleagues for their continued commitment, flexibility, and resilience in managing both our on- going day-to-day operations and our key strategic projects. I have been delighted by the level of engagement seen within our programme of cultural change referenced earlier and look forward to continuing in our goals of fostering an engaged and innovative workforce to meet our ambitions, and the expectations of our stakeholders. Capitalisation and Solvency Our key financial objective is to ensure that the Group’s solvency is managed safely through the economic cycle to meet the Graham Sheward Group Chief Executive Officer 27 September 2023 6 Hansard Global plc Report and Accounts 2023 7 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTOur Business Model and Strategy Our Business Model and Strategy Hansard is a specialist long-term savings provider that has been providing innovative financial solutions for international clients since 1987. We focus on helping our customers with savings and investment products in secure life assurance wrappers to meet their long-term savings and investment objectives. We administer assets in excess of £1 billion for just under 40,000 client accounts around the world. Business Model The Company’s head office is in Douglas, Isle of Man, and its principal subsidiaries operate from the Isle of Man, The Bahamas and the Republic of Ireland. Hansard International is authorised by the Isle of Man Financial Services Authority and has a branch in Malaysia, authorised by the Labuan Financial Services Authority, to support business flows from Asian growth economies. The Company also has a branch in Japan to support its Japanese proposition, which is authorised by the Japanese Financial Services Agency. Through its relationship with a local insurer in the UAE, Hansard International reinsures business written in the UAE. Our talented people are the foundation of our business. We have created an empowering culture, which values innovation, quality, integrity, and respect. Our strategy to improve, grow and future-proof our business will be delivered through three key areas of strategic focus: i. Improve our business: We will improve customer outcomes through the introduction of new disclosures, the provision of new products and services, focusing on the quality of our IFAs with whom we work with and continuing to drive up the engagement of our people within our business. ii. Grow our business: In recent years we established a new life company in The Bahamas and entered into a strategic alliance with Union Insurance in the UAE. We have acquired the necessary licence and approvals to access the Japanese market. We will continue to seek out opportunities for locally licenced business in other targeted jurisdictions over the coming years. iii. Future-proof our business: We actively consider new and innovative technologies, propositions, and business models. It remains critical to support the online and digital needs of our clients alongside improving organisational efficiency and scalability. Hansard Worldwide underwrites international and expatriate business around the world. It is authorised by the Insurance Commission of The Bahamas. Strategy Development Our current strategy has three main aims: Hansard Europe is authorised by the Central Bank of Ireland. Hansard Europe ceased accepting new business with effect from 30 June 2013. i. To capitalise on near term strategic opportunities; ii. To ensure the Group is well positioned to respond and adapt to regulatory and development change; and Our products are designed to appeal to affluent international investors, institutions, and wealth-management groups. They are distributed exclusively through independent financial advisers (IFAs) and the retail operations of financial institutions. Our network of Regional Sales Managers provides local language- based support services to independent financial advisors in key territories around the world, supported by our multi-language online platform, Hansard OnLine. Vision and Strategy Our vision for the Hansard Group is: “to share success with our clients by providing simple, understandable and innovative financial solutions”. To deliver this vision, client outcomes will be the central focus within our business and, consequently, we will seek to evolve all aspects of our products, processes, and distribution in order to constantly improve. iii. To consider and plan for longer term industry and technological evolution. During the past financial year, the primary focus has continued to be on delivering our two most significant near-term strategic initiatives: l bringing to market our locally-licensed investment products in Japan; and l upgrading and streamlining our systems and IT infrastructure. We have completed internally the development of our two new Japanese products and continue to make positive progress with distribution opportunities for them. Core functionality for our new IT platform has been delivered as at 30 June 2023. 8 Hansard Global plc Report and Accounts 2023We administer assets in excess of £1 billion for just under 40,000 client accounts located around the world Regulatory Change Transformational change remains high on the agenda of the Isle of Man Financial Services Authority (the Authority) as it continues to maintain a robust regulatory environment and keep pace with international standards. The Island’s reputation as a well-regulated and internationally responsible jurisdiction remains of vital importance to its competitive positioning in the global marketplace and maintaining consumer confidence in the Island’s financial services sector. The Regulator’s strategic priorities are also closely aligned with the Isle of Man Government’s vision to build a secure, vibrant and sustainable Manx economy. The Authority has continued its work to drive continuous improvement in the Isle of Man’s regulatory environment, targeting the protection of customers, the deterrence of financial crime and upholding confidence in the financial services sector. Supervisory emphasis remains focused on the delivery of outcomes that enhance the Island’s reputation as a well-regulated jurisdiction and a high level of compliance with international standards. Major milestones have been enacted in recent years with the implementation of new risk-based capital, conduct and governance regimes. More recently the Regulator has completed the transition from a predominantly sector risk-based supervisory approach to a wider impact and risk-led model, which deploys regulatory resources in the most appropriate and efficient way. Throughout the reporting period the Hansard Group has continued its work to adapt to and embrace the intent and objectives of regulatory change and development, working transparently with all the Group’s Regulatory bodies to shape our responses and embed associated changes in strategy, policy, practice and culture. Products The Group’s products are unit-linked regular or single premium life assurance and investment contracts which offer access to a wide range of investment assets. The contracts are flexible, secure and allow life assurance cover or other features depending upon the needs of the client. The contract benefits are directly linked to the value of assets that are selected by, or on behalf of, the client. The Group does not offer investment advice. Contract holders bear the investment risk. The Group’s products do not include any contracts with financial options and/or guarantees regarding investment performance and, hence, unlike the situation faced by some other life assurers, the Group carries no investment guarantee risk that can cause capital strain. As a result of high levels of service, the nature of the Group’s products, the functionality of Hansard OnLine, and the ability of the contract holder to reposition assets within a contract, we aim to retain the contract holder relationship over the long term. Contract holder servicing and related activities are performed by Hansard Administration Services Limited, which is authorised by the Financial Services Authority of the Isle of Man Government to act as an Insurance Manager to insurance subsidiaries of the Group. Revenues The main sources of income for the Group are the fees earned from the administration of insurance contracts. These fees are largely fixed in nature and amount to £40.5m. Approximately 30% of the Group’s revenues, under IFRS, are based upon the value of assets under administration. From this income we meet the overheads of the business, invest in our business, remunerate our distribution network, and pay dividends. Managing Risk Risk can arise from a combination of macro events and company- specific matters. On the macro side, the lingering effects of the Covid-19 pandemic, the Russia-Ukraine conflict and other geo- political tensions can cause significant volatility to stock markets, foreign exchange markets, interest rates and expense inflation. We therefore continue to maintain a robust, low risk balance sheet. We believe this prudent approach to be appropriate to meet the requirements of regulators, contract holders, intermediaries, and shareholders. We are conscious that managing operational risk is critical to our business and we remain committed to iterative development and enhancement of our enterprise risk management system and controls. Further details of our approach to risk management, and the principal risks facing the Group, are outlined in the Risk Management and Internal Control Section at pages 20 to 28. Hansard Online Hansard OnLine is a powerful and secure tool that is used by our IFAs around the world. Available in multiple languages, it allows them to access information about their clients, to generate reports for their clients, to submit new business applications online, to place dealing and switch instructions online, to access all client correspondence and to access a library of forms and literature. Almost all investment transactions are processed electronically by intermediaries, on behalf of their clients, using Hansard OnLine and over 90% of all new business applications are submitted via the platform. The straight-through processing of contract holder instructions (whether received directly or through their appointed agents) reduces the Group’s operational risk exposures, as does the ability of the Group to communicate electronically with contract holders 9 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTOur Business Model and Strategy continued and intermediaries, irrespective of geographical boundaries. Data validation happens in real-time to ensure there are no delays to the investment of client funds. and cost-effective means of communication with clients but also the convenience to manage their own contract within a timeframe which is more suitable. Continuous Improvements to our Online Proposition When it comes to improving how we operate and the proposition we offer, we value the views of our clients and IFAs. This means that we regularly seek feedback through surveys and office visits in order to identify ways in which we can improve our systems and processes to best meet their needs. However, it is not just functionality that is important, we also have a continuous programme to enhance the overall user experience, for both IFA’s and our clients. Cyber Security Hansard has continued to invest in its cyber security infrastructure with the implementation of a Security Operations Centre, operating at an ISO27001 (Information Technology Security Standard) standard, to provide further enhanced surveillance of our systems and external threats. Excellent Customer Service We strive to provide excellent customer service and turn-around times to our clients and our IFA community. We have won several external awards in this area over the years, most recently in October 2022 when we won ‘Excellence in Client Service - Industry’ from International Investor for the Asian region, Africa region and as overall global winner. We also maintained our five-star rating for customer service by AKG Financial Analytics in their 2022 review. Hansard Online Lite provides prospective IFAs with easy access to a subset of the online system. Its purpose is to showcase our online proposition to prospective and new IFAs and to allow easy access to non-sensitive documents and functionality. Users can access our online document library, the Unit Fund Centre, company news and submit new business online. The benefit of Hansard OnLine is recognised by many IFAs as market leading and our online proposition has been nominated for and won several independent industry awards. Most recently this included winning International Investment’s “Excellence in Fintech” award in October 2022, the third year in a row to win this prestigious award. Online Accounts Whilst many of our IFAs are technologically sophisticated and have been utilising our online offering for years, we remain committed to supporting greater take up by our clients, enabling them to realise the benefits of our technology solutions, including ease of access and improved security. However, we are now observing a growing trend amongst our clients to take more control of their financial wellbeing by embracing mobile technology to better monitor and manage their finances. To support our commitment to delivering ‘excellent customer service’, we believe it is vital to provide our clients with a modern and secure online platform that allows them to access their finances easily and comprehensively, 24/7. We provide this through our client-facing version of Hansard OnLine, called Online Accounts. Similar to our IFA-facing online platform, the client’s Online Account allows them to access all their policy information, valuation statements, transaction history, premium reports, switch funds online, access all correspondence, access a library of forms and literature, and more. A large and increasing number of clients have signed up for this service which allows them to view all documentation and communications relating to their contracts via their Online Account, as well as choosing to receive post electronically, rather than in hard-copy form. This not only provides a more secure, more efficient 10 Hansard Global plc Report and Accounts 2023Key Performance Indicators Key Performance Indicators The Group’s senior management team monitors a wide range of Key Performance Indicators, both financial and non-financial, that are designed to ensure that performance against targets and expectations across significant areas of activity are monitored and variances explained. The following is a summary of the key indicators that were monitored during the financial year under review. New Business – The Group’s internal indicator of calculating new business production, Compensation Credit (“CC”) reflects the amount of base commission payable to intermediaries. Incentive arrangements for intermediaries and the Group’s Regional Sales Managers incorporate targets based on CC (weighted where appropriate). New business levels are reported daily and monitored weekly against target levels. Compensation credit was down £2.6m compared to 2022 driven by client hesitancy to commit to long-term savings and other economic headwinds on sales activity. Administrative Expenses (excl. litigation and non-recurring items) – The Group maintains a rigorous focus on expense levels and the value gained from such expenditure. The objective is to develop processes to restrain increases in administrative expenses to the rates of inflation assumed in the charging structure of the Group’s policies. The Group’s administrative and other expenses for the year (excl. litigation and non- recurring items) were £22.3m compared to £22.1m in the previous year. Further detail is contained in the section on Administrative and other expenses on page 15. Cash – Bank balances and significant movements on balances are reported monthly. The Group’s cash and deposits at the balance sheet date were £65.4m (2022: £74.5m). Movements are reflective of cash earned from new and existing business, commissions and expenses paid, investments in new systems, the level of inflight transactions, and the dividends paid to shareholders. Issued CC for the year ending 30 June Group Admin and other expenses for year ended 30 June Total cash balances at 30 June m £ m £ m £ Business Continuity – Maintenance of continual access to data is critical to the Group’s operations. This has been achieved throughout the year through a robust infrastructure. The Group is pro-active in its consideration of threats to data, data security and data integrity. Business continuity and penetration testing is carried out regularly by internal and external parties. Business continuity is further evidenced by ongoing remote working as a normal business practice. Risk Profile – The factors impacting on the Group’s risk profile are kept under continuous review. Senior management review actual and emerging risk issues at least monthly. The principal risks faced by the Group are summarised in the Principal Risks section below. Solvency – The Solvency Capital Requirement (”SCR”) of the Group and its’ subsidiaries is monitored frequently and reported to the Board. The SCR as at 30 June 2023 is reported in Other Information. 11 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTBusiness and Financial Review New Business Performance for the Year Ended 30 June 2023 The Group continues to focus on the distribution of regular and single premium products in a range of jurisdictions around the world, achieving well diversified new business growth. New business performance for the year is summarised in the table below: 2023 2022 % Basis £m £m change Present Value of New Business Premiums Annualised Premium Equivalent 85.7 12.7 120.5 (28.9%) 16.4 (22.6%) The recruitment of last year has helped establish new relationships and support ongoing relationships through this difficult time. Activities around new business generation remain high as we work with key advisors around both existing and new opportunities. The Head of Sales has taken oversight of our global IFA-channel sales team and is tasked to deliver our key distribution and relationship initiatives, with particular focus around delivery of the new proposition developments into key markets and to maximise the opportunities that this will create. Alongside this the Head of New Business Development is tasked with developing business relationships with new distributors globally and further invigorating relationships with current distributors. Several new relationships have already started producing business and this work will continue in the forthcoming year to expand further our networks of distributors. In Present Value of New Business Premiums (“PVNBP”) terms, new business for the year to 30 June 2023 was £85.7m, 28.9% down compared to the prior year. The Annualised Premium Equivalent (“APE”) measure shows a decline of 22.6% from 2022 to £12.7m. Present Value of New Business Premiums (“PVNBP”) New business flows on the PVNBP basis for the Group are further analysed as follows: The sales team is well positioned to drive broker and product initiatives to increase new business in the 2024 financial year and beyond. This includes the development and launch of new products for key target markets, updates and improvements to existing products and launch of our new system that will serve as the foundation of product and service in the future. Premium currencies remained relatively consistent year on year, with the predominant currency being US Dollars: Currency denominations (as a percentage of PVNBP) US dollar Sterling Euro Other 2023 % 87 8 4 1 2022 % 82 15 3 - 100 100 PVNBP by product type Regular premium Single premium Total PVNBP by region Middle East and Africa Rest of World Latin America Far East Total 2023 £m 55.7 30.0 85.7 2023 £m 42.4 25.7 12.1 5.5 85.7 2022 £m % change 76.9 (27.6%) 43.6 (31.2%) 120.5 (28.9%) 2022 £m % change 44.3 (4.3%) 33.9 (24.2%) 28.2 (57.0%) 14.1 (61.0%) 120.5 (28.9%) New business for the financial year was impacted by economic uncertainty, geopolitical developments, and a general hesitancy by clients to commit to long-term savings products as the global cost of living crisis impacted the outlook for savings, particularly in the contractual regular premiums market. We saw a number of large single premium cases which gives a glimpse of potential opportunity as we roll out our new single premium proposition. 12 Hansard Global plc Report and Accounts 2023 Presentation of Financial Results Our business is long term in nature. The nature of the Group’s products means that new business flows have a limited immediate impact on current earnings reported under International Financial Reporting Standards as adopted by the United Kingdom (“IFRS”), as initial fees and acquisition costs from the contracts sold are mostly deferred and amortised over the life of the contract. The benefit of sales to fee income levels are felt in future financial periods, noting also that our newer products have a longer earning period than our older products. Results for the Year The following is a summary of key items to allow readers to better understand the results for the year. IFRS profit before tax for the year was £5.9m, up from £3.8m in 2022. The primary drivers behind the increase are higher investment returns as central bank rates have increased throughout the year, and lower administration expenses. Operating profit prior to litigation and non-recurring items was £7.4m in 2023, up from £5.9m in 2022. Abridged Consolidated Income Statement The consolidated statement of comprehensive income presented under IFRS reflects the financial results of the Group’s activities during the year. This income statement however, as a result of its method of presentation, incorporates a number of features that might affect an understanding of the results of the Group’s underlying transactions. These relate principally to: ■ Investment gains attributable to contract holder assets were £40.2m (2022: loss of £103.6m). These assets are selected by the contract holder, or an authorised intermediary and the contract holder bears the investment risk. They are also reflected within ‘Change in provisions for investment contract liabilities’ and together have no net impact on IFRS profit. ■ Fund management fees are collected and paid onwards by the Group to third parties having a relationship with the underlying contract. In 2023 these were £5.2m (2022: £5.6m). These are reflected on a gross basis in both income and expenses under the IFRS presentation on page 80. Deducting the £5.2m from £45.7m for fees and commissions and £29.0m for administrative and other expenses in the consolidated statement of comprehensive income results in the figures of £40.5m, £22.3m and £1.5m presented below. An abridged non-GAAP consolidated income statement in relation to the Group’s own activities is presented below, adjusted for the items of income and expenditure indicated above. Fees and commissions attributable to Group activities Investment and other income 2023 £m 40.5 5.4 45.9 2022 £m 43.2 1.0 44.2 Origination costs (16.2) (16.2) Administrative and other expenses attributable to the Group, before litigation and non-recurring items Operating profit for the year before litigation and non-recurring items Litigation and non-recurring expense items Profit for the year before taxation Taxation Profit for the year after taxation (22.3) (22.1) 7.4 5.9 (1.5) 5.9 (0.2) 5.7 (2.1) 3.8 (0.2) 3.6 Fees and Commissions Fees and commissions for the year attributable to Group activities were £40.5m, 6.3% lower than the 2022 total of £43.2m. Contract fee income totalled £28.1m for the year, down £2.0m on the 2022 comparative of £30.1m. Contract fee income includes the amortised element of up-front income deferred under IFRS and contract-servicing charges. Amortisation of deferred income in Hansard International was broadly similar to the prior year, whilst immediately recognised fees, including surrender charges from redemptions, decreased compared to the prior year. This was reflective of lower levels of redemptions compared to the prior year. The continuing run-off of Hansard Europe which closed to new business in 2013 resulted in lower contract fee income of £2.0m (2022: £2.5m). Fund management fees accruing to the Group and commissions receivable from third parties totalled £12.4m (2022: £13.1m). Such fees are related directly to the value of assets under administration and are affected by market movements, currency rates and valuation judgements. 13 Hansard Global plc Report and Accounts 2023STRATEGIC REPORT Business and Financial Review continued A summary of fees and commissions is set out below: Contract fee income Fund management fees accruing to the Group Commissions receivable 2023 £m 28.1 7.7 4.7 40.5 2022 £m 30.1 8.3 4.8 43.2 Origination costs incurred in 2023 have decreased by £2.1m from the prior year. Origination costs were lower in line with lower new business levels but offset by increased amortisation of prior year balances. Origination costs – deferred to match future income streams Origination costs – expensed as incurred Included in contract fee income is £16.8m (2022: £16.6m) representing the amortisation of fees prepaid in previous years, as can be seen in the analysis set out below: Investment in new business in year Amortisation of deferred origination costs net of new deferrals Amortisation of deferred income Income earned during the year Contract fee income 2023 £m 16.8 11.3 28.1 2022 £m 16.6 13.5 30.1 Amounts totaling £13.5m (2022: £13.9m) have been expensed to match contract fee income earned this year from contracts issued in previous financial years, as can be seen in the analysis below. Summarised origination costs for the year were: 2023 £m 2022 £m 8.8 2.7 11.5 4.7 16.2 11.3 2.3 13.6 2.6 16.2 2023 £m 2022 £m 13.5 13.9 2.7 16.2 2.3 16.2 Investment and Other Income Investment income has improved significantly as UK and US interest rates have increased from their historically low levels. Amortisation of deferred origination costs Other origination costs incurred during the year Bank interest and other income receivable Foreign exchange profits / (losses) on revaluation of net operating assets 2023 £m 2022 £m 4.5 1.3 0.9 5.4 (0.3) 1.0 Origination Costs Under IFRS, new business commissions paid, together with the directly attributable incremental costs incurred on the issue of a contract, are deferred and amortised over the anticipated life of that contract to match the longer-term income streams expected to accrue from the contracts issued this year. Typical terms range between 6 years and 16 years, depending on the nature of the product. Other elements of the Group’s new business costs, for example, salaries of sales staff, are expensed as incurred. 14 Hansard Global plc Report and Accounts 2023 Administrative and Other Expenses We continue to manage our expense base robustly to control administrative expenses while supporting our strategic developments and other new business growth activities with targeted expenditure. An analysis of administrative and other expenses is set out in notes 8 and 9 to the consolidated financial statements under IFRS. The following summarises some of the expenses attributable to the Group’s own activities, excluding the third-party fund management fees collected and paid onwards by the Group to third parties having a relationship with the underlying contract of £5.2m (2022: £5.6m). Growth investment spend represents internal and external strategic costs to generate opportunities for growth. This includes the costs of our commercial development team and costs associated with developing our Japanese proposition which have reduced in the current year as the project has neared conclusion. Litigation defence and settlement costs represent those costs (net of insurance recoveries) incurred in defending Hansard Europe against writs taken against it, as described more fully in note 26 to the consolidated financial statements. Legal costs recovered from insurers were £0.1m (2022: £0.5m). No further additional provisions have been required in the current year with the balance of the provision as at 30 June 2023 being £0.1m (2022: £0.2m). 2023 £m 2022 £m Provision for doubtful debts relate to the provision in full of fees and other balances likely to be irrecoverable from a set of primarily Hansard Europe legacy funds which are in the process of liquidation. Salaries and other employment costs Other administrative expenses Professional fees, including audit Recurring administrative and other expenses Growth investment spend Administrative and other expenses, excl. litigation and non-recurring expense items Litigation defence and settlement costs Provision for doubtful debts 10.6 7.7 3.1 21.5 0.8 22.3 1.4 0.1 10.8 7.3 2.8 20.9 0.8 21.7 1.1 1.4 24.2 Total administrative and other expenses 23.8 Salaries and other employment costs have decreased by £0.2m or 1.9% to £10.6m as a result of close scrutiny of headcount and a lower variable compensation element. The average Group headcount for the 2023 financial year was 187 people (2022: 189 people). Other administrative expenses increased marginally to £7.7m from £7.3m as we actively managed the Group cost base despite high inflationary pressure. Professional fees including audit increased by £0.3m to £3.1m. These costs include amounts totalling £0.8m paid to the Group’s auditor (2022: £0.5m) with the increase driven by additional fees in respect of the prior year, and fees for assurance work in respect of ESG; £0.5m (2022: £0.5m) for administration, custody, dealing and other charges paid under the terms of the investment processing outsourcing arrangements; recruitment costs of £0.2m (2022: £0.2m), costs of investor relations activities of £0.2m (2022: £0.2m) and general legal and professional fees of £1.4m (2022: £1.4m). Cash Flow Analysis The operational cash surplus (fees deducted from contracts and commissions received, less operational expenses paid) for the year was £15.9m (2022: £21.1m). Operating cash flows have decreased this year as a result of the reduction in fee income. Writing new business, particularly regular premium business, produces a short-term cash strain as a result of the commission and other costs incurred at the inception of a contract. Annual management charges offset this strain and produce a positive return over time. Future increases in new business levels can be funded where necessary by the Group’s significant cash resources, but over time as the level of contract holder assets is built up, the annual management charges that are earned from the Group’s newer products will become sufficient to sustain new business growth and dividends. During 2023, the Group invested £6.6m (2022: £4.2m) as part of a project to replace its administration systems. These costs are capitalised as Intangible Assets on the Group’s consolidated balance sheet. Net cash outflows before dividends was £1.6m (2022: inflows of £5.3m), with a reduction in cash from operating activities offset to some extent by interest received as a result of increases in interest rates. Overall Group cash and deposits have decreased from £74.5m to £65.4m as at 30 June 2023, primarily driven by lower new business as noted above. 15 Hansard Global plc Report and Accounts 2023STRATEGIC REPORT Business and Financial Review continued The following non-GAAP tables summarise the Group’s own cash flows in the year: Group Bank Deposits and Money Market Funds The Group holds its liquid assets in highly rated money market liquidity funds and with a wide range of deposit institutions to diversify counterparty risk. Deposits totalling £13.2m (2022: £15.6m) have original maturity dates typically greater than 3 months and are therefore excluded from the definition of “cash and cash equivalents” under IFRS and are instead included within ‘Deposits and money market funds’ in the consolidated balance sheet. The following table summarises the total cash and deposits at the balance sheet date. Money market funds and immediately available cash Short-term deposits with credit institutions Cash and cash equivalents under IFRS Longer-term deposits with credit institutions Group cash and deposits 2023 £m 2022 £m 41.2 11.0 52.2 13.2 65.4 54.2 4.7 58.9 15.6 74.5 Net cash surplus from operating activities Interest received Net cash inflow from operations 2023 £m 15.9 3.0 18.9 2022 £m 21.1 0.3 21.4 Net cash investment in new business (8.5) (11.5) Purchase of property and computer equipment Net cash investment in bond portfolio Corporation tax paid Net cash (outflow)/inflow before dividends Dividends paid Net cash outflow after dividends (6.6) (5.0) (0.4) (1.6) (5.9) (7.5) (4.5) - (0.1) 5.3 (6.1) (0.8) 2023 £m 2022 £m Net cash (outflow) after dividends (7.5) (0.8) (Decrease)/increase in amounts due to contract holders Net Group cash movements (0.6) (8.1) Group cash and deposits - opening position 74.5 Effect of exchange rate changes (1.0) Group cash and deposits - closing position 65.4 9.8 9.0 63.5 2.0 74.5 The below table reconciles the key lines for the current year in the above non-GAAP cash flow to the key lines in the consolidated cash flow shown on page 83. Consolidated Non-GAAP Cash Flow Statement Cash Flow Net cash flow from operations before tax 13.9 Adjust for net movement in policyholder financial assets and liabilities Purchase of property and computer equipment (tangible and intangible) Corporation tax paid Dividends paid Net cash investment in business Decrease in amounts due to contract holders Net movement in assets and liabilities relating to contract holders Net Group cash movements - 13.9 (6.6) (0.4) (5.9) (8.5) (0.6) - (9.1) (8.1) £m 7.4 2.4 9.8 (6.6) (0.4) (5.9) - - (5.0) (5.0) (8.1) 16 Hansard Global plc Report and Accounts 2023 Abridged Consolidated Balance Sheet The consolidated balance sheet on page 82 presented under IFRS reflects the financial position of the Group at 30 June 2023. As a result of its method of presentation, the consolidated balance sheet incorporates the financial assets held to back the Group’s liability to contract holders and incorporates the net liability to those contract holders of £1,101.5m (2022: £1,092.3m). Additionally, that portion of the Group’s capital that is held in bank deposits is disclosed in “cash and cash equivalents” based on original maturity terms, as noted above. The abridged consolidated balance sheet presented below, adjusted for those differences in disclosure, allows a better understanding of the Group’s own capital position. Assets Deferred origination costs Other assets Bank deposits and money market funds Liabilities Deferred income Other payables Net assets Shareholders’ equity 2023 £m 2022 £m 117.8 27.6 65.4 122.5 20.4 74.5 210.8 217.4 144.8 44.2 189.0 21.8 145.1 50.1 195.2 22.2 Share capital and reserves 21.8 22.2 Other assets include intangible assets, property, plant, and equipment and other receivables. Other payables include amounts due to investment contract holders and other payables. Deferred Origination Costs The deferral of origination costs reflects that the Group will earn fees over the long-term from contracts issued in a given financial year. These costs are recoverable out of future net income from the relevant contract and are charged to the consolidated statement of comprehensive income on a straight-line basis over the life of each contract. The movement in value over the financial year is summarised below Carrying value At beginning of financial year 2023 £m 2022 £m 122.5 125.1 Origination costs deferred during the year 8.7 Origination costs amortised during the year (13.4) 11.3 (13.9) 117.8 122.5 Deferred Income The treatment of deferred income ensures that contract fees are taken to the consolidated statement of comprehensive income in equal instalments over the longer-term, reflecting the services to be provided over the period of the contract. This is consistent with the treatment of deferred origination costs. Deferred income at the balance sheet date is the unamortised balance of accumulated initial amounts received on new business. The proportion of income deferred in any one year is dependent upon the mix and volume of new business flows in previous years. The Group’s focus on regular premium business means that these fees are received over the initial period of the contract, rather than being received up front, as is often the case with single premium contracts. The majority of initial fees collected during the year relates to charges taken from contracts issued in prior financial years demonstrating the cash generative nature of the business. Regular premium contracts issued in this financial year will generate the majority of their initial fees over the next 18 months on average. The movement in value of deferred income over the financial year is summarised below. Carrying value At beginning of financial year Initial fees collected in the year and deferred Income amortised during the year to fees income 2023 £m 2022 £m 145.1 142.5 16.5 19.2 (16.8) (16.6) 144.8 145.1 Contract Holder Assets Under Administration In the following paragraphs, contract holder assets under administration (“AuA”), refers to net assets held to cover financial liabilities, as analysed in note 17 to the consolidated financial statements presented under IFRS. Such assets are selected by or on behalf of contract holders to meet their investment needs. The Group receives investment inflows to its AuA from single and regular premium contracts which are offset by withdrawals, charges, premium holidays affecting regular premium policies, and by market valuation movements. The majority of premium contributions are designated in currencies other than sterling, reflecting the wide geographical spread of those contact holders. The currency composition of AuA at the balance sheet date is similar to prior year, with 71% of AuA designated in US dollar (2022: 71%) and 8% in euro (2022: 8%). 17 Hansard Global plc Report and Accounts 2023STRATEGIC REPORT Business and Financial Review continued Certain collective investment schemes linked to customers’ contracts can from time to time become illiquid, suspended or be put into liquidation. In such cases, the Directors are required to exercise their judgement in relation to the fair value of these assets. The cumulative impact on the balance sheet is not material. The value of AuA at 30 June 2023 was £1,101.5m, 0.8% higher than 30 June 2022. Significantly lower single premiums were offset by lower withdrawals, and market and currency movements increased as global stock markets regained ground lost as a result of economic concerns arising out of the Russia/Ukraine conflict and the impact of monetary tightening with high levels of inflation. The following table summarises the movements in the year: Dividends An interim dividend of 1.8p per share was paid in April 2023. This amounted to £2.5m. The Board has resolved to recommend a final dividend of 2.65p per share (2022: 2.65p) for shareholder approval at the AGM. In making this recommendation, the Board has carefully considered its current and future cash flows, the risks and potential impacts introduced by global economic conditions, geopolitical factors (including the ongoing Russia-Ukraine conflict), the outlook for future growth and profitability, and the views of key stakeholders, including shareholders and regulators. Subject to approval at the AGM, this dividend will be paid on 16 November 2023. Deposits to investment contracts – regular premiums Deposits to investment contracts – single premiums 2023 £m 2022 £m 86.1 86.2 30.2 43.8 Complaints and Potential Litigation Financial services institutions can be drawn into disputes in cases where the performance of assets selected directly by or on behalf of contract holders through their advisors fails to meet their expectations. This is particularly relevant in the case of more complex products distributed throughout Europe prior to 2014. Withdrawals from contracts and charges (147.7) (158.4) Effect of market and currency movements Movement in year Opening balance Closing balance 40.6 9.2 (103.5) (131.9) 1,092.3 1,224.2 1,101.5 1,092.3 The analysis of AuA held by each Group subsidiary to cover financial liabilities is as follows: Fair value of AuA at 30 June Hansard International Hansard Europe 2023 £m 2022 £m 1,037.7 1,024.5 63.8 67.8 1,101.5 1,092.3 Assets to cover the financial liabilities of Hansard Worldwide are held by Hansard International and therefore are included within Hansard International’s total AuA. Since it closed to new business in 2013, Hansard Europe’s AuA has been declining broadly in line with expectations as contracts are surrendered or mature. Even though the Group have never given any investment advice, as this is left to the contract holder directly or through an agent, advisor or an entity appointed at their request or preference, the Group has been subject to a number of complaints in relation to the performance of assets linked to contracts. As at 30 June 2023, the Group had been served with cumulative writs with a net exposure totalling €26.1m, or £22.4m in sterling terms (30 June 2022: €24.6m / £21.2m) arising from contract holder complaints and other asset performance-related issues. These are disclosed as contingent liabilities in note 26 to the consolidated financial statements. The principal reasons for the increase in contingent liabilities are a case which was previously defended successfully, being subject to a new claim, and a further new claim During the year, the Group successfully defended 15 cases with net exposures of approximately £1.9m, 14 of which may be appealed by the plaintiffs (2022: successfully defended 24 cases with net exposures of £3.2m). These successes continue to affirm confidence in the Group’s legal arguments. Our policy is to maintain contingent liabilities even where we win cases in the court of first instance if such cases have been subsequently appealed. This includes our largest single case in Belgium. 18 Hansard Global plc Report and Accounts 2023 We have previously noted that we expect a number of our larger claims to ultimately be covered by our Group insurance cover. During FY 2023 we recorded £0.1m in insurance recoveries in relation to litigation expenses (2022: £0.5m). We expect such reimbursement to continue during the course of those claims. We continue to estimate insurance coverage against the £22.4m of contingent liabilities referred to above to be in the range of £3m to £10m. While it is not possible to forecast or determine the final result of such litigation, based on the pleadings and advice received from the Group’s legal representatives and experience with cases previously successfully defended, we believe we have a strong chance of success in defending these claims. Other than smaller cases where based on past experience it is expected a settlement might be reached, the writs have therefore been treated as contingent liabilities and are disclosed in note 26 to the consolidated financial statements. Where there is an established pattern of settlement for a grouping of claims, a provision has been made for the remaining exposures and included in note 20 ‘Provisions’ Net Asset Value Per Share The net asset value per share on an IFRS basis as at 30 June 2023 is 15.9p (2022: 16.1p) based on the net assets in the Consolidated Balance Sheet divided by the number of shares in issue, being 137,557,079 ordinary shares (2022: 137,557,079). 19 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTRisk Management and Internal Control Risk Management and Internal Control The Group is naturally exposed to both existing and emerging risks, as it pursues its strategic and business plan objectives, which may arise via the internal or the external environment. All such risks, are identified, assessed, monitored, managed and reported under the governance, risk management and internal control protocols, which constitute the Group’s ERM Framework, and which remain central to the Board’s oversight, direction and control of the Group. For the year ended 30 June 2023 the Board has remained sensitive to the disruptions provoked by the outbreak of war in Ukraine, which coincided with the residual stresses of the Covid-19 pandemic. Particular focus has been maintained on understanding and assessing the capacity for risks in the external environment, which have more immediate prominence – including energy supply risks, cost of living crises, rising inflation and cyberattacks on critical infrastructure - to impede the visibility of other emerging challenges, including climate transition risks, broader increase in cyber vulnerabilities, persistent barriers to international mobility, wider supply chain disruptions, protectionism, geopolitical instabilities and inflationary pressures. The nature and duration of uncertain and unpredictable events, over short, mid and longer-term time horizons remains under close scrutiny. Approach Having regard to the Financial Reporting Council’s ‘Guidance on Risk Management, Internal Control and Related Financial and Business Reporting’, the ERM Framework encompasses the policies, processes, tasks, reporting conventions, behaviours, and other aspects of the Group’s environment, which cumulatively: ■ Support the Board’s assessment of existing and emerging risks, together with combinations of those risks in the form of plausible stresses and scenarios, which have the potential to threaten the Company’s business model, future performance, solvency, liquidity, or reputation. Such assessment includes analysis of the likelihood, impact, and time horizon over which such risks, or combinations of risks might emerge or crystallise. ■ Facilitate the effective and efficient operation of the Group and its subsidiary entities by enabling a consolidated and comprehensive approach to the management of risks across the Group, with specific attention to aggregate impacts and effects, enabling appropriate responses to significant business, operational, financial, compliance and other risks to business objectives, so safeguarding the assets of the Group. ■ Help to ensure the quality of internal and external reporting. This requires the maintenance of proper records and processes that generate a flow of timely, relevant, and reliable information from within and outside the Group, enabling the Board to form their own view on the effectiveness of risk management and internal control arrangements through the regular provision of relevant information and assurances. ■ Seek to ensure continuous compliance with applicable laws and regulations as well as with internal policies governing the conduct of business. ■ Drive the cultural tone and expectations of the Board in respect of governance, risk management and internal control arrangements and the delegation of associated authorities and accountabilities. The Board has overall responsibility for the effective operation of the ERM Framework and the Directors retain responsibility for determining, evaluating, and controlling the nature and extent of the risks which the Board is willing to accept across the spectrum of risk types, taking account of varying levels of strategic, financial, and operational stresses, potential risk scenarios and emerging as well as existing risk exposures. This approach ensures that risk appetite remains an integral element of decision-making by both the Board and the Executive Management Team, including in the setting of strategy, ongoing business planning and business change initiatives. The ERM Framework has been designed to be appropriate to the nature, scale, and complexity of the Group’s business at both corporate and subsidiary level. The Framework components are reviewed on at least an annual basis and refined, if necessary, to ensure they remain fit for purpose in substance and form and continue to support the Directors’ assessment of the adequacy and effectiveness of the Group’s risk management and internal control systems. Such assessment depends upon the Board maintaining a thorough understanding of the Group’s risk profile, including the types, characteristics, interdependencies, sources, and potential impact of both existing and emerging risks on an individual and aggregate basis. During the year ended 30 June 2023 the Group Risk Forum (“GRF”), previously established during the 2022 Financial Year to replace the pre-existing Executive and Operational Risk Committees, has continued its work to further enhance the evidencing and demonstration of risk ownership, ensuring responsibilities and accountabilities for risk management and risk-based decision making are transparent and proactively owned at all business levels. The GRF has continued to drive clearer and more dynamic interfaces between the governance, risk management and internal control conventions of the ERM Framework and those constituting the Group and subsidiary Own Risk and Solvency Assessment (“ORSA”) cycles. The Group ORSA report reflects the cycle of ongoing activities and arrangements which enable the Group Board and the Executive Management Team to properly assess and understand at a practical level the short- and longer-term risks facing the Group and the capital required to cover those risks, under both normal and stressed conditions. The ORSA considers the 20 Hansard Global plc Report and Accounts 2023major sources of risk that the Group, or a subsidiary entity may face under the principal and subordinate risk designations of the ERM Framework. Both internal and external risks are considered, together with emerging risks and any risks associated with the Group’s systems of governance. The ORSA includes capital, performance and strategic information and provides management with key information for decision making. The disciplines of the ERM Framework seek to coordinate risk management in respect of the Group as a whole, including for the purpose of ensuring compliance with capital adequacy requirements, liquidity adequacy requirements and regulatory capital requirements, in line with the Isle of Man Financial Services Authority Risk-Based Capital Regime. Governance, risk management and internal control protocols remain structured upon a ‘three lines’ model, which determines how specific duties and responsibilities are assigned and coordinated. Front line management are responsible for identifying risks, executing effective controls, and escalating risk issues and events to the Group’s Control Functions. The Group Risk and Compliance Functions oversee and work in collaboration with the First Line, ensuring that the business is conducted in a manner consistent with rules, limits, and risk appetite constraints. The Group Internal Audit Department provides independent assurance services to the Board and Executive Management Team on the adequacy and effectiveness of the Group’s governance, risk management and internal control arrangements. The ERM Framework seeks to add value through embedding risk management and effective internal control systems as continuous and developing processes within strategy setting, programme level functions and day-to-day operating activities. The ERM Framework also acknowledges the significance of organisational culture and values in relation to risk management and their impact on the overall effectiveness of the internal control framework. Emerging Risks The ERM Framework promotes the pursuit of its overarching performance, information, and compliance objectives through focus on five interrelated elements, which enable the management of risk at strategic, programme and operational level to be integrated, so that layers of activity support each other. The five interrelated elements are defined as: ■ Management oversight and the control culture ■ Risk recognition and assessment ■ Control activities and segregation of duties ■ Information and communication; and ■ Monitoring activities and correcting deficiencies Risk management processes are undertaken on both a top-down and bottom-up basis, structured to promote improved organisational performance through better integration of strategy, risk, control and governance. The top-down aspect involves the Board assessing, analysing, and evaluating what it believes to be the principal risks facing the Group, with focus on current and forward-looking risks. The bottom-up approach involves the identification, review and monitoring of risk issues and emerging risks at functional and divisional levels, with analysis and formal reporting to the Group Risk Forum on a quarterly basis and onward analytical reporting to the Board. Stress and scenario testing is used to explore, assess, and quantify emerging risks as well as to analyse and assess any changes in existing aspects of the ‘Risk Universe’, which are monitored via the ERM Framework. Such assessment and analyses use both quantitative tests and qualitative assessments to consider reasonably plausible risk events, including those stresses and scenarios that could lead to failure of the business, approximated to the range of impact types which can be envisaged. The results of the stress and scenario testing are considered and explored by the Group Risk Forum, the Audit and Risk Committee and the Board, as necessary and appropriate. The system of internal control is designed to understand and manage, rather than eliminate risk of failure to achieve business objectives, and seeks to provide reasonable, rather than absolute, assurance against material misstatement or loss. Review of Risk Management and Internal Control Systems The results of the risk management processes combine to facilitate identification of the principal business, financial, operational and compliance risks and any associated key risks at a subordinate level. Established reporting cycles enable the Board to maintain oversight of the quality and value of risk management and internal control activities throughout the year and ensure that the entirety of the governance, risk management and internal control frameworks, which constitute the ERM Framework, are operating effectively and as intended. These processes have been in place throughout the year under review and up to the date of this report. Independently of its quarterly and ad hoc risk reporting arrangements the Board has conducted its annual review of the effectiveness of the Company’s risk management and internal control systems including financial, operational and compliance controls. This review is undertaken in collaboration with the Audit and Risk Committee and is based upon analysis and evaluation of: 21 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTRisk Management and Internal Control continued ■ Attestation reporting from the key subsidiary companies of the Group as to the effective functioning of the risk management and internal control frameworks and the ongoing identification and evaluation of risk within each subsidiary. ■ Formal compliance declarations from senior managers at divisional level that key risks are being managed appropriately within the functional and operational areas falling under their respective span of control and that controls have been examined and are effective. ■ The cumulative results of cyclical risk reporting by senior and executive management via the GRF, having regard to the ‘five pillar’ structure of the ERM Framework, which drives analytical reporting to the Audit and Risk Committee. Independent assurance work by the Group Internal Audit Department to identify any areas for enhancements to internal controls and work with management to define associated action plans to deliver them. The Board has determined that there were no areas for enhancement which constituted a significant weakness for the year under review and they are satisfied that the Group’s governance, risk management and internal control systems are operating effectively and as intended. Financial Reporting Process Integral to ERM monitoring and reporting arrangements are the conventions which ensure that the Board maintains a continuous understanding of the financial impacts of the Group failing to meet its objectives, due to crystallisation of an actual or emerging risk, or via the stress and scenario events, which the Board considers to be reasonably plausible. This includes those stresses and scenarios that could lead to a failure of the business. Planning and sensitivity analyses incorporate Board approval of forecast financial and other information. The Board receives regular representations from Senior Executives in this regard. Performance against targets is reported to the Board quarterly through a review of Group and subsidiary companies’ results based on accounting policies that are applied consistently throughout the Group. Financial and management information is prepared quarterly by the Chief Financial Officer (“CFO”) and presented to the Board and the Audit and Risk Committee. The members of the Audit and Risk Committee review the interim financial statements for the half year ending 31 December and for the full financial year and engage with the CFO to discuss and challenge the presentation and disclosures therein. Once the draft document is approved by the Audit and Risk Committee, it is reviewed by the Board before final approval at a Board meeting. Outsourcing The majority of investment dealing and custody processes in relation to contract holder assets are outsourced to Capital International Limited (CIL), a company authorised by the Isle of Man Financial Services Authority and a member of the London Stock Exchange. These processes are detailed in a formal contract that incorporates notice periods and a full exit management plan. Delivery of services under the contract is monitored by a dedicated Relationship Manager against a documented Service Level Agreement, which includes Key Performance Indicators. CIL is required to confirm monthly that no material control weaknesses have been identified in their operations; this is overseen via service delivery monitoring performed by the Relationship Manager. Each year CIL are required to confirm and evidence the adequacy and effectiveness of their internal control framework through a formal Assurance Report on Internal Controls, with an external independent review performed every second year. Risks Relating to the Group’s Financial and Other Exposures Hansard’s business model involves the controlled acceptance and management of risk exposures. Under the terms of the unit-linked investment contracts issued by the Group, the contract holder bears the investment risk on the assets in the unit-linked funds, as the policy benefits are directly linked to the value of the assets in the funds. These assets are administered in a manner consistent with the expectations of the contract holders. The Group maintains a precise match between the investment assets held and the contract holder liabilities, and so the market risk and credit risk lie with contract holders. The Group’s exposure on this unit-linked business is limited to the extent that income arising from asset management charges and commissions is generally based on the value of assets in the funds, and any sustained falls in value will reduce earnings. In addition, there are certain financial risks (credit, market and liquidity risks) in relation to the investment of shareholders’ funds. The Group’s exposure to financial risks is explained in note 3 to the consolidated financial statements. The Board believes that the principal risks facing the Group’s earnings and financial position are those risks which are inherent to the Group’s business model and operating environment. The regulatory landscape continues to evolve at both a local and international level and the risk management and internal control frameworks of the Group must remain responsive to developments which may change the nature, impact or likelihood of such risks, or the time horizon within which they might crystallise. 22 Hansard Global plc Report and Accounts 2023Principal Risks The following table sets out the principal inherent risks that may impact the Group’s strategic objectives, profitability or capital and provides an overview of how such risks are managed or mitigated. The Board robustly reviews and considers its principal risks on at least an annual basis and for the year ended 30 June 2023 have continued to consider specifically the likelihood, impacts and timescales within which such risks might crystallise, together with assessment of contingent uncertainties and any emerging risks. Risk Risk factors and management Distribution Risk: Arising from market changes, technological advancement, loss of key intermediary relationships or competitor activity The business environment in which the international insurance industry operates is subject to continuous change as new market and competitor forces come into effect and as technology continues to evolve. The Group may be unable to maintain competitive advantage in commercially significant jurisdictions, or market segments, or be unable to build and sustain successful distribution relationships, particularly in the event of any prolonged uncertainties consequent to the pandemic environment. How we manage the risk: Market Risks: Arising from major market stresses, or fluctuation in market variables, resulting in falls in equity or other asset values, currency movements or a combined scenario manifesting • Close monitoring of marketplaces, competitor activity and consumer sentiment for signs of emerging risks and threats to forecast new business levels. • Stress and scenario modelling considers the consequences of production falling materially above or below target and enables the Board to ensure that forecasting and planning activities are sufficiently robust and revised product and distribution strategies are designed to add additional scale to the business, on a more diversified basis, through organic growth at acceptable levels of risk and profitability. • Continuous investment in and development of technology. During the reporting period we have continued to maintain close contact with our distribution partners and deploy technological solutions, where appropriate. • Investment in new markets and expansion of existing markets, developing new key distributor relationships and new product development for specific markets and globally. Market risks are an inherent element of the Group’s unit linked business and are routinely assessed and monitored via the Group ERM Framework, having regard to the balance sheet and profit reduction impacts of a drop in equities, causing a reduction in fees derived from the value of contract holder assets, as well as the contagion effects for aspects of the broader risk portfolio. Such contagion might include deferred impacts to profit through reduced sales activity, concentration risks on fund holdings/ underlying assets, and reduced incomes through increased lapse rates. The Board also recognises that extreme market conditions and prolonged macroeconomic challenges may have the capacity to influence consumer appetite for the selection and purchase of financial services products and the period over which business is retained. Inflation quickly moved to become a significant driver of economic volatilities during the reporting period, with prevailing uncertainty as to how effective typical policy responses might be and the potential for wide ranging and profound changes to be triggered. In addition, the Group operates internationally and earns income in a range of different currencies, with the majority of premiums denominated in USD whilst the vast majority of it’s operational cost base is denominated in GBP. A significant adverse currency movement over a sustained period remains a principal risk to the Group. How we manage the risk: • The Board recognises that market volatilities and currency movements are unpredictable and driven by a diverse range of factors and these risks are inherent in the provision of investment-linked products. • The currencies of assets and liabilities are matched within set tolerances and certain expenses invoiced in US Dollars to match against US Dollar income streams. • Business plans are modelled across a broad range of market and economic scenarios and take account of alternative commercial outlooks within overall business strategy. This promotes a greater understanding of market and currency risk, the limits of the Company’s resilience and the range of possible mitigating options. • Stress testing performed during the year-ended 30 June 2023 assessed the impacts of reasonably plausible market risk events and scenarios, including those resulting from macroeconomic challenges driven by geopolitical instabilities, rising inflation, uncertainties in commodity price and currency volatilities. • The long-term nature of the Group’s products serves to smooth short term currency fluctuations. However, longer term trends are monitored and considered in pricing models. 23 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTRisk Management and Internal Control continued Credit Risk: Arising from the failure of a counterparty Liquidity Risk: Arising from a failure to maintain an adequate level of liquidity to meet financial obligations under both planned and stressed conditions Legal and Regulatory Risk: Arising from changes in the regulatory landscape, which adversely impact the Group’s business model, or from a failure by the Group, or one of its subsidiary entities, to meet its legal, regulatory or contractual obligations, resulting in the risk of loss or the imposition of penalties, damages or fines In dealing with third party financial institutions, including banking, money market and settlement, custody and other counterparties, the Group is exposed to the risk of financial loss and potential disruption of core business functional and operational processes. Financial loss can also arise when the funds in which contract holders are invested become illiquid, resulting in past and future fee income not being received. The failure of Independent Financial Agents (IFAs) can also result in loss where unearned commissions can be due back to the Group. How we manage the risk: • The Group seeks to limit exposure to loss or detriment via counterparty failure through robust selection criteria, minimum rating agency limits, pre-defined risk-based limits on concentrations of exposures and continuous review of positions to identify, evaluate, restrict and monitor various forms of exposure on an individual and aggregate basis. • During the reporting period we have continued to closely monitor geopolitical developments and potential disruptions to international payment systems and capital markets arising from the extensive sanctions in force in the context of the Russia-Ukraine conflict. If the Group does not have sufficient levels of liquid assets to support business activities or settle its obligations as they fall due, the Group may be in default of its obligations and may incur significant sanction, loss or cost to rectify the position. How we manage the risk: • The Group maintains highly prudent positions in accordance with its risk appetite and investment policies which ensures a high level of liquidity is always available in the short term. Generally, shareholder assets are invested in cash or money market instruments with highly rated counterparties. • During the reporting period we have maintained a prudent approach to the availability of short-term cash, with no material change in risk exposures. The scale and pace of change in regulatory and supervisory environments, including the continued emergence of new and/or updated compliance obligations and increasingly granular data submission requirements has maintained the momentum gathered post-Covid. Changes to rule sets and supervisory expectations continue to require efficient and effective ways to evidence and demonstrate how compliance obligations are met, whilst compliance analytics and high-quality data driven insights are becoming increasingly important. The direction of regulatory travel demands continued investment in the capacity, competence and capability of resourcing across all business areas, having regard to the extent of risk interdependencies and the embedding of personal accountability regimes. The impacts associated with crystalisation of a significant compliance failing, including financial penalties, public disclosures, restrictions on activities and other forms of intervention, have been escalated by sea-changes in political landscapes and shifting supervisory attitudes to regulatory effectiveness. The interpretation or application of regulation over time may impact market accessibility, broker relationships and / or competitive viability. If the Group fails to monitor the regulatory environment or adequately integrate the management of associated obligations within strategic, business model or business planning processes there may be material risk to the achievement of strategic objectives both in the short and longer term. How we manage the risk: • Robust strategic planning processes informed by analytical review of the external environment and consideration of associated risk in the short and longer term. • Continuous monitoring and review of developments in international law and regulation and proactive management of how such developments might shape jurisdictional specific reaction. • Active and transparent engagement with regulatory authorities and industry bodies on a multi- jurisdictional basis, including active engagement in and responding to regulatory consultation exercises. • Maintenance of robust governance, risk management and internal control arrangements to ensure that legal and regulatory obligations are substantively met on a continuing basis. • Active engagement with professional advisors to address specific risks and issues that arise. 24 Hansard Global plc Report and Accounts 2023Fraud and Financial Crime Risk: Economic challenges flowing from the pandemic persist, provoking an increase in the source and form of fraud and financial crime risks. These have combined with geopolitical instabilities and the mobilisation of unprecedented levels of sanctions against Russia in the context of the Russia-Ukraine conflict Culture and Conduct Risk: Arising from any failure of governance, risk management and internal control arrangements, via corporate or individual actions. Regulators are taking – and expecting from firms – an increasingly holistic approach to mitigating heightened financial crime risks. Fraud and scam activities continue to target weaknesses in internal control environments - contingent with greater reliance upon remote working arrangements. Emerging risk research further indicates the bulk of the largest operational risk losses across financial services companies continues to emanate from mega frauds, indicative of macro-economic pressures and their propensity to drive episodes of internal fraud. These challenges and increased pressures on profitability are also seen as increasing the risk of poor-quality business being written and potentially diminishing the attention paid to due diligence procedures and processes. Regulators retain substantial leeway to take enforcement action ‘in hindsight’ and financial crime systems and controls are one of the most significant areas of enforcement risk as supervisory authorities seek to demonstrate the effectiveness of the regulatory environment. How we manage the risk: • Rigorous anti-money laundering, counter-terrorist financing and anti-bribery and corruption measures. • Rapid, scalable and effective sanctions screening mechanisms to ensure robust, effective and compliant understanding of the landscape on a continuing basis. • Implementation of controls to identify and mitigate any emerging risks associated with the exploitation of economic stimulus schemes, prolonged dependencies upon remote working or other measures to counteract the impacts of the pandemic. • Continuous review of measures to support activity in the context of divergent economic recoveries from the pandemic, including those measures relied upon by key business partners. Organisational culture remains under scrutiny by the Board on the basis that it is recognised as a fundamental driver of corporate success, prudential soundness, and compliant conduct. Any failure to adequately assess, monitor, manage and mitigate risks to the delivery of fair customer outcomes, or to market integrity, can be expected to result in material detriment to the achievement of strategic objectives and could incur regulatory censure, financial penalty, contract holder litigation and / or material reputational damage. Clear and heightened regulatory expectations of individual and corporate accountability continue to connect governance, risk and compliance obligations directly to cultural imperatives and the responsibilities assigned to individual Senior Managers. How we manage the risk: • Programme level initiatives to address and support cultural change and development have remained in active progress during the reporting period with the results of investment in culture diagnostics informing strategic decision-making and tactical solutions to drive cultural change, where needed. • Iterative enhancements to the Group’s ERM framework continue to drive and deliver the integration of conduct risk management at both a cultural and practical level. • Business activities designed to manage the volume and velocity of regulatory change include a core focus on ensuring compliance with conduct risk obligations, managing conflicts of interest, preventing market abuse and building robust governance arrangements around new product development and product suitability processes. • Forward looking risk indicators and executive leadership in respect of understanding and addressing the drivers of conduct risk focus on all core areas with assessment at strategic, functional and operational levels. • The Group maintains regular dialogue with its regulatory authorities and with its external advisors in relation to developments in the regulatory environments in which we operate. 25 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTRisk Management and Internal Control continued Operational Resilience Risk: Arising from any exposure to risk events with the capacity to cause operational failures or wide scale disruptions in financial markets Cyber and Information Security Risk: Arising from the increased digitalisation of business activities and growing dependence upon technology in the context of exposure to elevated and more pernicious forms of digital and cyber risk The ability to maintain critical services or operations during periods of disruption is receiving increasing levels of regulatory scrutiny with concurrent growth in the formalisation of regulatory expectation. ‘Resilience Principles’ build on the real-world tests presented by the Covid-19 pandemic and the near-term threat of disruption of key global infrastructure in the context of the ongoing Russia-Ukraine conflict. Resilience risk and associated regulatory expectations directly extend to threats originating via third parties, including external providers, supply chains networks and outsourcing architectures intended to leverage economies of scale, gain access to specialist expertise, or deliver advanced technologies supporting innovative services. Global supervisory attention is focussed on regulating for resilience by ensuring that strategies such as grounding resilience analyses in key delivery requirements, appreciating the potential for systemic vulnerabilities and embracing a diversity of approaches combine to strengthen the ability of financial services firms to withstand operational risk related events How we manage the risk: ■ ERM conventions guide the identification and assessment of events or scenarios presenting risk to operational resilience – typically pandemics, cyber incidents, technology failures or natural disasters – as well as supply chain disruption impacts to critical processes, business continuity and good governance. ■ Impact tolerances, together with mapping and testing allow the identification of services which could cause harm, if disrupted and identify any areas of vulnerability. ■ Stress testing, continuity planning and recovery and resolution strategies provide for continuous review of the adequacy and effectiveness with which the business can respond to and recover from disruptions. The nature and complexity of cyber threats and cyber risk are recognised by the Board as presenting the single most significant risk to financial services firms. The mounting sophistication and persistence of cybercrime and the growing adoption of highly advanced, nation-state type tools by cyber criminals, underscore the challenges in understanding and anticipating the nature of cyber threats and cyber risks. The pandemic served to accelerate the efforts of organised crime to exploit weaknesses in cyber defences and explicitly target remote working vulnerabilities, whilst new technological capabilities and use of third-party platforms add to the complexity of understanding the complete reach of cyber and information security exposures. More recently geopolitical tensions at a global level and the escalation of the Russia-Ukraine conflict are considered to have triggered unprecedented cyber risks for Western governments and corporations. Building resilience to continuously evolving cyber risk is a priority for all stakeholders. Growing levels of regulatory scrutiny, focussed on three core areas - cyber risk identification, cyber risk governance and cyber risk resilience – is clearly foreseeable. Increased pressure for regulated entities to evidence and demonstrate how they are addressing emerging regulatory concerns and the timeliness of their actions can also be expected. In the event of any material failure in our core business systems, or business processes, or if the Group fails to take adequate and appropriate measures to protect its systems and data from the inherent risk of attack, disruption and/or unauthorised access by internal or external parties, this could result in confidential data being exposed and/or systems interruption. A significant cybercrime event could result in reputational damage, regulatory censure, and financial loss. How we manage the risk: ■ Continuous focus on the maintenance of a robust, secure, and resilient IT environment that protects customer and corporate data as a core element of our operational resilience mapping. ■ Control techniques deployed to evaluate the security of systems and proactively address emerging threats both internally within the organisation and externally, through regular engagement with internet and technology providers and through industry forums. ■ Maintenance of detailed and robust Business Continuity and Disaster Recovery Plans, including full data replication at an independent recovery centre, which can be invoked when required. ■ Frequent and robust testing of business continuity and disaster recovery arrangements. ■ Periodic independent third-party systems penetration testing and review of controls. ■ Horizon scanning to identify and assess supervisory initiatives advocating and promoting good practice in cyber resilience and associated industry developments. 26 Hansard Global plc Report and Accounts 2023Environmental, Social and Governance (ESG) Risk: Arising from a failure to anticipate and respond to emerging sustainability risks or successfully integrate ESG considerations and policy positions into strategy and business planning Climate change is recognised by the Board as presenting a potential source of high-impact, high- probability risk, requiring a strategic response which is value-driven in terms of improving resilience and demonstrating to clients, investors, regulators, and wider stakeholder groups that the risks and opportunities of climate change are understood. The Board has identified that climate risk factors affecting the Group can be grouped into two main categories of risk exposure: - Physical risks: arising from increased damage and losses from physical phenomena associated both with climate trends - typically changing weather patterns and sea level rises - and physical events, including natural disasters and extreme weather events; and Transition risks: arising from disruptions and shifts associated with the transition to a low-carbon economy, which may affect the value of assets or the costs of doing business. Transition risks may be motivated by changes in policyholder, or other stakeholder expectations, market dynamics, technological innovation, or reputational factors. Key examples of transition risks include policy changes and regulatory reforms which affect carbon-intensive sectors. Policy and regulatory measures may also affect specific classes of financial assets relevant for investments available through an insurer’s platform, whilst social movements and civil society activism – such as that aiming to motivate divestment from and cessation of underwriting to the fossil fuel sector – may pose a risk of reputational damage to firms, if appropriate risk mitigation strategies (and communication actions) are not implemented appropriately. How we manage the risk: ■ Development of adaptation plans, which embrace forward-looking analysis and support strategic decision-making, with consideration of relevant business planning, operations, underwriting and investment activities in order to contribute to a sustainable transition to net-zero targets and provide effective mitigation of climate change related risks, ■ Climate and other ESG risks could cause macroeconomic stresses in future, including impacts to markets, interest rates, inflation and exchange rates. The business manages its exposure to these macro-economic risks as described in the market risk section above. ■ Actively building sustainability considerations into strategy development and business planning processes through structured analysis, formal assessment mechanisms and cross-functional collaboration. ■ Factoring emerging sustainability risk issues into key decision-making and understanding the impacts for the tools and methodologies currently used to manage risk, including governance structures, risk ownership, risk and control self-assessment principles, regulatory developments, third party service provisions and effective reporting. ■ Developing and updating relevant components in relation to the sustainability risk domain – including policies, procedures, risk indicators, management data and stress testing. ■ ‘In flight’ initiatives addressing cultural alignment and structural resilience encompass core ESG considerations. 27 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTEmployee Engagement and Talent Risk: Arising from any failure to drive and support the right corporate culture and attract, develop, engage and retain key personnel ‘Talent risk’ is growing in prominence on the operational risk agenda at industry level with the emergence of unprecedented challenges linked to attracting and retaining employees across all financial services sectors. The most material concern attach to the shortfall in skilled employees to fill open vacancies, with a real danger that a skills shortage leads to weak oversight of business operations, particularly in critical functions/personnel, with the capacity to result in regulatory breaches through direct compliance failings, or as the result of poor governance protocols in terms of business structuring, capacity, and competence. Simultaneously, delivery of the Group’s strategy has core dependencies on attracting and retaining experienced and high-performing management and employees and building a strong and sustainable culture, driven by our purpose, our leadership, our performance management regime and our governance principles and objectives. The knowledge, skills, attitudes and behaviours of our employees, and the success with which these shape and define our culture, are central to our success. How we manage the risk: ■ Significant investment in initiatives to address and support cultural change and development, shape strategy and inform tactical solutions. ■ Continuation of our ‘Culture Programme’ with clearly defined areas of focus under three core pillars, those being: - - - High Performance Culture Learning Culture Environment & Wellbeing These remain in active progress led by the Executive Management Team with oversight by the Board. During March 2023, we released our first in-house Employee Engagement survey which showed progress against all surveyed areas. Feedback from the survey has helped inform the Culture Programme activities for 2023/2024 (as set out above). Further detail around financial risks are outlined in note 3 of the consolidated financial statements. Philip Kay Chair 27 September 2023 28 Hansard Global plc Report and Accounts 202329 Hansard Global plc Report and Accounts 2023STRATEGIC REPORTBoard of Directors Contents Board of Directors Directors’ Report Directors’ Responsibilities Corporate Governance Report Report of the Audit & Risk Committee Report of the Nominations Committee Report of the Remuneration Committee Page 28 30 35 36 46 48 50 We recognise our obligations to adopt a responsible attitude towards our stakeholders. The Board believes that the Group continues to demonstrate such an attitude but recognises that the Group is a relatively small organisation. Board of Directors The Directors serving at the date of approval of this Annual Report and Accounts are as follows: Philip Kay Non-executive Chair Chair of the Nominations Committee. Member of the Remuneration Committee. Philip was appointed as non-executive Chair with effect from 1 May 2022. He was previously appointed as an independent non-executive Director with effect from 3 March 2020. Philip has had a long career in investment banking and investment management. He is Chair of Schroder Japan Trust PLC and a fellow of Wolfson College, Oxford. He is a former Managing Director and Senior Advisor of Credit Suisse First Boston where he ran the firm’s global Japanese cash equity business. He is also a former Director of Fidelity Japan Trust PLC, of Schroder Securities Limited and of Smith New Court PLC. Graham Sheward Group Chief Executive Officer Graham was appointed as Group Chief Executive Officer and executive Director with effect from 10 May 2021. Graham is an experienced international financial services Director with more than 20 years’ experience developing successful international financial services businesses across a wide range of jurisdictions, including UK, Isle of Man, Jersey, Guernsey, Ireland, Mauritius, Singapore and South Africa. He has experience in managing and leading regulated multi- jurisdictional banking, investment, fund & corporate administration, trust & fiduciary, and outsourcing businesses. Graham moved to the Isle of Man in 1999 with NatWest Offshore, and subsequently held various executive roles with Zurich Financial Services before becoming Managing Director of Close Brothers Group, Offshore Banking Division. After spending 8 years in Mauritius holding a country corporate Director role for Barclays and then as MD of SGG Group (now IQ-EQ), he returned to the Isle of Man to take up the role of Managing Director of the Sancus Group local office. Thomas Morfett Group Chief Financial Officer Tom was appointed as Chief Financial Officer and executive Director with effect from 17 April 2023. He is a Fellow of the Institute of Chartered Accountants in England and Wales, a Fellow of the Institute and Faculty of Actuaries, and holds an MA in Mathematics from Oxford University. Prior to joining the group, Tom was Financial Controller and Head of Actuarial for the Utmost Isle of Man group of companies, having previously held the same positions for the Quilter International group of companies. He has extensive experience within the Isle of Man life insurance sector including as Appointed Actuary for Canada Life’s Isle of Man companies, and roles at Zurich Isle of Man and Royal London Isle of Man. He trained as a Chartered Accountant with Deloitte. 30 Hansard Global plc Report and Accounts 2023Christine Theodorovics Independent Non-executive Director Christine was appointed as a non- executive Director with effect from 23 January 2023. Christine has more than 25 years’ experience in financial services, where she most recently joined the Baloise Group as the Chief Executive Officer of Baloise Luxembourg. Christine has a proven track record in management, business transformation, distribution, and strategic development across various senior positions in several countries. Marc Polonsky Non-executive Director Marc was appointed as a non-executive Director on 26 September 2018, having previously served as an alternate Director to Dr Leonard Polonsky since 26 September 2013. He is managing trustee of The Polonsky Foundation, a UK-registered charity supporting cultural heritage, the arts and humanities education. He is a Retired Partner from international law firm White & Case. Jose Ribeiro Senior Independent Non-executive Director Chairman of the Remuneration Committee. Member of the Audit & Risk and Nominations Committees. Jose was appointed as an independent non-executive Director with effect from 2 December 2019. He has over 30 years of experience in the financial services industry globally having been a board member in several jurisdictions around the world. Jose is a certified EU actuary with an MBA degree. Jose is the Chair and independent non-executive Director of Starr Insurance Companies and Insurance Lead and guest lecturer at Imperial College. Jose started his insurance career with American International Group (ALICO) in 1986 as a Life and Pensions actuary and spent the first 16 years of his career working with subsidiaries of AIG and Munich Re, performing a variety of senior roles (including CEO, Chief Actuary, Pension Fund manager, Regional Director for Employee Benefits) in Europe, the US and Latin America. Since 2002 Jose has had a variety of roles including CEO for Latin America and the Caribbean at Willis, Director for International Markets at Lloyd’s of London where he was responsible for overseeing the Lloyd’s trading platforms in China, Japan and Singapore, and Managing Director and Board Member for Asia- Pacific at A.M. Best (Credit Rating Agency). David Peach Independent Non-executive Director Chairman of the Audit & Risk Committee. Member of Remuneration and Nominations Committees. David was appointed as an independent non-executive Director with effect from 31 December 2020. David is a Fellow of the Institute of Chartered Accountants in England and Wales and a Fellow of the Association of Corporate Treasurers. He has a degree in Economics from the University of Warwick. He is a non-executive Director of IntegraLife International Ltd, IntegraLife UK Ltd and Manx Development Corporation Limited. After training as an accountant with KPMG, David has had more than 25 years’ experience in financial services. He has held board level roles in insurance, banking, trust and fund management companies across a number of different jurisdictions. 31 Hansard Global plc Report and Accounts 2023GOVERNANCE Directors’ Report Financial Statements The Directors have pleasure in submitting their Annual Report on the affairs of the Company and the Group together with the financial statements and the auditor’s report for the year ended 30 June 2023. Where the context requires “the Group” means Hansard Global plc and its wholly owned subsidiaries. Hansard Global plc is the holding company of the Group and has a Premium Listing on the London Stock Exchange. The Company is a limited liability company incorporated and domiciled in the Isle of Man. Activities The principal activity of the Company is to act as the holding company of the Hansard Group of companies. The activities of the principal operating subsidiaries include the transaction of life assurance business and related activities. Principal Operating Subsidiaries The following companies are wholly owned subsidiaries of the Company and represent its principal operating subsidiaries at the balance sheet date and at the date of this report. All companies are incorporated in the Isle of Man with the exception of Hansard Europe and Hansard Worldwide. Hansard Europe is incorporated in the Republic of Ireland. Hansard Europe was closed to new business with effect from 30 June 2013. Hansard Worldwide is incorporated in The Bahamas. Company Business Hansard International Limited* Life Assurance Hansard Europe Designated Activity Company Life Assurance Hansard Worldwide Limited Life Assurance Hansard Administration Services Limited** Administration services Hansard Development Services Limited Marketing and development services * Hansard International Limited has two overseas branches in Labuan and Japan. ** Hansard Administration Services Limited has a branch in Ireland Results and Dividends The results of trading of the Group for the year under IFRS are set out in the consolidated statement of comprehensive income on page 80. The consolidated financial statements have been prepared under IFRS. The financial statements of the parent company have been prepared under UK Generally Accepted Accounting Practice (“UK GAAP”), comprising Financial Reporting Standard 102. Additionally, certain information relating to Own Funds and Risk Based Capital is presented in the “Other Information” section of this report on pages 115 to 116. The Board believes that such information provides additional meaningful information on the financial position and performance of the Group in a particular financial year than that provided by IFRS reporting alone. Results under IFRS Profit before tax for the year was £5.9m, compared with a profit for the prior year of £3.8m. Dividends totalling £5.9m were paid during the year (2022: £6.1m). Proposed Final Dividend The Board has resolved to pay a final dividend of 2.65p per share on 16 November 2023, subject to approval at the Annual General Meeting (“AGM”), to shareholders on the register on 6 October 2023 (with the ex-dividend date being 5 October 2023). If approved, this would bring the total dividends in respect of the year ended 30 June 2023 to 4.45p per share. (2022: 4.45p pershare). In making this decision, the Board has carefully considered its current and future cash flows, the risks and potential impacts introduced by the on-going Russia-Ukraine conflict, global economic conditions, the outlook for future growth and profitability and the views of key stakeholders, including shareholders and regulators. Business Review and Future Developments A full review of the Group’s activities during the year, recent events and future developments is contained in the Chair’s Statement on pages 2 and 3, the Chief Executive Officer’s Review on pages 4 to 7, and the Business and Financial Review on pages 12 to 19. Risk Management and Internal Controls Details of the Group’s risk management and internal control processes can be found on pages 20 to 22. A summary of the principal risks and uncertainties can be found on pages 23 to 28. Corporate Governance and Corporate Social Responsibility The Corporate Governance Report on pages 38 to 45 provides full details on the efforts made by the Group in the areas of corporate governance and corporate social responsibility within the business. 32 Hansard Global plc Report and Accounts 2023Audit and Risk Committee The Audit and Risk Committee Report on pages 62 to 63 outline how the integrity of the financial reporting and audit process is overseen and the maintenance of sound internal controls and risk management systems. Directors’ Remuneration Details of Directors’ remuneration for the year can be found in the Report of the Remuneration Committee on pages 66 to 71. Directors Details of Board members at the date of this report, together with their biographical details, are set out on pages 30 to 31. Except where otherwise noted, all Board members served throughout the financial year and to the date of this report. Dr Leonard Polonsky maintains the honorary title of President to reflect his role having founded the Group in 1970. In accordance with the Articles of Association all the Directors will retire at the AGM and, where applicable and eligible, shall seek election or re-election. Share Capital At 30 June 2023, the Company’s issued share capital comprised 137,557,079 ordinary shares of 50 pence each. As at 30 June 2023, the total voting rights of the Company were 137,557,079. There have been no changes to the issued share capital and total voting rights during the period from 30 June 2023 until the date of this report. Further details of the issued share capital together with details of authorised share capital and movements during the year are included in note 22 to the consolidated financial statements. The Company has one class of share in issue, ordinary shares of 50 pence each, all of which are fully paid. Each ordinary share in issue carries equal rights including one vote per share on a poll at general meetings of the Company, subject to the terms of the Company’s Articles of Association and applicable laws. Votes may be exercised by shareholders attending or otherwise duly represented at general meetings. Deadlines for the exercise of voting rights by proxy on a poll at a general meeting are detailed in the notice of meeting and proxy cards issued in connection with the relevant meeting. There are no restrictions on voting rights or on the transfer of shares. Substantial shareholdings At 30 June 2023 the Company had been notified of the following holdings in its share capital. Name Shares (millions) % holding Dr L S Polonsky CBE * Aberforth Partners LLP The Polonsky Foundation Mr M A L Polonsky * Premier Miton Group plc *Including holdings of spouse 50.8 20.0 8.5 7.8 7.0 36.9 14.6 6.2 5.7 5.1 There have been no other significant changes in these holdings between the balance sheet date and the date of this report. 33 Hansard Global plc Report and Accounts 2023GOVERNANCEDirectors’ Report continued Employee Benefit Trust An Employee Benefit Trust (“EBT”) was established in February 2018 for the purpose of providing share-based reward. During the year, net share awards totalling 526,785 shares were granted to Directors and Executive Management, with the awards vesting after 3 years, subject to the rules of the Deferred Bonus Plan. 545,000 shares were purchased and transferred into the EBT, to give a total of 557,000 held as at 30 June 2023. Share incentive schemes Save As You Earn Programme A Save As You Earn share save programme allows eligible employees to have the opportunity of acquiring an equity interest in the Company. The Save As You Earn programme was renewed for a further ten years at the 2017 AGM. At the balance sheet date 29,031 options remain outstanding (2022: 78,779 options), details of which can be found in the Report of the Remuneration Committee. Information About Securities Carrying Voting Rights The following information is disclosed in accordance with DTR 7.2.6 of the FCA’s Disclosure Guidance and Transparency Rules: ■ the Company’s capital structure and voting rights are summarised on page 32 and 33.; ■ details of the Company’s substantial shareholders are set out on page 33. ■ an amendment to the Company’s Articles of Association and the giving of powers to issue or buy back the Company’s shares requires an appropriate resolution to be passed by shareholders. Proposals to grant powers to the Board to issue and buy back shares are set out in the notice of the AGM. ■ the Company may alter its Articles of Association by special resolution at a general meeting of the Company; and ■ the appointment and replacement of Directors is governed by the Company’s Articles of Association. The Articles of Association provide that the Directors may be appointed by ordinary resolution of the shareholders or by the Board. The Company must have not less than two, and not more than 12 Directors. Where Directors are appointed by the Board, they may only hold office until the next AGM of the Company where they will be eligible for election. Each Director must then retire from office at each AGM. The Company may remove a Director by ordinary resolution. 34 Hansard Global plc Report and Accounts 2023Powers of Directors Subject to the Articles of Association, the Isle of Man Companies Acts 1931 to 2004 and related legislation and any directions given by resolution of shareholders, the business of the Company will be managed by the Board which may exercise all the powers of the Company. Directors’ Interests Directors’ interests in shares in the Company and in options granted under the Save As You Earn programme are disclosed in the Report of the Remuneration Committee on pages 66 to 71 together with details of their contractual arrangements with the Group. Controlling Shareholder Dr Leonard Polonsky is the controlling shareholder of the Group. To ensure compliance with independence provisions set out in Listing Rule 6.5.4 a summary of the most recent written and legally binding agreement, dated 22 September 2014, governing his relationship with the Group (the “Agreement”) is set out in the Report of the Remuneration Committee on pages 66 to 71. There were no significant transactions between the Group and Dr Polonsky during the year. In accordance with Listing Rule 9.8.4 R (14), since entering into the Agreement, the Company has fully complied with the independence provisions included within this Agreement, and, so far as the Company is aware, the controlling shareholder and its associates have also complied with the independence and procurement provisions set out in Listing Rule 6.5.4 during the period under review. Company Secretary The Company Secretary at 30 June 2023 was Hazel Stewart. Forward-Looking Statements The Chair’s statement, the Group Chief Executive Officer’s overview, the Business and Financial Review and other sections of this Annual Report and Accounts may contain forward-looking statements about the Group’s current plans, goals and expectations on future financial conditions, performance, results, strategy, and objectives. Statements containing the words: ‘believes’, ‘intends’, ‘expects’, ‘plans’, ‘seeks’, ‘anticipates’ and other words of similar meaning are forward-looking. All forward-looking statements involve risk and uncertainty. This is because they relate to future events and circumstances that are beyond the Group’s control. As a result, the Group’s future financial condition, performance and results may differ materially from the plans, goals and expectations set out in the forward-looking statements. The Company will not undertake any obligation to update any of the forward-looking statements in this Annual Report and Accounts. Annual General Meeting (AGM) The AGM of the Company will be held on 8 November 2023 at the Company’s registered office. A copy of the notice of the AGM will be available on www.hansard. com together with this Annual Report and Accounts to shareholders. As well as the business normally conducted at such a meeting, shareholders will be asked to: ■ elect or re-elect all Directors; and ■ Adopt new articles of association in order to modernise the Company’s constitution, provide greater flexibility to communicate with shareholders electronically and to clarify ambiguities. Full details of the changes will be provided in the notice. The Directors consider that all the resolutions to be put to the AGM are in the best interests of the Company and its shareholders as a whole and will be voting in favour of them. The Board undertakes to apply the Listing Rules in relation to the re-appointment of the independent non-executive Directors. This requires that re-election is by majority of votes cast by independent shareholders as well as by majority of all shareholders. The Company further confirms that, as required by the Listing Rules, it has an agreement in place with Dr Polonsky as the controlling shareholder and that the Company has complied with the requirements of the agreement throughout the year to 30 June 2023. Copies of the Letters of Appointment for the non-executive Directors, will be available for inspection at the Company’s registered office during normal business hours and the AGM venue 15 minutes prior to the AGM until the conclusion of the AGM. In accordance with the Group’s normal practice, the total number of proxy votes lodged at the meeting on each resolution (categorised as for; against; and votes withheld) will be made available both at the meeting and subsequently on the Company’s website. Political Donations The Group did not make any political donations during the year (2022: £nil). Adequacy of the Information Supplied to the Auditor The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as each is aware, there is no relevant audit information of which the Company’s auditor is unaware, and each Director has taken all steps that he ought to 35 Hansard Global plc Report and Accounts 2023GOVERNANCEDirectors’ Report continued have taken as a Director to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. ■ The Group has and continues to the date of this report to have, a strong capital position with significant levels of liquidity and cash (as outlined in the Business and Financial Review). Auditor The Company’s auditor, KPMG Audit LLC (“KPMG”), has indicated its willingness to continue in office. The Audit Committee has recommended that KPMG be reappointed as the Company’s auditor. Accordingly, a resolution to reappoint KPMG as auditor to the Company, and to authorise the Directors to determine its remuneration, will be proposed at the 2023 AGM. Going Concern The Directors have at the date of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to operate as a going concern for the foreseeable future, being a period of 12 months from the approval of the Annual Report and Accounts and have prepared the financial statements on that basis. In making this statement, the Directors have considered the impact on the business of the ongoing Russia-Ukraine conflict, and global economic conditions. They have reviewed financial forecasts that include plausible downside scenarios such as reduced levels of new business and higher expenses arising from increased inflation. These show the Group continuing to generate profit over at least the required 12 months from the date of approval of the financial statements and that the Group has sufficient cash reserves to enable it to meet its obligations as they fall due. The Directors expect that the acquisition of new business will continue to be challenging in the current climate. The impact of this however is not immediate to the Group’s profit and cash flows and therefore allows for longer term adjustments to operations and the cost base. Long periods of lower new business or indeed lower AuA would be addressed by reducing the cost base and where necessary, the dividend paid. The following factors are considered as supportive to the Group’s resilience to external market and economic challenges: ■ The Group’s business model focuses on long term savings products, a majority of which are regular premium paying products which continue to receive cash inflows regardless of the amount of new business sold. ■ The Group earns approximately a third of its revenues from asset-based income which is not immediately dependent on sourcing new business. ■ New business channels are geographically dispersed and therefore less exposed to specific regional lock-downs and other regional factors. ■ The largest cash outflow associated with new business is commission expenditure which reduces directly in line with reduced sales. ■ The Group places the majority of its shareholder assets into conservative, highly-liquid, highly rated bank deposits and money market funds. These are typically not subject to price fluctuation and protect the Group’s assets against potential market volatility. ■ The Group has no borrowings. Post Balance Sheet Events There have been no material post-balance sheet events, which would require disclosure in, or adjustment to, these consolidated financial statements. Longer-Term Viability Statement In accordance with provision 31 of the UK Corporate Governance Code and Listing Rule 9.8.6, the Directors have assessed the prospects of the Group over a five-year period and have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of assessment. The Group and its insurance subsidiaries are required to maintain at all times minimum regulatory solvency capital levels based on the size and nature of business written. The assessment of prospects is considered over a five-year period as this matches the period over which business plans are considered by the Board. The Board also considers it a reasonable period in light of rapidly changing regulation, competitive landscape and technology advances and developments. The Group’s business plan and associated scenario modelling includes projections of the Group’s profit, capital, liquidity and solvency. Scenario and stress testing considers the Group’s capacity to absorb or respond to potential economic, contract holder activity or operational stresses. These include for example material investment market declines, interest rate movements, mass surrenders by contract-holders and operational losses. Reverse stress tests are also considered to provide insight into the level of stress needed to breach regulatory solvency requirements. The assessment also considered simultaneous multiple adverse impacts that could plausibly occur. This included a 50% reduction to new business, a 25% reduction in AuA due to market declines and a 15% strengthening of sterling all arising at the same time. While these stresses produce lower levels of profit, cash and dividends, none of them produce an immediate risk to the viability of the business. This allows therefore for compensatory management actions to be taken to secure longer-term viability through for example expense and dividend reductions. 36 Hansard Global plc Report and Accounts 2023In making its overall assessment, the Board has also considered the principal and emerging risks and associated mitigating strategies which it has identified and outlined on page 23 to 28. The Directors confirm that they have undertaken a robust assessment of the principal and emerging risks facing the Group. Statement of Directors’ Responsibilities in Respect of the Report and the Financial Statements The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Acts 1931 to 2004 and applicable law and have elected to prepare the Parent Company financial statements in accordance with United Kingdom Accounting Standards, comprising Financial Reporting Standard 102 ‘The Financial Reporting Standard Applicable in the UK and Republic of Ireland’ (“FRS 102”). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the Group’s profit or loss for that period. In preparing each of the Group and Parent Company financial statements, the Directors are required to: ■ select suitable accounting policies and then apply them 2004. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility Statement of the Directors in Respect of the Annual Financial Report We confirm that to the best of our knowledge: ■ the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and ■ the Directors’ Report includes a fair review of the development and performance of the business and the position of the issuer, and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. consistently; By Order of the Board ■ make judgements and estimates that are reasonable, relevant and reliable; ■ state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Acts 1931 to 2004 and as regards the group financial statements, UK adopted International Accounting Standards. ■ assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and ■ use the going concern basis of accounting unless they intend either to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and to enable them to ensure that its financial statements comply with the Companies Acts 1931 to Hazel Stewart Company Secretary 27 September 2023 37 Hansard Global plc Report and Accounts 2023GOVERNANCECorporate Governance Report Compliance with Companies Acts As an Isle of Man incorporated company, the Company’s primary obligation is to comply with the Isle of Man Companies Acts 1931 to 2004. The Board confirms that the Company is compliant with the relevant provisions of the Companies Acts. Compliance with the UK Corporate Governance Code 2018 (“the Code”) The Board believes high standards of corporate governance are integral to the delivery of the Group strategy and so the Board maintains a strong commitment to achieving the highest standards of corporate governance. During the year under review, the Group applied the principles and provisions of the UK Corporate Governance Code 2018 (“the Code”). A copy of the Code is available on the Financial Reporting Council website at www.frc.org.uk. Details on how we have applied the provisions and principles of the Code to our activities throughout the financial year and to the date of this report are set out in this Corporate Governance Report and in the following reports: the Directors’ Report on pages 32 to 37, the Report of the Remuneration Committee on pages 66 to 71, the Report of the Nominations Committee on pages 64 to 65 and/or in the Report of the Audit & Risk Committee on pages 62 to 63. For the year ended 30 June 2023, the Board considers that it has complied in full with the provisions of the Code, other than in respect of provision 36 as further outlined in the Remuneration Report, and provision 11 following the resignation of Graeme Easton. During the recruitment process that led to the appointment of Christine Theodorovics, the Board did not comply with provision 11 as during that period, less than half of the board were independent non- Executive Directors. Stakeholders Stakeholders are critical to the Company’s long-term, sustainable success. They are our shareholders, employees, regulators, distribution partners, service providers, and the communities in which we operate. This section explains why and how the Company interacts with these stakeholders, as well as the steps it takes to ensure that their interests are considered in the Board’s decision making. As the Company is listed on the Main Market of the London Stock Exchange, it reports on its compliance with the UK Corporate Governance Code on a comply or explain basis. Provision 5 of the UK Corporate Governance Code recommends that the Company report on how the interests of its key stakeholders were considered in board discussions and decision-making, including those matters outlined in Section 172 of the UK Companies Act 2006 (the “UK Act”). While the Company is not domiciled in the United Kingdom, we have chosen to voluntarily report in accordance with Section 172 of the UK Act in order to demonstrate our commitment to best practice governance and thorough application of the UK Corporate Governance Code. The tables on the following pages show how the Company and its Board interact with its stakeholders. We recognise that these relationships are the foundation for the Company’s long-term viability, which benefits all parties. The Board recognises the significance of upholding a high standard of business conduct and stakeholder engagement, as well as having a positive impact on the environment in which we operate. We actively engage with our key stakeholders in order to understand their perspectives and build effective relationships, and our engagement strategy for each stakeholder group is outlined in the tables on the following pages. Aside from stakeholder considerations, the Board recognises its responsibility to consider long-term impacts and the Company’s impact on and from wider society and the environment. The Board monitors performance against strategy and appropriate decision-making by receiving regular updates, both in Board and Committee meetings and through regular Board reports from the CEO, CFO, Executive Committee members, and other senior managers, all of which enable it to make well-informed principal decisions for the Company’s and its various stakeholders’ long- term success. We define principal decisions as those that are both material to the Group and significant to any of our key stakeholder groups. In making principal decisions, the Board has considered the outcome from its stakeholder engagement as well as the need to maintain a reputation for high standards of business conduct and the need to act fairly between the members of the Company. The Board believes that the Group’s decision-making is balanced, and that Hansard’s policies and actions meet the Group’s obligations Section 172: Promoting the Success of the Company The Directors recognise that their overarching duty, both individually and collectively, is to act in good faith and in a manner most likely to promote the success of the Company, as defined in Section 172 of the UK Act, for the benefit of shareholders as a whole, taking into account, among other things: The Likely Consequences of Any Decision in the Long Term The Board’s focus is on ensuring that the Company generates and preserves value over the long term for all its shareholders. The Board’s aim is to make sure that decisions are consistent with the strategic objectives of the Company and the long-term success of the Company. The Interests of the Company’s Employees The Board engages with employees via a variety of mechanisms and forums to ensure that people interests are considered. The Need to Foster the Company’s Business Relationships with Suppliers, Customers, and Others The Board considers customers, suppliers and others’ factoring in their needs, feedback, and concerns to make informed decisions that seek to benefit all parties. This ensures a balanced and sustainable business relationship. 38 Hansard Global plc Report and Accounts 2023The Impact of the Company’s Operations on the Community and the Environment The Board CSR strategy focuses on minimising the Group’s environmental impact, making a positive contribution to society and supporting our people to make a difference to the environment. The Board is equally interested in communications with private shareholders and the CFO oversees communication with these investors. All information reported to the regulatory information services is simultaneously published on the Company’s website, affording the widest possible access to Company announcements. The Desirability of the Company Maintaining a Reputation for High Standards of Business Conduct The Company has four core values that are the foundation of the Company’s culture: Integrity, Respect, Quality and Innovation. These values ensure that the Company maintains a reputation for high standards in all areas of the business it conducts. The Need to Act Fairly Between Shareholders of the Company The Board actively engages with shareholders and considers their interests when setting the Company’s strategy. Stakeholders Shareholders Our shareholders include institutional investors, retail investors, and management, among others. Why We Engage The Board recognises the importance of regularly engaging with shareholders in order to maintain a high level of transparency and accountability, to act fairly, and to inform the Company’s decision making and future strategy. The Board is accountable to the shareholders for creating and delivering value through effective business governance. How We Engage The Group places considerable importance on developing its relationships with our shareholders and it aims to achieve this by way of the following regular communication activities: ■ regular dialogue with major institutional shareholders, both directly and through the Company’s advisors; ■ Annual General Meetings; ■ market announcements, corporate presentations and other Company information which are available on our website at www.hansard.com; and ■ the Annual Report and Accounts issued to all registered shareholders, The Chair the CEO and Committee Chairs are available to meet or correspond with major shareholders to discuss any areas of concern not resolved through normal channels of investor communication. There were no significant areas of concern raised during the 2023 financial year. Arrangements can be made to meet with the Chairman or the Senior Independent Director through the CFO or Company Secretary. The Board receives regular feedback on the views of shareholders on the Company from its executive management team after meetings with those shareholders, as well as from reports from the Company’s corporate brokers, the Chairman and the Senior Independent Director. Employees We recognise that to meet our Company goals, we need to retain, attract and develop our talent pool, by providing a supportive and safe workplace where our employees can develop and thrive. Why We Engage We understand the importance of engaging with our employees and recognise that the Company culture and our overall remuneration and benefits package can have significant effect on employees. Communication therefore continues to be a key part of our Culture programme. We want our employees to have a voice, feel appreciated for their contribution and to understand their roles within the Company. It’s important that our employees are made aware of key business updates and that they have the opportunity to provide feedback on what’s important to them. We work hard to meet our employees’ needs and to maintain strong relationships that foster a positive workplace culture. How We Engage We actively and regularly communicate with our employees via various mechanisms covering matters such as strategic updates, business performance and culture or any other matters which are relevant to employees. Our employees are also offered opportunities to provide feedback in different ways such as engagement and culture surveys and in team and individual settings. We provide regular training and development opportunities for our employees and make sure they receive regular feedback and recognition, supported via the performance management framework. We strive to provide a supportive and safe and comfortable working environment, as well as competitive wages and benefits. We encourage all of our employees to provide feedback to the Board and provide open channels of communication for them to do so. 39 Hansard Global plc Report and Accounts 2023GOVERNANCE Corporate Governance Report Regulators These are the governmental or regulatory bodies in charge of overseeing the Company’s operations and ensuring compliance with applicable laws and regulations. Each of our regulators is in charge of overseeing various aspects of the Company’s operations, including financial reporting and consumer protection. Why We Engage We work with our regulators to ensure that we are in compliance with all policies, laws, and regulations. Regular communication with our regulators assists us in identifying potential risks and obtaining guidance on how to mitigate them. How We Engage The Company meets with its regulators proactively to address any concerns, and it establishes regular meetings to ensure that the Company is up to date on any proposed changes. We make every effort to respond to any queries or requests for information from our regulators in a timely manner. Distribution Partners Those who assist the Company in providing its products and services, both domestically and internationally, and who assist the Company in getting our products into the hands of our customers. Why We Engage We understand the importance of maintaining positive relationships with our distribution partners in order to ensure that our products reach customers on time and accurately represent our brand. How We Engage All our distribution partners receive regular training to ensure they are knowledgeable about all of the Company’s products. Service Providers Those upon whose services the Company rely in order to provide its products and services, both domestically and internationally. Why We Engage To ensure that the services on which the Company places reliance are delivered to the Company’s required standards and timelines. How We Engage We receive regular service attestations from providers and meet frequently to review the performance of services. Communities The locations in which the Group maintains its operations, and in which our employees live. Why We Engage We appreciate that we have a responsibility to support our local communities. How We Engage We encourage our employees to support local causes, either financially or by allowing them to spend time out of the office on community engagement, and we partner with local organisations directly where appropriate, Compliance with the Market Abuse Regulation In order to ensure compliance with the Market Abuse Regulation (“MAR”), the Company maintains internal policies, procedures and controls in respect of market abuse, market manipulation and insider dealing. A Share Dealing Code is in place which all employees must adhere to. The Company has complied with this Share Dealing Code and MAR throughout the period. Role of the Board of Directors and its Principal Committees The primary role of the Board is to provide leadership of the Company. The Company is directed and controlled both by its Board of Directors and through systems of delegation and escalation, in order to achieve its business objectives in accordance with high standards of transparency, probity and accountability. It achieves these goals by making decisions relating to a number of key areas for the business, by overseeing the activities of the executive management team, and by delegating certain matters for resolution through the principal Board Committees, namely the Audit & Risk Committee, the Executive Committee, the Remuneration Committee and the Nominations Committee. The specific duties of the Board are clearly set out in a Board Procedures Manual that addresses a wide range of corporate governance issues and lists those items that are specifically reserved for decision by the Board. The primary responsibilities of the Board include, but are not limited to: ■ formulation of medium and long-term direction and strategy for the Group; ■ establishment of capital structure and dividend policy; ■ ensuring the Group’s operations are well managed and proper succession plans are in place; ■ review of major transactions or initiatives proposed by management; ■ implementation of policy and procedures to support the governance framework of the Group; ■ regular review of the results and operations of the Group; ■ ensuring that proper accounting records are maintained, and adequate controls are in place to safeguard the assets of the Group from fraud and other significant risks. ■ regular evaluation of board performance; ■ oversight of the Group’s ERM framework; and ■ decisions regarding the Group’s policy on charitable and political donations. The duties of the principal Board Committees are detailed in the relevant terms of reference, which are reviewed annually and are available on the Company’s website, www.hansard.com. 40 Hansard Global plc Report and Accounts 2023Board Composition and Key Roles At the date of this report the Board comprises the non-executive Chair, three independent non-executive Directors, one non- executive Director, the Group Chief Executive Officer, and the Group Chief Financial Officer. As required by the Articles of Association, all Board members will offer themselves for election or re-election at the forthcoming AGM. The Board supports greater transparency regarding the election and re-election of independent non-executive Directors. In compliance with the Listing Rules, the Company operates a dual voting structure for any resolutions on the election and re-election of the independent non-executive Directors. The results from the AGM votes on any such resolutions, together with other information normally circulated following the conclusion of the meeting, will be disclosed through the Regulatory Information Services following the conclusion of the Meeting. In the event that the majority of independent shareholders are shown to have voted against these resolutions, a further vote will be called after 90 days. Chair Philip Kay was appointed the Company’s non-executive Chair with effect from 1 May 2022, succeeding Graeme Easton who remained on the Board as a non-executive Director. As required by the Code, Philip was considered independent upon appointment. He leads the Board within a solid governance framework, and he ensures that the Board provides effective leadership for the Group including strategy and direction. As part of the appointment process the time commitments required for this role were considered. Group Chief Executive Officer Graham Sheward was appointed the Group Chief Executive Officer with effect from 10 May 2021. As Chief Executive Officer, he leads the senior executive team in the day-to-day running of the Group’s business, including execution of the Group’s business plans and objectives and communicating its decisions and recommendations to the Board. The division of responsibilities between the Chair and the Chief Executive Officer is clearly defined and has been approved by the Board. The Chair has no day-to-day involvement in the management of the Group. The Chief Executive Officer has direct charge of the Group on a day-to-day basis and is accountable to the Board for the financial and operational performance of the Group. Group Chief Financial Officer Thomas Morfett was appointed the Chief Financial Officer with effect from 17 April 2023. As Chief Financial Officer, he is responsible for the Group’s Finance, Actuarial and Investments functions, and is as a key member of the Chief Executive Officer’s executive team. Senior Independent Director Jose Ribeiro is the Company’s Senior Independent Director. The Senior Independent Director provides a sounding board for the Chair and serves as an intermediary for the other Directors. He is also available to shareholders should they have any concerns that they are unable to resolve through other channels, or when such channels would be inappropriate. The responsibilities of the Chair, Group Chief Executive Officer and Senior Independent Director are available on the Company’s website, www.hansard.com. Non-Executive Directors Jose Ribeiro, David Peach and Christine Theodorovics are considered by the Board to be independent non-executive Directors in accordance with the Code definition. Philip Kay, as non-executive Chair was considered independent on appointment. Marc Polonsky, a non- executive Director, is not considered to be independent for the purposes of the Code due to close family ties with Dr Leonard Polonsky and representing the Polonsky family shareholding. The non-executive Directors fulfil a critical role to constructively challenge all recommendations presented to the Board for approval and to provide the benefit of their experience and expertise to manage risk within the Group and enhance delivery of the overall strategy. Board Independence The Board’s policy is to appoint and retain independent non-executive Directors who can apply their wider knowledge and experiences to their understanding of the Group. The process for appointing new Directors is conducted by the Nominations Committee. It is the Board’s view that an independent non-executive Director also needs to be able to present an objective, rigorous and constructive challenge to management. To be effective, an independent non- executive Director needs to acquire a sound understanding of the industry and the Company so as to be able to evaluate properly the information provided. Each independent non-executive Director serves for a fixed term not exceeding three years that may be renewed by mutual agreement and subject to shareholder approval at the AGM. Subject to the Board being satisfied with a Director’s performance, independence and commitment, an independent non-executive Director may have their terms renewed for up to nine years. Beyond that period, a Director would typically be considered to no longer be fully independent. A review of the arrangements affecting all non-executive Directors who served during the year covering the current term of appointment and review of their independence (where relevant) was undertaken by the Nominations Committee. The Committee was satisfied that based on their performance during their time on the Board, Jose Ribeiro, David Peach, and Christine Theodorovics (from 23 January 2023) remain independent. Philip Kay, as Chair, was considered independent upon appointment. 41 Hansard Global plc Report and Accounts 2023GOVERNANCECorporate Governance Report continued Board Meeting Attendance The Board meets regularly to determine the Company’s strategic direction, to review the Company’s operating and financial performance and to provide oversight that the Company is adequately resourced and effectively controlled. The Company requires Directors to devote sufficient time to the Company in order to perform their duties. If Directors are not able to attend a meeting, they have the opportunity to submit their comments in advance to the Chair or the Company Secretary. If necessary, they can follow up with the Chair of the meeting. The attendance of the Directors at scheduled Board and Committee meetings of which they were a member held during the year (and the maximum number of meetings that each Director could have attended) were as follows: Board Audit & Risk Nominations Remuneration Number of meetings 9 5/5 Graeme Easton * 9/9 Philip Kay 9/9 Jose Ribeiro 9/9 Marc Polonsky 9/9 David Peach 9/9 Graham Sheward Tim Davies** 8/8 Christine Theodorovics*** 3/3 1/1 Thomas Morfett**** 7 3/3 n/a 7/7 n/a 7/7 n/a n/a 2/2 n/a 4 1/1 4/4 4/4 n/a 4/4 n/a n/a 1/1 n/a * Resigned with effect from 2 November 2022 ** Resigned as CFO with effect from 17th April 2023 *** Appointed with effect from 23rd January 2023 **** Appointed as CFO with effect from 17th April 2023 6 2/2 6/6 6/6 n/a 6/6 n/a n/a 2/2 n/a The Chair of the relevant Board or Committee invited other non- executive Directors to attend meetings of which they were not a member whenever considered appropriate. The CEO and CFO have standing invitations to all meetings and Marc Polonsky attended or partially attended 6 Audit & Risk Meetings, 4 Nomination Committee Meetings and 4 Remuneration Committee meetings. Board Committees The Board has established standing committees to oversee important issues of policy and maintain such oversight outside the main Board meetings. Each committee operates within defined terms of reference, which can be accessed on the Company’s website. The committee positions held by the Directors as at the date of this report are summarised below: ■ Nominations Committee - Chair: Philip Kay. Members: David Peach, Jose Ribeiro and Graeme Easton (until 2nd November 2022) and Christine Theodorovics (since 23 January 2023). ■ Remuneration Committee - Chair: Jose Ribeiro. Members: Graeme Easton (until 2nd November 2022), David Peach, Philip Kay and Christine Theodorovics (since 23 January 2023). The Chairs of the relevant Board Committees are available to engage with shareholders on any significant matters related to their areas of responsibility. Reports from the Audit & Risk, Nominations and Remuneration Committees are set out in this Annual Report and Accounts, together with a summary of their activities during the year. The Executive Committee is chaired by the Group Chief Executive Officer and currently meets fortnightly. The Executive Committee has responsibility for the day-to-day management of the Group, and other items as delegated from time-to-time by the Board. In addition to Graham Sheward and Thomas Morfett (replacing Tim Davies from 17th April 2023), the Executive Committee is currently comprised of Ollie Byrne (Commercial Director), Karen Corran (Head of People and Culture), Angela McCraith (Chief Risk Officer), Ailish Sherlin (Chief Actuary), Hazel Stewart (Company Secretary), Keith Brown (Head of Sales) and John Whitehouse (Chief Operating Officer). Board Processes The agenda for each Board and Committee meeting is considered by the Chair or Committee Chair and the papers for each meeting are distributed by the Company Secretary to the Board or Committee members beforehand. As a standard agenda item during the scheduled Board meetings, the Chair and non-executive Directors meet without the executive Directors present. The Chair maintains regular contact with the Chief Executive Officer and with the non-executive Directors, outside of Board meetings or calls, in order to discuss specific issues. Board Evaluation and Effectiveness The effectiveness of the Board is vital to the success of the Group. The Company undertakes an evaluation each year in order to assess the performance of the Board, its Committees, the Directors and the Chair. The Board engaged Boston Limited to conduct a board evaluation in the year. The evaluation took the form of a questionnaire, where Directors were required to rate certain aspects of the Board’s and Committees’ performance. The questionnaire also gave Directors the opportunity to provide comments on areas of focus, which included the structure of the Board, effectiveness of the Board, and committee-specific questions. ■ Audit & Risk Committee - Chair: David Peach. Members: Jose Ribeiro, Graeme Easton (until 2nd November 2022) and Christine Theodorovics (since 23 January 2023). ■ Executive Committee - Chair: Graham Sheward. Member: Thomas Morfett (from 17th April 2023) and Tim Davies (until 17th April 2023). The responses to the evaluation of the Board and the Committees were collated and analysed by the Chair and the Senior Independent Director. The results indicated that the Board continues to work well and there were no significant concerns among the Directors about the Board’s effectiveness. Additional focus will be given to succession planning and initiatives such as diversity and ESG. 42 Hansard Global plc Report and Accounts 2023 As part of the Chair’s evaluation the independent non-executive Directors meet separately under the leadership of the Senior Independent Director who, in turn, engages in reviews with the Chair. Following these reviews, the Directors have concluded that the Board and its Committees operate effectively. Additionally, the Chair and the Senior Independent Director have concluded that each Director contributes effectively and demonstrates full commitment to his duties. Remuneration of Directors The principles and details of Directors’ remuneration, as well as the composition and activities of the Remuneration Committee, are contained in the Report of the Remuneration Committee on pages 66 to 71. Insurance The Company maintains insurance cover with respect to the liabilities of Directors and Officers within the Group. In addition, qualifying third party indemnity arrangements are in force for the benefit of the Directors within the Group and were in force for the benefit of former Directors of the Group during the year under review. Board Support Directors are fully briefed in advance of Board and Committee meetings on all matters to be discussed. The Company Secretary is responsible for following Board procedures and advising the Board, through the Chair, on governance matters. All Directors have access to her advice and services. The Board has adopted a procedure whereby Directors may, in the performance of their duties, seek independent professional advice at the Company’s expense if considered appropriate. Directors of the life companies are required to complete several mandatory training sessions during each year, for example on Anti-Money Laundering responsibilities (provided by the Money Laundering Reporting Officer or an external supplier). Training and support is also provided on any other key topics that the Board feel appropriate in addition to their individual Continuing Professional Development requirements. Risk Management and Internal Controls The Board has overall responsibility for the Group’s systems of risk management and internal control, and for reviewing their effectiveness. The Board recognises that the governance risk management and internal control arrangements which constitute the ERM Framework are intended to reduce, although cannot eliminate, the range of possibilities which might cause detriment to the Group. Similarly, the ERM Framework cannot provide protection with certainty against any failure of the Group to meet its business objectives, or guard against material errors, losses, fraud, or breaches of laws and regulations. Taking all of these factors into account the ERM Framework is intended to provide reasonable, but not absolute, assurance against material misstatement or losses and / or the breach of any laws or regulations. The primary responsibility for developing and implementing internal control and risk management procedures covering all aspects of the business lies with the Executive Management Team. As part of the reporting processes from the ERM Framework, the Board regularly receives written reports covering all such aspects in addition to overseeing controls and risk management procedures via the Audit & Risk Committee. Individual managers have primary responsibility for ensuring compliance with Group policies, principles, and compliance obligations within their respective span of control. This includes the identification, evaluation, monitoring, management, and reporting of risks within their areas of responsibility. The substance and form of risk management activities and the quality of their application are regularly reviewed by the Group Risk Forum and objectively analysed and evaluated by the Group’s Internal Audit function, with oversight by and reporting to the Audit & Risk Committee, which is ultimately responsible for reporting on the same to the Board. Processes for identifying, evaluating, and managing the risks faced by the Group have been in place throughout the year under review and up to the date of this report. They are regularly reviewed by the Board, with the assistance of the Audit & Risk Committee. The Board, through the Audit & Risk Committee, has reviewed the effectiveness of the Company’s risk management and internal control systems including financial, operational and compliance controls. The Board has further undertaken a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency, or liquidity, in accordance with provision 28 of the UK Corporate Governance Code. Additional information on the principal risks and uncertainties faced by the Group, together with steps taken to manage them, can be found within the Principal Risk Report on pages 23 to 28. Whistleblowing Arrangements The Group has an established Whistleblowing Policy, which is accessible to all employees, with new starters introduced to the Policy and its objectives during induction training. The Policy is designed to ensure the principles of, responsibilities for, and the approach to effective management of whistleblowing are clearly explained and that staff feel empowered and supported to raise concerns, in confidence, where they have a reasonable belief of actual or potential wrongdoing. The Policy recognises that for some individuals raising a concern under the Group’s Whistleblowing arrangements may be a daunting or difficult experience and so provides for such concerns to be raised anonymously and/or outside the Management reporting line if preferable, providing for direct access to the Chief Risk Officer or the Chair of the Audit and Risk Committee. 43 Hansard Global plc Report and Accounts 2023GOVERNANCECorporate Governance Report continued Financial Reporting Process The Group maintains a process to assist the Board in understanding the risks to the Group failing to meet its objectives. This incorporates a system of planning and sensitivity analysis incorporating Board approval of forecast financial and other information. Operational management reports monthly to the Executive Committee and Group Risk Forum on a wide range of key performance indicators and other significant matters. The Board receives regular representations from the senior executives. Performance against targets is reported to the Board quarterly through a review of the Group’s and Company’s results based on accounting policies that are applied consistently throughout the Group. Draft management financial statements are prepared quarterly by the CFO. The members of the Audit & Risk Committee review the draft financial statements for the half year ending 31 December and for the full financial year and engage with the CFO to discuss and challenge the presentation and disclosures therein. Once the draft document is approved by the Audit & Risk Committee, it is reviewed by the Board before final approval at a Board meeting. Financial Reporting The statement on the responsibilities of the Directors in relation to the preparation of the accounts and the Directors’ evaluation of the business as a going concern is contained in the Directors’ Report on pages 32 to 37. The Directors as at the date of this report consider that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. Culture The Board believes that strong corporate governance underpinned by a sound culture is fundamental to the success of the Group. It has sought to create an empowering culture, which values innovation, quality, integrity and respect. The Board helps to ensure appropriate behaviours and culture are instilled throughout the Group, with the tone and expectations continuing to be set from the top. In its decision making, the Board aims to reinforce the Group’s values and reflect the culture it wishes to foster. Our Culture Programme is now well established, and we are confident that we are progressing a culture agenda which aligns and supports the delivery of our corporate objectives with areas that are important to our people. Feedback provided from a Companywide Employee Engagement survey, undertaken in March 2023, has informed what we focus on next. As our culture story continues to evolve, 2023 will see the bringing together of work already well underway around Performance Management, Leadership, Learning & Innovation, CSR and Communication and amalgamating those workstreams under three core pillars of focus, those being: ■ High Performance Culture ■ Learning Culture ■ Environment & Wellbeing We will continue in our commitment to supporting development opportunities for our people, be that via learning events, professional qualifications, internal promotions and secondment opportunities. During the year, we introduced a framework for Succession and Talent planning, which enables us to provide specialised learning events and development opportunities to support our people to be ready for their next role at Hansard. Work will continue this year and beyond to support the Succession and Talent framework via the High Performance and Learning Culture focus areas. Our Wellbeing team continue to play a vital role in terms of providing support and initiatives to our people around three key areas, Mental, Physical and Financial Wellbeing. Our Employee Assistance Programme provides additional support to our people and their families and friends through various life events. Through a range of Group schemes, which underpin the Mental, Physical and Financial pillars, we stand by our commitment to support the health and wellbeing of our people. We have a very active Sports and Social team who arrange a wide mix of activities and social events, bringing our people together outside of the workplace. This is a great way for our people to enhance current relationships and build new ones in a fun and interactive way. With representation from different business areas, our Culture Champions continue to be a conduit for employee feedback with the key aim of improving both our working environment and general working practices across the business. Our Culture Programme, along with the Culture Champions, Wellbeing and Sports and Social teams, are key components of employee engagement, all of which have links and visibility to the Board. People and Gender Reporting We recognise our people are key to our success in delivering the strategic objectives of the business. Our core values of Innovation, Quality, Integrity and Respect were defined by our people and underpin our working environment and practices. We believe all of our people can make a difference and we continually work to ensure that they are appropriately developed, engaged, rewarded and retained. The Culture Programme is designed to further enhance the employee experience. The Group’s principal administrative operations are performed in the Isle of Man on behalf of the wider Group. Management of Hansard Europe and certain support functions are located in the Republic of Ireland. Employees of our Malaysian and Japanese branches are included in “Other” below. Regional Sales Managers and related market development resources are principally based in local markets to support IFAs and other intermediaries that introduce business to the Group. 44 Hansard Global plc Report and Accounts 2023As at 30 June, the number of the Group’s employees (excluding non-executive Directors) by location was as follows: Location Isle of Man Republic of Ireland Other Number Number 2023 2022 145 20 20 185 155 17 17 189 The gender profile of the Group at 30 June 2023 is split with a total of 94 male and 91 female employees (2022: 99 male and 90 female). Within the executive management team, there were 6 male executives and 4 female executives. Employees reporting directly to members of the executive management team comprised 18 male employees and 23 female employees. As at 30 June 2023, the Board comprised 6 male Directors and 1 female Director. Following Graeme Easton’s resignation from the Board during the financial year under review, a vigorous process to appoint a replacement was initiated. Dr Christine Theodorovics was identified because of her wealth of experience in the insurance industry with a number of senior positions in well established companies, further demonstrated by her most recent appointment as CEO of Baloise Luxembourg. Dr Theodorovics’ appointment as an Independent non-executive Director is the first step in the Company’s journey to compliance with the new requirements on diversity and inclusion. Whilst the gender profile across the Group is evenly balanced, with a number of senior executive positions being held by female employees, including Appointed Actuary, Chief Risk Officer, General Counsel and Company Secretary, and Head of People and Culture, the composition of the Board currently means that we do not comply with the Listing Rule requirements on diversity and inclusion. The current structure and size of our Board means that it has been difficult to create a material change. In addition to the Chief Executive Officer and the Chief Financial Officer, Marc Polonsky sits as a non-independent Director in his capacity as the representative of the Company’s controlling shareholder. The Company must therefore have at least three independent non-executive Directors (excluding the Chairman, Philip Kay, who was considered independent upon appointment) as required by the UK Corporate Governance Code 2018. Consideration was given to increasing the size of the Board to enable greater diversity and inclusion but, since the Company is currently operating a tight control on expenditure pending the conclusion of two major projects, the Board did not consider it appropriate to do this during the current financial year. Nor did the Board consider it correct to refresh the Board at this time, given the imminent conclusion of these major projects and given too that all the independent non-executive Directors had been appointed to the Board only within the last four years. As and when vacancies on the Board do arise, however, candidates will be considered not only on merit but also on the basis of gender and minority ethnic background. In the meantime, the Board is excited to be developing the Company’s senior management talent pool to provide a suitable pipeline for future executive or Board appointments. Notably, Angela McCraith, Chief Risk Officer, was appointed to the board of the Company’s principal operating subsidiary, Hansard International Limited, in June 2023. Corporate and Social Responsibility ‘CSR’ Hansard is committed to being a socially responsible employer and member of the corporate community in all jurisdictions in which we have offices. During the year we formally reviewed our approach to CSR, culminating in a formal strategy document approved by the Board. Our CSR strategy is to create sustainable value for our stakeholders over the long term whilst making a positive impact on the world. As part of the review exercise a materiality assessment was undertaken with internal stakeholders to help to define the strategy over the coming years. The following areas of focus were identified as part of the materiality assessment: ■ Minimising our environmental impact ■ Making a positive contribution to society; and ■ Supporting our people to make a difference to society and the environment Initiatives that began during the year or were extended were: ■ Online and electronic communications with stakeholders in order to reduce the use of paper, printing and distribution costs ■ Utilising video conferencing to avoid unnecessary business travel ■ Challenging our travel requirements so that carbon emissions from flights are lower ■ Promotion of “bring your own water bottles” and use of water refill stations to top up ■ Recycling of electronic equipment, paper and milk cartons ■ Commitment to allowing our people volunteering days on company initiatives/ or individual initiatives aligning with the CSR strategy ■ Use of renewable energy suppliers where it is possible to do so ■ Availability of cycle to work / public transport incentive schemes A “Green Team” has been established, via our Culture Programme, comprising of people from across the Group to embed the work that has already been started and to extend the work in the coming months and years. 45 Hansard Global plc Report and Accounts 2023GOVERNANCE Hansard Global plc Climate-Related Financial Disclosures Report, 2023 Climate-Related Financial Disclosures We have developed and expanded our climate-related financial disclosures for the Group, following our first disclosures in 2022. This section explains the actions which the Group is taking to incorporate climate-related risks and opportunities into its risk management, strategic planning and decision-making processes, and seeks to provide both investors and wider stakeholder groups with a clear understanding of the Group’s progress in identifying, understanding and disclosing its exposures to climate risks and in building strategic resilience to these exposures, whilst also seeking out climate-related opportunities in the mid to longer term. The Group recognises that its work to adopt and embed the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations is an iterative process of learning and refinement as we adapt and optimise our implementation plans and tackle the challenges inherent within our journey towards establishing, expanding and embedding our ESG ambitions and objectives. 46 Hansard Global plc Report and Accounts 2023governance structures, risk ownerships, risk and control self- assessment principles, regulatory developments, third party service provisions and effective reporting. ■ Developing and updating relevant components in relation to the sustainability risk domain – including policies, procedures, risk indicators, management data and stress testing; and ■ Initiatives addressing cultural alignment and structural resilience, which encompass core ESG considerations. Our approach has been informed by the development of a model which can be actively used by the Group to promote consciousness of and accountability for our impact on society and the environment and developing a set of sustainability principles to inform our strategy and guide our actions. Recognising Our Impact on Society and the Environment ■ We recognise that climate change is one of the most significant threats to humanity. The world is hitting a global warming point- of-no-return and it is imperative that we act now for our people and the planet. We believe it is imperative that we do our bit to avoid the impact of climate change in the future. ■ We recognise that our clients depend upon us to act for the long-term and so, we will provide them with options that embrace the future. Innovation and technology will play an important role in meeting their needs. ■ We recognise our people are our greatest strength and will play a crucial role in delivering more sustainable practices, propositions, and operations. ■ We recognise that sustainability success will enhance the reputation of the organisation and help to attract new, and retain existing, stakeholders. ■ We recognise that our sustainability strategy will need to be dynamic to remain relevant and effective, and for Hansard to influence change and become an impactful business; and ■ We recognise that measurement and reporting of sustainability issues should change behaviour and result in meaningful outcomes. Introduction and TCFD Report Overview Our TCFD Journey: In addition to its obligations associated with TCFD a range of other important factors have contributed to the Group’s TCFD journey and continue to support progress towards our TCFD related goals and objectives. Importantly, the Isle of Man was designated as a UNESCO Biosphere during 2016, in recognition of its special environment, culture, heritage and economy and is the only Biosphere that encompasses an entire nation, which includes all the Island’s land and territorial sea. The Island is and always has been the home of the Hansard Group and as such, the Group is proactively committed to its role in supporting the Isle of Man Government’s initiatives associated with the sustainability of the Island’s future, with particular focus on the Treasury’s Sustainable Financing Framework, established during 2021. As a responsible island nation, the Isle of Man is particularly aware of the local and global impact of climate change and of the social and environmental imperative for action. The Island has committed to reaching carbon neutrality by 2050 and the fundamental changes required to make this happen. It is against this backdrop that the Group has continued its work, throughout the 2023 Financial Year, to enhance and embed its approach to the management of climate related and broader ESG risks and expand upon the substantive detail supporting its disclosures, under the four pillars of the TCFD recommendations. The Group remains committed to further iterative enhancements and refinements in its TCFD disclosure and reporting arrangements, for the benefit of the Group’s investors and wider stakeholder cohorts, across short-, mid- and longer-term time horizons. Achieving maturity of both qualitative and quantitative metrics and broadening their scope from carbon-related to climate-sensitive exposures, risks and opportunities, remains a priority in the near-term. Our Approach Climate-related risks and opportunities are an intrinsic element of the Group’s broader ESG Strategy. ESG risks are defined, at the highest level, as those risks arising from a failure to anticipate and respond to emerging sustainability risks or successfully integrate ESG considerations and policy positions into strategy and business planning. Risk mitigations include: ■ Actively building sustainability considerations into strategy development and business planning processes through structured analysis, formal assessment mechanisms and cross- functional collaboration. ■ Factoring emerging sustainability risk issues into key decision- making and understanding the impacts for the tools and methodologies currently used to manage risk, including 47 Hansard Global plc Report and Accounts 2023GOVERNANCEHansard Global plc Climate-Related Financial Disclosures Report, 2023 continued Relevant details of the Group’s work during the report period are organised under the four pillars of the TCFD disclosure framework, below. Areas prioritised for attention in terms of enhancing the quality and substantive nature of the Group’s disclosures, targeted at achieving full compliance with the framework, include disclosures relevant to the environmental impact of our assets under administration, iterative enhancement of the understanding of climate-related risks within our regularly assessed range of risks to the business and the resilience of our Group strategy to various climate-related scenarios. A summary of our disclosure report is presented at figure 1 below. Our Sustainability Principles ■ Our sustainability strategy is a plan to design, execute, and optimise our environmental and social responsibility initiatives. ■ Our sustainability strategy is based on the principles of sustainability, accountability, and transparency. ■ Our sustainability strategy is relevant to our business and aligns to our purpose and values. ■ Our sustainability strategy is being actively embedded into our overall corporate strategy and supported from the top (Board, CEO and Executive Committee) and across all levels of the organisation. ■ Our sustainability strategy will remain realistic and authentic – developed, measured, delivered, and reported in an honest way – avoiding ‘green washing’. ■ Our sustainability targets and objectives are an integral component of our ESG Strategy; and ■ Our sustainability strategy is consistent with our wider goal of supporting the well-being of our people. Figure 1: Summary Disclosure Report Disclosure Summary: (Key to report: 1 = fully coloured circle (full/green), 2= three quarters complete circle (near complete/yellow), 3 = half coloured circle (partial/amber), 4 =empty circle (omitted/red) Pillar Description TCFD Recommended Disclosure 2023 2022 Our Disclosure Governance Disclose the organisation’s governance around climate-related risks Strategy Disclose the actual and potential impacts of climate- related risks and opportunities on the organisation’s businesses, strategy and financial planning, where such information is material a. Describe the Board’s oversight of climate-related risks and opportunities. b. Describe Management’s role in assessing and managing climate-related risks and opportunities a. Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long-term. b. Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial- planning. c. Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2˚C or lower scenario. 48 Our TCFD Report provides an overview of our governance arrangements associated with our ESG strategy, which incorporates our governance of climate related risks and opportunities. We also describe how these arrangements support Board oversight and monitoring of progress against goals and targets as well as the roles and responsibilities of Management and how these are coordinated to ensure robust, coherent and coordinated action. Our TCFD Report describes our strategic intent in relation to climate-related risks and opportunities and the structure of ‘sustainability pillars’ supporting delivery of this intent. We set out the progress we have made in determining relevant time horizons, the main categories of risk exposure and the results of early scenario analysis. We also describe some of our important collaborations with local environmental agencies and sustainability initiatives. Hansard Global plc Report and Accounts 2023Pillar Description Risk Management Disclose how the organisation identifies, assesses and manages climate-related risks Metrics and Targets Disclose the metrics and targets used to assess and manage relevant climate- related risks and opportunities where such information is material TCFD Recommended Disclosure a. Describe the organisation’s processes for identifying and assessing climate- related risks. b. Describe the organisation’s processes for managing climate-related risks. c. Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management. a. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas emissions (GHG), and the related risks. c. Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets. 2023 2022 Our Disclosure Our TCFD Report explains how the protocols of our embedded ERM Framework have enabled climate-related risk identification, assessment and management processes to be integrated into our risk management activities. We also describe how ERM reporting conventions support our climate- risk governance arrangements. Our TCFD Reports sets out the most relevant and applicable data, in respect of emissions and energy for which we are responsible, measured in tCO2e.We also describe the results of progress in calculating and measuring Scope 3 emissions and our plans for future improvements in all target and metric data measurement and disclosure. Pillar 1 - Governance The Board retains overall responsibility for the effective functioning of the Group’s governance, risk management and internal control arrangements associated with climate-related risks and opportunities and ESG strategy more broadly. This includes responsibility for determining, evaluating and controlling the nature and extent of these risks and opportunities, taking account of the varying levels of strategic, financial and operational stresses, potential risk scenarios and emerging as well as existing climate risk exposures over short, mid and long-term time horizons. These activities are governed by the protocols of the established ERM Framework, defined and described in more detail under ‘Pillar 3 – Risk Management’, below, which include both top-down and bottom-up risk assessment bases. During the year ended 30 June 2023 the conventions of the ERM Framework have enabled the Board to continue to develop its oversight of climate-related risks and opportunities, via quarterly and annual risk reporting to the Group Audit and Risk Committee, which has included analysis and challenge of results from the formal cycle of relevant stress and scenario testing. The Board has also sought opportunities for iterative refinement of ESG strategy, described in more detail at Section 2, below and enhanced, effective integration of climate risks and opportunities into the Group’s structure and decision-making processes, with clear accountability and ownership for climate risk management allocated to members of the Executive Committee. This work is supported by the HG plc ‘Green Team’, which was established under the stewardship of the Group’s Corporate Social Responsibility (CSR) Workstream, to drive 49 Hansard Global plc Report and Accounts 2023GOVERNANCEHansard Global plc Climate-Related Financial Disclosures Report, 2023 continued corporate focus on the collation and analysis of climate and emissions data and initiatives, and ESG priorities more broadly, promoting measurable and achievable targets and metrics. ESG is included as a standing agenda item at each quarterly Board meeting with the specific aim of ensuring that progress towards strategic objectives and targets can be closely monitored. Board oversight also ensures that climate-related risk, opportunities and associated issues become an integral and embedded element of decision-making in respect of overall Group strategy, policies and actions. The annual Group Strategy Day during May 2023, which was attended by all members of the Board and the Executive Committee provided an important platform for objective review of the Group’s climate-related strategic goals. These were considered within the context of wider industry experience and stakeholder perspectives, having regard to the aggregate levels and types of risk the Board is prepared to accept within risk capacity, in pursuit of Figure 2: Group Governance Structures strategic and business plan objectives. The governance structures which support the Board’s oversight of climate-related risks include the Executive Committee, the Group and subsidiary entity Audit and Risk Committees, the Group Risk Forum and the Investment Committees of both Hansard International Ltd (HIL) and Hansard Europe, Designated Activity Company (HE dac). The Investment Committees and the Group Risk Forum also consider ESG as a standing agenda item, ensuring that priorities and considerations remain aligned with those of the Board and there is a structured approach to the identification of climate related risks. Protocols are now in place to enable ESG-related decisions made by the Investment Committees to be communicated via the respective Boards to the Hansard Global Plc Board. A summary view of the Group’s governance structures supporting the Board’s oversight of climate-related risks and opportunities is presented at figure 2 below. Chief Executive Officer Leads ExCo. deliveries and execution of ESG strategy Chief Risk Officer Oversees the effective functioning of the Group ERM Framework ExCo The Group Executive Committee define and facilitate climate- related business plan objectives and outcomes consistent with the strategic direction and objectives set by the Board CSR Workstream Drive corporate focus on the collation and analysis of ESG and climate/ emissions data and initiatives Green Team Specific focus on climate and emissions improvements an support on climate- related initiatives HG plc Board The Group Board sets ESG strategy and retains responsibility for the effective functioning of the associated governance and oversight arrangements Group Risk Forum Ensure that priorities and considerations remain aligned with Board strategic direction and there is a structured approach to the identification, analysis and reporting of climate-related risks Group & Subsidiary Audit and Risk Committees Oversee and monitor progress in strategic deliveries and the integrity of reporting, giving necessary consideration and challenge of progress to plan and compliance with compliance obligations HIL Investment Committee Driving and developing responsible investment policies and practices, aligned with Board strategy HE dac Investment Committee Driving and developing responsible investment policies and practices, aligned with Board strategy During the financial year ended 30 June 2023 the Board has continued to delegate activities to the Executive Committee and to the Group’s CSR Workstream, with two members of the Executive Committee having specific accountability for oversight of the CSR workstream deliveries and progress reporting to the Executive Committee and Board, prior to each quarterly Board meeting. The ‘Green Team’ that was established under the CSR workstream to specifically focus on climate and emissions improvements, have continued to provide support on climate-related initiatives throughout the year, and have been instrumental in developing data collation initiatives to facilitate early reporting on Category 6 and 7 Scope 3 emissions data. An annual budget for CSR is reviewed and approved by the Board. 50 Hansard Global plc Report and Accounts 2023 Pillar 2 - Strategy The Group’s strategic goals in terms of climate related risks and opportunities is to create long-term sustainable value for our stakeholders whilst making a positive impact on the world. The Group aims to deliver its strategic objectives in this regard and build a sustainable future through focus on three sustainability elements. 51 Hansard Global plc Report and Accounts 2023GOVERNANCEHansard Global plc Climate-Related Financial Disclosures Report, 2023 continued 52 Hansard Global plc Report and Accounts 2023time horizons, and the capital required to cover those risks, under both normal and stressed conditions. Internal and external risks are considered, together with emerging risks and any risks associated with the Group’s systems of governance, having regard to capital, performance, and strategic information, which ultimately provides the Board and Executive Team with substantiated bases relevant to decision making. Forward-looking business plan and solvency projections use a range of stress and scenario testing and analyses to evaluate the adequacy of the Group’s overall financial resources, including capital and liquidity resources. The stress and scenario tests are derived from analytical review of the Group’s risk universe, enabling distinguishable patterns of impact to be considered and allowing plausible risk scenarios to be approximated into impact types, with attention given to both single test and multi-factor scenarios. During the year ended 30 June 2023 the Board have identified that climate risk factors affecting the Company can be grouped into two main categories of risk exposure: - 1. Physical risks: arising from the physical consequences of climate change, deteriorating risks to natural capital and the interplay between biodiversity loss, pollution, natural resource consumption, climate change and socio-economic drivers. Increased damage and losses from physical phenomena associated both with climate trends - typically changing weather patterns and sea level rises - and physical events, including natural disasters and extreme weather events, also have the capacity to crystallise, with impacts across key stakeholder groups. 2. Transition risks: arising from disruptions and shifts associated with the transition to a low-carbon economy, which may affect the value of assets, and consequently impact important revenue streams, or the costs of doing business. Transition risks may be motivated by changes in policyholder, or other stakeholder expectations, market dynamics, technological innovation, or reputational factors. Key examples of transition risks include policy changes and regulatory reforms which affect carbon- intensive sectors. Policy and regulatory measures may also affect specific classes of financial assets relevant for available investments, whilst social movements and civil society activism – such as that aiming to motivate divestment from and cessation of underwriting to the fossil fuel sector – may pose a risk of reputational damage, if appropriate risk mitigation strategies (and communication actions) are not implemented appropriately The Group’s strategic approach to the management and mitigation of ESG and climate-risks and opportunities are built in direct reference to its broader corporate strategy and business model. The Group’s products are unit-linked regular or single premium life assurance and investment contracts, which offer access to a wide range of investment assets. The contracts are flexible, secure, and held within wrappers, allowing life assurance cover, or other features, depending upon the needs of the client. The contract benefits are directly linked to the value of those assets that are selected by, or on behalf of, the client and held within the wrapper. The Group’s products do not include any contracts with financial options and/or guarantees regarding investment performance, which can require additional capital to be held. Levels of service and the delivery of fair client outcomes, the nature of the Group’s products, the functionality of Hansard On-line, and the ability of the contract holder to reposition assets within a contract are all designed to achieve retention of the contract holder relationship over the long- term. The main sources of income for the Group continue to be the fees earned from the administration of insurance contracts. These fees are largely fixed in nature and amount. Approximately 30% of the Group’s revenues, under IFRS, are based upon the value of assets under administration. The new business generated in a particular year is expected to earn income for an average period of 14 years. Business is therefore long term in nature both from a contract holder perspective and with regards to the income that is generated, which supports business overheads, business investment, remuneration of the distribution network and payment of dividends, whilst contractual obligations can range from 5 years to over 25 years. All of these business model aspects are contributing factors to the Board’s determination of relevant short, medium, and long-term time horizons, respectively classified as 0-5 years, 6-10 years and >10 years, which support analysis and assessment of climate-related risks and opportunities, together with broader ESG considerations. Within this context the Board has recognised climate change as presenting a potential source of high-impact, high-probability risk, requiring a strategic response which is value-driven in terms of improving resilience and demonstrating to clients, investors, regulators, and wider stakeholder groups that the risks and opportunities of climate change are understood. Effective mitigation of climate change related risks requires the iterative development of adaptation plans, which embrace forward-looking analysis and support strategic decision-making through consideration of relevant business planning, operations, underwriting and investment activities, in order to contribute to a sustainable transition to net- zero targets. The Group’s risk management arrangements, described in more detail at ‘Pillar 3 – Risk Management’ below, operate on a cyclical basis to enable the Group Board and the Executive Management Team to properly assess and understand at a practical level the major sources of risk facing the Group, on short, mid, and long-term 53 Hansard Global plc Report and Accounts 2023GOVERNANCEHansard Global plc Climate-Related Financial Disclosures Report, 2023 continued A summary of underlying analysis is presented below. Figure 3: Climate Impact Analysis Type Climate Related Risks Potential Financial Impacts Policy and Legal - Short Term - Increased Pricing of GHG Emissions. - Increased operational costs. - Medium Term - Restrictions on fuel types available. - Potential costs of transitioning to different fuels. - Medium Term - New reporting requirements associated with - More staff required to cover new and existing reporting climate and ESG in general. requirements. - Any Term - Potential legal action as a result of failing to - Costs of both compliance and non-compliance. follow new regulatory requirements. Technology - Short Term - Increase in sustainability-friendly energy options. - Medium term - Potential to invest in new products that end up - Quick response and adoption results in ESG target progress could increase market confidence and therefore investment. failing as uncertainty over future direction remains. - Sunk costs and unhappy clients, resulting in a fall in consumer - Medium term - The opposing possibility that excellent opportunities arise and smart investments are made. confidence and therefore new business and income. - Increased returns for both the company and its clients. - Long Term - Failure to invest in commodities or technologies that are climate disaster resilient results in non-profitable holdings. - Non-modernised investment portfolio would dissuade any potential new customers and by this point in time we would likely have made losses for too long to sustain the company. Market - Short Term - Customer desire to shift portfolio towards - Failure to provide clarity on ESG may cause customers to companies/investments with clear ESG direction. withdraw their holdings and move elsewhere. - Medium Term - Increased costs of fossil fuels for everyday - Customers have less money to invest resulting in less fees customer activities e.g. travel and heating. generated by the company and thus falling profits. - Long Term - Certain markets become obsolete as scarcity increases and/or stringent regulations make investing in them ineligible. - Failure to adapt policyholder portfolio in line with changing market sentiment would result in reduced or non-existent returns on investments. Reputation - Short - Medium Term - Shift in the wants and needs of company stakeholders. - Failure to keep important stakeholders happy, such as suppliers or regulators, may increase cost of operating. - Medium Term - Failure to show improvement and progress - Share price begins to fall, with old investors getting out and towards ESG targets may result in lack of investor confidence. new investors reluctant to get in. - Long Term - Completely fall behind market competitors as they approach their net zero targets with real progress while we fall wide of ours. - It is likely by this point that the importance granted to ESG by investors means that we would have completely fallen away as competition and may already have closed as a business. - All Terms - Increased risk and geographical coverage of - Customers have less money to invest as they look to ensure extreme weather events such as flooding, cyclones/hurricanes and heat waves. they have the financial means to cover any damage caused by extreme weather, resulting in decreased revenues for us. Acute - Fear of destructive weather in particular parts of the world results in large migration from places that constitute a high proportion of our business i.e. Latin America. - Weather disasters result in extreme operational disruption, potentially resulting in an increase in operational costs. Chronic - Medium - Long Term - Widescale environmental damage results in scarcity of multiple resources. - Long Term - Habitability of certain locations becomes unsustainable, resulting in loss of life or mass migration. - Permanent increases in cost of operating as scarcity increases price would result in heavily diminished profits and potentially make continuation of business unsustainable. - Failure to adapt to a worldwide shift in demographic could result in severe loss of business and likely company failure. i s k s R n o i t i s n a r T s k s R i l i a c s y h P 54 Hansard Global plc Report and Accounts 2023 during the 2023 reporting period. These are intended to create a solid foundation for the shaping of our initiatives and the actions needed to mitigate the Group’s environmental impact through the gross reduction of Scope 1, 2 and 3 emissions on a long-term, sustainable basis, recognising that their effectiveness and integrity are as significant as the pace of their achievement. In the interim investment in carbon offset programs has been an important priority. The programs chosen, with the support and insights of the Green Team, include the Delta Blue Project in Pakistan, and the Sumatra Merang Project in Indonesia. These programs are providing a solid foundation as we wait to realise future initiatives and actions to mitigate the Group’s environmental impact and continue the journey towards successful delivery of our ESG strategic objectives. During the year, Hansard collaborated with ‘Junior Achievement Isle of Man’, which works in partnership with the Island’s schools, to promote and encourage student take up of valuable skills that may not form part of the traditional curriculum. Students are also provided with important opportunities to learn about the environment and the importance of climate risk mitigation, as well as inspiring their entrepreneurial spirit and discussing the possibilities of creating their own businesses. Through this collaboration, members of Hansard’s Green Team provide assistance to Junior Achievement’s program through a range of volunteer work. Hansard is also a Corporate Partner of the Manx Wildlife Trust, enabling staff to participate in supporting and assisting the Trust in its work to enhance the Manx environment for local wildlife, educate Hansard colleagues and broader stakeholder groups on environmentally sustainable business practices and collaborate on Trust products that aim to benefit the wider community. The Green Team have also partnered with UNESCO Biosphere Isle of Man and are currently in the process of working through the relevant accreditations, via attending different workshops held throughout the year, to earn our official certification. Near-term climate-related scenarios, which have reasonable plausibility over a five-year projection period, confirmed during the 2023 reporting cycle, include: ■ Events or trends impacting the Group’s strategic priorities and business plans associated with Japan, or another target jurisdiction of critical importance to distribution strategy ■ The devaluation of, or the stranding of some asset classes, reputational damage through a failure to evidence climate risk as a strategic priority, or failure to position the Group as a sustainability leader. The Board have determined, via its ERM Framework arrangements for identifying, mitigating, and managing climate risks, that the crystallisation of physical and transition risks can be expected to manifest as a combination of expense, market, production, and policyholder behaviour stresses, with the capacity to concurrently impact both operational resilience and financial stability. Further maturity of data and analytics is expected to emerge during the 2024 financial year and provide more substantive understanding of the range and plausibility of subordinate risks and opportunities within the main exposure categories and their capacity to impact specific areas of the Group’s business, over short, medium and long-term time horizons. Consideration will then be given to how these issues could then have a material financial impact on the organisation and its stakeholders. This will include developing an analysis of climate-related issues that affect the geographical regions in which we generate most of our revenues – these being the Middle East and Latin America. The Group’s adaptation plans will target more geographically specific disclosures in future financial statements. To date climate-related issues have not presented a material impact to the Group’s financial performance or position. Stress and scenario testing during the year ended 30 June 2023 confirmed that reasonably plausible climate-risk scenarios are unlikely to adversely impact the Group’s business, strategy or financial planning over a five-year business plan period and the transition to a low-carbon economy is not expected to generate critical impacts for our business model or financial performance. However, the Group’s work in anticipation of and preparation for broader sustainability reporting, including non-climate related sustainability disclosures, is designed to strengthen analysis of reasonably foreseeable risks and impacts on a broader ESG spectrum and the resilience of the Group’s management and mitigation strategies through this lens, ensuring that both short - and long-term financial planning and strategic decision-making take account of the growing significance of climate and ESG risks and opportunities under five key risk dimensions, which include economic risks, environmental risks, geopolitical risks, societal risks and technological risks. Simultaneously the Group is continuing its work towards achieving the target reductions in gross GHG emissions, which have been established and approved by the Board via work undertaken 55 Hansard Global plc Report and Accounts 2023GOVERNANCEHansard Global plc Climate-Related Financial Disclosures Report, 2023 continued Simultaneously the Board have recognised that there are clear strategic and commercial opportunities and benefits, both primary and secondary, associated with embracing a strategic response to climate-related and ESG issues, which pursues a strong commitment to climate mitigation: 56 Hansard Global plc Report and Accounts 2023Pillar 3 – Risk Management As with all businesses, the Group is exposed to risk in respect of its strategic and business plan objectives. The Board has overall responsibility for the Group’s system of risk management and internal control and for reviewing their effectiveness, supported by the governance structures and reporting arrangements of the ERM Framework. These have been adapted to assist with the identification and management of climate-related risks, enabling the Group to readily apply its well-established and embedded risk management conventions and processes to identify, understand and assess relevant ESG related risks and opportunities in a manner consistent with the approach for all other risks to which the Group is or may be exposed. The ‘Schedule of Powers Reserved to the Board’ ensures that the Directors are responsible for determining, evaluating, and controlling the nature and extent of such risks and opportunities, including both quantifiable and non-quantifiable risks, and for assessing the effectiveness of the Group’s ERM Framework. An overview of the associated protocols is set out below. The overall scope of, responsibilities for, and approach to risk management, via which the Group’s risk management activities, processes and procedures are to be directed and controlled are set out within the ERM Policy, which governs the consistent identification, measurement, assessment, management, monitoring and reporting of all risks, including climate related and broader ESG risks. The Board recognises the need to ensure that the risk management system is effective and well-integrated into the Group’s structure and decision-making processes, with clear accountability and ownership for risk management. On this basis the Framework seeks to add value through embedding risk management and effective internal control systems as continuous and developing processes within strategy setting, programme level functions and day-to-day operating activities. The ERM Framework also acknowledges the significance of operating culture and values in relation to risk management and their impact on the overall effectiveness of the internal control framework. The Policy objectives and conventions of the ERM Framework, which are mature and well embedded, guide and govern the identification, assessment, management, monitoring and reporting of risks. These conventions are actively supporting the work to accommodate and integrate focus on and quantification of climate related risks and exposures at strategic, programme and operational level such that layers of core activity support each other. This includes identifying climate risk drivers and assessing the likelihood and impacts of such risks crystallising. Within this context and consistent with the Group’s ERM protocols climate risk management processes are undertaken on both a top-down and bottom-up basis. The top-down aspect involves the Board assessing, analysing, and evaluating what it believes to be the principal risks facing the Group. The bottom-up approach involves the identification, review, and monitoring of current and forward-looking climate risks on a continuous basis at functional and divisional levels, with analysis and formal reporting to the quarterly Group Risk Forum, and onward analytical reporting to the Audit and Risk Committee. The Audit and Risk Committee receives regular reporting from the Group’s Chief Risk Officer in relation to the outcome of periodic risk assessments undertaken by management in line with the governing principles and practices of the ERM Framework. The ‘Risk Universe’ captures the range of material inherent risks, which are identified as having the capacity to prevent or limit the achievement of business objectives, taking into account the recommendations of the Group Risk Forum, the Audit and Risk Committees and the Chief Risk Officer. The ‘Risk Universe’ supports the structure and functioning of both the ERM Framework and the Board Approved Risk Appetite Statement. Effective maintenance of the Risk Universe is dependent upon strategic and business objectives over appropriate time horizons being actively maintained. The Group’s material inherent risks are classified into five main risk categories and then grouped into categories of subordinate risk . Whilst there is some overlap within the subordinate categories this taxonomy of risks is considered to strengthen the monitoring of risk appetite as it is reflective of the nature of the risks to which the Group is or could be exposed in the pursuit of its business objectives and corporate strategies. Risk identification, measurement, monitoring, managing, and reporting under the Group’s ERM Framework are based on this taxonomy. Risk Appetite is the aggregate level and types of risk the Board is prepared to accept, within risk capacity, before action is deemed necessary to reduce the risk. Risk appetite represents the balance between the potential benefits and rewards of commercial decision-making and innovation versus the threats that change, and development inevitably bring. Risk Capacity is the maximum level of risk at which the Group can operate, whilst remaining within constraints implied by capital, funding needs and the expectation of shareholders. The Board has an agreed Risk Appetite Statement, structured according to the taxonomies described above, which is comprehensive and clear to all stakeholders. Where the Board sets its Risk Appetite at principal risk category level, such Risk Appetite is applicable to the aggregate of the sub-risks within the specific Risk Category. The Group’s Risk Appetite over the short, medium, and long-term time horizons is reviewed annually. For some risks within the Group’s risk universe, such as strategic, reputational group and some aspects of climate risks, the holding of capital by itself is considered by the Board to be an inappropriate mitigating measure. The governance, risk management and internal control mechanisms, which constitute the ERM Programme, promote the capture and analysis of non-quantifiable risks with assessment against the respective risk appetite metrics approved by the Board. This approach, driven by ERM protocols, ensures that all risks within the risk universe (quantifiable and non-quantifiable) are treated with equivalence and reporting on risks is not limited 57 Hansard Global plc Report and Accounts 2023GOVERNANCEHansard Global plc Climate-Related Financial Disclosures Report, 2023 continued to those which only support calculation of solvency requirements. This methodology allows the nature of the Group’s principal and subordinate risks, relative to strategic and business objectives to be considered via stress and scenario testing and movements in Hansard’s risk profile, relative to risk appetite, to be identified, managed, monitored and reported on a continuing basis. To demonstrate whether the Group is being managed in accordance with the Board’s approved Risk Appetite, periodic risk appetite tolerance assessments are carried out and reported to the Audit and Risk Committees in accordance with requirements as set out in the Policy and the Boards’ approved Risk Appetite document. The Board has set specific risk tolerances for all categories of principal and subordinate risk based on its business plans and corporate strategy. These are detailed in the approved Risk Appetite Statements (including tolerances and metrics). In line with the agreed policy framework risks are assessed according to the qualitative and quantitative metrics using data feeds from the relevant business areas. Formal quarterly reporting is submitted to the Audit and Risk Committee and the Board confirming the Group’s risk profile experience during the reporting period including substantive detail on any changes in risk profile and any new or emerging risks. Further details on the Company’s overall ERM Policy can be found in the Risk Management and Internal Control section on page 20 to 22 and in the Principal Risks section on page 23 to 28. 58 Hansard Global plc Report and Accounts 2023Pillar 4 – Metrics and Targets An effective ESG strategy, which controls and reduces environmental impact and promotes sustainable business practices includes climate-related considerations, such as physical and transition risks, climate resilience and GHG targets, must be driven by a detailed understanding of the Group’s generated emissions and recognition of the value for all stakeholders in the use of clear, meaningful metrics to measure and manage climate-related risks and opportunities. The Group’s ESG metrics and targets are intended to evidence and demonstrate how the Group is working to achieve reductions in its energy use (measured in tCO2e), consequent emissions and environmental impacts and establish sustainable business practices. To calculate our emissions, we follow the Greenhouse Gas Protocol (GHGP) Corporate Standard. Under this Protocol we categorise emissions on the following basis: ■ Scope 1: Direct emissions from gas, refrigerants, and owned vehicles. ■ Scope 2: Indirect emissions from the generation of acquired and consumed electricity, which are a consequence of our activities, but originate at sources owned or controlled by another organisation; and Figure 4: 2023 Carbon Footprint Results ■ Scope 3: Value-chain emissions, having regard to both upstream activities – typically business travel, employee commuting and waste generation, and the downstream impacts of our business – typically linked to investments made or enabled by the Life Companies of the Group. Continuing the relationship from last year, we have again worked with the Environmental Sustainability Index (ESI) Monitor, utilising their online application FutureTracker, to upload and record our environmental footprint data, across Scopes 1, 2 and 3 and provide useful industry benchmarking. The subsequent 2023 Environmental Footprint Report is then used to inform our Metric and Target disclosures and enable refinement of our sustainability targets and associated policy objectives. Data for the financial year ended 30 June 2023 is set out in figure 4 below, representing the most relevant and applicable data in respect of emissions for which Hansard is responsible via its energy use, measured in tCO2e. This does not currently include measurement of other GHG’s identified under GHGP or incorporate CO2 equivalence measurements. Emissions from gas, refrigerants and owned vehicles Description 2023 (tCO2e) 2022 (tCO2e) Scope 1 - Fugitive - Static Combustion - Mobile Combustion Gross Measurable Scope 1 Emissions 2 Electricity (purchased electricity factor - market based) Gross Measurable Scope 2 Emissions Category 6: Business Travel, excluding accommodation (700,766 km) 156.4 3 Category 7: Employee Commute (14,327 km) Category 7: Teleworking (remote working) Gross Measurable Scope 3 Emissions Gross Total Company Emissions Carbon Offset Credits (500 tCO2) Net Measurable Scope 1, 2 and 3 Emissions 86.5 10.1 253.0 353.2 (378.6) (25.4) 0.5 4.9 0.7 6.1 94.1 94.1 10.6 5.3 0.9 16.8 104.6 104.6 N/A N/A N/A N/A - - - 59 Hansard Global plc Report and Accounts 2023GOVERNANCEHansard Global plc Climate-Related Financial Disclosures Report, 2023 continued We have improved our disclosures for 2023 by calculating and disclosing our more readily measurable Scope 3 emissions, under GHGP Categorisations, including Business Travel (Category 6) and Employee Commuting and Teleworking (Category 7) emissions. We are targeting continued improvements in the capture and measurement of all relevant and applicable upstream and downstream Scope 3 emissions during the 2024 financial year. In particular, following the implementation of a new fund management system, we are actively targeting the capture of accurate Scope 3 weighted average carbon intensity (WACI) measurements for our Assets Under Administration (AuA). Through this work we will also be able to provide detailed information on the Category 15 metrics considered by the Life Companies of the Group when making decisions on funds that are made available to policyholders, and investments made by the Group. Emissions relating to hotel stays has been omitted from current Category 6 reporting, as we continue to compile complete and accurate data to enable us to capture, record and mitigate associated emissions. As such, 2023 metrics will not be considered a gross Scope 3 baseline, with baselines instead being applied to each activity as reliable data becomes more readily available and measurable. The Group’s 2023 reported Scope 3 metrics are therefore considered the baselines for Category 6 and 7 emissions respectively, subject to any adjustments that may be required once the accommodation element of business travel becomes more readily quantifiable. Our Scope 1 and 2 reporting includes data from our Isle of Man, Ireland, and Japan offices. The main drivers for our Scope 1 and 2 emissions continues to be electricity and as such is a key imperative for reducing our carbon footprint. The Group is directly engaged with the landlord of our Isle of Man Head Office in order to switch our electricity supply to a Guaranteed Green Tariff, which is verified to be zero carbon electricity. In addition to our total emissions in tCO2e, we have calculated our emissions per employee to be 2.03 tCO2e per full-time employee. For just scope 1 and 2, this was 0.58, well below a benchmark average. For Scope 3, the primary contributor to our measured Carbon Footprint is business travel, at 62% of our total measurable Scope 3 emissions, and 44% of the Group total emissions. The Group continues to explore ways in which international travel can be minimised, exploiting the value of advances in digital transformation solutions for engaging with clients, business partners remote working, which were gained during the pandemic. The development and implementation of a ‘carbon budget’ is also in progress for the 2024 Financial Year. As we continue work towards target reductions in our GHG emissions, the Board and Executive Committee considered and approved a recommendation, presented by the Group’s Green Team, at the 2023 Strategy Days, to make an investment of 500 tCO2e in carbon offset programs, to contribute to mitigation of the Group’s measured Scope 1, 2 and 3 emissions for the 2023 Financial Year, ahead of reduction programmes taking full effect. As a result, the Group purchased 250 tCO2e verified carbon offset credits in both the Delta Blue project in Pakistan, and the Sumatra Merang project in Indonesia, to achieve net zero for measurable Scope 1, 2 and 3 emissions as set out in the table above. Our decision to purchase carbon offsets as a way of mitigating our net impact has led to the company determining revised strategic parameters for emission reductions gross of offset. These will be refined and formalised via the 2024 cycle of risk appetite metric calibrations, seeking absolute based targets, referenced to respective baselines, framed around the following ambitions: - ■ We will aim to reduce Scope 1 and Scope 2 emissions by 50% gross of offsets by 2030, and by 100% by 2050. ■ We will aim to reduce Scope 3 emissions, excluding those relating to our AuA by 50%, gross of offsets by 2035 and fully gross zero by 2050. ■ We have not set an ambition at this stage for emissions relating to AuA. These investments are chosen by our clients or by their advisors. However, we will look for opportunities to assist clients and financial advisers in addressing climate-related data challenges relating to their investments. We will aim to define target reductions for our guided architecture AuA during our 2024 reporting period, recognising that this will involve establishing a substantive understanding of the emission measures for our existing investment portfolio to influence more environmentally considerate investment decision making. For clarity, Scopes 1 and 2 will use 2022 as the baseline, while our currently measured Scope 3 metrics will inform future reporting. Baselines for metrics we disclose in future editions will be set at the time. The Group continues to investigate ways in which we can capture further data to be able to provide additional metrics in future, such as those relating to waste management, water usage, and any other areas that will help to manage our overall environmental impact. There are no current material financial exposures arising out of our carbon emission levels in terms of specified regulatory caps or direct taxes. At present, our executive Directors’ remuneration packages are not tied to performance against ESG metrics. We also do not produce any internal carbon pricing, as we believe it to be not applicable to our current business model. Our Community As a major employer on the Isle of Man, we recognise the importance of supporting our local community. We encourage our people in their efforts to support local causes, through charitable collections in the office, financial top-ups to funds raised by our people, and time out of work to support the community. Over the past year we have committed to this promise and supported efforts raising money for numerous local and international charitable causes. The Group continues to assist a wide range of local Isle of Man charities with our support. Through various employee initiatives we have supported numerous charities with one-off cash donations, 60 Hansard Global plc Report and Accounts 2023event support and profile raising through our social media channels, including the Isle of Man Children’s Centre, Manx Heart Foundation, Victim Support Isle of Man, and many more. ■ market announcements, corporate presentations and other Company information which are available on our website at www.hansard.com; and Through supporting the above initiatives, we have donated just over £18,000 to charity initiatives across our 2023 financial year, which enabled additional fundraising to be generated through events, raffles and more. Going forward, we will be supporting youth initiatives in the fields of technology and finance through partners such as Junior Achievement. We have also agreed to grant up to two days of our employees’ time per annum on a matching basis to support community engagement activities during working hours. Stakeholder Engagement and Board Decision Making We recognise our obligations to adopt a responsible attitude towards our stakeholders in operating our business. As well as shareholders, key stakeholders include employees, contract holders, distribution partners, service providers and the communities in which we operate. The Board seeks to understand the views of such stakeholders in making any key decisions in accordance with the Code. The Board believes that the Group demonstrates a balanced approach in its decision making and that Hansard’s policies and actions fulfil the Group’s obligations. ■ the Annual Report and Accounts issued to all registered shareholders, either in hard copy or electronically for those that have elected to receive it in that form. The CEO and Chair typically meet with the investor community, major shareholders, and analysts at various points throughout the year. In addition, the Chair of each Committee is available to meet or correspond with major shareholders to discuss any areas of concern not resolved through normal channels of investor communication. There were no significant areas of concern raised during the 2023 financial year. Arrangements can be made to meet with the Chair through the CFO or Company Secretary. The Board is equally interested in communications with private shareholders and the CFO oversees communication with these investors. All information reported to the regulatory information services is simultaneously published on the Company’s website, affording the widest possible access to Company announcements. The Board receives regular feedback on the views of shareholders on the Company from its executive management team after meetings with those shareholders, as well as from reports from the Company’s corporate brokers, the Chair and the Senior Independent Director. The Board is accountable to the shareholders for creating and delivering value through the effective governance of the business. The Group places considerable importance on developing its relationships with our shareholders and it aims to achieve this by way of the following regular communication activities: ■ regular dialogue with major institutional shareholders, both directly and through the Company’s advisors. By Order of the Board Hazel Stewart, Company Secretary 27 September 2023 61 Hansard Global plc Report and Accounts 2023GOVERNANCE Report of the Audit & Risk Committee Purpose and Terms of Reference Meetings and Frequency This report provides details of the role of the Group Audit & Risk Committee and the work it has undertaken during the year. The primary function of the Audit & Risk Committee is to assist the Board in fulfilling its responsibilities to protect the interests of shareholders with regard to the integrity of financial reporting, risk management and internal controls and overseeing the relationship with the external auditor. The role, responsibilities and work of the Committee can best be understood by reference to its written terms of reference. These are published on the Company’s website, www.hansard.com. Key responsibilities include: ■ monitoring the integrity of the financial statements of the Group, including its annual and interim reports and other formal announcements relating to its financial performance; ■ reviewing and reporting to the Board on significant financial reporting issues, accounting policies and judgements; ■ reviewing summary financial statements, significant financial returns to regulators and any other financial information contained in certain other documents; ■ recommending to the Board the appointment, re-appointment and removal of the external auditor and approving the terms of engagement and remuneration; ■ monitoring the independence of the external auditor and the provision of non-audit services; ■ monitoring the effectiveness and objectivity of the internal and external auditors; ■ reviewing the Group’s systems and controls for the prevention of bribery and procedures for detection of fraud; ■ reviewing the effectiveness of internal financial controls and risk management systems relating to financial reporting; and ■ reviewing annually the Group’s internal audit requirements and budget. Composition and Structure At the date of this report, the members of the Committee were the Group’s independent non-executive Directors being David Peach, Jose Ribeiro and Christine Theodorovics. David Peach is the Chair of the Committee. The Board is satisfied that during the year, and at the date of this report, at least one member of the Committee has competence in accounting and all members of the Committee have considerable recent and relevant financial experience and competence relevant to the sector in which the Company operates. The Company Secretary acts as the secretary to the Committee. The Chair of the Committee reports to each subsequent meeting of the Board on the Committee’s work and the Board receives a copy of the minutes of each meeting of the Committee. The Committee met on seven occasions during the financial year. The members’ attendance record is set out in the Corporate Governance Report. During the year, the Chair invited the CFO, the other non-executive Directors, the Head of Internal Audit and KPMG Audit LLC (“KPMG”) (the external auditor) to attend all meetings of the Committee. Other members of senior management, including the Group Chief Executive Officer, the Group Chief Actuary and the Head of Group Risk and Compliance were also invited to attend as appropriate. It is the Committee’s practice to meet separately, at least once a year, with both the Internal Audit function and with the engagement partner of the external auditor, without any members of management being present. In addition, outside the structure of formal meetings, David Peach has had separate meetings throughout the year directly with the external auditor and the Internal Audit function. David also meets and has regular contact with the Chief Executive Officer, the Chief Financial Officer, the Chief Actuary and the Chief Risk Officer. In performing its duties, the Committee has access to the services of the Internal Audit Function, the Company Secretary and, if required, external professional advisers. Subsidiary Company Audit & Risk Committees Each of the Group’s life assurance subsidiaries has established an audit & risk committee that provides an oversight role for its own business. The chair of each of those committees is an independent non-executive Director of the relevant company. Each committee operated throughout the financial year and considered specifically the reporting of outsourced services and the valuation of contract holder liabilities, having regard to the opinion of the Chief Actuary. The minutes of the meetings of those committees are available to the Group Audit & Risk Committee which monitors in particular the adherence of the subsidiaries to regulatory requirements. Committee Activities During the Financial Year 1. Review of Accounting and Reporting During the financial year the Committee: ■ agreed the annual audit plan with the external auditor, considered the auditor’s reports and monitored management actions in response to the issues raised; ■ reviewed the annual and half-yearly report and accounts, including the external auditor’s reports, and associated announcements; ■ reviewed the reports and projections of the head of actuarial function and considered any implications for disclosures; ■ monitored the submission of key regulatory returns; 62 Hansard Global plc Report and Accounts 2023 ■ monitored compliance with the relevant parts of the UK Corporate Governance Code, the effectiveness of internal controls and reporting procedures for risk management processes. ■ continued to monitor the application of the Group’s policy on whistleblowing, reporting where relevant to the Board; and ■ reviewed other Stock Exchange reporting prior to publication of each announcement. Whilst reviewing the annual and half-yearly report and accounts, the Committee focussed on the following areas where significant financial judgements were required: ■ the accounting principles, policies, assumptions, and practices adopted. ■ judgements exercised in the production of the financial results including the valuation of certain financial investments, deferred origination costs and deferred income, and the appropriateness of key actuarial assumptions within financial and regulatory reporting. ■ the impact of the ongoing Russia/Ukraine conflict with respect to valuation and provisioning issues, longer term actuarial assumptions of contract holder behaviour and going concern disclosures. ■ the status of known or potential litigation claims against the Group including accounting treatment in the financial statements and judgements made on whether to recognise a provision or contingent liability; and ■ the carrying amount of the investment in subsidiaries in the Parent Company including an assessment of whether any impairment should be recognised. The Group has in place a policy to ensure the independence and objectivity of the external auditor. During the year, the Committee performed its annual review of the independence, effectiveness and objectivity of KPMG, assessing the audit firm, the audit partner and the audit teams. This is performed through written documentation provided by KPMG which is discussed and challenged where appropriate by the Committee. The Committee was satisfied in regard to its compliance with the Code and other relevant legislation for the year ended 30 June 2023. Based on the Committee’s review and with input from Group management and Internal Audit, the Committee concluded that the audit service of KPMG was fit for purpose and provided a robust overall examination of the Group’s business and its associated financial reporting. The Committee monitored compliance with the Group policy for the provision of non-audit services by the external auditor. This policy aims to ensure that external auditor objectivity and independence is safeguarded and sets out the categories of non-audit services which the external auditor is allowed to provide to the Group. Financial limits for non-audit related advice and consultancy work by the external audit firm apply to each company in the Group with a limit of £25,000 per company per year. Non-audit assignments exceeding the agreed limits, either individually or cumulatively, must have the prior approval of the Group Audit & Risk Committee. During the year, the Committee approved audit related assurance services relating to Solvency II and the Isle of Man’s risk-based solvency regime. Details of the amount paid to the external auditors during the year for audit and non-audit related services are set out in note 8 to the consolidated financial statements. 4. Review of Internal Controls To assist the Committee’s review of key judgements around the accounting for litigation-related contingent liabilities, expert input was received from its legal advisors. The Committee has reported to the Board regarding the review of the Group’s risk management and internal control systems. No material issues were noted. 2. Review of Internal Audit The Head of Internal Audit reports to the Audit & Risk Committee on the effectiveness of the Group’s systems of risk management and internal control, the adequacy of those systems to manage business risk and to safeguard the Group’s assets and resources. The Internal Audit Department provides objective assurance on risks and controls to the Committee. The plans, the level of resources and the budget of the Internal Audit Department are reviewed at least annually by the Committee. During the financial year the Committee monitored and reviewed the effectiveness and independence of the Internal Audit Department, including consideration of the plan of assurance and consulting activities (including changes thereof) and results from completed audits and concluded that the Department was fit for purpose. 3. Review of External Audit KPMG Audit LLC were re-appointed as auditors following shareholder approval at the 2022 AGM for the year ending 30 June 2023. The Committee took into account events during the year and to the date of signing of the Annual Report and Accounts, including internal reporting structures together with reporting from Internal Audit, external audit and the Chief Actuary. 5. Review of Committee Performance As part of the internal Board evaluation this year, the performance of the Audit & Risk Committee was reviewed. There were no areas of significant concern, and it was concluded that the Committee had effectively fulfilled its role. For the Board David Peach Chair of Audit & Risk Committee 27 September 2023 63 Hansard Global plc Report and Accounts 2023GOVERNANCEReport of the Nominations Committee This report provides details of the role of the Nominations Committee and the work it has undertaken during the year. Purpose and Terms of Reference The role, responsibilities and work of the Committee can best be understood by reference to its written terms of reference. These are published on the Company’s website. A summary is set out below: ■ to regularly review the structure, size and composition required of the Board (including a review of the scope to further promote diversity of skills, social and ethnic background, nationality, experience, cognitive and personal strengths, knowledge, outlook, approach and gender) and the membership of its Committees and make recommendations to the Board with regard to any changes. ■ to give full consideration to succession planning processes for Directors and executive management positions and the opportunities available to the Company to further promote diversity and inclusion; and ■ to be responsible for identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise. The Committee keeps under review the balance of skills on the Board and the knowledge, experience, length of service and performance of the Directors. It also reviews their external interests with a view to identifying any actual, perceived or potential conflicts of interests, including the time available to commit to their duties to the Company. Prior to accepting any additional external appointments Directors are required to seek the Board’s approval. The Group ensures that each of its companies is compliant with relevant applicable legislation relating to health and safety, employment legislation including sex, race and other discrimination rules, in striving to be an equal opportunity employer. The Group’s recruitment process seeks to find candidates most suited for the job. The Group respects the dignity of individuals and their beliefs and does not tolerate any sexual, racial, physical or any other form of harassment of employees nor tolerate any discrimination in the workplace. Membership At the date of this report, the members of the Committee were the independent non-executive Directors David Peach, Christine Theodorovics, Jose Ribeiro and the non-executive Group Chair, Philip Kay. Philip Kay is Chair of the Committee. The Company Secretary acts as the secretary to the Committee. The Chair of the Committee reports to each subsequent meeting of the Board on the Committee’s work and the Board receives a copy of the minutes of each meeting of the Committee. Activities of the Committee During the Year The Committee met on four occasions during the year. The members’ attendance record is set out in the Corporate Governance Report. During the year the Committee considered the following: ■ considered and accepted the resignation of Graeme Easton as Independent non-executive Director and Christine Theodorovics as successor. ■ considered and accepted the resignation of Tim Davies as Chief Financial Officer and executive Director and Thomas Morfett as successor. ■ reviewed the structure, size and composition of the Board. ■ reviewed the skills, experience and knowledge of each Board member and of the Board as a whole. ■ reviewed the time commitment required from the Chair and non- executive Directors to fulfil their roles; and ■ Considered and recommended subsidiary Board and Committee appointments for Angela McCraith, Norrie Little and Lee Worsfold. Directors’ Appointments and Induction The Board has a formal procedure in respect of the appointment of new Directors, with the Nominations Committee leading the process and making recommendations to the Board. The Company has in place an induction programme for new Directors to provide them with a full, formal and tailored induction on joining the Board, which ensures that they attain sufficient knowledge of the Company to discharge their duties and responsibilities effectively. Diversity The Committee and Board acknowledges the importance of diversity, including gender diversity, for the Company. The Board acknowledges the FCA Policy Statement on Diversity and Inclusion on company boards and executive management, which sets out targets as follows: • At least 40% of the board are women. • At least one of the following senior board positions is held by a woman - Chair, Chief Executive Officer (CEO), Senior Independent Director (SID) or Chief Financial Officer (CFO); and • At least one board member is from a minority ethnic background, defined by reference to the categories recommended by the Office for National Statistics, excluding those listed as coming from a White ethnic background. 64 Hansard Global plc Report and Accounts 2023Number of board members Percentage of the board Number of senior positions in the board (CEO, CFO, SID and Chair Number in Executive management Percentage of Executive management 4 0 3 1 6 4 10 60% 40% 100% Men Women Not specified/prefer not to say White British White other (including minority- white groups) Mixed/Multiple Ethnic Groups Asian/Asian British Black/African/ Caribbean/ Black British Other ethnic group, including Arab Not specified/prefer not to say 6 1 4 2 1 85% 15% 57% 29% 14% Review of Committee Performance The Chair had regular meetings during the year with the Group Chief Executive Officer, Group Chief Financial Officer and the non-executive Directors. In addition, after each Board meeting, the Chair held informal sessions with the full Board (without management being present) and also with only the independent non-executive and non-executive Directors in attendance (without executive Directors being present). An evaluation of the performance of the Chair is performed by the non-executive Directors led by the Senior Independent Director. Philip Kay Chair of the Nominations Committee 27 September 2023 65 Hansard Global plc Report and Accounts 2023GOVERNANCEReport of the Remuneration Committee This report provides details of the role of the Committee and the work it has undertaken during the year. Purpose and Terms of Reference The key responsibilities of the Committee are to: ■ determine and make recommendations to the Board on the overall remuneration policy and the remuneration packages of the executive Directors, the Company Secretary, and such other members of the executive management as it considers appropriate. ■ ensure that remuneration is designed to support strategy and promote the long-term sustainable success of the Group; ■ review the executive Directors’ service contracts; ■ review the design and operation of share incentive schemes; and ■ oversee any changes in employee benefit structures throughout the Group. As such the remuneration policy is designed to: ■ recognise the need to be competitive in an international market, though taking account of the local knowledge and packages in the UK and the Isle of Man; discussed by the Committee and adopted or amended as it sees fit. The Head of People and Culture provides all necessary support to the Remuneration Committee in executing their duties. At the request of the Committee, the Head of People and Culture engaged with Polymetrix Ltd to provide benchmarking data on remuneration. Polymetrix has no connection with the Company. The Committee also received advice from FIT Remuneration Consultants LLP (“FIT”) in the 2023 financial year. FIT were appointed to advise the Committee in 2022 following a competitive tender process. FIT has no other connection with the Company and the Committee is satisfied that the advice received from FIT in the 2023 financial year was independent and objective. During the year and to the date of this report, the Committee addressed issues concerning remuneration and incentive schemes implemented by the Group, in particular: ■ agreed the weighting of the corporate performance objectives for the bonus schemes for the year ended 30 June 2023 and assessed achievement of these; ■ agreed awards to be made under bonus schemes for the year ended 30 June 2023; ■ agreed executive Director bonuses for the year ended 30 June ■ support key business strategies and create a strong, 2023; performance-orientated environment; ■ attract, motivate and retain talent; and ■ agreed the weighting of the corporate performance objectives for the bonus schemes for the year ending 30 June 2024; ■ be aligned to proper risk management consistent with risk tolerance set out by the Board as part of its strategy. ■ reviewed Directors’ fees for the Company and subsidiary appointments for the year ending June 2024; The role, responsibilities and work of the Committee can best be understood by reference to its terms of reference. These are published on the Company’s website. Membership As at the date of this report, members of the Committee are the independent non-executive Directors David Peach, Jose Ribeiro and Christine Theodorovics and the non-executive Group Chair, Philip Kay. The Committee is chaired by Jose Ribeiro. ■ reviewed incentive provision; ■ reviewed employee benefits; ■ approved that Tim Davies leaving due to retirement qualified as a good leaver under the rules of the Deferred Bonus plan; ■ approved remuneration for Thomas Morfett in line with his appointment as Chief Financial Officer; ■ reviewed and approved the Remuneration Policy. Summary of Remuneration Policy The Company Secretary acts as the secretary to the Committee. The Chair of the Committee reports to each subsequent meeting of the Board on the Committee’s work and the Board receives a copy of the minutes of each meeting of the Committee. As an Isle of Man registered company, the Company is not required to present a remuneration policy in the format required by the UK Companies Act. However, the following information is provided to summarise the remuneration policy. Activities of the Committee During the Year Policy on Salary of Executive Directors During the year there were six meetings of the Committee. The members’ attendance record is set out in the Corporate Governance Report. At the request of the Committee, Graham Sheward, the CEO, also attends meetings and makes recommendations to the Committee regarding changes to particular remuneration packages (excluding himself) or to policies generally. Such recommendations are It is the policy of the Committee to pay base salaries to the Executive Directors at broadly market rates (taking account of the Isle of Man location where relevant) compared with those of executives of companies of a similar size and international scope, whilst also taking into account the executives’ personal performance and the performance of the Group. In addition, reliance is placed on the People and Culture function to provide appropriate benchmarking data. 66 Hansard Global plc Report and Accounts 2023The CEO’s salary was reviewed during 2023. After due care and consideration, the Committee determined that the salary was appropriate for the size and scope of the role, on the basis of the decision made on appointment to reflect a lower fixed base salary with a higher variable element and therefore was not increased following the review. The CFO’s salary was set upon his appointment in 2023. Name Salary as at 30 June 2023 Salary as at 30 June 2022 Increase Graham Sheward (CEO) £250,000 £250,000 Thomas Morfett (CFO) £150,000 N/A 0% N/A Cash-Settled Bonus Scheme The Committee approved the continuation of a bonus scheme for all employees. The terms of the scheme that became effective from 1 July 2018 incorporate targets for both company and individual performance. Bonuses earned will be paid in the October following the end of the financial year. Deferred Bonus Scheme Our executive Directors participate in a bespoke version of the firm- wide bonus scheme that is overseen by the Committee.Potential earnings under the bonus scheme for the executive Directors range from nil to 100% of salary for the CEO and from nil to 50% of salary for the CFO. 50% of any bonus awarded is paid in cash and 50% in shares deferred for 3 years as governed by the shareholder-approved deferred bonus scheme. The deferred bonus scheme was approved at the AGM on 8 November 2016 and has been the only long-term element of incentive pay operated by the Company. Review of Incentive Provision in 2023 During the 2023 financial year, the Committee undertook a review of incentive provision for our executive Directors and other senior executives. While consideration was given to introducing a forward- looking share-based long-term incentive (beyond our existing deferred bonus plan) at market-normal levels for a company of Hansard’s scale and business-type, having considered the priorities of the business and our shareholders, the Committee determined that it is more practical and will be of greater benefit to shareholders to provide for enhanced annual bonus potential for 2024 for our executive Directors rather than establishing a new share plan. This is intended to provide appropriate incentive opportunities and a retention mechanism for participants. Accordingly, for 2024, the maximum bonus potential available to our executive Directors will be enhanced by a further 40% of base salary to provide 140% of base salary as the maximum annual bonus for the CEO and 90% of base salary as the maximum annual bonus for the CFO (2023: 100% of base salary for CEO and 50% of base salary for the CFO). The annual bonus plan remains overseen by the Committee and the Committee will ensure that the element within the 2023/24 annual bonus relating to this enhanced potential will be available only if demanding performance metrics (which may include financial, shareholder value and strategic non-financial measures) are achieved to the Committee’s satisfaction. Any amounts payable under the enhanced potential is payable in cash. SAYE Share-Save Programme No options over shares were exercised under the Scheme rules during the year (2022: nil). At the date of this report, the following options remain outstanding under each tranche: Scheme year 2017 2018 2023 2022 No. of options No. of options - 20,717 29,031 58,062 29,031 78,779 The scheme was renewed for a further 10 years at the AGM in 2017. Employee Benefit Trusts An Employee Benefit Trust (“EBT”) was established in February 2018 in order to provide certain discretionary share-based awards as part of an overall compensation and retention package. During the year 545,000 shares were purchased and transferred into the EBT. As at 30 June 2023 the EBT held 557,000 shares (2022: 12,000). Policy on Fees for Non-Executive Directors It is our policy to set the fees for each non-executive Director so that they reflect the time commitment in preparing for and attending meetings, the responsibility and duties of the position and the contribution that is expected from them. Our policy is to pay a market rate which is set annually by the Board. President and Controlling Shareholder Dr Leonard Polonsky - Dr Leonard Polonsky was appointed President of the Group under a letter of appointment effective from 22 September 2014. This letter incorporates the requirements of the Listing Rules in relation to Dr Polonsky as controlling shareholder of the Group. A summary of the agreement, dated 22 September 2014, governing his relationship with the Group is available for inspection at the Company’s registered office and will be made available to shareholders at the AGM. To maintain effective corporate governance, the agreement contains the following terms: 67 Hansard Global plc Report and Accounts 2023GOVERNANCE Report of the Remuneration Committee continued consecutive, in any 12-month period due to illness or injury and 30 days annual leave in addition to public holidays. Other than the right to receive a payment in lieu of notice upon termination, his service agreement dated 19 January 2023 does not provide for any benefits upon termination of employment. The notice period (by either party) is six months. Thomas was appointed to the Board on 17 April 2023 It was agreed that Thomas would receive a conditional award over ordinary shares in the capital of Hansard Global plc subject to key terms being achieved. Shares granted (74,899) will vest on 17th October 2023. Thomas is a member of the deferred bonus scheme which is based on corporate and individual performance, as set out on page 67. Non-Executive Directors. The appointment of each non-executive Director has been confirmed by an individual letter of appointment which includes a one month notice provision. The non-executive Directors do not have service contracts or any benefits-in-kind arrangements and do not receive any performance-related remuneration. Stakeholder Engagement During the past year we have received feedback on remuneration from certain key shareholders through non-executive Board member engagement. There is also an avenue for communication and feedback through our corporate broker relationships. During the year we undertook an employee engagement survey to understand the key drivers of engagement for our people. Results from the survey, which included feedback to defined and open questions, were then explored and debated further during employee feedback sessions where we encouraged open and honest debate. During these sessions, our approach to remuneration was discussed in more detail. Feedback from those sessions was relayed to both the Executive Committee and the Board and has informed priorities for our action planning and Culture programme. ■ all transactions between Dr Polonsky and the Group are to be conducted at arm’s length and on normal commercial terms; ■ Dr Polonsky will take no actions which would prevent the Company from complying with its obligations under the Listing Rules or propose a resolution to circumvent the proper application of the Listing Rules; ■ Dr Polonsky will exercise his voting rights to ensure a requisite number of independent non-executive Directors are appointed to and retained by the Board; and ■ Dr Polonsky will consult with independent non-executive Directors where proposals have been made by the Board in relation to its composition. There were no significant transactions between the Group and Dr Polonsky during the year under review, except as noted in the Director’s Report. Summary of Directors’ Employment Terms and Conditions In accordance with the Articles of Association all Directors are subject to annual re-election. All Directors subject to election/re- election on 2 November 2022 were re-elected at the AGM held at that date. The key terms and benefits of the contractual arrangements between each Director and the Company are as follows: Graham Sheward – Group Chief Executive Officer. The Service Agreement in place sets out the contractual employment arrangements, the key terms being: Company contribution into personal pension arrangements; private health insurance for himself and his spouse and dependent children, permanent health insurance; life assurance; full-pay sick leave for a maximum of eight weeks of absence, whether or not consecutive, in any 12-month period due to illness or injury and 30 days annual leave in addition to public holidays. Other than the right to receive a payment in lieu of notice upon termination, his service agreement dated 7th May 2021 does not provide for any benefits upon termination of employment. The notice period (by either party) is twelve months. Graham was appointed to the Board with effect from 10 May 2021. Graham is a member of the deferred bonus scheme which is based on corporate and individual performance, as set out on page 67 Thomas Morfett – Group Chief Financial Officer. The Service Agreement in place sets out the contractual employment arrangements, the key terms being: Company contribution into personal pension arrangements; private healthcare for himself and his spouse; permanent health insurance; life assurance; full-pay sick leave for a maximum of eight weeks of absence, whether or not 68 Hansard Global plc Report and Accounts 2023Directors’ Remuneration for Financial Year 2022 / 23 The following information, including the table below, includes audited information. Name Executive Directors Graham Sheward (CEO) Tim Davies (CFO) 1,2 Thomas Morfett (CFO) 3 Non-Executive Directors Marc Polonsky Graeme Easton 4 Jose Ribeiro Philip Kay 8 David Peach Christine Theodorovics 5 Total Salary and fees 2023 £ 250,000 158,970 30,769 50,000 35,000 55,000 77,500 80,000 22,180 759,419 Pension 2023 £ 25,000 18,737 - - - - - - - 43,737 Cash Bonus 2023 £ 78,750 - - - - - - - - 78,750 Deferred Bonus 6 2023 £ 78,750 - - - - - - - - 78,750 Other7 2023 £ Aggregate 2023 £ Aggregate 2022 £ 1,728 23,234 284 - - - - - - 25,246 434,228 200,941 31,053 50,000 35,000 55,000 77,500 80,000 22,180 985,902 426,736 225,236 - 50,000 87,500 55,000 52,500 80,000 - 976,972 1 Salary amounts are net of amounts elected to be transferred to pension. 2 Tim Davies – retired on 17 April 2023 Thomas Morfett – appointed 17th April 2023 3 4 Graeme Easton – resigned 2nd November 2022 5 Christine Theodorovics – appointed 23rd January 2023 6 7 The deferred bonus is awarded in shares and deferred for a period of 3 years prior to vesting. “Other” includes healthcare benefits and, in respect of Tim Davies, final salary included payment relating to holidays accrued of £7,471 and a share payment of £14,256. 8 Philip Kay – appointed Chair of Hansard Europe 28th December 2022 Annual Bonus for CEO for Financial Year 2022/23 For financial year 2022/23 the CEO’s performance was assessed using weighted corporate objectives (aggregating to 90%) and weighted personal objectives (aggregating to 10%). The corporate objectives set by the Board for the year to 30 June 2023 related to achievement of the Company’s principal strategic objectives; sales performance; expense management; risk and corporate culture. The personal objectives related to leadership and litigation management. The Committee conducted an assessment of the CEO’s performance against his objectives for 2022/23. They determined that the formulaic outcome of the assessment was 63% and that this outcome was justified. Accordingly the Committee agreed to apply a figure of 63% of base salary, 50% awarded in cash and 50% in shares deferred for 3 years under the deferred bonus scheme. 69 Hansard Global plc Report and Accounts 2023GOVERNANCE Report of the Remuneration Committee continued Executive Management Deferred Bonus Scheme Awards In addition to the Executive Directors, the remaining members of the Executive Committee also participate in the deferred bonus scheme. This scheme resulted in the award of £102,000 worth of shares which are deferred for a period of 3 years. Directors’ Interests in Share Capital The following information, presented in the table below, includes audited information. There are currently no requirements for any Director to have a shareholding in the Company. The Company also does not have a policy for post-employment shareholding requirements. The Polonsky Foundation (a UK Registered Charity of which Dr Polonsky and Marc Polonsky are among the trustees) has a beneficial interest in 8,547,708 shares in the Company’s share capital, or 6.2% (2022: 6.2%). The table set out below shows the beneficial interests of other Directors and their spouses in the Company’s share capital, at 30 June 2023 and at 30 June 2022. Number of shares Executive Director Graham Sheward Tim Davies Thomas Morfett Non-executive Directors Graeme Easton Philip Kay Jose Ribeiro Marc Polonsky 1 David Peach Christine Theodorovics 1 Direct holdings include shares held by spouse. Direct Indirect Total 2023 Direct Indirect Total 2022 17,000 104,850 – – – – 7,800,000 – – – – – – – – – – – 17,000 17,000 104,850 104,850 – – – – – – – – – – 17000 104,850 – – – – – – – – 7,800,000 7,800,000 – 7,800,000 – – – – – – – – There have been no other significant changes in these holdings between the balance sheet date and the date of this report. The Committee will continue to consider whether it may be appropriate to introduce guidelines for executive Directors’ shareholdings in the future and in particular will do so in connection with the introduction of any new long-term incentive plan operating over the Company’s shares. This will include consideration of a policy for post-employment shareholding requirements.. 70 Hansard Global plc Report and Accounts 2023 Directors’ Salaries and Fees for the Financial Year Ending 30 June 2024 The following table sets out the salary and fee levels approved by the Remuneration Committee for the year ending 30 June 2024 for each Director, as agreed by the Board. There have been no changes in relation to non-salary benefits applicable to any Director. Name Executive Directors Graham Sheward (CEO) Tom Morfett (CFO) Non-executive Directors Marc Polonsky Jose Ribeiro 1 Philip Kay 2 David Peach 3 Christine Theodorovics Total Salary and fees 2024 £ 250,000 150,000 50,000 55,000 90,000 80,000 50,000 725,000 1 The amount for Jose Ribeiro includes additional fees in relation to his position as Chair of the Remuneration Committee. 2 The amount for Philip Kay includes additional fees in relation to his position as Chair of the Board and Chair of Hansard Europe dac. 3 The amount for David Peach includes additional fees in relation to his position as Chair of the Audit & Risk Committee and Directorship (and Chair of the Audit Committee) of Hansard Europe dac. He is also a Director of Hansard Administration Services Limited. Bonus and incentive arrangements for 2024 for Graham Sheward and Thomas Morfett are outlined in the Review of Incentive Provision 2023 earlier in this report. Compliance With Code As mentioned above, the Company has not fully complied with provision 36 of the Code in the following respect: ■ The Company does not currently have a policy for post-employment shareholding requirements. For the Board Jose Ribeiro Chair of the Remuneration Committee 27 September 2023 71 Hansard Global plc Report and Accounts 2023GOVERNANCE Independent Auditors Report Requirements of the Listing Rules Second line continued Requirements of Rule 9.8.4R of the Listing Rules The following table provides references to where the information required by Listing Rule 9.8.4R is disclosed. Listing Rule Requirement Location in Annual Report A statement of the amount of interest capitalised during the period under review and details of any related tax relief. Information required in relation to the publication of unaudited financial information. Not applicable Not applicable Details of any long-term incentive schemes. Report of the Remuneration Committee, pages 66 to 71 Details of any arrangements under which a Director has waived emoluments, or agreed to waive any future emoluments, from the company. Report of the Remuneration Committee, pages 66 to 71 Details of any non pre-emptive issues of equity for cash. No such share allotments Details of any non pre-emptive issues of equity for cash by any unlisted major subsidiary undertaking. Not applicable Details of any contract of significance in which a Director is or was materially interested. Not applicable Details of any contract of significance between the company (or one of its subsidiaries) and a controlling shareholder. Directors’ Report, pages 32 to 37 Details of waiver of dividends by a shareholder. Not applicable Board statement in respect of relationship agreement with the controlling shareholder. Report of the Remuneration Committee, pages 66 to 71 72 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I Independent Auditor’s Report to the Members of Hansard Global plc Our opinion is unmodified We have audited the financial statements of Hansard Global plc (“the Company”) and its subsidiaries (together, the ‘Group’) which comprise the consolidated balance sheet and parent company balance sheet as at 30 June 2023, the consolidated statements of comprehensive income, changes in equity and cash flows and parent company statements of changes in equity and cash flows for the year then ended, and related notes, comprising significant accounting policies and other explanatory information. In our opinion, • • • the financial statements give a true and fair view of the financial position of the Group’s and of the Company’s affairs as at 30 June 2023, and of the Group’s profit for the year then ended; the Group financial statements have been properly prepared in accordance with UK- Adopted International Accounting Standards; the Company financial statements have been properly prepared in accordance with UK Accounting Standards including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and • the financial statements have been properly prepared in accordance with the requirements of the Companies Acts 1931 to 2004. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company and Group in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies’ Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Key audit matters: our assessment of the risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. 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. In arriving at our audit opinion above, the key audit matters, in decreasing order of significance for the financial statements were as follows: Revenue recognition £45.7m (2022: £48.8m) Risk vs 2022: same Refer to the Audit & Risk Committee Report on page 62, note 5 accounting policy and note 18 disclosures. The risk: Calculation error and subjective estimate The Group charges fees to investment contract holders for contract administration services, investment management services, payment of benefits and other services related to the administration of investment contracts. Determination of revenue earned can be complex where the fee calculation includes judgement in the determination of the life of the contract and actuarial funding factors to apply in amortisation of the deferred revenue. There is a risk that the assumptions and judgements made in the determination of revenue may not be appropriate due to fraud or error. Additionally, as certain fee income is determined based on the valuation of investments during the year, there is a risk that revenue may not be calculated accurately. Our response Our audit procedures included: Control design and operation • Assessing the design and implementation of the fee income and investments valuations processes and internal controls. • Testing operating effectiveness of internal controls over fee income and valuations of investments throughout the year which feed into the calculation of fee income. • Testing automated controls and performing a test of one transaction for revenue streams which are automated. Use of independent specialists • Utilising KPMG’s internal actuarial specialists to assess the methodology used where there is subjectivity in the selection, and benchmarking the amortisation period and actuarial funding factors used in unwinding deferred income using our own expectations based on our knowledge of the entity and experience of the industry in which it operates. • Utilising KPMG’s internal Data & Analytics specialists to independently recalculate fee income streams. Testing accuracy of data • For a randomly chosen selection, agreeing the premium information to contracts signed by policyholders and bank statements. • Agreeing a randomly chosen selection of fee rates to contracts signed by policyholders. • Agreeing a randomly chosen selection of investments values being used in the fee income calculation to the investments system. We tested general IT controls around the invemetment holdings and valuation system. • Assessing the accuracy of the funding factors by agreeing a randomly chosen selection of contract maturities to the policy documents and comparing the expected funding factors to the funding factor used in the amortisation of deferred income. Assessing transparency • Assessing the adequacy of the Group’s disclosures in respect of revenue recognition in the financial statements for compliance with UK-Adopted International Accounting Standards. Hansard Global plc Report and Accounts 2023 73 Independent Auditor’s Report to the Members of Hansard Global plc continued Litigation and claims liabilities and contingent liabilities disclosure Provision: £0.1m (2022: £0.2m) Risk vs 2022: same Contingent liabilities: £22.4m (2022: £21.2m) Refer to the Audit Committee Report on page 62, note 20 provision and note 26.1 accounting policy and disclosure. The risk: Dispute outcomes and omitted exposures The Group is subject to a number of legal claims from policyholders in relation to the performance of assets linked to investment contracts and other asset related issues. Management evaluates each legal claim, taking into consideration the assessment and advice of external legal counsel. As at 30 June 2023, the Group had been served with cumulative writs with a net exposure totaling £22.4m (2022: £21.2m) and the judgement made by management as to whether the Group is more likely than not to be successful in contesting these claims is highly subjective. It is the Group’s position that all such legal claims will be contested. This is on the basis that the Group does not provide investment advice and that any investment advice received by the policyholder would have been provided by a professional intermediary appointed by the policyholder. The amounts involved are potentially significant, and the application of accounting standards to determine the amount, if any, to be provided as a liability, is inherently subjective. There is a risk that the litigations provisions and disclosure for potential financial losses to the business may not be complete. There is also a risk that judgements made by management in assessing whether to recognise a provision or disclose a contingent liability may not be appropriate. The effect of these matters is that, as part of our risk assessment, we determined that the litigation liability and disclosed contingent liability has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the Group financial statements as a whole. Our response Our audit procedures included: Control design and operation • Testing the design and implementation of internal controls over the litigations process. Enquiry of lawyers • On all significant legal cases, assessment of correspondence with the Group’s respective external counsel and obtaining formal independent confirmations from the counsel. Testing completeness and accuracy of data • Obtaining litigation schedules and legal logs for re-calculating and agreeing on a sample basis the potential exposure to underlying policy data. • Agreeing litigation schedules and legal logs to independently obtained confirmations from external legal counsel. Historical comparison • Comparing management’s previous provision to actual settlements made during the period under review. • Comparing management’s previous contingent liability estimate to actual results of cases concluded during the period under review. Assessing transparency • Assessing whether the Group’s accounting policy and disclosure detailing significant legal proceedings adequately disclose the potential liabilities of the Group in accordance with UK- Adopted International Accounting Standards. Valuation of structured notes held at fair value (level 2 and 3) £50.2m (2022: £43.8m) Refer to the Audit Committee Report on page 62, note 3.6 accounting policy and note 17.3 disclosures. The risk: Risk vs 2022: decrease We continue to perform procedures over valuation of bonds £13.1m (2022: £6.8m). However, since there is a quoted price available for these, we have not assessed this as one of the significant risks in our current year audit. Thus, it is not separately identified in our report this year. Subjective valuation The Group holds and manages investments on behalf of policyholders. A number of the structured notes are noted as being illiquid in nature, predominantly due to an active market not being available for these investments. These assets are measured at fair value. Auditor judgement is required in determining the appropriate valuation methodology where external pricing sources are either not readily available or are unreliable. The fair value of structured notes is determined by evaluating observable inputs, which may include quoted prices for similar assets and quoted prices for identical and similar assets in a market that is not active and unobservable inputs which may include the underlying volatility which is benchmarked against other valuation tools. There is a significant risk that the investments may not be valued appropriately due to estimation uncertainty inherent in unobservable pricing inputs or where a significant degree of judgement is required. 74 Hansard Global plc Report and Accounts 2023There is also a risk that the fair value levelling disclosures in the financial statements might not be appropriate as required by IFRS 13. Due to the linked nature of the contracts administered by the Group’s insurance undertakings, any change in the value of structured notes will result in an equal and opposite change in the value of contract liabilities. Any change in the structured notes value will also have an impact on fee income which is calculated as a percentage of investment values. Our response Our audit procedures included: Control design and operation • Assessing design and implementation of the investment valuation processes and controls. • Testing operating effectiveness of key valuation and unit holding controls in the investments process. Use of KPMG Specialists • Engaging our valuation specialists to independently price and assess the fair value levelling on a sample of structured notes using observable or unobservable input parameters. Structured notes are valued using a discounted cash flow technique. The discount rates used are determined with reference to observable market transactions and instruments with substantially the same terms and characteristics including credit quality, the remaining term to repayments of the principal and the currency in which the payments are made adjusted for underlying volatility. Assessing disclosures • Assessing the adequacy of the Group’s disclosures in respect of the valuation of investments for which there is no quoted price in an active market for compliance with UK-Adopted International Accounting Standards. Parent Company’s investment in subsidiaries £72.5m (2022: £72.5m) Risk vs 2022: same Refer to page 62 of the Audit & Risk Committee Report, note 2.6 accounting policy and note 4 disclosures The risk: Low risk, high value The carrying amount of the investment in subsidiaries represents 76.3% (2022: 81.6%) of the Company’s total assets. The carrying amount of the investment in subsidiaries is measured at cost less impairment and is considered to have a low risk of material misstatement. However, due to its materiality in the context of the Company’s financial statements, this is considered to be the area that had the greatest effect on our overall Company audit. Our response Our audit procedures included: Tests of detail: • Comparing the carrying amount of each subsidiary to its audited balance sheet to identify whether their net assets, being an approximation of their minimum recoverable amount were in excess of their carrying amount, as well as assessing whether those subsidiaries have historically been profit-making. • Utilising our actuaries to assess the value in force contracts calculation, being the net forecast future cashflows in the Company and assess whether this is greater than the carrying amount of investment in subsidiaries. • Assessing whether there are any indicators of impairment in relation to 100% of the carrying amount of investment in subsidiaries. Our application of materiality and an overview of the scope of our audit Materiality for the group financial statements as a whole was set at £300K (2022: £235K), determined with reference to a benchmark of group profit before tax. Materiality for the Company financial statements as a whole was set at £150K (2022: £117.5K), determined with reference to the allocated Group materiality as above, of which it represents 50% (2022:50%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2022: 75%) of materiality for the financial statements as a whole, which equates to £225k (2022: £176K) for the Group and £112K (2022: £88K) for the Company. In addition, we have set a higher materiality at £10,000K (2022: £9,870K) solely for the purpose of identifying and evaluating the effect of misstatements that lead to a reclassification between line items within the policyholder assets and liabilities and associated income statements line items in the Group financial statements, to the extent that any such balances offset and have no net impact on the shareholder’s equity and reserves. This has been determined in reference to 0.75% (2022: 0.75%) of total assets. We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £15K (2022: £11.7K) for the Group and £7.4K (2022: £5.8K) for the Company, in addition to other identified misstatements that warranted reporting on qualitative grounds. For certain financial statement captions, as referred to above, any corrected or uncorrected identified misstatements exceeding £500K (2022: £493K) have been reported to the Audit Committee. Our audit of the Group was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above. The group team performed the audit of the Group as if it was a single aggregated set of financial information. The audit was performed using the materiality level set out above and covered 100% of total group revenue, total group profit before tax, and total group assets and liabilities. 75 FINANCIALSHansard Global plc Report and Accounts 2023Independent Auditor’s report to the Members of Hansard Global plc continued Going concern The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (the “going concern period”). In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group and the Company’s business model and analysed how those risks might affect the Group and the Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to affect the Group and the Company’s financial resources or ability to continue operations over this period were: • Availability of capital to meet operating costs and other financial commitments. • Availability of capital to meet regulatory and solvency requirements. We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Group’s and Company’s financial forecasts. We considered whether the going concern disclosure in note 1.4 to the Group financial statements gives a full and accurate description of the Directors’ assessment of going concern. Our conclusions based on this work: • we consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; • we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Company’s ability to continue as a going concern for the going concern period; and • we have nothing material to add or draw attention to in relation to the Directors’ statement in the notes to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and the Company’s use of that basis for the going concern period, and that statement is materially consistent with the financial statements and our audit knowledge. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group and the Company will continue in operation. Fraud and breaches of laws and regulations – ability to detect Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: • enquiring of management as to the Group’s policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud; • reading minutes of meetings of those charged with governance; and • using analytical procedures to identify any unusual or unexpected relationships. As required by auditing standards, and taking into account possible incentives or pressures to misstate performance and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition, and the risk that management may be in a position to make inappropriate accounting entries. We did not identify any additional fraud risks. We performed procedures including: identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation; incorporating an element of unpredictability in our audit procedures and; those set out in the revenue recognition key audit matter. • • • 76 Hansard Global plc Report and Accounts 2023Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements. The Group and Company are subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. The Group and Company are subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Group and the Company’s ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. Other information The Directors are responsible for the other information. The other information comprises the information included in 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 an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information 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. 77 FINANCIALSHansard Global plc Report and Accounts 2023Independent Auditor’s Report to the Members of Hansard Global plc continued Disclosures of emerging and principal risks and longer term viability We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect of emerging and principal risks and the viability statement, and the Group financial statements and our audit knowledge. We have nothing material to add or draw attention to in relation to: • • • the Directors’ confirmation within the longer-term viability statement (page 36) that they have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; the emerging and principal risks disclosures describing these risks and explaining how they are being managed or mitigated; the Directors’ explanation in the longer-term viability statement (page 36) as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to review the longer-term viability statement, set out on page 36 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the Group financial statements and our audit knowledge. Corporate governance disclosures We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ corporate governance disclosures and the Group financial statements and our audit knowledge. Based on those procedures, we have concluded that each of the following is materially consistent with the Group financial statements and our audit knowledge: • • • the Directors’ statement that they consider that the annual report and Group financial statements taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy; the section of the annual report describing the work of the Audit & Risk Committee, including the significant issues that the Audit & Risk Committee considered in relation to the financial statements, and how these issues were addressed; and the section of the annual report that describes the review of the effectiveness of the Group’s risk management and internal control systems. We are required to review the part of Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect. We have nothing to report on other matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Acts 1931 to 2004 require us to report to you if, in our opinion: • proper books of account have not been kept by the Company and proper returns adequate for our audit have not been received from branches not visited by us; or • the Company financial statements are not in agreement with the books of account and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. 78 Hansard Global plc Report and Accounts 2023Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 37, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and 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 they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities 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 our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and 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. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. The purpose of this report and restrictions on its use by persons other than the Company’s members as a body This report is made solely to the Company’s members, as a body, in accordance with section 15 of the Companies Act 1982. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Simon Nicholas Responsible Individual For and on behalf of KPMG Audit LLC Chartered Accountants and Recognised Auditors Heritage Court, 41 Athol Street, Douglas, Isle of Man IM1 1LA 27 September 2023 79 FINANCIALSHansard Global plc Report and Accounts 2023Financial Results Under UK Adopted International Accounting Standards for the Year Ended 30 June 2023 Consolidated Statement of Comprehensive Income for the Year Ended 30 June 2023 Fees and commissions Investment income Other operating income Change in provisions for investment contract liabilities Origination costs Administrative and other expenses Profit before taxation Taxation Profit and total comprehensive income for the year after taxation Earnings per share Basic Diluted Notes 5 6 17 7 8 10 Note 11 11 The notes on pages 84 to 106 form an integral part of these financial statements. Year ended 30 June 2023 £m Year ended 30 June 2022 £m 45.7 44.5 1.5 91.7 (40.6) (16.2) (29.0) (85.8) 5.9 (0.2) 5.7 48.8 (103.5) 1.0 (53.7) 103.5 (16.2) (29.8) 57.5 3.8 (0.2) 3.6 2023 (p) 4.1 4.1 2022 (p) 2.6 2.6 80 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I Consolidated Statement of Changes in Equity for the Year Ended 30 June 2023 At 1 July 2021 Profit and total comprehensive income for the year after taxation Share based payment reserve Transactions with owners Dividends paid At 30 June 2022 At 1 July 2022 Profit and total comprehensive income for the year after taxation Share based payment reserve Transactions with owners Dividends paid At 30 June 2023 Share capital £m 68.8 - - - 68.8 Share capital £m 68.8 - - - 68.8 Other reserves £m Retained earnings £m (48.3) - - - (48.3) 4.2 3.6 - (6.1) 1.7 Other reserves £m Retained earnings £m (48.3) - (0.2) - (48.5) 1.7 5.7 - (5.9) 1.5 Total £m 24.7 3.6 - (6.1) 22.2 Total £m 22.2 5.7 (0.2) (5.9) 21.8 The notes on pages 84 to 106 form an integral part of these financial statements. Hansard Global plc Report and Accounts 2023 81 Consolidated Balance Sheet As at 30 June 2023 Assets Intangible assets Property, plant and equipment Deferred origination costs Financial investments Measured at fair value: Equity securities Investments in collective investment schemes Fixed income securities, bonds and structured notes Measured at amortised cost: Deposits and money market funds Other receivables Cash and cash equivalents Total assets Liabilities Financial liabilities under investment contracts Deferred income Amounts due to investment contract holders Other payables Provisions Total liabilities Net assets Shareholders’ equity Called up share capital Other reserves Retained earnings Total shareholders’ equity Notes 13 13 14 3 3 3 15 16 17 18 17 19 20 22 23 30 June 2023 £m 19.9 2.8 117.8 52.0 915.5 63.3 1,030.8 30 June 2022 £m 13.4 2.7 122.5 55.7 903.4 50.6 1,009.7 90.2 99.7 4.9 52.2 1,318.6 4.3 58.9 1,311.2 1,101.5 1,092.3 144.8 36.6 13.8 0.1 1,296.8 21.8 68.8 (48.5) 1.5 21.8 145.1 37.3 14.1 0.2 1,289.0 22.2 68.8 (48.3) 1.7 22.2 The notes on pages 84 to 106 form an integral part of these financial statements. The financial statements on pages 80 to 106 were approved by the Board on 27 September 2023 and signed on its behalf by: Graham Sheward Director Thomas Morfett Director 82 Hansard Global plc Report and Accounts 2023 Consolidated Cash Flow Statement for the Year Ended 30 June 2023 I S L A C N A N F I Cash flow from operating activities Profit before tax for the year Adjustments for: Depreciation Dividends receivable Dividends received Interest receivable Interest received Foreign exchange losses / (gains) Changes in operating assets and liabilities (Increase) in other receivables Decrease in deferred origination costs (Decrease) / Increase in deferred income (Decrease) / Increase in creditors (Increase) / decrease in financial investments Increase / (decrease) in financial liabilities Cash flow from operations Corporation tax paid Cash flow from operations after taxation Cash flows from investing activities Investment in intangible assets Investment in property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of investments Cash flows used in investing activities Cash flows from financing activities Dividends paid Principal elements of leased liabilities Cash flows used in financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of exchange rate movements Cash and cash equivalents at year end 2023 £m 5.9 1.1 (4.7) 4.7 (3.0) 3.0 1.0 (0.6) 4.7 (0.4) (1.7) (11.7) 9.1 7.4 (0.4) 7.0 (6.6) - 0.4 (0.1) (6.3) (5.9) (0.4) (6.3) (5.6) 58.9 (1.1) 52.2 2022 £m 3.8 0.8 (4.6) 4.6 (0.3) 0.3 (2.0) (1.6) 2.6 2.6 13.7 123.3 (131.8) 11.4 (0.1) 11.3 (4.2) (0.3) - - (4.5) (6.1) (0.5) (6.6) 0.2 56.7 2.0 58.9 Hansard Global plc Report and Accounts 2023 83 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2023 1 General Information Hansard Global plc (“the Company”) is a limited liability company, incorporated in the Isle of Man under the Isle of Man Companies 1931 to 2024, whose shares are publicly traded. The principal activity of the Company is to act as the holding company of the Hansard group of companies. The activities of the principal operating wholly owned subsidiaries include the transaction of life assurance business and related activities. Hansard Europe was closed to new business with effect from 30 June 2013. The principal subsidiaries of the Company are as follows: Company name Hansard International Limited Hansard Worldwide Limited Hansard Europe Designated Activity Company Hansard Administration Services Limited Hansard Development Services Limited Incorporated Isle of Man The Bahamas Ireland Isle of Man Isle of Man Activity Life Assurance Life Assurance Life Assurance Administration Services Marketing and Development Services The registered office of the Company is 55 Athol Street, Douglas, Isle of Man, IM99 1QL. The Company has its primary listing on the London Stock Exchange. 1.1 Principal Accounting Policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below or, in the case of accounting policies that relate to separately disclosed values in the primary statements, within the relevant note to these consolidated financial statements. These policies have been consistently applied, unless otherwise stated. 1.2 Basis of Presentation The consolidated financial statements have been prepared in accordance with UK Adopted International Accounting Standards (“IFRSs”), International Financial Reporting Standards Interpretations Committee (“IFRSIC”) interpretations, the Isle of Man Insurance Act 2008, and with the Isle of Man Companies Acts 1931 to 2004. The financial statements have been prepared under the historical cost convention as modified by the revaluation of financial investments and financial liabilities at fair value through profit or loss. The Group has applied all International Financial Reporting Standards adopted by the United Kingdom and effective at 30 June 2023. The Group underwrites a small amount of insurance business. Management has undertaken an assessment of the impact of accounting for this business as investment business rather than insurance business and concluded that this would not have a material impact on the financial statements. This assessment has been refreshed to consider the impact of IFRS 17, and management have not changed their conclusion that accounting for the business as investment business would not have a material impact on the financial statements. Management will keep this assessment under review, and should the outcome change in future the Group accounting treatment will be reassessed. Consequently, the Group’s products are designated as investment rather than insurance products under IFRS 4 ‘Insurance Contracts’ as they do not transfer significant insurance risk. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting year. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 2. Except where otherwise stated, the financial statements are presented in pounds sterling, the functional currency of the Company, rounded to the nearest one hundred thousand pounds. The following new standards, amendments and interpretations are in issue but not yet effective and have not been early adopted by the Group and are not expected to have a significant impact; • IFRS 17 Insurance Contracts – effective for periods beginning after January 2023 • Classification of liabilities as current or non-current (Amendments to IAS 1) – effective from January 2023 • Disclosure of Accounting Policies (Amendments to IAS1 and IFRS Practice Statement 2) – effective from January 2023 • Definition of Accounting Estimate (Amendments to IAS 8) • Deferred Tax related Asset and Liabilities Arising from a Single Transaction – Amendments to IAS 12 Income Taxes – effective 1 January 2023 • Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures (Amendments to FRS 10 and IAS 28) • Non-current liabilities with covenants (Amendments to IAS 1) – effective from 1 January 2024 • Lease liability in a Sale and Leaseback (amendments to IFRS 16) – effective from 1 January 2024 84 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I There are no other standards, amendments or interpretations to existing standards that are not yet effective, that would have a material impact on the Group’s reported results. 1.3 Basis of Consolidation The Group’s financial statements consolidate those of the parent company and all its subsidiaries as at 30 June 2023. All transactions between Group companies are eliminated on consolidation between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. 1.4 Going Concern As shown within the Business and Financial Review, the Group’s capital position is strong and well in excess of regulatory requirements. The long-term nature of the Group’s business results in considerable recurring cash inflows arising from existing business. The Directors believe that the Group is well placed to manage its business risks successfully. The Directors are satisfied that the Company and the Group have adequate resources to continue to operate as a going concern for the foreseeable future and have prepared the consolidated financial statements on that basis. In making this statement, the Directors have reviewed financial forecasts that include plausible downside scenarios as a result of the ongoing Russia-Ukraine conflict and global economic conditions. These show the Group continuing to generate profit over the next 12 months and that the Group has sufficient cash reserves to enable it to meet its obligations as they fall due. The Directors expect the acquisition of new business will continue to be challenging. The impact of this however is not immediate to the Group’s profit and cash flows and therefore allows for longer term adjustments to operations and the cost base. Long periods of lower new business, or indeed lower AuA, would be addressed by reducing the cost base and where necessary, the dividend paid. The following factors are considered as supportive to the Group’s resilience to external market and economic challenges: • The Group’s business model focuses on long term savings products, a majority of which are regular premium paying products which continue to receive cash inflows regardless of the amount of new business sold. • The Group earns approximately a third of its revenues from asset-based income which is not immediately dependent on sourcing new business. Initial fees in respect of new business are broadly offset by initial commissions, limiting the impact of any reduction in new business. • New business channels are geographically dispersed and therefore less exposed to specific regional challenges. • The largest expense associated with new business is commission expenditure which reduces directly in line with reduced sales. • The Group has, and continues to the date of this report to have, a strong capital position with significant levels of liquidity and cash (as outlined in the Business and Financial Review). • The business has demonstrated operational resilience in being able to operate remotely from its offices without any material impact to processing and servicing levels. Its control environment continued to operate effectively during this time. • The Group places the majority of its shareholder assets into conservative, highly-liquid, highly rated bank deposits and money market funds. These are typically not subject to price fluctuation and protect the Group’s assets against potential market volatility; and • The Group has no borrowings. 2 Critical Accounting Estimates and Judgements in Applying Accounting Policies Estimates, assumptions, and judgements are used in the application of accounting policies in these financial statements. Critical accounting estimates are those which involve the most complex or subjective judgements or assessments. Estimates, assumptions, and judgements are evaluated continually and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may differ from assumptions and estimates made by management. 2.1 Accounting Estimates and Assumptions The principal areas in which the Group applies accounting estimates and assumptions are the period and method of amortisation of deferred origination costs and deferred income. Estimates are also applied in determining the recoverability of deferred origination costs. 2.1.1 Amortisation of Deferred Origination Costs and Deferred Income Deferred origination costs and deferred income are amortised on a straight-line basis over the estimated life of the underlying investment contract. Estimates are determined based on an analysis of recent experience. The estimated life is between 7 and 15 years depending on the product type. Certain contracts are amortised on actual life. 2.1.2 Recoverability of Deferred Origination Costs Formal reviews to assess the recoverability of deferred origination costs on investment contracts are carried out at each balance sheet date to determine whether there is any indication of impairment based on the estimated future income levels. If, based upon a review of the remaining contracts, there is any indication of irrecoverability or impairment, the contract’s recoverable amount is estimated. Impairment losses are reversed through the consolidated statement of comprehensive income if there is a change in the estimates used to determine the recoverable amount. Such losses are reversed only to the extent that the contract’s carrying amount does not exceed the carrying amount that would have been determined, net of amortisation where applicable, if no impairment loss had been recognised 2.1.3 Fair Value of Financial Investments Where the Directors determine that there is no active market for a particular financial instrument, fair value is assessed using valuation Hansard Global plc Report and Accounts 2023 85 Notes to the Consolidated Financial Statements continued techniques based on available relevant information and an appraisal of all associated risks as detailed in note 3. 2.2 Judgements The primary areas in which the Group has applied judgement in applying accounting policies are as follows: • to determine whether a provision or contingent liability is required in respect of any pending or threatened litigation, which is addressed in note 20 and note 26. • the type of expenses that are treated as origination costs to be deferred. Any other expenses are expensed as incurred. 2.3 Intangible Assets The carrying amount, residual value and useful life of the Group’s computer software is reviewed annually to determine whether there is any indication of impairment, or a change in residual value or expected useful life. If there is any indication of impairment, the asset’s carrying value is revised. 3 Financial Risk Management Risk Management Objectives and Risk Policies The Group’s objective in the management of financial risk is to minimise, where practicable, its exposure to such risk, except when necessary to support other objectives. The Group seeks to manage risk through the operation of unit-linked business whereby the contract holder bears the financial risk. In addition, shareholder assets are invested in highly rated investments. Overall responsibility for the management of the Group’s exposure to risk is vested in the Board. To support it in this role, the Group ERM Framework is in place comprising risk identification, risk assessment, control and reporting processes. Additionally, the Board and the Boards of subsidiary companies have established a number of Committees with defined terms of reference. These are the Audit & Risk, Executive and Investment Committees. Additional information concerning the operation of the Board Committees is contained in the Corporate Governance section of this Annual Report. The main significant financial risks to which the Group is exposed are set out below. For each category of risk, the Group determines its risk appetite and sets its investment, treasury and associated policies accordingly. 3.1 Market Risk This is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, analysed between price, interest rate and currency risk. The Group adopts a risk averse approach to market risk, with a stated policy of not actively pursuing or accepting market risk except where necessary to support other objectives. However, the Group accepts the risk that the fall in equity or other asset values, whether as a result of price falls or strengthening of sterling against the currencies in which contract holder assets are denominated, will reduce the level of annual management charge income derived from such contract holder assets and the risk of lower future profits. Sensitivity Analysis to Market Risk The Group’s business is unit-linked, and the direct associated market risk is therefore borne by contract holders (although there is a secondary impact as shareholder income is dependent upon the fair value of contract holder assets). Other financial assets and liabilities held outside of contract holder unitised funds primarily consist of units in money market funds, cash and cash equivalents, and other assets and liabilities. Cash held in unitised money market funds and at bank is valued at par and is unaffected by movements in interest rates. Other assets and liabilities are similarly unaffected by market movements. As a result of these combined factors, the Group’s financial assets and liabilities held outside unitised funds are not materially subject to market risk, and movements at the reporting date in interest rates and equity values have an immaterial impact on the Group’s profit after tax and equity. Future revenues from annual management charges may be affected by movements in interest rates, foreign currencies and equity values. The Group does not control the asset selection strategy as assets are chosen by the contract holders. (a) Price Risk Unit linked funds are exposed to securities price risk as the investments held are subject to prices in the future which are uncertain. The fair value of financial assets (designated at fair value through profit or loss) exposed to price risk at 30 June 2023 was £1,030.8m (2022: £1,009.7m). In the event that investment income is affected by price risk then there will be an equal and opposite impact on the value of the changes in provisions for investment contract liabilities in the same accounting period. An overall change in the market value of the unit- linked funds would affect the annual management charges accruing to the Group since these charges, which are typically 1% per annum, are based on the market value of contract holder assets under administration. The approximate impact on the Group’s profits and equity of a 10% change in fund values, either as a result of price, interest rate or currency fluctuations, is £1.6m (2022: £1.7m). 86 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I (b) Interest Rate Risk Interest rate risk is the risk that the Group is exposed to lower returns or loss as a direct or indirect result of fluctuations in the value of, or income from, specific assets arising from changes in underlying interest rates. The Group is primarily exposed to interest rate risk on the balances that it holds with credit institutions and in money market funds. Taking into account the proportion of Group funds held on longer-term, fixed-rate deposits, a change of 1% per annum in interest rates will result in an increase or decrease of approximately £0.6m (2022: £0.7m) in the Group’s annual investment income and equity. A summary of the Group’s liquid assets at the balance sheet date is set out in note 3.2. (c) Currency Risk Currency risk is the risk that the Group is exposed to higher or lower returns as a direct or indirect result of fluctuations in the value of, or income from, specific assets and liabilities arising from changes in underlying exchange rates. (c) (i) Group Foreign Currency Exposures The Group is exposed to currency risk on the foreign currency denominated bank balances, contract fees receivable and other liquid assets that it holds to the extent that they do not match liabilities in those currencies. The Group receives 87% (2022: 82%) of premiums in US Dollars and settles the majority of expenses in Sterling. The impact of currency risk is minimised by regular conversion of excess foreign currency funds to sterling. The Group does not hedge foreign currency cash flows. At the balance sheet date the Group had exposures in the following currencies: Gross assets Matching currency liabilities Uncovered currency exposures Sterling equivalent (£m) 2023 US$m 23.2 (20.5) 2.7 2.1 2023 €m 11.1 (10.4) 0.7 0.5 2023 ¥m 255.0 (285.0) (30.0) (0.2) 2022 US$m 26.3 (24.1) 2.2 1.8 2022 €m 13.9 (12.8) 1.1 1.0 2022 ¥m 164.3 (217.6) (53.3) (0.3) The approximate effect of a 5% change: in the value of US dollars to sterling is £0.1m (2022: £0.1m); in the value of the euro to sterling is less than £0.1m (2022: less than £0.1m); and in the value of the yen to sterling is less than £0.1m (2022: less than £0.1m). (c) (ii) Financial Investments by Currency Certain fees and commissions are earned in currencies other than sterling, based on the value of financial investments held in those currencies from time to time. The sensitivity of the Group to the currency risk inherent in investments held to cover financial liabilities under investment contracts is incorporated within the analysis set out in (a) above. At the balance sheet date the analysis of financial investments by currency denomination is as follows, US dollars: 71% (2022: 71%); euro: 8% (2022: 8%); sterling: 20% (2022: 20%); other: 1% (2022: 1%). 3.2 Credit Risk Credit risk is the risk that the Group is exposed to lower returns or loss if another party fails to perform its financial obligations to the Group. The Group has adopted a risk averse approach to such risk and has a stated policy of not actively pursuing or accepting credit risk except when necessary to support other objectives. The clearing and custody operations for the Group’s security transactions are mainly concentrated with one broker, namely Capital International Limited, a member of the London Stock Exchange. At 30 June 2023 and 2022, substantially all contract holder cash and cash equivalents, balances due from investment brokers and financial investments are placed in custody with Capital International Limited. These operations are detailed in a formal contract that incorporates notice periods and a full exit management plan. Delivery of services under the contract is monitored by a dedicated relationship manager against a documented Service Level Agreement and Key Performance Indicators. The Group has an exposure to credit risk in relation to its deposits with credit institutions, its investments in unitised money market funds and it’s investment in a bond portfolio. To manage these risks; deposits and the bond portfolio are placed in accordance with established policy, with credit institutions having a short-term rating of at least F1 or P1 from Fitch IBCA and Moody’s respectively and a long-term rating of at least A or A3. Investments in unitised money market funds are made only where such fund is AAA rated. Additionally, maximum counterparty exposure limits are set both at an individual subsidiary company level and on a Group-wide basis. Hansard Global plc Report and Accounts 2023 87 Notes to the Consolidated Financial Statements continued These assets are considered to have a high degree of credit worthiness and no assets of a lower credit worthiness are held. The following table sets out information about the credit quality of the Group’s deposits with credit institutions and its investments in unitised money market funds. Deposits and Cash with Credit Institutions and Investments in Unitised Money Market Funds (Based on Standards & Poor’s ratings) AAA AA- to AA+ A- To A+ Total Deposits AA- to AA+ A- To A+ Total Cash at bank Group cash and deposits 2023 £m 2022 £m 26.3 6.0 10.8 43.1 0.3 22.0 22.3 65.4 29.9 4.9 15.4 50.2 3.9 20.4 24.3 74.5 Financial assets held at amortised cost, are impaired using an expected credit loss model. The model splits financial assets into those which are performing, underperforming and non-performing based on changes in credit quality since initial recognition. At initial recognition financial assets are considered to be performing. They become underperforming where there has been a significant increase in credit risk since initial recognition, and non-performing when there is objective evidence of impairment. Twelve months of expected credit losses are recognised in the statement of comprehensive income and netted against the financial asset in the statement of financial position for all performing financial assets, with lifetime expected credit losses recognised for underperforming and non-performing financial assets. Trade receivables are designated as having no significant financing component. The Group applies the IFRS 9 simplified approach to measuring expected credit losses for trade receivables by using a lifetime expected loss allowance. Expected credit losses are based on the historic levels of loss experienced for the relevant financial assets, with consideration given to forward looking information. The following table sets out the movement in expected credit losses. At 1 July Credit loss charges in the year At 30 June 2023 £m 1.8 0.1 1.9 There have been no changes in the assets in the year ended 30 June 2023 attributable to changes in credit risk (30 June 2022: nil). At the balance sheet date, an analysis of the Group’s cash and deposit balances was as follows: Longer term deposits with credit institutions Cash and cash equivalents under IFRS 3.3 Liquidity Risk 2023 £m 13.2 52.2 65.4 2022 £m 0.4 1.4 1.8 2022 £m 15.6 58.9 74.5 Liquidity risk is the risk that the Group, though solvent, does not have sufficient financial resources to enable it to meet its obligations as they fall due, or can only secure them at excessive cost. The Group’s objective is to ensure that it has sufficient liquidity over short-term (up to one year) and medium-term time horizons to meet the needs of the business. This includes liquidity to cover, amongst other things, new business costs, planned strategic activities, servicing of equity capital as well as working capital to fund day-to-day cash flow requirements. Liquidity risk is principally managed in the following ways: • • Assets of a suitable marketability are held to meet contract holder liabilities as they fall due. Forecasts are prepared regularly to predict required liquidity levels over both the short-term and medium-term. The Group’s exposure to liquidity risk is considered to be low since it maintains a high level of liquid assets to meet its liabilities. 88 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I 3.3.1 Undiscounted contractual maturity analysis Set out below is a summary of the undiscounted contractual maturity profile of the Group’s assets. Maturity within 1 year Shareholder deposits and money market funds Other shareholder assets Maturity from 1 to 5 years Other shareholder assets Shareholder assets with maturity values within 5 years Other shareholder assets (no defined maturity profile) Shareholder assets Gross assets held to cover financial liabilities under investment contracts Total assets 2023 £m 65.4 4.8 70.2 - - 70.2 146.9 217.1 1,101.5 1,318.6 2022 £m 74.5 4.3 78.8 - - 78.8 140.1 218.9 1,092.3 1,311.2 There is no significant difference between the value of the Group’s assets on an undiscounted basis and the balance sheet values. Assets held to cover financial liabilities under investment contracts are deemed to have no fixed maturity since the corresponding unit-linked liabilities are repayable and transferable on demand. In certain circumstances the contractual maturities of a portion of the assets may be longer than one year, but the majority of assets held within the unit-linked funds are highly liquid. The Group actively monitors fund liquidity. Set out below is a summary of the undiscounted contractual maturity profile of the Group’s liabilities. Maturity within 1 year Amounts due to investment contract holders Other payables Provisions Maturity from 1 to 5 years Other payables Liabilities with maturity values within 5 years Other liabilities (no defined maturity profile) Shareholder liabilities Maturity within 1 year Financial liabilities under investment contracts Maturity from 1 to 5 years Financial liabilities under investment contracts Maturity greater than 5 years Financial liabilities under investment contracts Financial liabilities under investment contracts Total liabilities 2023 £m 36.6 11.1 0.1 47.8 2.7 2.7 50.5 144.8 195.3 2022 £m 37.3 12.1 0.2 49.6 2.0 2.0 51.6 145.1 196.7 43.4 32.3 209.0 199.6 849.1 1,101.5 1,296.8 860.4 1,092.3 1,289.0 Any difference between the total liabilities in the above table and the total liabilities per the consolidated balance sheet represents the impact of discounting liabilities with a maturity profile of more than one year. Hansard Global plc Report and Accounts 2023 89 Notes to the Consolidated Financial Statements continued 3.4 Insurance Risk Insurance risk is the risk of loss arising from actual experience being different than that assumed when an insurance product was designed and priced. For the Group, the key insurance risks are lapse risk, expense risk and mortality risk. However, the size of insurance risk is not deemed to be materially significant. From an accounting perspective all contracts have been classified as investment contracts. 3.4.1 Lapse Risk A key risk for investment contracts is policyholder behaviour risk in particular the risk that contracts are surrendered, or significant cash withdrawals are made before sufficient fees have been collected to cover up-front commissions paid by the Group. The risk is mitigated by charging penalties on the early surrender of contracts. 3.5 Classification and Subsequent Measurement of Financial Assets and Liabilities The Group recognises deposits with financial institutions and loans and borrowings on the date on which they are originated. All other financial instruments are recognised on the trade date, which is the date on which the Group becomes a part to the contractual provisions of the instrument. A financial asset or financial liability is initially measured at fair value plus, for a financial asset or financial liability not measured at ‘fair value through profit and loss’ (“FVTPL”), transaction costs that are directly attributable to its acquisition or issue. On initial recognition, a financial asset is classified as measured at amortised cost, ‘fair value through other comprehensive income’ (“FVOCI”) or FVTPL. Financial assets are not reclassified subsequent to their initial recognition. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • It is held within a business model whose objective is to hold assets to collect contractual cash flows; and • Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest. A financial asset is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: • It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and • Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. The classification of each financial asset and liability is commented on within each respective financial statement note. As at 30 June 2023 and 30 June 2022, only financial assets measured at amortised cost and FVTPL are held. The subsequent measurement of each class of financial assets is defined in the below table: Class of Asset Subsequent Measurement Financial assets at FVTPL Measured at fair value. Net gains and losses, including any interest or dividend income and foreign exchange gains and losses, are recognised in profit or loss. Financial assets at amortised cost Measured at amortised cost using the effective interest method. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. On initial recognition, a financial liability is designated as amortised cost or FVTPL. The criteria for classification and subsequent measurement mirrors that of the financial assets, albeit the classification of ‘FVOCI’ does not exist for financial liabilities. Therefore, any liabilities which do not meet the amortised cost classification criteria, are designated as FVTPL. 3.6 Fair Value of Financial Assets and Liabilities The Group closely monitors the valuation of assets in markets that have become less liquid. Determining whether a market is active requires the exercise of judgement and is determined based upon the facts and circumstances of the market for the instrument being measured. Where the Directors determine that there is no active market for a particular financial instrument, for example where a particular collective investment scheme is suspended from trading, fair value is assessed using valuation techniques based on available, relevant, information and an appraisal of all associated risks. When a collective investment scheme recommences regular trading, the value would be transferred back to Level 1. This process requires the exercise of significant judgement on the part of Directors. Due to the linked nature of the contracts administered by the Group’s insurance undertakings, any change in the value of financial assets held to cover financial liabilities under those contracts will result in an equal and opposite change in the value of contract liabilities. The separate effect on financial assets and financial liabilities is included in investment income and investment contract benefits, respectively, in the consolidated statement of comprehensive income. 90 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I IFRS 13 requires the Group to classify fair value measurements into a fair value hierarchy by reference to the observability and significance of the inputs used in measuring that fair value. The hierarchy is as follows: • Level 1: fair value is determined using quoted prices (unadjusted) in active markets for identical assets. • Level 2: fair value is determined using inputs other than quoted prices included within Level 1 that are observable for the asset either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3: fair value is determined using inputs for the asset that are not based on observable market data (unobservable inputs). The following table analyses the Group’s financial assets and liabilities at fair value through profit or loss, at 30 June 2023: Financial assets at fair value through profit or loss Equity securities Collective investment schemes Fixed income securities, bonds and structured notes Total financial assets at fair value through profit or loss Level 1 £m 52.0 899.3 1.2 952.5 Level 2 £m - 10.9 10.0 20.9 Level 3 £m - 5.3 52.1 57.4 All other financial assets and liabilities are designated as held at amortised cost which approximates to fair value. Deposit and money market funds Total financial assets at fair value through profit or loss Level 1 £m 90.2 1,042.7 Level 2 £m - 20.9 Financial liabilities at fair value through profit or loss - 1,101.5 Level 3 £m - 57.4 - Total £m 52.0 915.5 63.3 1,030.8 Total £m 90.2 1,121.0 1,101.5 Financial liabilities at fair value through profit or loss are classified as level 2 on the basis that they relate to policies investing in financial assets at fair value through profit and loss. During the year there were no transfers between the fair value hierarchy levels. The following tables analyse the Group’s financial assets and liabilities at fair value through profit or loss, at 30 June 2022: Level 1 Level 2 Level 3 Financial assets at fair value through profit or loss Equity securities Collective investment schemes Fixed income securities, bonds and structured notes Total financial assets at fair value through profit or loss Deposit and money market funds Total financial assets at fair value through profit or loss £m 55.7 892.6 - 948.3 Level 1 £m 99.7 1,048.0 £m - 4.0 6.8 10.8 Level 2 £m - 10.8 Financial liabilities at fair value through profit or loss - 1,092.3 £m - 6.8 43.8 50.6 Level 3 £m - 50.6 - Total £m 55.7 903.4 50.6 1,009.7 Total £m 99.7 1.109.4 1,092.3 During the year ended 30 June 2022, £4.0m of collective investment scheme investments were transferred from Level 1 to Level 2 following a review of their pricing frequency. A further £2.1m of similar assets were reclassified from Level 1 to Level 3 as a result of the same classification review, reflecting that the value of these assets are not based on observable market data. £43.8m of structured notes were transferred from Level 2 to Level 3 during the year. This move was a reflection of the underlying market volatility in that asset class experienced in the latter part of the financial year and the resulting impact on the observable and unobservable inputs used in the valuation methodologies for this type of security. Hansard Global plc Report and Accounts 2023 91 Notes to the Consolidated Financial Statements continued Valuation techniques and significant unobservable inputs The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values for financial instruments in the statement of financial position, as well as the significant unobservable inputs used. Type Valuation technique Significant unobservable input Sensitivity to changes in unobservable inputs Suspended assets £5.3m (2022: £6.8m) Bonds and structured notes Level 2: £10.0m (2022: £6.8) Level 3: £52.0m (2022: £43.8m) Latest available information including or such as net asset values (NAV) or other communication received Discount factor (5%) and NAV Market comparison/ discounted cash flow: The fair value is estimated considering: (i) current or recent quoted prices for identical securities in markets that are not active; and (ii) a net present value calculated using discount rates which are determined with reference to observable market transactions in instruments with substantially the same terms and characteristics including credit quality, the remaining term to repayments of the principal and the currency in which the payments are made. Level 2: Not applicable. Level 3: Underlying volatility If the NAV was higher/lower, the fair value would be higher/lower. If the discount factor was higher/lower, the fair value would be lower/higher. Level 2: Not applicable. Level 3: Significant increases/ decreases in this input in isolation would result in a higher or lower fair value Level 3 Sensitivity to Changes in Unobservable Measurements For financial assets assessed as Level 3, based on its review of the prices used, the Company believes that any reasonable change to the unobservable inputs used to measure fair value would not result in a significantly higher or lower fair value measurement at year end, and therefore would not have a material impact on its reported results. Significant unobservable inputs are developed as follows: Underlying Volatility In the absence of implied volatility until the maturity and moneyness of the instrument, the best estimate is the use of extrapolated implied volatility or historical volatility. The inputs used are derived against other independent valuation sources and the reasonableness of the assumptions is evaluated as part of the process. The reconciliation between opening and closing balances of Level 3 assets are presented in the table below: Opening balance Unrealised losses Transfers into level 3 Transfers out of level 3 Purchases, sales, issues and settlements Closing balance 4 Segmental Information 2023 £m 50.6 (6.5) 1.6 - 11.7 57.4 2022 £m 12.2 (1.5) 46.3 (5.2) (1.2) 50.6 Disclosure of operating segments in these financial statements is consistent with reports provided to the Chief Operating Decision Maker (“CODM”) which, in the case of the Group, has been identified as the Executive Committee of Hansard Global plc. In the opinion of the CODM, the Group operates in a single reportable segment, that of the distribution and servicing of long-term investment products. New business development, distribution and associated activities in relation to the Republic of Ireland ceased with effect from 30 June 2013. All other activities of the Group are continuing. The Group’s Executive Committee uses two principal measures when appraising the performance of the business: net issued compensation credit (“NICC”) (weighted where appropriate by product line) and expenses. NICC is a measure of the value of new in-force business and top-ups on existing single premium contracts. NICC is the total amount of basic initial commission payable to intermediaries for business sold in a period and is calculated on each piece of new business. It excludes override commission paid to intermediaries over and above the basic level of commission. 92 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I The following table analyses NICC geographically and reconciles NICC to direct origination costs incurred during the year as set out in the Business and Operating Review section of this Annual Report and Accounts. Middle East and Africa Latin America Rest of the World Far East Net Issued Compensation Credit Other commission costs paid to third parties Enhanced unit allocations Direct origination costs incurred during the year 2023 £m 2.7 2.4 0.5 0.1 5.7 3.4 1.0 2022 £m 2.9 2.9 1.0 0.7 7.5 3.6 1.2 10.1 12.3 Revenues and expenses allocated to geographical locations contained in sections 4.1 to 4.4 below reflect the revenues and expenses generated in or incurred by the legal entities in those locations 4.1 Geographical Analysis of Fees and Commissions by Origin Isle of Man Republic of Ireland The Bahamas* 2023 £m 43.1 2.1 0.5 45.7 2022 £m 45.7 2.5 0.6 48.8 * Hansard Worldwide, which is based in the Bahamas, fully reinsures its business to Hansard International. All external fees and commissions for Hansard Worldwide are therefore presented within the Isle of Man category. These amounted to £3.2m in 2023 (2022: £2.0m). The fees shown in the table above in respect of Hansard Worldwide represent fees received from Hansard International. 4.2 Geographical Analysis of Profit Before Taxation Isle of Man Republic of Ireland The Bahamas 4.3 Geographical Analysis of Gross Assets Isle of Man* Republic of Ireland The Bahamas 2023 £m 6.5 (1.0) 0.4 5.9 2023 £m 1,229.8 87.0 1.8 1,318.6 2022 £m 4.2 (0.9) 0.5 3.8 2022 £m 1,216.5 92.5 2.2 1,311.2 * Includes assets held in the Isle of Man in connection with policies written in The Bahamas. As at 30 June 2023 these amounted to £178.5m (30 June 2022: £134.9m). 4.4 Geographical Analysis of Gross Liabilities Isle of Man Republic of Ireland The Bahamas 2023 £m 1,043.8 73.3 179.7 1,296.8 2022 £m 1,074.8 77.6 136.6 1,289.0 Hansard Global plc Report and Accounts 2023 93 Notes to the Consolidated Financial Statements continued 5 Fees and Commissions Fees are charged to the contract holders of investment contracts for contract administration services, investment management services, payment of benefits and other services related to the administration of investment contracts. Fees may be chargeable on either a fixed fee basis, a fee per transaction or as a percentage of assets under administration. Fees are recognised as revenue as the services are provided. Initial fees that exceed the level of recurring fees and relate to the future provision of services are deferred in the balance sheet and amortised on a straight-line basis over the life of the relevant contract. These fees are accounted for on the issue of a contract and on receipt of incremental premiums on existing single premium contracts. Regular fees charged to contracts are recognised on a straight-line basis over the period in which the service is provided. Transactional fees are recorded when the required action is complete. Commissions receivable arise principally from fund houses with which investments are held. Commissions are recognised on an accruals basis in accordance with the relevant agreement. Contract fee income Fund management charges Commissions receivable 2023 £m 28.1 12.9 4.7 45.7 2022 £m 30.1 13.9 4.8 48.8 Fund management charges and commissions receivable (39% of the total above (2022: 28%)) are a function of the level of assets under administration. 6 Investment Income Investment income comprises dividends, interest, and other income receivable, realised and unrealised gains and losses on investments. Movements are recognised in the consolidated statement of comprehensive income in the period in which they arise. Dividends are accrued on the date notified. Interest is accounted for on a time proportion basis using the effective interest method. Interest income Dividend income Gains on realisation of investments Movement in unrealised (losses) 7 Origination Costs 2023 £m 3.5 4.7 51.3 (15.0) 44.5 2022 £m 0.1 4.6 63.4 (171.6) (103.5) Origination costs include commissions, intermediary incentives, and other distribution-related expenditure (note 2.2). Origination costs which vary with, and are directly related to, securing new contracts and incremental premiums on existing single premium contracts are deferred to the extent that they are recoverable out of future net income from the relevant contract. Deferred origination costs are amortised on a straight-line basis over the life of the relevant contracts. Typical terms range between 6 years and 16 years. Origination costs that do not meet the criteria for deferral are expensed as incurred. Amortisation of deferred origination costs Other origination costs 2023 £m 13.5 2.7 16.2 2022 £m 13.9 2.3 16.2 94 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I 8 Administrative and Other Expenses Included in administrative and other expenses are the following: Auditors’ remuneration: - Fees payable for audit services - Fees payable for audit related services pursuant to legislation - Fees payable for non-audit services Employee costs (see note 9) Directors’ fees Fund management fees Renewal and other commission Professional and other fees Litigation fees and settlements Credit loss allowance Licences and maintenance fees Insurance costs Depreciation of property, plant and equipment Communications 9 Employee Costs 2023 £m 0.7 0.1 - 10.3 0.4 5.3 0.9 4.2 1.5 0.1 2.4 0.9 1.1 0.2 2022 £m 0.4 0.1 - 10.9 0.4 5.7 0.7 3.5 1.1 1.4 2.4 0.9 0.8 0.2 The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans. Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received. The Group pays fixed pension contributions on behalf of its employees (defined contribution plans). Once the contributions have been paid the Group has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the balance sheet. The assets of the plan are held separately from the Group in independently administered funds. The Group operates an annual bonus plan for employees. An expense is recognised in the consolidated statement of comprehensive income when the Group has a legal or constructive obligation to make payments under the plan as a result of past events and a reliable estimate of the obligation can be made. 9.1 The aggregate remuneration in respect of employees (including sales staff and executive Directors) was as follows: Wages and salaries Social security costs Contributions to pension plans Total salary and other employee costs for the year are incorporated within the following classifications: Administrative and other expenses Origination costs The above information includes Directors’ remuneration (excluding non-executive Directors’ fees). 9.2 The average number of employees during the year was as follows: Administration Distribution and marketing IT development 2023 £m 9.7 0.8 1.0 11.5 2023 £m 10.3 1.2 11.5 2023 No. 119 18 50 187 2022 £m 10.2 0.9 0.9 12.0 2022 £m 10.9 1.1 12.0 2022 No. 136 15 38 189 Hansard Global plc Report and Accounts 2023 95 Notes to the Consolidated Financial Statements continued 10 Taxation Taxation is based on profits and income for the period as determined with reference to the relevant tax legislation in the countries in which the Company and its subsidiaries operate. Tax payable is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised in equity. Tax on items relating to equity is recognised in equity. The corporation tax expense for the Group for 2023 was £0.2m (2022: £0.2m). Corporation tax is charged on any profits arising at the following rates depending on location of the company or branch: Isle of Man 0% (2022: 0%) Republic of Ireland 12.5% (2022: 12.5%) Japan branch 23.2% (2022: 23.2%) Labuan 24% (2022: 24%) The Bahamas 0% (2022: 0%) Current year tax provisions Adjustment to prior year tax provisions 2023 £m 0.2 - 0.2 2022 £m 0.2 - 0.2 No deferred tax asset is currently being recorded in relation to losses arising in Hansard Europe. There is no material difference between the current tax charge in the consolidated statement of comprehensive income and the current tax charge that would result from applying standard rates of tax to the profit before tax. 11 Earnings Per Share Profit after tax (£m) Weighted average number of shares in issue (millions) Basic and diluted earnings per share in pence 2023 5.7 137.6 4.4 2022 3.6 137.6 2.6 The Directors believe that there is no material difference between the weighted average number of shares in issue for the purposes of calculating either basic or diluted earnings per share. Earnings under either measure is 4.2p per share (2022: 2.6p). 12 Dividends Interim dividends payable to shareholders are recognised in the year in which the dividends are paid. Final dividends payable are recognised as liabilities when approved by the shareholders at the Annual General Meeting. The following dividends have been paid by the Group during the year: Final dividend in respect of previous financial year Interim dividend in respect of current financial year Per share 2023 p 2.65 1.80 4.45 Total 2023 £m 3.5 2.4 5.9 Per share 2022 p 2.65 1.80 4.45 Total 2022 £m 3.6 2.5 6.1 The Board has resolved to pay a final dividend of 2.65p per share on 16 November 2023, subject to approval at the Annual General Meeting, based on shareholders on the register on 6 October 2023. 13 Intangible Assets and Property, Plant and Equipment Intangible Assets The historical cost of computer software is the purchase cost and the direct cost of internal development. Computer software is recognised as an intangible asset. Intangible assets 96 Hansard Global plc Report and Accounts 2023 2023 £m 19.9 2022 £m 13.4 I S L A C N A N F I Amortisation is calculated so as to amortise the cost of intangible assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned and is included in administration and other expenses in the consolidated statement of comprehensive income. The economic lives used for this purpose are: Computer software 3 to 15 years The increase in computer software relates to capitalised costs associated with the development of a replacement policy administration system. The first segment of this development is expected to be put into use during FY2024, at which point amortisation will commence over its estimated expected life. Computer Software Costs as at 1 July Capitalised additions Cost as at 30 June Accumulated amortisation at 1 July Charge for the year Accumulated amortisation as at 30 June Net Book Value 2023 £m 14.1 6.6 20.7 (0.7) (0.1) (0.8) 19.9 2022 £m 9.9 4.2 10.7 (0.7) - (0.7) 13.4 The cost of computer software includes £11.2m of externally generated costs (2022: £7.5m) and £8.7m of internally generated costs (2022: £6.6m). All amortisation currently relates to externally generated costs. Property, Plant and Equipment Property, plant and equipment includes both tangible fixed assets and ‘right of use assets’ recognised in accordance with IFRS 16 ‘Leases’. Property, plant and equipment Right of use assets 2023 £m 0.4 2.4 2.8 2022 £m 0.8 1.9 2.7 Property, plant and equipment is stated at historical cost less depreciation and any impairment. The historical cost of property, plant and equipment is the purchase cost, together with any incremental costs directly attributable to the acquisition. Depreciation is calculated so as to amortise the cost of tangible assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned and is included in administration and other expenses in the consolidated statement of comprehensive income. The economic lives used for this purpose are: Freehold property Computer equipment Fixtures and fittings Right of use assets are depreciated over the useful life of the lease. Property plant and equipment Cost as at 1 July Additions Disposals Cost as at 30 June Accumulated depreciation as at 1 July Charge for the year Accumulated depreciation as at 30 June Net Book Value 50 years 3 to 5 years 4 years 2022 £m 10.6 0.1 - 10.7 (9.9) - (9.9) 0.8 2023 £m 10.7 - (0.4) 10.3 (9.9) - (9.9) 0.4 Hansard Global plc Report and Accounts 2023 97 Notes to the Consolidated Financial Statements continued IFRS 16 – Leases The right-of-use assets for property leases are measured at an amount equal to the lease liability adjusted by the amount of any prepaid or accrued lease payments recognised immediately before the date of initial application, being the commencement date. The liabilities are measured at the present value of the remaining lease payments, discounted using an incremental borrowing rate. The weighted average incremental borrowing rate applied to the lease liabilities on 30 June 2023 was 7% (2022: 4%). The Group leases various offices around the world to service its clients and operations. Rental contracts are typically made for periods of 1 to 15 years, incorporating break clauses where applicable. Lease terms are negotiated on an individual basis and contain differing terms and conditions. The lease agreements do not impose any covenants. In determining the lease terms utilised in assessing the position under IFRS 16, management considers break clauses in leases, where appropriate. No potential future outflows exist on leases beyond the break clause (2022: £1.6m). During the year the Group made the decision to change their position on the likelihood of exercising the break clause for the leases at the Group’s head office. The previous position assumed that these break clauses would be exercised. The Group now believes that the terms of the leases have become more favorable in the current high inflation environment, as well as the amount spent on infrastructure at the property means it is likely that the leases will continue past their break clause. As a result, the company has recognised additions of £0.9m in both the right-of-use asset and lease liability as at 30 June 2023. Leases (other than those classified as short-term leases or leases of low-value assets) are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and a finance cost. The finance cost is charged over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Short-term leases (those with a lease term or useful life of less than 12 months at inception) and leases of low value assets (comprising IT- equipment and small items of office furniture) are recognised on a straight-line basis as an expense in administration and other expenses in the consolidated statement of comprehensive income. The recognition of the right-of-use asset represents an increase in the property, plant and equipment figure of £2.4m (30 June 2022: £1.9m). Lease liabilities relating to the right-of-use asset are included within other payables. The interest recognised on the lease liabilities in respect of the right of use asset was £0.1m (30 June 2022: £0.1m). During the year ended 30 June 2021, the Group entered into a sub-lease for part of a building that is reported as a right-of-use asset. The group has classified the sub-lease as an operating lease, as it does not transfer substantially all of the risks and rewards incidental to the ownership of the sub-let asset. During the year ending 30 June 2023, the Group recognised rental income of less than £0.1m (2022: less than £0.1m). Right of use asset recognised 1 July Additions during the period Depreciation Net book value of right of use asset as at 30 June Lease liability recognised 1 July Additions during the period Lease payments made during the period Interest on leases Lease liability recognised as at 30 June Of which are: Current lease liabilities Non-current lease liabilities 14 Deferred Origination Costs 2023 £m 1.9 0.9 (0.4) 2.4 2023 £m 2.3 0.9 (0.4) 0.1 2.9 0.2 2.7 2022 £m 2.4 0.1 (0.6) 1.9 2022 £m 2.7 0.1 (0.5) - 2.3 0.3 2.0 Amortisation of deferred origination costs is charged within the origination costs line in the consolidated statement of comprehensive income. Formal reviews to assess the recoverability of deferred origination costs on investment contracts are carried out at each balance sheet date to determine whether there is any indication of impairment. If there is any indication of irrecoverability or impairment, the asset’s recoverable amount is estimated. Impairment losses are reversed through the consolidated statement of comprehensive income if there is a change in the estimates used to determine the recoverable amount. Such losses are reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortisation where applicable, if no impairment loss had been 98 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I recognised. The amount of deferred origination costs amortised each year is determined by the estimated lives of the Group’s products (note 2). Reducing the estimated life of the total portfolio by 1 year would increase the annual amortisation for the next financial year by £1.7m. Increasing the estimated life of the total portfolio by 1 year would reduce the annual amortisation for the next financial year by £1.3m. Offsetting movements would also arise in deferred income as outlined in note 18. The movement in value over the financial year is summarised below. At beginning of financial year Origination costs incurred and deferred during the year Origination costs amortised during the year Carrying value Expected to be amortised within one year Expected to be amortised after one year 15 Other Receivables 2023 £m 122.5 8.7 (13.4) 117.8 2023 £m 11.9 105.9 117.8 2022 £m 125.1 11.3 (13.9) 122.5 2022 £m 12.2 110.3 122.5 Other receivables are initially recognised at fair value and subsequently measured at amortised cost, less any provision for impairment. Commission receivable Other debtors Prepayments Estimated to be settled within 12 months Estimated to be settled after 12 months 2023 £m 1.4 2.2 1.2 4.8 4.8 - 4.8 2022 £m 1.2 1.9 1.2 4.3 4.3 - 4.3 Due to the short-term nature of these assets the carrying value is considered to reflect fair value. 16 Cash and Cash Equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with a minimal cost to be converted to cash, typically with original maturities of three months or less, net of short-term overdraft positions where a right of set-off exists. In the below table, Money market funds includes all immediately available cash, other than specific short-term deposits. Money market funds Short-term deposits with credit institutions Cash and cash equivalents are recognised on receipt prior to investment to contract holder funds. 2023 £m 46.8 5.4 52.2 2022 £m 54.2 4.7 58.9 Hansard Global plc Report and Accounts 2023 99 Notes to the Consolidated Financial Statements continued 17 Financial Liabilities Under Investment Contracts 17.1 Investment Contract Liabilities, Premiums and Benefits Paid 17.1.1 Investment Contract Liabilities Investment contracts consist of unit-linked contracts written through subsidiary companies in the Group. Unit-linked liabilities are measured at fair value by reference to the underlying net asset value of the Group’s unitised investment funds, determined on a bid basis, at the balance sheet date. The decision by the Group to designate its unit-linked liabilities at fair value through profit or loss is to eliminate a measurement inconsistency that would otherwise arise from measuring the investments at FVTPL and the contract liabilities at amortised cost. 17.1.2 Investment Contract Premiums Investment contract premiums are not included in the consolidated statement of comprehensive income but are reported as deposits to investment contracts and are included in financial liabilities in the balance sheet. On existing business, a liability is recognised at the point the premium falls due. The liability for premiums received on new business is deemed to commence at the acceptance of risk. 17.1.3 Benefits Paid Withdrawals from policy contracts and other benefits paid are not included in the consolidated statement of comprehensive income but are deducted from financial liabilities under investment contracts in the balance sheet. Benefits are deducted from financial liabilities and transferred to amounts due to investment contract holders based on notifications received, when the benefit falls due for payment or, on the earlier of the date when paid or when the contract ceases to be included within those liabilities. 17.2 Movement in Financial Liabilities Under Investment Contracts The following table summarises the movement in liabilities under investment contracts during the year: Deposits to investment contracts Withdrawals from contracts and charges Change in provisions for investment contract liabilities Movement in year At beginning of year Contractually expected to be settled within 12 months Contractually expected to be settled after 12 months 2023 £m 116.3 (147.7) 40.6 9.2 1,092.3 1,101.5 2023 £m 43.4 1,058.1 1,101.5 2022 £m 130.0 (158.4) (103.5) (131.9) 1,224.2 1,092.3 2022 £m 32.3 1,060.0 1,092.3 The change in provisions for investment contract liabilities includes dividend and interest income and net realised and unrealised gains and losses on financial investments held to cover financial liabilities. Dividend income, interest income and gains and losses are accounted for in accordance with note 6. 17.3 Investments Held to Cover Liabilities Under Investment Contracts The Group classifies its financial assets into the following categories: financial investments and trade receivables. Financial investments consist of units in collective investment schemes, equity securities, fixed income securities and deposits with credit institutions. Collective investment schemes, equity securities and fixed income securities are designated at fair value through profit or loss. Deposits with credit institutions are designated at amortised cost. The decision by the Group to designate its financial investments at fair value through profit or loss reflects the fact that the investment portfolio is managed, and its performance evaluated, on a fair value basis. The Group recognises purchases and sales of investments on trade date. Investment transaction costs are written off in administration expenses as incurred. All gains and losses derived from financial investments, realised or unrealised, are recognised within investment income in the consolidated statement of comprehensive income in the period in which they arise. The value of financial assets at fair value through profit or loss that are traded in active markets (such as trading securities) is based on quoted market prices at the balance sheet date. The quoted market price for financial assets held by the Group is the current bid price. Investments in funds are valued at the latest available net asset valuation provided by the administrators or managers of the funds and companies, unless the Directors are aware of good reasons why such valuations would not be the most appropriate or indicative of fair value. Where necessary, the Group uses other valuation methods to arrive at the stated fair value of its financial assets, such as recent arms’ length transactions or reference to similar listed investments. 100 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I Loans and receivables are financial assets with fixed or determinable payments that are not quoted on an active market. Loans and receivables consist, primarily, of contract fees receivable, long-term cash deposits (i.e. with an original maturity duration in excess of three months) and cash and cash equivalents. The following investments, other assets and liabilities are held to cover financial liabilities under investment contracts. They are included within the relevant headings on the condensed consolidated balance sheet. Equity securities Investments in collective investment schemes Fixed income securities, bonds and structured notes Deposits and money market funds Total assets Other payables Financial investments held to cover financial liabilities 2023 £m 52.0 915.4 58.7 77.4 1,103.5 (2.0) 1,101.5 2022 £m 55.7 903.4 50.6 84.4 1,094.1 (1.8) 1,092.3 The other receivables and other payables fair value approximates amortised cost. 17.4 Amounts Due to Investment Contract Holders Where financial liabilities under investment contracts mature or are redeemed by contact holders, such amounts payable are recorded as amounts due to investment contract holders. 18 Deferred Income Fees charged for services related to the management of investment contracts are recognised as revenue as the services are provided. Initial fees which exceed the level of recurring fees and relate to the future provision of services are deferred. These are amortised over the anticipated period in which services will be provided. The recognition of balances in the deferred income reserve is based on actuarial assumptions regarding the estimated life of each policy. These actuarial assumptions are complex in nature and are subject to estimation uncertainty (note 2). The actuarial assumptions are reviewed regularly by the Appointed Actuary. The amount of deferred income amortised each year is determined by the estimated lives of the Group’s products. Reducing the estimated life of the total portfolio by 1 year would increase the annual amortisation for the next financial year by £2.2m. Increasing the estimated life of the total portfolio by 1 year would reduce the annual amortisation for the next financial year by £1.7m. Offsetting movements would also arise in deferred income as outlined in note 14. The movement in value of deferred income over the financial year is summarised below. At beginning of financial year Income received and deferred during the year Income amortised and recognised in contract fees during the year Carrying value Expected to be amortised within one year Expected to be amortised after one year 19 Other Payables 2023 £m 145.1 16.5 (16.8) 144.8 2023 £m 15.1 129.7 144.8 2022 £m 142.5 19.2 (16.6) 145.1 2022 £m 14.8 130.3 145.1 Other payables are initially recognised at fair value and subsequently measured at amortised cost. They are recognised at the point where service is received but payment is due after the balance sheet date. Commission payable Other creditors and accruals Lease liabilities of which: Current lease liabilities Non-current lease liabilities 2023 £m 1.4 9.5 0.2 2.7 13.8 2022 £m 2.0 9.8 0.3 2.0 14.1 Hansard Global plc Report and Accounts 2023 101 Notes to the Consolidated Financial Statements continued 20 Provisions Provisions represent amounts to settle a number of the claims referred to in Note 26 ‘Contingent Liabilities’ where it is economically beneficial to do so. Such provisions are calculated where there is an established pattern of settlement for that grouping of claims. The following table reflects the movement in the provision during the period under review Settlement provision as at 1 July Additional provisions made in the period Released from the provision for settlement Settlement provision as at 30 June 2023 £m 0.2 - (0.1) 0.1 2022 £m 0.4 - (0.2) 0.2 Further information outlined within IAS 37.85 is not disclosed on the basis that it may prejudice the Company’s position. With the exception of the lease liabilities shown in note 13, and the provisions referred to above, all other payable balances, including amounts due to contract holders, are deemed to be current. Due to the short-term nature of these payables the carrying value is considered to reflect fair value. 21 Capital Management It is the Group’s policy to maintain a strong capital base in order to: • satisfy the requirements of its contract holders, creditors and regulators; • maintain financial strength to support new business growth and create shareholder value; • match the profile of its assets and liabilities, taking account of the risks inherent in the business and; • generate operating cash flows to meet dividend requirements. Within the Group each subsidiary company manages its own capital. Capital generated in excess of planned requirements is returned to the Company by way of dividends. Group capital requirements are monitored by the Board. The Company monitors capital on two bases: • • the total shareholder’s equity, as per the balance sheet; and the capital requirement of the relevant supervisory bodies, where subsidiaries are regulated. The Group’s policy is for each company to hold the higher of: • • the Company’s internal assessment of the capital required; or the capital requirement of the relevant supervisory body, where applicable. There has been no material change in the Group’s management of capital during the period. The Group continued to perform additional modelling around risks arising from the ongoing Russia/Ukraine conflict and global economic conditions, and to give consideration to emerging market practice and regulatory expectations around capital conservation. All regulated entities within the Group exceed significantly the minimum solvency requirements at the balance sheet date. The Group’s lead regulator, the Isle of Man FSA, monitors capital requirements for the Group as a whole. The insurance subsidiaries are directly supervised by their local regulators. The lead regulator’s approach to the measurement of capital adequacy is primarily based on monitoring the relationship of the Solvency Capital Requirement (‘SCR’) to regulatory capital. All regulated entities within the Group exceed the minimum solvency requirements at the balance sheet date. The capital held within Hansard Europe is considered not to be available for dividend to Hansard Global plc until such time as the legal cases referred to in note 26 are substantially resolved. 22 Share Capital Authorised: 200,000,000 ordinary shares of 50p Issued and fully paid: 2023 £m 2022 £m 100.0 100.0 137,557,079 (2022: 137,557,079) ordinary shares of 50p 68.8 68.8 No shares (2022: nil) were issued or bought back in the year. 102 Hansard Global plc Report and Accounts 2023 I S L A C N A N F I 23 Other Reserves Other reserves comprise the merger reserve arising on the acquisition by the Company of its subsidiary companies on 1 July 2005, the share premium account and the share save reserve. The merger reserve represents the difference between the par value of shares issued by the Company for the acquisition of those companies, compared to the par value of the share capital and the share premium of those companies at the date of acquisition. Merger reserve Share premium Share save reserve Reserve for own shares held within EBT 2023 £m (48.5) 0.1 0.1 (0.2) (48.5) 2022 £m (48.5) 0.1 0.1 - (48.3) Included within other reserves is an amount representing 557,000 (2022: 12,000) ordinary shares held by the Group’s employee benefit trust (‘EBT’) which were acquired at a cost of £0.2m (see note 24). The ordinary shares held by the trustee of the Group’s employee benefit trust are treated as treasury shares in the consolidated balance sheet in accordance with IAS 32 ‘’Financial Instruments: Presentation’’. This reserve arose when the Group acquired equity share capital under its EBT, which is held in trust by the trustee of the EBT. Treasury shares cease to be accounted for as such when they are sold outside the Group, or the interest is transferred in full to the employee pursuant to the terms of the incentive plan. 24 Equity Settled Share-Based Payments The Company has established a number of equity-based payment programmes for eligible employees. The fair value of expected equity- settled share-based payments under these programmes is calculated at date of grant using a standard option-pricing model and is amortised over the vesting period on a straight-line basis through the consolidated statement of comprehensive income. A corresponding amount is credited to equity over the same period. At each balance sheet date, the Group reviews its estimate of the number of options expected to be exercised. The impact of any revision in the number of such options is recognised in the consolidated statement of comprehensive income so that the charge to the consolidated statement of comprehensive income is based on the number of options that vest. A corresponding adjustment is made to equity. The estimated fair value of the schemes and the imputed cost for the period under review is not material to these financial statements. 24.1 SAYE Programme This is a standard scheme approved by the Revenue authorities in the Isle of Man that is available to all employees where individuals may make monthly contributions over three or five years to purchase shares at a price not less than 80% of the market price at the date of the invitation to participate. At the date of this report, the following options remain outstanding under each tranche: Scheme year 2017 2018 2023 No. of options 2022 No. of options - 29,031 29,031 20,717 58,062 78,779 Hansard Global plc Report and Accounts 2023 103 Notes to the Consolidated Financial Statements continued A summary of the transactions in the existing SAYE programmes during the year is as follows: 2023 2022 Weighted average exercise price (p) 65 - - 66 62 Weighted average exercise price (p) 63 - - 62 65 No. of options 290,996 - - (212,217) 78,779 No. of options 78,779 - - (49,748) 29,031 Outstanding at the start of year Granted Exercised Forfeited Outstanding at end of year* *None of these options are exercisable as at 30 June 2023. There were no new options granted during the current financial year. 24.2 Incentive Plan Employee Benefit Trust An Employee Benefit Trust was established in February 2018 to hold shares awarded to employees as an incentive on a deferred basis. Shares awarded under the scheme are purchased by the Trust in the open market and held until vesting. Awards made under the scheme would normally vest after three years. Share Awards Outstanding at start of period Granted Forfeited Vested Outstanding at the end of period 2023 No. of Shares - 631,446 (29,762) - 601,684 2022 No. of Shares - - - - - The Trust was funded with a loan of £446,000 during 2018 and as at 30 June 2023 the Trust held 557,000 shares (2022: 12,000). During the year the Trust was funded with a further loan of £187,000. As at 30 June 2023, the outstanding balance on the loan was £199,000 (30 June 2022: £12,000). Shares held by the Trust Outstanding at start of period Granted Forfeited Vested Outstanding at end of period 2023 No. of Shares 12,000 545,000 - - 557,000 2022 No. of Shares 12,000 - - - 12,000 During the period the expense arising from share-based payment transactions was £0.05m (2022: £nil). 25 Related Party Transactions 25.1 Intra-Group Transactions Various subsidiary companies within the Group perform services for other Group companies in the normal course of business. The financial results of these activities are eliminated in the consolidated financial statements. 25.2 Key Management Personnel Compensation Key management consists of 20 individuals (2022: 21), being members of the Group’s Executive Committee, executive Directors of direct subsidiaries of the Company and the non-executive Directors of both the Group and subsidiary companies. The aggregate remuneration paid to key management during the year-ended 30 June was as follows: Short-term employee benefits Post-employment benefits Total There were no outstanding amounts as at 30 June 2023 (2022: nil). The total value of investment contracts issued by the Group and held by key management is nil (2022: nil). 104 2023 £m 2.5 0.2 2.7 2022 £m 2.3 0.3 2.6 Hansard Global plc Report and Accounts 2023 25.3 Transactions of Controlling Shareholder Dr L S Polonsky is regarded as the controlling shareholder of the Group, as defined by the Listing Rules of the Financial Conduct Authority. In the year ending 30 June 2023 there were no transactions with Dr Polonsky (2022: nil). 25.4 Incentive Plan Employee Benefit Trust An Employee Benefit Trust was established in February 2018 to hold shares awarded to employees as an incentive on a deferred basis. The Trust was funded with a loan of £446,000 during 2018, and a further loan of £187,000 was made during the year. As at 30 June 2023 the Trust held 557,000 shares (2022: 12,000). No awards vested in the year ended 30 June 2023. 26 Contingent Liabilities 26.1 Litigation The Group does not and has never given any investment advice. Investment decisions are taken either by the contract holder directly or through a professional intermediary appointed by the contract holder. Contract holders bear the financial risk relating to the investments underpinning their contracts, as the policy benefits are linked to the value of the assets. Notwithstanding the above, financial services institutions are frequently drawn into disputes in cases where the value and performance of assets selected by or on behalf of contract holders fails to meet their expectations. At the balance sheet date a number of fund structures remain affected by liquidity or other issues that hinder their sales or redemptions on normal terms with a consequent adverse impact on policy transactions. As reported previously, the Group has been subject to a number of complaints in relation to the selection and performance of assets linked to contracts. The Group has been served with a number of writs arising from such complaints and other asset-related issues. All such writs relate to historic business written prior to the closure to new business of Hansard Europe in 2013. As at 30 June 2023, the Group had been served with cumulative writs with a net exposure totalling €26.1m, or £22.4m in sterling terms (30 June 2022: €24.6m / £21.2m) arising from contract holder complaints and other asset performance-related issues. The primary reason for the increase in contingent liabilities relates to a case which was previously defended successfully, being subject to a new claim. During the year, the Group successfully defended 15 cases with net exposures of approximately £1.9m, 14 of which may be appealed by the plaintiffs (2022: successfully defended 24 cases with net exposures of £3.2m). These successes continue to affirm confidence in the Group’s legal arguments. Our policy is to maintain contingent liabilities even where we win cases in the court of first instance if such cases have been subsequently appealed. This includes our largest single case in Belgium. We have previously noted that we expect a number of our larger claims to ultimately be covered by our Group insurance cover. During 2023 we recorded £0.1m in total recoveries during the year in relation to costs paid by the Group (2022: £0.5m). We expect such reimbursement to continue during the course of that litigation. We estimate insurance coverage against the £22.4m of contingent liabilities referred to above to be in the range of £3m to £10m. While it is not possible to forecast or determine the final results of pending or threatened legal proceedings, based on the pleadings and advice received from the Group’s legal representatives, the Directors believe that the Group has strong defences to such claims. Notwithstanding this, there may be circumstances where in order to avoid the expense and distraction of protracted litigation the Board may consider it in the best interests of the Group and its shareholders to reach a commercial resolution with regard to certain of these claims. Such cases totalled less than £0.1m (2022: less than £0.1m) during the period. A provision of £0.1m (2022: £0.2m) has been provided where based on past experience it is expected that future settlements may be reached. Where an established pattern of settlement is established for any grouping of claims, a provision for expected future settlements is made in line with IAS 37. This is outlined in Note 20. It is not possible at this time to make any further estimates of liability. Between 30 June 2023 and the date of this report, there have been no material developments. 26.2 Isle of Man Policyholders’ Compensation Scheme The Group’s principal subsidiary, Hansard International is a member of the Isle of Man Policyholders’ Compensation Scheme governed by the Life Assurance (Compensation of Policyholders) Regulations 1991. The objective of the Scheme is to provide compensation for policyholders should an authorised insurer be unable to meet its liabilities to policyholders. In the event of a levy being charged by the Scheme members, Hansard International would be obliged to meet the liability arising at the time. The maximum levy payable in accordance with the regulations of the Scheme in respect of the insolvency of the insurer is 2% of long term business liabilities. Hansard International’s products include a clause in their terms and conditions permitting it to recover any monies paid out under the Scheme from contract holders. 105 FINANCIALSHansard Global plc Report and Accounts 2023Notes to the Consolidated Financial Statements continued 27 Foreign Exchange Rates The Group’s functional currency is pounds sterling, being the currency of the primary economic environment in which the Group operates. The Group’s presentational currency is also pounds sterling. Foreign currency transactions are translated into sterling using the applicable exchange rate prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange prevailing at the balance sheet date, and the gains or losses on translation are recognised in the consolidated statement of comprehensive income. Non-monetary assets and liabilities that are held at historical cost are translated using exchange rates prevailing at the date of transaction; those held at fair value are translated using exchange rates ruling at the date on which the fair value was determined. The closing exchange rates used by the Group for the conversion of significant consolidated balance sheet items to sterling were as follows: US Dollar Japanese Yen Euro 28 Events After the Reporting Period 2023 2022 1.27 184 1.17 1.21 165 1.16 This report for the year ended 30 June 2023 was approved for issue on 27 September 2023. No material events have occurred between the reporting date and the issue date that require disclosure under IAS 10. 106 Hansard Global plc Report and Accounts 2023 Hansard Global plc Parent Company Statement of Changes in Equity for the Year Ended 30 June 2023 At 1 July 2021 Profit and total comprehensive income for the year after taxation Transactions with owners Dividends paid At 30 June 2022 At 1 July 2022 Profit and total comprehensive income for the year after taxation Transactions with owners Dividends paid At 30 June 2023 Share capital £m 68.8 - - 68.8 Share capital £m 68.8 - - 68.8 Other reserves £m Retained earnings £m 0.2 - - 0.2 13.8 7.7 (6.1) 15.4 Other reserves £m Retained earnings £m 0.2 - - 0.2 15.4 6.2 (5.9) 15.7 Total £m 82.8 7.7 (6.1) 84.4 Total £m 84.4 6.2 (5.9) 84.7 The notes on pages 110 to 114 form an integral part of these financial statements. 107 FINANCIALSHansard Global plc Report and Accounts 2023 Hansard Global plc Parent Company Balance Sheet as at 30 June 2023 Notes 2023 £m 2022 £m Assets Fixed assets Intangible assets Property, plant and equipment Investment in subsidiary companies Current assets Cash and cash equivalents Amounts due from subsidiary companies Other receivables Total assets Liabilities Other payables Amounts due to subsidiary companies Total liabilities Net assets Shareholders’ equity Called up share capital Share premium Retained earnings Share based payments reserve Total shareholders’ equity 6 7 4 5 8 19.9 0.4 72.5 0.1 1.4 0.7 95.0 1.7 8.6 10.3 84.7 68.8 0.1 15.7 0.1 84.7 13.3 0.8 72.5 0.1 1.7 0.4 88.8 2.1 2.3 4.4 84.4 68.8 0.1 15.4 0.1 84.4 The notes on pages 110 to 114 form an integral part of these financial statements. The parent company financial statements on pages 107 to 114 were approved by the Board on 27 September 2023 and signed on its behalf by: Graham Sheward Director Thomas Morfett Director 108 Hansard Global plc Report and Accounts 2023 Hansard Global plc Parent Company Cash Flow Statement for the Year Ended 30 June 2023 Cash flow from operating activities Profit before tax for the year Adjustments for: Dividends received Movement in share based payments reserve Changes in operating assets and liabilities Increase in amounts due to / from subsidiaries (Increase) in debtors (Decrease) / increase in creditors Cash flow generated from / (used in) operations Cash flows from investing activities Dividends received Purchase of intangible assets Cash flows from investing activities Cash flows from financing activities Dividends paid Cash flows used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at year end The notes on pages 110 to 114 form an integral part of these financial statements. 2023 £m 2022 £m 6.2 7.7 (11.5) - 6.4 (0.2) (0.4) 0.5 11.5 (6.1) 5.4 (5.9) (5.9) - 0.1 0.1 (14.8) - 1.2 - 0.8 (5.1) 14.8 (4.1) 10.7 (6.1) (6.1) (0.5) 0.6 0.1 109 FINANCIALSHansard Global plc Report and Accounts 2023 Notes to the Parent Company Financial Statements 1. General Information Hansard Global plc (“the Company”) is a limited liability company, and is incorporated and domiciled in the Isle of Man. The registered office of the company is 55 Athol Street, Douglas, Isle of Man, IM99 1QL. The Company is listed on the London Stock Exchange. The principal activity of the Company is to act as the holding company of the Hansard group of companies (“the Group”). The Company has its primary listing on the London Stock Exchange. 2. Significant Accounting Policies 2.1 Basis of Preparation The individual financial statements of the Company have been prepared on a going concern basis in compliance with United Kingdom Standards including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland’ (“FRS 102”) and the Isle of Man Companies Acts 1931 to 2004. They are prepared under the historical cost convention. In accordance with the provisions of the Isle of Man Companies Act 1982 the Company has not presented its own profit and loss account. The Company’s profit for the year ended 30 June 2023, including dividends received from subsidiaries, was £6.2m (2022: £7.7m). The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3. 2.2 Investment Income Investment income includes interest and dividends. Interest is accounted for on an accruals basis. Dividends are accrued on an ex-dividend basis. 2.3 Dividends Payable Dividends payable to shareholders are recognised in the year in which the dividends are approved. These amounts are recognised in the statement of changes in equity. 2.4 Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable and represents the amount receivable for services rendered, net of returns, discounts and rebates allowed by the Company and value added taxes. Where the consideration receivable in cash or cash equivalents is deferred, and the arrangement constitutes a financing transaction, the fair value of the consideration is measured as the present value of all future receipts using the imputed rate of interest. The Company recognises revenue when the services are rendered, the amount of revenue can be measured reliably, and it is probable that future economic benefits will flow to the Company. 2.5 Employee Benefits The Company provides a range of competitive benefits to employees in line with local legislation for the jurisdiction in which they are based. Our Head Office proposition includes private health insurance with the option to include family members, permanent health insurance, death in service scheme, annual bonus arrangements, and non-contributory pension plans which can be further enhanced via salary sacrifice arrangements. Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the balance sheet. The assets of the plan are held separately from the Company in independently administered funds. The Company operates an annual bonus plan for employees. An expense is recognised in the profit and loss account when the Company has a legal or constructive obligation to make payments under the plan as a result of past events and a reliable estimate of the obligation can be made. 110 Hansard Global plc Report and Accounts 2023Notes to the Parent Company Financial Statements continued 2.6 Investments in Subsidiaries Investments in subsidiary companies are held at cost, adjusted for any impairment. 2.7 Foreign Currencies The Company’s presentational and functional currency is pounds sterling, being the currency of the primary economic environment in which the Company operates. Foreign currency transactions are translated into sterling using the approximate exchange rate prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange prevailing at the balance sheet date and the gains or losses on translation are recognised in the profit and loss account. 2.8 Property, Plant and Equipment Property, plant and equipment is stated at historic purchase cost less accumulated depreciation. The cost of property, plant and equipment is their purchase cost, together with any incidental costs of acquisition. Depreciation is calculated so as to write off the cost of tangible assets, less their estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. The principal rates used for this purpose are: Freehold property Computer equipment Fixtures and fittings 50 years 3 years 4 years 2.9 Intangible Assets Intangible fixed assets are stated at historic purchase cost less accumulated amortisation. The cost of intangible assets is their purchase cost, together with any incidental costs of acquisition. Amortisation is calculated so as to write off the cost of intangible assets, less their estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. At present the intangible asset balance represents work in progress in relation to a new suite of IT systems which have not yet begun their useful economic life. 2.10 Cash and Cash Equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with a minimal cost to be converted to cash, typically with original maturities of three months or less, net of short-term overdraft positions where a right of set-off exists. 2.11 Financial Instruments The Company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments. (i) Financial Assets Basic financial assets, including trade and other receivables, (i.e., debtors and amounts due from group undertakings) and cash at bank, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Such assets are subsequently carried at amortised cost using the effective interest method. At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss. If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss. Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks and rewards of ownership of the asset are transferred to another party or (c) control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions. 111 FINANCIALSHansard Global plc Report and Accounts 2023 Notes to the Parent Company Financial Statements continued (ii) Financial Liabilities Basic financial liabilities, including accruals and other creditors, and amounts due to group undertakings, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Other creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method. Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires. 2.12 Operating Lease Assets Leases that do not transfer all of the risks of ownership are classified as operating leases. Payments under operating leases are charged to the profit and loss account on a straight-line basis over the period of the lease. 2.13 Share Capital Ordinary shares are classified as equity. 2.14 Related Parties The Company discloses transactions with related parties which are not wholly owned by the same group. It does not disclose transactions with members of the same group that are wholly owned. 3. Critical Accounting Estimates and Judgements in Applying Accounting Polices Estimates, assumptions and judgements are used in the application of accounting policies in these financial statements. Critical accounting estimates are those which involve the most complex or subjective judgements or assessments. Estimates, assumptions and judgements are evaluated continually and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may differ from assumptions and estimates made by management. There are no areas in which the Company applies significant accounting estimates or assumptions. 4. Investments in Subsidiary Companies The following schedule reflects the Company’s subsidiary companies at the balance sheet date and at the date of this report. All companies are wholly owned and incorporated in the Isle of Man, except where indicated. Subsidiary Company Hansard International Limited Hansard Worldwide Limited (incorporated in The Bahamas) Hansard Europe Designated Activity Company (incorporated in the Republic of Ireland) Hansard Development Services Limited Hansard Administration Services Limited The holding value of the Company’s investment in its subsidiaries is assessed annually for evidence of impairment. This assessment considers, among other factors, the cost versus carrying value of the investment, future dividend flows, going concern and the Value of In- Force of the Company’s subsidiaries in order to confirm there are no indicators of impairment identified. 5. Amounts Due from Subsidiary Companies The Company and various subsidiary companies within the Group perform services for other Group companies in the normal course of business. All balances are unsecured, interest free and repayable on demand. 112 Hansard Global plc Report and Accounts 2023Notes to the Parent Company Financial Statements continued 6. Intangible Assets The intangible asset represents work in progress in relation to a new suite of IT systems. Cost as at 1 July Additions Cost as at 30 June 2023 £m 13.3 6.6 19.9 2022 £m 9.1 4.2 13.3 No amortisation will be applicable until the system is complete and has begun its useful life. The cost of computer software includes £11.2m of externally generated costs (2022: £6.7m) and £8.7m of internally generated costs (2022: £6.6m). 7. Property, Plant and Equipment During the year the Company disposed of a freehold property with a net book value of £0.3m. Depreciation is included in the profit and loss account and calculated in line with the accounting policy published above. 8. Share Capital Authorised: 200,000,000 ordinary shares of 50p Issued and fully paid: 2023 £m 2022 £m 100.0 100.0 137,557,079 (2022: 137,557,079) ordinary shares of 50p 68.8 68.8 During the year no shares were issued or bought back (2022: nil). The Company has previously received clearance from the London Stock Exchange to list a maximum of 1,200,000 shares necessary to meet its obligations to employees under the terms of the employee share save (SAYE) scheme. As at 30 June 2023 924,123 shares remained available for listing (2022: 924,123). 9. Related Party Transactions The company has wholly owned subsidiaries as referred to in Note 4. Dr L S Polonsky is regarded as the controlling shareholder of the Group, as defined by the Listing Rules of the Financial Conduct Authority. During the year fees totalling £0.3m (2022: £0.3m) were paid to non-Executive Directors. The aggregate remuneration paid to key management of the Company for the year ended 30 June was as follows: Salaries, wages and bonuses 2023 £m 1.1 2022 £m 1.2 113 FINANCIALSHansard Global plc Report and Accounts 2023 Notes to the Parent Company Financial Statements continued 10. Equity Settled Share-based Payments 10.1 SAYE Programme Shareholders have approved a Save as You Earn (“SAYE”) share save program for employees. The scheme is a standard SAYE plan, approved by the Revenue Authorities in the Isle of Man and is available to eligible employees. Under the terms of the scheme, individuals can invest up to £500 per month for a three or five-year period to purchase shares at a price not less than 80% of the market price on the date of the invitation to participate. The scheme is typically operated annually, with the option price and awards criteria normally being established in February. No scheme was issued during the years ended 30 June 2023, 30 June 2022 and 2021. The estimated fair value of the schemes and the imputed cost for the period under review is not material to these financial statements. At the balance sheet date, all remaining options relate to Isle of Man based employees. Details are available in note 24 to the consolidated financial statements. 10.2 Incentive Plan Employee Benefit Trust An Employee Benefit Trust was established in February 2018 to hold shares awarded to employees as an incentive on a deferred basis. Shares awarded under the scheme are purchased by the Trust in the open market and held until vesting. Awards made under the scheme would normally vest after three years. The Trust was funded with a loan of £446,000 during 2018. During the year, 545,000 shares were purchased and transferred into the EBT, and as at 30 June 2023 the Trust held 557,000 shares (2022: 12,000). Share awards totalling 526,785 were made during the year (2022: nil). No shares vested in the year ended 30 June 2023 (2022: none). 11. Events After the Reporting Period This report for the year ended 30 June 2023 was approved for issue on 28 September 2023. No material events have occurred between the reporting date and the issue date that require disclosure under IAS 10. 114 Hansard Global plc Report and Accounts 2023Other Information Risk Based Solvency Capital A) Risk Based Solvency Capital Position The Group is subject to the Isle of Man Insurance (Group Supervision) Regulations 2019. It has adopted the default consolidated accounts method (“Method 1”) to calculate the Group Solvency Capital Requirement (“SCR”) and Own Funds as required by these regulations. The solvency position at 30 June 2023 has been reported below on this basis. The Group shareholder Risk Based Solvency surplus at 30 June 2023 was £44.6m (30 June 2022: £50.7m;), before allowing for payment of the 2023 final ordinary dividend. All Risk Based Solvency and related data presented in this section is subject to change prior to submission to regulatory authorities. Group Risk Based Solvency capital position Own Funds Solvency Capital Requirement Free assets Solvency ratio (%) All Own Funds are considered Tier 1 capital. The following compares Own Funds as at 30 June 2023 and 30 June 2022: Value of In-Force Risk Margin Net Worth Total 30 June 2023 Total £m 124.9 80.3 44.6 156% 30 June 2022 Total £m 129.1 78.4 50.7 165% 30 June 2023 Own Funds £m 30 June 2022 Own Funds £m 124.4 (24.9) 25.4 124.9 128.5 (26.7) 27.3 129.1 B) Analysis of Movement in Group Solvency Surplus A summary of the movement in Group Solvency surplus from £50.7m at 30 June 2022 to £44.6m at 30 June 2023 is set out in the table below. Risk Based Solvency surplus at 30 June 2022 Operating experience Investment performance Changes in assumptions Impact of dividends paid Foreign exchange Risk Based Solvency surplus at 30 June 2023 £m 50.7 (7.4) 4.6 5.3 (5.4) (3.2) 44.6 The movement in Group Risk Based Solvency surplus the 2023 financial year was the result of dividends paid operating experience, and negative exchange rate movements, offset by changes in assumptions, and positive investment market performance. New business written had a negative £4.1m impact on solvency surplus for the period. I I N N O O T T A A M M R R O O F F N N I I 115 Hansard Global plc Report and Accounts 2023 Other Information C) Analysis of Group Solvency Capital Requirement The analysis of the Group’s Solvency Capital Requirement (“SCR”) by risk type is as follows: Split of the Groups Solvency Capital Requirement* Risks Market Equity Currency Insurance Lapse Expense Default Operational 30 June 2023 % of SCR 30 June 2022 % of SCR 44% 14% 50% 17% 2% 18% 43% 11% 50% 20% 1% 19% * Figures are the capital requirements prior to diversification benefits expressed as a percentage of the final diversified SCR. D) Reconciliation of IFRS Equity to Group Risk Based Solvency Shareholder Own Funds IFRS shareholders’ equity Elimination of DOC Elimination of DIR Value of In-Force Liability valuation differences* Impact of risk margin Other** Risk Based Solvency Shareholder Own Funds 30 June 2023 £m 30 June 2022 £m 21.8 (117.8) 144.8 124.4 (3.5) (24.9) (19.9) 124.9 22.2 (122.5) 145.1 128.5 (4.1) (26.7) (13.4) 129.1 * Liability valuation differences relate to additional provisions made for risk-based capital purposes, notably for contingent liabilities. ** Other is related to Intangible Assets not recognised on the solvency balance sheet. E) Sensitivty Analysis The sensitivity of the Own Funds of the Group and of the Group’s life insurance subsidiaries to significant changes in market conditions is as follows: 30 June 2023 Group £m 124.9 (8.6) (0.8) (7.4) (5.3) (11.5) 30 June 2022 Group £m 129.1 (8.0) (1.2) (8.4) (6.0) (12.0) Own Funds Impact of: 10% instantaneous fall in equity markets 100 basis points decrease in interest rates 10% increase in expenses 1% increase in expense inflation 10% strengthening of sterling 116 Hansard Global plc Report and Accounts 2023 Glossary Annualised Premium Equivalent (“APE”) Earnings Per Share (“EPS”) An industry measure of insurance new business sales. It is calculated as the sum of regular premiums and 10% of single premiums written in the year. Assets Under Administration (“AUA”) A measure of the total assets that the Group administers on behalf of contract holders, who have selected an external third party investment manager. EPS is a commonly used financial metric which can be used to measure the profitability and strength of a company over time. EPS is calculated by dividing profit by the number of ordinary shares. Basic EPS uses the weighted average number of ordinary shares outstanding during the year. Diluted EPS adjusts the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares, for example share awards and share options awarded to employees. Compensation Credit (“CC”) Economic Assumptions The Group’s prime indicator of calculating new business production, weighted where appropriate. This indicates the relative value of each piece of new business and is used, therefore, in the calculation of commission payable. Corporate Governance Code (“the Code”) The UK Corporate Governance Code sets out guidance in the form of principles and provisions on how companies should be directed and controlled to follow good governance practice. The Financial Reporting Council requires companies listed in the UK to disclose how they have applied principles of the Code and whether they have complied with its provisions throughout the accounting year. Where the provisions have not been complied with, companies must provide an explanation for this. Covered Business The in-force business of the Group, including all contracts issued by the Group’s life insurance subsidiaries and subsidiaries providing administration, distribution and other services, as at the valuation date. It excludes the value of any future new business that the Group may write after the valuation date. Deferred Origination Costs (“DOC”) The method of accounting whereby origination costs of long- term business are deferred in the balance sheet as an asset and amortised over the life of those contracts. This leads to a smoothed recognition of up front expenses instead of the full cost in the year of sale. Deferred Income (“DIR”) The method of accounting whereby front end fees that relate to services to be provided in future periods are deferred in the balance sheet as a liability and amortised over the life of those contracts. This leads to a smoothed recognition of up front income instead of the full income in the year of sale. Discounting The reduction to present value at a given date of a future cash transaction at an assumed rate, using a discount factor reflecting the time value of money. Assumptions in relation to future interest rates, investment returns, inflation and tax. Enterprise Risk Management (“ERM”) Programme. The Framework of governance, risk management and internal control arrangements implemented by the Group to promote identification, monitoring and management of existing and emerging risks. Group Hansard Global plc and its subsidiaries. Growth Investment Spend Costs we incur investing in the future of our business, including technology to support our growth. Independent Financial Advisors (“IFAs”) A person or organisation authorised to give advice on financial matters and to sell the products of financial service providers. Outside the UK IFAs may be referred to by other names. In-force Long-term business which has been written before the period end and which has not terminated before the period end. International Financial Reporting Standards (“IFRS”) International Financial Reporting Standards are accounting standards issued by the International Accounting Standards Board (“IASB”). The Group’s consolidated financial statements are required to be prepared in accordance with IFRS as adopted by the United Kingdom to allow comparable reporting between companies. IFRS Equity Per Share Total IFRS equity divided by the diluted number of issued shares at the end of the period. I I N N O O T T A A M M R R O O F F N N I I 117 Hansard Global plc Report and Accounts 2023 Key Performance Indicators (“KPI”) Present Value of New Business Premiums (“PVNBP”) This is one of a number of measures by reference to which the development, performance or position of the business can be measured effectively. Maintenance Expenses Expenses related to the servicing of the in-force book of business (including investment and termination expenses and a share of overheads). The industry measure of insurance new business sales under the European Embedded Value methodology. It is calculated as 100% of single premiums plus the expected present value of new regular premiums. Regular Premium A regular premium contract (as opposed to a single premium contract), is one where the contract holder agrees at inception to make regular payments throughout the term of the contract. Net Worth The market value of the shareholders’ funds, determined on an IFRS basis, adjusted to exclude certain assets such as the deferred origination costs and liabilities such as deferred income and to add back any non-admissible assets. This has been adjusted for statutory reserves on the “Own Funds” basis. Risk Based Solvency Solvency calculated according to the Isle of Man Insurance (Long-term business Valuation and Solvency) Regulations 2018. A solvency regime designed to be capable of a positive Solvency II equivalence assessment. New Business Contribution (“NBC”) Risk Discount Rate The expected present value of all future cash flows attributable to shareholders from new business. NBC is calculated after the effect of any frictional costs. Unless otherwise stated, it is also quoted net of tax. It is calculated at point of sale. NBC is shown after allowing for the cost of required capital, calculated on the same basis as in-force business. New Business Margin (“NBM”) NBC expressed as a percentage of PVNBP. This measures whether new business written is adding value or eroding value. It is a measure of profitability (not profit), comparing the expected profit (or losses) with the value of expected premiums. New Business Strain (“NBS”) Costs involved in acquiring new business (such as commission payments to intermediaries, expenses and reserves) affecting the insurance company’s financial position at that point and where all of the income from that new business (including premiums and investment income) has not yet been received and will not be received until a point in the future. To begin with, therefore, a strain may be created where cash outflows exceed inflows. The present value of a future cash amount depends on its currency and the time until it will become available. The present value is determined using a discount rate that reflects currency and timing. Discount rates are set based on swap rates for the relevant currency determined at year-long intervals for amounts in GBP, EUR, USD and JPY up to year 30, and the year 30 rate thereafter. This covers over 95% of the future expected cash amounts by funds under management: other currencies are assumed to be subject to the GBP rate. Year 1 rates are used to unwind the existing business and are shown separately in the disclosures. Single Premium A single premium contract (as opposed to a regular premium contract (see above)), involves the payment of one premium at inception with no obligation for the contract holder to make subsequent additional payments. Solvency II The EU-wide regulatory regime which aims to more closely align solvency capital to an insurer’s risk profile. It came into force on 1 January 2016. Origination Costs Unit-linked Policy Expenses related to the procurement and processing of new business written including a share of overheads. Sometimes known as acquisition costs. A policy where the benefits are determined by reference to the investment performance of a specified pool of assets referred to as the unit-linked fund. Own Funds Value of In-Force (“VIF”) Those funds as defined under Solvency II, comprising Basic Own Funds and Ancillary Own Funds. Basic Own Funds consist of the excess of assets over liabilities as valued in accordance with Solvency II rules. Ancillary Own Funds consist of items other than Basic Own Funds which can be called up to absorb losses such as unpaid share capital or letters of credit and guarantees. The Group does not have any such Ancillary Own Funds. The present value of expected future shareholder profits less the present value cost of holding capital required to support the in- force business. 118 Hansard Global plc Report and Accounts 2023Financial Calendar Financial Calendar for the financial year ending 30 June 2024 Annual General Meeting Payment date for final dividend Publication of half-yearly results Declaration of interim dividend Ex-dividend date for interim dividend Record date for interim dividend Payment of interim dividend Announcement of results for the year ended 30 June 2024 Declaration of final dividend Ex-dividend date for final dividend Record date for final dividend Annual General Meeting Payment date for final dividend 8 November 2023 16 November 2023 7 March 2024 7 March 2024 14 March 2024 15 March 2024 25 April 2024 26 September 2024 26 September 2024 3 October 2024 4 October 2024 6 November 2024 14 November 2024 I I N N O O T T A A M M R R O O F F N N I I 119 Hansard Global plc Report and Accounts 2023 Contacts and Advisors Registered Office 55 Athol Street Douglas Isle of Man IM99 1QL Tel: +44 (0)1624 688000 Fax: +44 (0)1624 688008 www.hansard.com President Dr Leonard S Polonsky, CBE Leonard.Polonsky@hansard.com Non-executive chair Philip Kay Philip.Kay@hansard.com Financial Advisor Rothschild & Co. New Court St. Swithin’s Lane London EC4N 8AL Tel: +44 (0)20 780 1966 Independent Auditor KPMG Audit LLC Heritage Court 41 Athol Street Douglas Isle of Man IM1 1LA Tel: +44 (0)1624 681000 Media Enquiries Camarco 107 Cheapside London EC2V 6DN Tel: +44 (0)20 3757 4980 Broker Panmure Gordon (UK) Limited 40 Gracechurch Street London EC3V 0BT Tel. +44 (0)20 7886 2500 Registrar Link Market Services (Isle of Man) Limited PO Box 227 Peveril Buildings Peveril Square Douglas Isle of Man IM99 1RZ Tel (UK): 0871 664 0300* Tel: +44 (0)20 8639 3399 UK Transfer Agent Link Market Services Trustees Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Tel (UK): 0871 664 0300* Tel: +44 (0)20 8639 3399 *NB: 0871 Number – calls cost 12p per minute plus network extras. If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales. 120 Hansard Global plc Report and Accounts 2023 I N O T A M R O F N I 121 Hansard Global plc Report and Accounts 2023Hansard Global plc 55 Athol Street Douglas Isle of Man IM99 1QL British Isles Tel: +44 (0)1624 688000 hansard.com hansard.com 

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