Appendix 4E
Hearts and Minds Investments Limited (HM1)
ABN 61 628 753 220
Financial Report
Results for Announcement to the Market for the Year Ended 30 June 2023
Total Net Investment Income
Profit/(Loss) from ordinary activities after tax
Other Comprehensive Income net of tax
Total Comprehensive Income net of tax
Net Tangible Assets (NTA) Per Ordinary Share
Pre-tax NTA per ordinary share
Net tax benefit/(liability) per ordinary share
Post-tax NTA per ordinary share
Dividends
Change
30 Jun 2023
30 Jun 2022
147%
135%
124%
129%
$’000
57,581
32,726
30,227
62,954
$’000
(122,588)
(94,837)
(124,752)
(219,589)
30 Jun 2023
$2.90
30 Jun 2022
$2.58
$0.05
$2.95
$0.23
$2.81
In April 2023 HM1 paid its third annual dividend to shareholders. A fully franked dividend of 13.5 cents per
ordinary share was paid on 12 April 2023. The Board maintains a policy of paying fully franked dividends
to shareholders subject to sufficient cash reserves, available franking credits and prudent business practice.
Following shareholder feedback we have modified the dividend policy to increase the frequency of dividend
payments to twice yearly. The half-yearly dividend will be paid in April and October of each year. The first
half-yearly fully franked dividend of 7 cents per share will be paid in October 2023.
_____________________________________________
Hearts and Minds Investments Limited ACN 628 753 220
A: 12.04A, Chifley Tower, 2 Chifley Square, Sydney NSW 2000 | W: HM1.com.au | E: ir@hm1.com.au | P: 1300 737 760 or +61 2 9290 9600
Appendix 4E
The Dividend Reinvestment Plan (DRP) will be in operation and participating shareholders can reinvest
their cash dividend in new HM1 shares at the DRP issue price. The DRP issue price will be based on the
market price of shares issued or acquired under the on market acquisition provisions of the DRP.
Dividend per ordinary share
7.0
100%
Cents per
Ordinary share
Franking
%
Dividend dates:
Ex-dividend date:
Record date:
DRP election date:
Payment date:
20 September 2023
21 September 2023
25 September 2023
19 October 2023
Brief Explanation of Results:
For the year ended 30 June 2023, the Company recorded a total comprehensive income after tax of $63.0
million (2022: total comprehensive loss after tax of $219.6 million). The result is driven by the investment
portfolio which increased on a pre-tax basis by 15.1% for the year ended 30 June 2023. The investment
performance benefited from a strong recovery in the market values of the Core Portfolio, partially offset by
net realised losses primarily from the previous year’s Conference Portfolio.
The net asset value of the Company increased 5.4% over the year from $641.1 million on 30 June 2022 to
$675.5 million as of 30 June 2023. Since the inception of the Company in November 2018 HM1 has
generated a compound annual pre-tax investment return of 8.8%. Further details of the performance of the
investment portfolio and the Company can be found in the Investment Committee Report.
In line with its philanthropic objective, HM1 provides financial support to leading Australian medical research
organisations to help the development of new medicines and treatments and drive a new generation of
medical research in Australia. HM1 and its participating fund managers forego any investment fees and
instead donate an amount equivalent to 1.5% of net tangible assets per annum to designated medical
research organisations. During the year ended 30 June 2023, HM1 paid $10.2 million to its designated
medical research organisations and provided for a further $5.7 million, bringing the total funding to medical
research to $49.8 million since inception. Further details on the results are included in the Annual Report.
This report is based on the Annual Report which has been audited by Pitcher Partners. The audit report is
included in the Annual Report which accompanies this Appendix 4E. All the documents comprise the
information required by Listing Rule 4.3A.
Annual General Meeting
HM1 advises that its Annual General Meeting will be held on or around Thursday, 30 November 2023. The
time and other details relating to the meeting will be advised in the Notice of Meeting to be sent to all
shareholders and released to ASX immediately after dispatch. In accordance with the ASX Listing Rules,
valid nominations for the position of director are required to be lodged at the registered office of the
Company by 5:00 pm (AEDT) on Monday, 2 October 2023.
_____________________________________________
Hearts and Minds Investments Limited ACN 628 753 220
A: 12.04A, Chifley Tower, 2 Chifley Square, Sydney NSW 2000 | W: HM1.com.au | E: ir@hm1.com.au | P: 1300 737 760 or +61 2 9290 9600
Hearts and Minds
Investments Limited
Annual
Report
For the year ended
30 June 2023
ACN 628 753 220
Hearts and Minds Investments Limited
For the year ended 30 June 2023
Contents
Corporate Directory
Chairman and Chief Executive Officer’s Letter
Investment Committee Report
Medical Research Report
Directors’ Report to Shareholders
Auditor’s Independence Declaration
Financial Statements
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Review Report to the Shareholders
ASX Additional Information
1
3
5
13
18
31
32
33
34
35
36
61
62
66
Corporate Directory
Directors
(Pro bono)
Company Secretary
(Pro bono)
Investment Committee
(Pro bono)
Conference Fund Manager
Selection Committee
(Pro bono)
Core Fund Managers
(Pro bono)
2022 Conference Fund Managers
(Pro bono)
Registered Office
Auditor
Administrator
Hearts and Minds Investments Limited
ACN 628 753 220
Corporate Directory
Chairman and Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Chair
Perpetual
Regal Funds Management
Samuel Terry Asset Management
Tribeca Investment Partners
WaveStone Capital
Christopher Cuffe AO
Lorraine Berends
Guy Fowler
Matthew Grounds AM
Michael Traill AM
Gary Weiss AM
Geoffrey Wilson AO
David Wright
Tom Bloomfield
Lorraine Berends
David Wright
Christopher Cuffe AO
Matthew Grounds AM
Brett Paton
Paul Rayson
David Wright
Gary Weiss AM
Michael Walsh
Charlie Lanchester
Caledonia (Private) Investments
Cooper Investors
Magellan Asset Management
Munro Partners
Regal Funds Management
TDM Growth Partners
Tribeca Investment Partners
Auscap Asset Management
Claremont Global
Eminence Capital
FACT Capital
Firetrail Investments
Munro Partners
Boardroom Pty Limited
Level 8, 210 George Street
Sydney NSW 2000
Pitcher Partners
Level 16, Tower 2 Darling Park
201 Sussex Street, NSW 2000
Telephone: (02) 9221 2099
Citco Fund Services (Australia) Pty Limited
Level 22, 45 Clarence Street
Sydney NSW 2000
Telephone: (02) 9005 0400
1
Hearts and Minds Investments Limited
ACN 628 753 220
Corporate Directory (continued)
Share Registrar
Stock Exchange
Boardroom Pty Limited
Level 8, 210 George Street
Sydney NSW 2000
Telephone: (02) 9290 9600
Australian Securities Exchange
The home exchange is Sydney
ASX code: HM1 Ordinary Shares
2
Hearts and Minds Investments Limited
Chairman and Chief Executive Officer’s Letter
For the year ended 30 June 2023
Chairman and Chief Executive Officer’s Letter
Dear Shareholders,
On behalf of the Board and management we would like to thank you for your ongoing support of Hearts and Minds
Investments Limited (hereafter referred to as ‘HM1’ or the ‘Company’) and we are pleased to share the Annual Report
for the year ended 30 June 2023.
HM1 is a listed investment company that was established in 2018 with the combined objective of providing a
concentrated securities portfolio of the highest conviction ideas from respected fund managers, whilst also supporting
Australian medical research institutes. It was born out of the investment and philanthropic vision of the Sohn Hearts &
Minds Investment Leaders Conference.
We are pleased to report that, following the changes we made to the management of our investment portfolio over the
last year, investment performance is beginning to improve. These changes included:
We refined the selection process for Conference Fund Managers to provide greater diversification of fund manager
style and sector exposure. We also implemented a stock risk filter to avoid an over concentration of single risk
factors. These changes were implemented for the current Conference Portfolio.
In November 2022, we appointed two new Core Fund Managers, Munro Partners and Tribeca Investment Partners
to replace Paradice Investment Management at the end of their mandate term. Munro Partners is an investment
manager with a core focus on global growth equities. Munro Partners’ Founder and Chief Investment Officer, Nick
Griffin, has been a Conference Fund Manager to HM1 over the last 4 years and has achieved excellent returns for
HM1 in each year. Tribeca Investment Partners manages a suite of specialist strategies across equities, credit,
global natural resources and opportunistic mandates. Jun Bei Liu is the Portfolio Manager of Tribeca’s Alpha Plus
Fund. Since taking over the Alpha Plus Fund, she has doubled funds under management to over $1bn, making it
one of the largest long-short equity funds in the Australian market. Jun Bei has been a Conference Fund Manager
for 3 out of the last 4 years and has also achieved excellent returns in each year. Munro Partners’ and Tribeca
Investment Partners’ mandate as a Core Fund Manager to HM1 will be for an initial term of 3 years.
Also in November 2022, we amended the portfolio investment guidelines for the Core Portfolio to provide additional
flexibility to access the expertise, style and investment performance of our Core Fund Managers. The change
permits HM1 to gain exposure to the highest conviction strategies of our Core Fund Managers, whether via listed
or unlisted securities. The change is expected to provide both performance and diversification benefits whilst
retaining the essence of a high conviction portfolio. An investment in unlisted securities will be by exception only,
and only where such investment provides HM1 with a better method to gain exposure to a particular Core Fund
Manager’s expertise, style and investment performance. For clarity, HM1’s portfolio exposure will remain
predominantly listed equity exposures.
Following these changes, in January 2023 HM1 invested in two unlisted securities, Guzman Y Gomez Ltd and Rokt
Ltd, that are high conviction investments of TDM Growth Partners, one of our Core Fund Managers. HM1 also made
an investment in an unlisted managed fund operated by another Core Fund Manager, Regal Funds Management. In
both these cases, HM1 determined that the investments are appropriate and provide HM1 with a better form of exposure
to the expertise, style and investment performance of those Core Fund Managers. On 30 June 2023, these investments
represent in total 8.4% of HM1’s investment portfolio.
In March 2023, we announced the appointment of Charlie Lanchester as the new Chief Investment Officer for HM1.
Charlie is an accomplished fund manager and investor with over 30 years active funds management experience at
leading investment organisations. We are delighted to have someone of Charlie’s experience and calibre to select and
manage HM1’s suite of Core and Conference Fund Managers and oversee HM1’s investment portfolio.
Over the last year the Board has been very focussed on, and dissatisfied with, the discount at which the HM1 share
price is trading to its net tangible assets (NTA). In light of the share price discount, and following shareholder feedback,
the Board decided to modify the dividend policy to increase the frequency of dividend payments to twice yearly. The
half-yearly dividend will be paid in April and October of each year.
We believe that the changes we have made to the management of HM1’s investment portfolio will lead to a sustained
improvement in investment performance. We further believe that this, combined with our modified dividend policy and
improved insight and disclosure of our investment portfolio, will narrow the share price discount to NTA over time.
3
Hearts and Minds Investments Limited
Chairman and Chief Executive Officer’s Letter (continued)
For the year ended 30 June 2023
The HM1 investment portfolio increased on a pre-tax basis by 15.1% for the year ended 30 June 2023, recovering
some of the losses of the prior year. Since the inception of the Company in November 2018, HM1 has generated a
compound pre-tax investment return of 8.8% per annum. For the year ended 30 June 2023, HM1 recorded a total
comprehensive income after tax of $63.0 million (2022: total comprehensive loss after tax of $219.6 million). The result
was driven by a strong recovery in the market value of the Core Portfolio generating unrealised gains, partially offset
by realised losses from the previous year’s Conference Portfolio. Further details of the performance of the investment
portfolio can be found in the Investment Committee Report.
In April 2023, HM1 paid its third annual dividend to shareholders. A fully franked dividend of 13.5 cents per ordinary
share was paid on 13 April 2023. Our dividend reinvestment plan was operational and many shareholders reinvested
their dividend in HM1 shares at the prevailing market price. The Board aims to maintain a policy of paying fully franked
dividends to shareholders subject to sufficient cash reserves, available franking credits and prudent business practice.
As noted above we have modified the dividend policy to increase the frequency of dividend payments to twice yearly.
The first half-yearly dividend of 7 cents per share will be paid in October 2023.
In line with its philanthropic objective, HM1 provides financial contributions equivalent to 1.5% of NTA per annum to
leading Australian medical research organisations, to fund the development of new medicines and treatments and to
drive a new generation of medical research in Australia. This is effectively funded by HM1’s participating fund
managers, its Board of Directors and Committees and many of our service providers all working on a pro bono basis.
We sincerely thank everyone for their ongoing involvement and generosity.
During the year ended 30 June 2023, HM1 paid $10.2 million to its designated medical research organisations and
made provision for a further $5.7 million. These donated monies will be used by the medical research organisations to
fund important research into the prevention and treatment of chronic diseases and mental health disorders.
The current designated medical research organisations are Baker Heart and Diabetes Institute, University of Sydney
Brain and Mind Centre, Cerebral Palsy Alliance Research Foundation, The Florey, Kids Critical Care Research at The
Children’s Hospital at Westmead, Pain Management Research Institute, RPA Green Light Institute, Victor Chang
Cardiac Research Institute and WEHI. More information on the wonderful work of these organisations can be found in
the Medical Research Report.
Finally, we would also like to thank you, our shareholders, for supporting the advancement of medical research in
Australia through your investment in HM1.
Christopher Cuffe AO
Chairman
Paul Rayson
Chief Executive Officer
Sydney
29 August 2023
4
Hearts and Minds Investments Limited
Investment Committee Report
For the year ended 30 June 2023
Investment Committee Report
The Investment Committee of HM1, in conjunction with the Chief Investment Officer (CIO) Charlie Lanchester, is
responsible for implementing the Company’s investment strategy, including the selection of fund managers, managing
the investment portfolio and reviewing fund manager performance. The Company’s Investment Committee consists of
Lorraine Berends (Chair), David Wright, Christopher Cuffe, Matthew Grounds, Brett Paton and Paul Rayson. The
Investment Committee’s experience and qualifications are provided in the Directors’ Report.
HM1 Investment Strategy
HM1 invests in a concentrated portfolio of Australian and international securities based on the highest conviction ideas
from two groups of fund managers.
65% of the investment portfolio is held in up to 20 securities based on the highest conviction ideas of our Core
Fund Managers. The Core Fund Managers together with the CIO regularly monitor their recommendations.
35% of the investment portfolio is held in 10 to 15 securities based on the annual investment recommendations
of our Conference Fund Managers. HM1 generally allocates an equal weight investment to each of these
recommendations. These securities are expected to be held in the investment portfolio for a period of up to
12 months. After this period the securities are expected to be sold to invest in the recommendations of the
selected Conference Fund Managers who present at the next conference.
The Board’s view is that the investment strategy offers investors an opportunity to:
gain exposure to the highest conviction ideas, investment approach and expertise of each fund manager, a
number of whom are not otherwise readily accessible to retail investors;
benefit from having a portfolio that is not concentrated on the philosophy or investment style of just one fund
manager; and
access a concentrated portfolio of Australian and international securities which are expected to provide
attractive shareholder returns over the medium term (being five years or more).
HM1 aims to be fully invested subject to an appropriate cash buffer to meet tax liabilities, dividend payments, donation
payments and general expenses.
Company Performance
As a listed investment company, we use three key measures to evaluate the performance of HM1:
1.
Investment portfolio performance, which measures the growth of the investment portfolio on a pre-tax basis
and after the payment of all expenses, including the donation payments and provisions. An investment
benchmark, the MSCI World Index (AUD), is also measured before taxes. Our investment performance
compared to this benchmark is reported to shareholders on a monthly basis;
2. Net tangible asset (NTA) growth, which is a post-tax measure and represents the change in the value of the
Company’s assets less liabilities. The post-tax NTA of the Company is essentially the realisable value of the
Company at a point in time. The pre- and post-tax NTA per share of the Company is reported to shareholders
on a weekly basis; and
3. Total shareholder return, which measures the total return to shareholders from share price growth and
dividends paid.
5
Hearts and Minds Investments Limited
Investment Committee Report (continued)
For the year ended 30 June 2023
Each of these are set out below.
1.
Investment Portfolio Performance
Performance to 30 June 2023
1 year
3 year
Since
inception1
HM1 Investment Portfolio Performance
MSCI World Index (AUD)
1. Inception 14 November 2018
15.1%
20.8%
-0.7% p.a.
8.8% p.a.
11.7% p.a.
10.4% p.a.
The HM1 investment portfolio increased on a pre-tax basis by 15.1% for the year ended 30 June 2023 recovering some
of the losses of the prior year. Since the inception of the Company in November 2018, HM1 has generated a compound
annual pre-tax investment return of 8.8%. The current year’s investment performance was driven by a strong recovery
in the market value of the Core Portfolio, partially offset by realised losses from the previous year’s Conference
Portfolio.
The Core Portfolio recovered much of the unrealised losses recorded in 2022 driven by large share price gains in a
number of our Core Portfolio holdings, namely Zillow Group, Microsoft, Amazon, TSMC and Liberty Media Formula
One. We also sold or reduced a number of Core Portfolio holdings recording substantial realised gains in Mineral
Resources, Danaher, Alphabet and Microsoft. The major detractors to performance in the Core Portfolio were Just Eat
Takeaway, Spotify and Opthea. We appointed two new Core Fund Managers during the year, Munro Partners, and
Tribeca Investment Partners. We have invested in the recommendations of the new Core Fund Managers and we are
satisfied with the early progress.
As reported in the last Annual Report, the previous year’s Conference Portfolio performed very poorly and was sold
during the current financial year recording a significant loss. We have since made a number of changes to the selection
criteria for fund managers and the risk parameters for the Conference Portfolio construction. The current Conference
Portfolio is proving more resilient albeit has only recorded slight gains over the first seven months to 30 June 2023.
Major contributors to the Conference Portfolio to date are ASML, New Relic, Champion Iron and Carsales.
6
Hearts and Minds Investments Limited
Investment Committee Report (continued)
For the year ended 30 June 2023
2. NTA Growth
HM1’s post-tax NTA increased 5.4% over the year from $641.1 million on 30 June 2022 to $675.5 million as of 30 June
2023. The following chart shows the components of the change in post-tax NTA over this period. The major increase
in post-tax NTA came from unrealised gains from the investment portfolio, partially offset by realised losses on the
Conference Portfolio and the tax benefit of the total net losses. HM1 also paid a fully franked dividend of 13.5 cents per
share amounting to a total dividend payment of $30.8 million. An amount of $3.8 million was reinvested by shareholders
in additional HM1 shares via the dividend reinvestment plan. The dividend reinvestment was satisfied by the acquisition
of 645,964 HM1 shares on market and the issue of 951,571 new HM1 shares. On a per share basis, HM1’s post-tax
NTA per share has increased from $2.81 on 30 June 2022 to $2.95 on 30 June 2023. The pre-tax NTA per share on
30 June 2023 was $2.90.
HM1 NTA Performance
3. Total Shareholder Return
Total shareholder return measures the change in the HM1 share price plus dividends paid. HM1’s share price has
decreased from $2.50 at listing on 14 November 2018 to $2.26 on 30 June 2023. HM1 has paid three fully franked
dividends amounting to a total of 39 cents per share to shareholders. The notional value of a $10,000 investment in
HM1 shares from the date of listing, assuming the reinvestment of dividends would be $10,545 on 30 June 2023, an
increase of 5.5%. The HM1 share price of $2.26 on 30 June 2022 represented a 22% discount to the pre-tax NTA per
share of HM1 of $2.90.
Set out on the next page is a table of the investment portfolio holdings of HM1 on 30 June 2023 ranked by the market
value of HM1’s holdings.
7
Investments at Fair Value on 30 June 2023
Hearts and Minds Investments Limited
Investment Committee Report (continued)
For the year ended 30 June 2023
Company Name
Liberty Formula One
Zillow Group, Inc. - C
Mastercard Inc.
Microsoft Corporation
Intercontinental Exchange Inc.
Block, Inc.
ASML Holding N.V.
New Relic Inc.
Carsales.com Ltd
BHP Group Ltd
Rokt Ltd
Champion Iron Ltd
Guzman Y Gomez Ltd
Nike Inc.
Transurban Group
Eurofins Scientific
Darling Ingredients Inc.
AMP Ltd
Stock
Exchange
Nasdaq
Nasdaq
NYSE
Nasdaq
NYSE
NYSE
AMS
NYSE
ASX
ASX
Unlisted
ASX
Unlisted
NYSE
ASX
PAR
NYSE
ASX
Regal Australia Long/Short Equity Fund
Unlisted
Brookfield Corporation
Ramsay Health Care
FDJ
Amazon.com Inc.
Keywords Studio
NEXTDC
Constellation Energy Corporation
Opthea Ltd
Taiwan Semiconductor Manufacturing Co. Ltd
CTG Duty Free
Just Eat Takeaway.com N.V.
Domino Pizza Enterprises Ltd
Brookfield Asset Management Ltd
Cash and Cash Equivalents
Total Equity Securities
TSX
ASX
PAR
Nasdaq
LSE
ASX
Nasdaq
ASX
NYSE
HKE
AMS
ASX
TSX
8
Fair Value
$53,658,463
$38,464,286
$38,362,095
$38,326,080
$35,634,454
$28,470,063
$21,706,684
$21,603,842
$21,564,341
$21,145,300
$20,912,365
$20,064,000
$20,000,000
$18,218,337
$18,097,500
$17,137,476
$16,272,959
$15,820,000
$15,465,021
$15,161,241
$12,946,700
$12,581,721
$12,519,568
$12,042,269
$11,322,000
$10,303,496
$8,859,783
$8,480,672
$8,135,354
$6,893,100
$5,339,450
$3,674,731
$59,246,589
% of
Portfolio
8.0%
5.8%
5.7%
5.7%
5.3%
4.3%
3.2%
3.2%
3.2%
3.2%
3.1%
3.0%
3.0%
2.7%
2.7%
2.6%
2.4%
2.4%
2.3%
2.3%
1.9%
1.9%
1.9%
1.8%
1.7%
1.5%
1.3%
1.3%
1.2%
1.0%
0.9%
0.5%
9.0%
$668,429,940
100.00%
Hearts and Minds Investments Limited
Investment Committee Report (continued)
For the year ended 30 June 2023
Risk Analysis
The following information summarises the risk metrics of the security holdings in the HM1 investment portfolio on
30 June 2023 based on analysis prepared by Zenith Investment Partners. The analysis is a snapshot of the investment
portfolio structure and biases at that point in time and does not reflect any future biases within the portfolio.
Industry Exposure Biases
The investment portfolio is concentrated in a relatively small number of securities and sector exposure is clearly
weighted to certain industry sectors. Compared to the broad MSCI World Index ex Australia, the HM1 investment
portfolio exhibits positive biases to the IT and Internet Software and Services, Media, Real Estate Management,
Semiconductors, Steel, Diversified Metals and Gold sectors. The investment portfolio has negative (underweight)
biases to the Financial, Computers and Electronics, Food and Beverage, Retail, Health Care and Transportation
sectors. The chart below shows the differences in sector exposure of the investment portfolio compared to the broad
MSCI World Index ex Australia on 30 June 2023. Note that industry sectors where there is not a major difference in
exposure are not shown in the chart.
Active Style Biases
The chart below illustrates the style tilts exhibited in the HM1 investment portfolio based on the securities in the portfolio
on 30 June 2023.
9
Hearts and Minds Investments Limited
Investment Committee Report (continued)
For the year ended 30 June 2023
Active Style Biases (continued)
Consistent with HM1’s capital growth objective, the investment portfolio exhibits a strong factor bias to securities
categorised as growth securities with consequent higher volatility. Other significant style biases include a negative bias
to size (meaning a smaller companies bias than the benchmark), dividend yielding securities and value categorised
securities. Despite strong liquidity in the portfolio holdings, the negative size factor indicates a bias to mid capitalisation
securities compared to the comparative benchmark, the MSCI World Index (AUD). Eleven of the companies in the
investment portfolio have a market capitalisation of over US$50 billion. The smallest security is capitalised at A$270
million.
Risk Metrics
The following table provides a number of risk measures associated with the blend of securities that form the HM1
investment portfolio on 30 June 2023 compared to the MSCI World Index (AUD). As these risk measures are taken at
a specific point in time, these factors are not predictive of the risk characteristics of the HM1 investment portfolio going
forward. The portfolio displays a very high active share measure which indicates it is a concentrated high conviction
portfolio, is actively managed and does not closely track either the composition or performance of the MSCI World
Index (AUD). The investment portfolio carries a commensurate level of risk which is indicated by the low Sharpe ratio
and downside capture metrics.
HM1 Portfolio Risk Metrics (current portfolio since inception to 30 June 2023)
Portfolio Beta
Tracking Error
Active Share
Portfolio Volatility
Correlation (with Benchmark)
Sharpe Ratio
Upside Capture
Downside Capture
1.34
22.7%
93.5%
27.7%
0.59
-0.14
89.7%
176.4%
Lorraine Berends
Chair
Charlie Lanchester
Chief Investment Officer
10
Hearts and Minds Investments Limited
Investment Committee Report (continued)
For the year ended 30 June 2023
Our Fund Managers
We sincerely thank our participating fund managers that provide their time, expertise, and highest conviction investment
ideas on a pro bono basis. The notional value to HM1 of the investment management fees and performance fees
foregone during the financial year ended 30 June 2023 is equivalent to $9.7m.
Core Fund Managers
Seven Core Fund Managers each provide their highest conviction investment ideas which are reviewed regularly.
These securities represent 65% of the total investment portfolio.
Caledonia (Private) Investments Pty Limited is a global investment management firm with
offices in Sydney and New York. With over 25 years’ investment experience, Caledonia’s
goal is to achieve high absolute returns for their clients over a long-term time horizon. The
firm manages a long-short equity strategy with a focus on deep fundamental research and
high conviction long-term investing.
Cooper Investors Pty Limited is a specialist equities fund manager. Cooper Investors
commenced operations in 2001 and manages money for a range of clients, including large
pension and superannuation funds, religious institutions, Australian State Government
agencies, school endowments, charities, high net worth families and retail clients. Cooper
Investors is 100% owned by its employees. Cooper Investors seeks to invest in quality
companies with a strong value proposition.
Magellan Asset Management Limited is an Australian-based asset manager that is a
wholly-owned subsidiary of Magellan Financial Group Limited that was formed by Hamish
Douglass and Chris Mackay in Sydney in 2006. Magellan manages investments across its
global equities, global listed infrastructure and Australian equities strategies for retail, high
net worth and institutional investors.
Munro Partners is a global investment manager with a core focus on growth equities.
Established in 2016 by an award-winning investment team with a proven track record of
strong returns, the business has $4 billion in AUM and is owned and controlled by key staff.
Via a proprietary investment process, Munro invests alongside clients to benefit from some
of the key structural changes that occur in our world today. Munro is Australian domiciled,
with its head office in Melbourne.
Regal Partners Limited is an ASX-listed, specialist alternatives investment manager
providing investors with access to a diverse range of strategies covering hedge funds,
private markets and real assets. It was founded in early 2004 and services a wide range
of institutional investors and high net worth individuals. The investment team has extensive
investment experience through many market cycles and a long track record of delivering
superior returns for investors. Regal offers a range of products to suit different investment
objectives.
TDM Growth Partners Pty Limited is a global investment firm with offices in Sydney and
New York. TDM invests in fast growing companies run by passionate management teams.
Their unique and flexible mandate allows them to invest in public and private companies
globally. They operate on long-term time horizons, fully aligned incentives, and a
commitment to help scale businesses they are proud of. TDM has a highly focused
approach to investing, with a portfolio of no more than 15 investments globally.
Tribeca Investment Partners is an Asia Pacific based asset management and advisory firm
with over two decades of experience in partnering with sophisticated clients to provide
innovative solutions beyond the mainstream. Combining deep multi-asset class expertise
across investment management, private wealth management and corporate advisory with
key staff located across the Asia Pacific, Tribeca takes pride in its strong alignment with
clients, speed to market and proven track record.
11
Hearts and Minds Investments Limited
Investment Committee Report (continued)
For the year ended 30 June 2023
Conference Fund Managers
The remaining 35% of the investment portfolio is invested in 10 to 15 recommendations from the fund managers who
present at the annual Sohn Hearts & Minds Investment Leaders Conference. Each year this group of fund managers
will change based on the conference program of speakers and their eligible recommendations. The speakers are invited
onto the program following a rigorous six-month selection process by the HM1 Board, Investment Committee and
Conference Fund Manager Selection Committee. The 2022 Conference Fund Managers are set out below.
Anthony Aboud
Perpetual (AUS)
Bob Desmond
Claremont Global (AUS)
Catherine Allfrey
WaveStone Capital (AUS)
Fred Woollard
Samuel Terry Asset Management (AUS)
James Miller
Firetrail Investments (AUS)
Joyce Meng
FACT Capital (USA)
Jun Bei Liu
Tribeca Investment Partners (AUS)
Nick Griffin
Munro Partners (AUS)
Ricky Sandler
Eminence Capital (USA)
Tim Carleton
Auscap Asset Management (AUS)
Tim Elliott
Regal Funds Management (AUS)
12
Hearts and Minds Investments Limited
Medical Research Report
For the year ended 30 June 2023
Medical Research Organisations
We are proud to support leading Australian medical research organisations. Beneficiaries are nominated by our Core
Fund Managers and Board. This Medical Research Report provides an update on some of the ground-breaking
projects and discoveries underway.
Baker Heart and Diabetes Institute
The Baker Heart and Diabetes Institute is an independent, internationally renowned medical research
facility. It has been at the centre of some of the world’s greatest scientific discoveries and medical
advances since it was established in Melbourne in 1926. But, despite improvements in life expectancy,
heart disease remains one of the leading killers of Australians, and diabetes is the fastest-growing chronic
condition in the country.
The comprehensive range of research undertaken to target these deadly conditions, combined with the
flexibility and innovation to respond to changing health and community needs, is unique and sets the Baker
Institute apart from other health and medical research institutes.
Researchers at the Baker Institute are dedicated to creating a healthier world for today and for future
generations, it’s what drives the scientists, clinicians, public health experts, diabetes educators and
dieticians every day. That dedication is evident in the Baker Institute’s diabetes domain where researchers
are exploring the regeneration of the pancreas. In type 1 diabetes, insulin-producing cells are damaged
or destroyed, researchers are delving into treatments that may be able to reactivate these cells. This could
ultimately be the long sought-after cure for diabetes.
In the cardiovascular domain, teams are using mRNA technology to precisely target the treatment of some
of the most prevalent cardiovascular diseases. Their long-term aim is a vaccine to guard against
atherosclerosis, stopping it in its tracks. Atherosclerosis, the build-up of plaque in the arteries, is the most
common cause of heart attack and stroke.
In 2020, 56,700
Australians had an
acute coronary
event, that’s 155
every day.
Black Dog Institute
As the only medical research institute in Australia to investigate mental health across the lifespan, the
Black Dog Institute aims to create a mentally healthier world for everyone. This is done through
‘translational’ research. Integrating research studies, education programs, digital tools and apps, clinical
services and public resources to discover new solutions, foster connections and create real-world change.
.
Partnerships with people with lived experience, federal, state, and local governments, communities,
schools, corporate Australia and others in the mental health sector enable the organisation to drive
evidence-informed change in mental health where it’s needed most.
Research Developments this year:
Contributed to the World Health Organisation’s first-ever global guidelines for mental health.
Launched the Aboriginal and Torres Strait Islander Lived Experience Portal, which elevates
the voices of Indigenous lived experience.
Released the Youth Depression Report which shows that youth depression has doubled in the
last 14 years.
Launched a report to inform suicide prevention efforts in veterans and made
recommendations to the Royal Commission on Defence and Veteran Suicide.
Held the Summit of Self-Harm, a first time event that brought world-leading researchers,
clinicians and lived experience experts to unpack and explore the challenges and solutions
surrounding self-harm.
Started the Vibe Up study, a first of its kind digital intervention for university students that aims to
reduce distress and improve mental well-being.
Researched healing through art with body mapping, which has been found to help people share
difficult to discuss experiences connected to mental health, trauma and distress.
Launched Sleep Ninja app to assist teens in mastering their sleep.
1 in 5 Australians
will experience a
mental illness
within the year. In
Australia that’s
around 5 million
people. And
roughly 60% of
these people
won’t seek help.
13
Hearts and Minds Investments Limited
Medical Research Report (continued)
For the year ended 30 June 2023
The University of Sydney Brain and Mind Centre
The University of Sydney Brain and Mind Centre (BMC) brings together a network of researchers and
clinicians who partner across borders and disciplines in pursuit of a common goal: to develop better
treatments for conditions of the brain and mind and improve health outcomes now and for future
generations.
The BMC’s multidisciplinary research teams are at the forefront of brain and mind sciences. They work to
find answers to some of the world’s most pressing health concerns across the lifespan, including childhood
development and behaviour disorders, youth mental health and addiction, and ageing and
neurodegeneration such as dementia, multiple sclerosis and Parkinson’s disease.
Within this landscape of neurodegenerative disorders, one particular focus is on Progressive Supranuclear
Palsy (PSP), formally known as Steele Richardson’s disease. PSP is an uncommon brain disorder that
causes serious problems with walking, balance and eye movements, and swallowing. The disorder
worsens over time and can lead to life-threatening complications. There is no cure, treatment focuses on
managing the signs and symptoms and the cause isn’t yet understood.
Dr Eleanor Drummond and Professor Glenda Halliday are working to change this. They are leading a
research project that will aim to identify new potential drug targets and biomarkers of PSP. They will use
cutting-edge protein analysis techniques to map protein changes that occur in the disease and will
particularly focus on identifying proteins that become insoluble as these could have an important role in
driving PSP.
Furthermore, their research will identify proteins that interact with tau – a problematic protein known to
accumulate in the disease. Their objective is to determine if these proteins contribute to the harmful effects
of tau. This research seeks to uncover the central triggers of the disorder in the complex brain
environment. These findings will then inform a comprehensive assessment of the potential of using these
proteins for innovative therapeutic approaches. Ultimately, this work holds the promise of leaving a
profound impact on individuals affected by PSP and their loved ones.
The life
expectancy of
someone
diagnosed with
Progressive
Supranuclear
Palsy is just five to
seven years
following
symptom onset.
Cerebral Palsy Alliance Research Foundation
Cerebral Palsy (CP) is caused by non-progressive damage to the developing brain, before, during or after
birth. It is the most common physical disability in childhood, affecting the movement and speech of 17
million people globally. Cerebral Palsy Alliance (CPA) is a ground-breaking, global centre of expertise for
CP research, advocacy, intervention and assistive technology innovation. The Research Foundation
(CPARF) was established in 2005 to support and fund the prevention, treatment and cure for CP. The
Foundation’s research priorities are informed by people with CP and include early diagnosis and
intervention, epidemiology, regenerative medicine and technology. This ground-breaking research has
seen the rate of CP drop in Australia by 30%.
The Foundation’s technology research priorities are focused on cognition, communication and mobility
solutions to improve inclusion for people with CP.
In 2023, HM1 funding supported the following research:
Testing an implant device to alleviate muscle spasticity, giving easy and instant control to individuals
in strengthening muscles.
Testing the potential to stimulate muscles and give a level of functional control to patients.
Clinic testing of a tiny prototype device injected next to the nerves controlling problematic muscles,
providing an electrical signal to prevent the contraction signal from reaching the muscle.
Research is key to allow the development of a highly desirable medical device with the potential for
people with CP to achieve a better quality of life.
Non-invasive neuro modulation is proving to improve leg, arm and trunk, bladder, bowel and
breathing function after spinal cord injury.
The device may improve motor function in children with CP by improving neural network function to
help initiate movement of their limbs.
This research aims to understand if the new device is a feasible and acceptable intervention for
children with moderate motor impairment. Research being conducted with children 5-12 years.
Our vision is to
enable the
world’s best
cerebral palsy
experts to find
ways to prevent
and treat cerebral
palsy, a condition
affecting more
than 17 million
people worldwide.
14
Hearts and Minds Investments Limited
Medical Research Report (continued)
For the year ended 30 June 2023
The Florey
The Florey is the largest brain research centre in the southern hemisphere, with more than 350 talented
people in our teams of researchers. We are dedicated to finding solutions for the range of neurological
and psychiatric conditions that we research, and we do so with our world-class facilities, collaborations
and expertise. This enables us to effectively translate new discoveries from the lab, directly to the bedside.
Overview of research:
The Florey has been an important participant in the biggest breakthroughs in Alzheimer’s
disease research for four decades, in the form of a new treatment for the condition.
Florey researchers came one step closer to transforming the management of sepsis in
intensive care units in Australia.
The Florey led flagship programs to improve the care of people with epilepsy and stroke
through the Australian Epilepsy Project and the Young Stroke Service.
Our scientists launched LASEREDD Therapeutics, a new biotech spin-out to undertake
next-generation drug discovery to identify new medicines for schizophrenia.
We identified sex-based differences in the drivers of alcohol consumption, indicating the need
to develop more female-specific treatment options for alcohol addiction.
We advanced our understanding of how to better deliver medications to the brain to maximise
their benefits.
Over the last twelve months, the Florey:
Has published more than 830 pieces of research globally and cited over 38,430 times.
Continue to be the experts in more than 20 neurological and psychiatric conditions.
Has disseminated to more than 5 million Australians who are directly affected by the conditions we
Is currently running more than 200 live projects.
research.
Every year over 5
million Australians
are directly
affected by one of
the twenty
illnesses that the
Florey researches.
Kids Critical Care Research at The Children’s Hospital at Westmead
Kids Critical Care Research (KCCR) at The Children’s Hospital at Westmead coordinates and conducts
research to improve short and long-term outcomes in babies and children with life-threatening critical
illness. Their vision is to deliver highly responsive, personalised care that enables positive patient
experiences and best outcomes. KCCR aims to address existing gaps in the evidence base and to build
new knowledge for rapid translation to clinical practice. Progress and key achievements this year:
Data Science and Paediatric Critical Care Trial Design:
o Collaboration with Hospital for Sick Children, Toronto to finalise infrastructure and
demonstrate capability for data capture and analysis for “Big Data in Little People” project.
o Collaboration with School of Public Health (Health and Clinical Analytics), University of Sydney
and international PediRES-Q registry to design an innovative clinical trial to improve outcomes
following paediatric cardiac arrest.
Genomics, Transcriptomics and Metabolomics in Paediatric Critical Illness:
o Collaboration with Charles Sturt University to understand changes in metabolic profile in
children undergoing Fontan cardiac surgery – PhD commenced.
Red Cell and Microvascular Adaptation to Critical illness:
o New multicentre study: Characterisation of transfusion practices and thresholds in paediatric
cardiac surgery (NITRIC study cohort).
Brain and Nervous System health and recovery from Paediatric Critical Illness
o New study: Cross-sectional study of long-term neurodevelopmental childhood outcomes
following cardiac arrest or ECMO care in NSW.
Human Factors and Social Sciences of Paediatric Critical Care:
o Support for PhD in collaboration with Harvard University, Boston and University of Sydney:
Social determinants of health in childhood survivors of ECMO.
More than 12,000
children require
admission to
intensive care in
Australia and New
Zealand every
year for
potentially
life-threatening
conditions.
15
Hearts and Minds Investments Limited
Medical Research Report (continued)
For the year ended 30 June 2023
Pain Management Research Institute
A national consortium, led by Professor Michael Nicholas at the Pain Management Research Institute,
University of Sydney is developing interdisciplinary digital pain education to support the healthcare
workforce and improve the lives of patients with chronic pain.
The purpose of the interdisciplinary digital pain education is to develop a nationally consistent and
integrated approach to the management of people with chronic pain. A patient care priorities framework
was developed to shape the interdisciplinary digital pain education.
At the recent Australian Pain Society (APS) annual conference, the topical session about the
interdisciplinary digital pain education had high engagement from the audience of health care
professionals, researchers, government decision-makers and consumers. The topical session described
the framework of patient pain care priorities, the architecture of the pain management education, and how
patient stories are threaded through the e-learning modules as a vehicle to drive engagement and
resonate with real world clinical experience.
The interdisciplinary digital pain education will be piloted with design experts, health care professionals,
consumer organisation representatives and key stakeholders.
The Pain Foundation acknowledges the generous funding support from HM1 and their Core Fund
Manager, TDM Growth Partners, as well as their keen interest in promoting the pilot trials and eventual
rollout to practitioners nationally.
Chronic pain is
a major and
increasing public
health issue and
affects one in five
people in Australia
with more than
68% of people
living with chronic
pain of working
age.
RPA Green Light Institute
The RPA Green Light Institute was established at Royal Prince Alfred Hospital (RPA Hospital) to facilitate
and coordinate research for emergency departments. The Institute brings together experienced
emergency clinicians from RPA Hospital, the Sydney Local Health District and other research institutes
and teaching hospitals within NSW. While the RPA Green Light Institute remains acutely focused on
emergency presentations and improving the emergency service experienced by patients, they are
currently leading and supporting research projects ranging from improving cardiac arrest and sepsis, injury
and trauma care, management of patients at risk of human trafficking and slavery, as well as studies
looking at improving patient flow, reducing waiting times and enhancing patient experience. Of note, the
Institute is currently supporting important research on:
Mental Health
The RPA Green Light Institute is conducting research into adolescent mental health presentations to the
emergency department pre- and post- COVID-19. The aim is to determine the specific motivators for
children and young adults with mental health needs in order to improve emergency care and understand
the psychosocial triggers for presentation that may help inform future models of emergency department
care and practice.
Sexual Assaults
The RPA Green Light Institute is collaborating with the Sexual Assault Medical Service at RPA Hospital
to gain an understanding of factors associated with acute sexual assault presentations and characteristics
of individuals who attend the Sexual Assault Medical Service within the metropolitan Sydney area. This
research will deepen understanding, improve patient care and management, as well as potentially change
service provision within the Sexual Assault sector.
Artificial Intelligence
The RPA Green Light Institute is collaborating with Macquarie University and the Digital Health
Cooperative Research Centre to evaluate whether Artificial Intelligence for chest radiograph interpretation
increases diagnostic accuracy and improves patient management decision making in simulated
emergency care episodes.
One in five
Australians
present to an
Emergency
Department for
health care each
year.
16
Hearts and Minds Investments Limited
Medical Research Report (continued)
For the year ended 30 June 2023
Victor Chang Cardiac Research Institute
The Victor Chang Cardiac Research Institute is renowned worldwide for the quality of its scientific
discoveries and is dedicated to finding cures for cardiovascular disease through innovative,
collaborative, and cutting-edge medical research. Its 230 scientists and staff are working across the
country to impact clinical patient care, improve health outcomes and save lives.
2022/2023 Highlights
The Institute’s Professor Jason Kovacic was part of a global team that identified the most critical
genes that cause coronary heart disease. The knowledge will allow the Institute’s scientists to
understand the critical genes that cause heart attacks and coronary heart disease, and if they
might be promising drug targets for patients. Another important aspect of this study was that a
gene called PHACTR1 was validated as being among the top two genes for causing coronary
heart disease. Professor Kovacic’s team is spearheading world-leading research into PHACTR1.
Researchers at the Institute have developed a new electrical test that can screen hundreds of
gene mutations to pinpoint the exact mutations that are harmful to the heart for those suffering
from inherited heart disorders. It will make it easier for families to discover if they are carrying
genetic mutations that cause sudden cardiac arrest – a condition that kills nine out of 10 victims.
Those at risk will be able to undertake lifestyle changes and get preventative treatment.
The number of successful heart transplants has increased by 25% at St Vincent’s Hospital in Sydney,
since the introduction of world-first technology pioneered by the Institute and St Vincent’s. Through
this game-changing research, the team developed a special technique, which allows surgeons to
transplant donor hearts that have stopped beating after death (also known as DCD hearts). Research
published in 2022 revealed it has reduced waiting lists in Australia and potentially around the world
and that DCD hearts have similar survival rates to traditional transplants.
One Australian dies
from heart disease
every 28 minutes.
WEHI
WEHI’s medical researchers have been serving the community for 108 years, making transformative
discoveries in cancers, diseases related to ageing, infectious and immune diseases and developmental
disorders. WEHI brings together diverse and creative teams of scientists with the experience and
expertise to solve some of the world’s most complex health problems. A spirit of collaboration is in our
DNA, bringing together the brightest medical researchers from across the globe, remarkable clinicians
focused on the health of the community and the power of philanthropy. A passion for improving and
saving lives drives WEHI forward, even when breakthroughs are decades in the making. Highlights
from the last year include:
Brain-POP trial platform - A world-first clinical trial platform to transform research into new
therapies for brain cancer and deliver more targeted, personalised treatment for patients was
launched. Globally, it’s the first perioperative clinical trial program for brain cancer.
A landmark discovery offering another way to regulate the cell death process for diseases like
psoriasis and inflammatory bowel disease – conditions that occur due to excessive cell death in
the body – and could also help reduce the severity of viruses like SARS-CoV-2, responsible for
COVID-19.
An Australian-Israeli research team developed a way to reduce the toxic side-effects of pioneering
cancer treatment, CAR T cell immunotherapy. About half of patients suffer adverse effects from
the therapy but the findings could overcome this limitation by tailoring the immune cells used in
the treatment.
Revolutionary, world-first 3D images enabled researchers to understand how new anti-malaria
compounds kill malaria parasites, paving the way for the next generation of anti-malarial
treatments.
Our scientists developed a blood test that can identify which colon cancer patients need
chemotherapy after surgery and those who do not. The discovery could prevent thousands of low-
risk cancer patients receiving unnecessary chemotherapy treatment.
A powerful new genome editing technique enabled our researchers to replicate human diseases
with unprecedented accuracy, promising to revolutionise the drug discovery process for a range
of cancers. The technology can activate any gene, allowing new drug targets and causes of drug
resistance to be explored on an unmatched level.
A WEHI-led study has shown that treatment and drugs called mTOR inhibitors can prevent the
formation of coronary artery damage and aneurisms, a much-feared complication of Kawasaki
Disease (KD). KD mainly affects children under five years of age and is the most common cause
of acquired heart disease in children in developed countries. Up to 300 Australian children are
diagnosed with the disease each year.
17
WEHI have over 90 labs
researching more than
50+ diseases, and over
390 clinical trials
underway which are
based on WEHI
discoveries.
Hearts and Minds Investments Limited
Directors’ Report to Shareholders
For the year ended 30 June 2023
Directors’ Report to Shareholders
The Directors of Hearts and Minds Investments Limited (hereafter referred to as ‘HM1’ or ‘the Company’) present their
report together with the annual report of the Company (Annual Report) for the year ended 30 June 2023.
Principal Activity
HM1 was established in 2018 with the combined objective of providing a concentrated investment portfolio of the
highest conviction ideas from respected fund managers, while also supporting Australian medical research
organisations. No change in this activity took place during the period or is likely in the future.
Review of Operations
For the year ended 30 June 2023, the Company recorded a total comprehensive income after tax of $63.0 million (2022:
total comprehensive loss after tax of $219.6 million). The result for the year is driven by the performance of the
investment portfolio. The investment portfolio increased on a pre-tax basis by 15.1% for the year ended 30 June 2023
recovering some of the losses of the prior year. The result was driven by a strong recovery in the market values of the
Core Portfolio generating $150.4 million in net unrealised gains, partially offset by $49.0 million in net realised losses
primarily from the previous year’s Conference Portfolio. Since the inception of the Company in November 2018, HM1
has generated a compound annual pre-tax investment return of 8.8%. Further details of the performance of the
investment portfolio and the Company can be found in the Investment Committee Report.
Financial Position
The net asset value of the Company increased 5.4% over the year from $641.1 million on 30 June 2022 to $675.5 million
as of 30 June 2023. Further information on the financial position of the Company and the movement in net asset values
is contained in the Investment Committee Report.
Dividends
HM1 provides shareholders with exposure to a concentrated portfolio of Australian and international securities. As such,
returns to shareholders are predominantly delivered through capital growth which, when realised from the sale of
securities, is taxed at the corporate tax rate, and may be paid as franked dividends to shareholders. The Board is
committed to paying fully franked dividends to shareholders provided the Company has sufficient profit reserves and
franking credits and it is within prudent business practice.
In April 2023, the Company paid a fully franked dividend of 13.5 cents per share. In light of the discount between the
HM1 share price and NTA per share, and following shareholder feedback, the Board has modified the dividend policy
to increase the frequency of dividend payments to twice yearly. The half-yearly dividend will be paid in April and October
of each year. The first half-yearly fully franked dividend of 7 cents per share will be paid in October 2023.
Corporate Tax Rate
The Company is taxed at the corporate rate of 30.0%. The Company maintains a franking account and may declare
franked dividends to shareholders.
Medical Research
In line with its philanthropic objective, HM1 provides financial support to leading Australian medical research
organisations to help the development of new medicines and treatments and drive a new generation of medical
research in Australia. HM1 and its participating fund managers forego any investment fees and instead donate an
amount equivalent to 1.5% of net tangible assets per annum to designated medical research organisations.
During the year ended 30 June 2023, HM1 paid $10.2 million to its designated medical research organisations and
made a further provision of $5.7 million. These donated monies will be used by the medical research organisations to
fund important research into the prevention and treatment of chronic diseases and mental health disorders.
18
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Directors
The following persons held office as Directors during the period or since the end of the period and up to the date of this
report:
Christopher Cuffe AO
Lorraine Berends
Guy Fowler
Matthew Grounds AM
Michael Traill AM
Gary Weiss AM
Geoffrey Wilson AO
David Wright
Information of Directors
Chairman and Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Christopher Cuffe AO (Chairman and Independent Director)
Experience and expertise
Commencing his career as a chartered accountant, Christopher Cuffe entered the fund management industry in 1985.
In 1988, he joined Colonial First State where he was CEO from 1990 until 2003. In 2003, he became CEO of the listed
Challenger Group. He holds a Bachelor of Commerce from the University of New South Wales and a Diploma from the
Securities Institute of Australia. He is a Fellow of the Chartered Accountants in Australia and New Zealand, a Fellow of
the Institute of Company Directors, and an Associate of the Financial Services Institute of Australasia. In October 2007
Christopher was inducted into the Australian Fund Manager’s RBS Hall of Fame for services to the investment industry.
Christopher Cuffe has been Chairman of the Company since 12 September 2018, the date of incorporation.
Christopher Cuffe has been Chairman of the Company since 12 September 2018, the date of incorporation.
Other current directorships
Christopher Cuffe is currently involved in a portfolio of activities in the investment and non-profit sectors which include:
member of the investment committee of UniSuper (a $115 billion profit-for-members superannuation fund); member of
the investment committee of the Paul Ramsay Foundation (Australia’s largest charitable foundation); Chairman of
Australian Philanthropic Services (a not for profit organisation assisting individuals, families and professional advisers
with effective philanthropy); director of listed companies Global Value Fund Limited and Argo Investments Limited; and
founder, director and manager of Third Link Growth Fund.
Former directorship in the last 3 years
Christopher Cuffe was a non-executive director of Antipodes Global Investment Company Limited from July 2016 to
December 2021.
Special responsibilities
Chairman of the Board and member of the Investment Committee.
Interests in shares of the Company
Details of Christopher Cuffe’s interests in shares of the Company are included later in this report.
Interests in contracts
Christopher Cuffe has no interests in contracts of the Company.
19
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Information of Directors (continued)
Lorraine Berends (Independent Director)
Experience and expertise
Lorraine Berends has worked in the financial services industry for over 40 years and possesses extensive experience
in both investment management and superannuation. Before moving to a non-executive career in 2014, she worked
for 15 years with US based investment manager Marvin & Palmer Associates. She contributed extensively to industry
associations throughout her executive career, serving on the boards of the Investment Management Consultants
Association (now the CIMA Society of Australia) for 13 years (7 years as Chair) and the Association of Superannuation
Funds Australia (ASFA) for 12 years (3 years as Chair). She has been awarded life membership of both the CIMA
Society and ASFA. She holds a Bachelor of Science from Monash University, is a fellow of the Actuaries Institute and
a fellow of ASFA.
Other current directorships
Lorraine Berends is an independent non-executive director of ASX listed Pinnacle Investment Management Group
Limited and of listed investment companies Plato Income Maximiser Limited and Spheria Emerging Companies Limited.
She is also a company appointed director of Qantas Superannuation Limited and a non-executive director of the
Pinnacle Charitable Foundation.
Former directorship in the last 3 years
Lorraine Berends was a non-executive director of Antipodes Global Investment Company Limited from July 2016 to
December 2021.
Special responsibilities
Chair of the Investment Committee.
Interests in shares of the Company
Details of Lorraine Berends’ interests in shares of the Company are included later in this report.
Interests in contracts
Lorraine Berends has no interests in contracts of the Company.
Guy Fowler (Independent Director)
Experience and expertise
Guy Fowler is a co-founder of the Hearts and Minds Investment Leaders Conference. Guy is also the founder and Co-
Executive Chairman of Barrenjoey Capital Partners Pty Ltd. He worked in a range of senior positions at UBS Australia
for over 25 years including as the Head of Capital Markets and as the Head of the Corporate Advisory business. In
these roles he has advised on many of the largest and most complex equity capital markets and corporate transactions
completed in Australia. He is a qualified Chartered Accountant.
Other current directorships
None.
Special responsibilities
None.
Interests in shares of the Company
Details of Guy Fowler’s interests in shares of the Company are included later in this report.
Interests in contracts
Guy Fowler has no interest in contracts of the Company.
20
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Information of Directors (continued)
Matthew Grounds AM (Independent Director)
Experience and expertise
Matthew Grounds is a co-founder of the Hearts and Minds Investment Leaders Conference. Matthew is also the Co-
Executive Chairman of Barrenjoey Capital Partners Pty Ltd. Over the past 25 years, he held a variety of senior roles at
UBS including CEO and Country Head, Joint Global Head of the Investment Banking business, Head of Capital Markets
and Head of the Corporate Advisory business. In these roles, he has advised on many of the largest and most complex
equity capital markets and corporate transactions completed in Australia. He is also a Council Member of the University
of NSW, Chairman of Victor Chang Cardiac Research Institute, and a Director of the Financial Markets Foundation for
Children. He holds a Bachelor of Commerce (Finance major) and a Bachelor of Laws from the University of New South
Wales.
Other current directorships
None.
Special responsibilities
Member of the Investment Committee
Interests in shares of the Company
Details of Matthew Grounds’ interests in shares of the Company are included later in this report.
Interests in contracts
Matthew Grounds is Chairman of Victor Chang Cardiac Research Institute which is a designated charitable beneficiary
of Hearts and Minds Investments Limited.
Michael Traill AM (Independent Director)
Experience and expertise
Michael Traill founded Social Ventures Australia in 2002, after 15 years as a co-founder and Executive Director of
Macquarie Group’s private equity arm, Macquarie Direct Investment. He is the author of “Jumping Ship – From the
world of corporate Australia to the heart of social investment” which won the prestigious Ashurst Business Literature
Prize. In 2010, he was made a member of the Order of Australia in recognition of his services to non-profit organisations.
He holds a BA (Hons) from the University of Melbourne and an MBA from Harvard University. He is also an Adjunct
Professor for the Centre for Social Impact (UNSW) and Chair of the Federal Government Task Force on Social Impact
Investing.
Other current directorships
Michael Traill currently has a range of primarily social purpose Chair and board roles including Chair of the Paul Ramsay
Foundation, Executive Director of For Purpose Investments, a Director of M H Carnegie & Co, Australian Retirement
Trust (and Chair of the Investment Committee), Catalyst Education and Australian Philanthropic Services.
Special responsibilities
None.
Interests in shares of the Company
Details of Michael Traill’s interests in shares of the Company are included later in this report.
Interests in contracts
Michael Traill has no interests in contracts of the Company.
21
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Information of Directors (continued)
Gary Weiss AM (Independent Director)
Experience and expertise
Gary Weiss is a co-founder of the Sohn Hearts & Minds Investment Leaders Conference. Gary was formerly Chairman
of Clearview Wealth Limited and Coats PLC, is a former Non-Executive Director of Premier Investments Limited and
Pro-Pac Packaging Limited, a former Executive Director of Whitlam, Turnbull & Co and Guinness Peat Group PLC and
sat on the board of Westfield Holdings Limited and many other public companies. He has also been involved in
overseeing large businesses with operations in many regions including Europe, China and India and is familiar with
investments across a wide range of industries, corporate finance, and private equity type deals. He holds an LLB (Hons)
and LLM from Victoria University of Wellington and a Doctor of the Science of Law (JSD) from Cornell University. He
was admitted as a Barrister and Solicitor of the Supreme Court of New Zealand, a Barrister and Solicitor of the Supreme
Court of Victoria and as a Solicitor of the Supreme Court of New South Wales. He is also a Commissioner of the
Australian Rugby League Commission.
Other current directorships
Gary Weiss is currently the Executive Director of Ariadne Australia Limited. He is Chairman of Ardent Leisure Group,
Cromwell Property Group and Estia Health Limited, and a Non-Executive Director of Victor Chang Cardiac Research
Institute and Thorney Opportunities Limited.
Special responsibilities
Gary Weiss is a member of the Conference Fund Managers Selection Committee.
Interests in shares of the Company
Details of Gary Weiss’ interests in shares of the Company are included later in this report.
Interests in contracts
Gary Weiss is a Non-Executive Director of Victor Chang Cardiac Research Institute which is a designated charitable
beneficiary of Hearts and Minds Investments Limited.
Geoffrey Wilson AO (Independent Director)
Experience and expertise
Geoffrey Wilson has over 43 years direct experience in investment markets having held a variety of senior investment
roles in Australia, the UK, and the US. He founded Wilson Asset Management in 1997 and created Australia’s first
listed philanthropic wealth creation vehicles, the Future Generation companies. He holds a Bachelor of Science, a
Graduate Management Qualification and is a Fellow of the Financial Services Institute of Australia and the Australian
Institute of Company Directors.
Other current directorships
Geoffrey Wilson is currently Chairman of WAM Capital Limited, WAM Leaders Limited, WAM Research Limited, WAM
Active Limited, WAM Microcap Limited, WAM Global Limited and WAM Strategic Value Limited. He is the Founder and
a Director of Future Generation Global Investment Company Limited, Future Generation Investment Company Limited
and a Director of WAM Alternative Assets Limited, Global Value Fund Limited, Wollongong 2021 Limited, Incubator
Capital Limited, Sporting Chance Cancer Foundation, the Australian Stockbrokers Foundation, the Australian Fund
Managers Foundation and the Australian Children’s Music Foundation. He is a member of the Second Bite NSW
Advisory Committee.
22
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Information of Directors (continued)
Geoffrey Wilson AO (Independent Director) (continued)
Special responsibilities
None.
Interests in shares of the Company
Details of Geoffrey Wilson’s interests in shares of the Company are included later in this report.
Interests in contracts
Geoffrey Wilson has no interest in contracts of the Company.
David Wright (Independent Director)
Experience and expertise
David is the CEO and joint founder of Zenith Investment Partners and has overall responsibility for the management of
the broader Group and remains closely involved in servicing the company’s investment consulting clients with portfolio
construction, management and monitoring advice. He has a wealth of investment industry experience acquired over
his extensive career including senior positions at IWL Ltd as Head of Research and Associate Director and Head of
Managed Funds research at Lonsdale Limited.
Other current directorships
David Wright is currently a director of Zenith Investment Partners Pty Ltd, Zenith Partners Group Pty Ltd, Zenith CW
Pty Ltd, ZIP Holdco Pty Ltd, FE fund info (Australia) Pty Ltd and FE (Au) Pty Ltd and a member of the Qantas
Superannuation Investment Committee and the Deakin University Financial Planning Advisory Board.
Special responsibilities
Chair of the Conference Fund Managers Selection Committee
Interests in shares of the Company
Details of David Wright’s interests in shares of the Company are included later in this report.
Interests in contracts
David Wright has no interests in contracts of the Company.
Chief Executive Officer
Paul Rayson
Paul Rayson is a Chartered Accountant and has worked in the financial services industry for over 25 years and has
extensive experience in investment markets, technology, retail banking, risk management and insurance. He is the
former Managing Director of CommSec, Australia’s leading online broker and former Managing Director of Australian
Investment Exchange Limited and Colonial Mutual Life Assurance Society Limited. He has also held a number of CFO
and governance positions across large financial services businesses. Prior to financial services, he held senior roles in
Chartered Accounting and Consulting firms specialising in corporate advisory, risk management and strategy. He holds
a Commerce degree from Swinburne University and is a Fellow of the Institute of Chartered Accountants.
23
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Chief Investment Officer
Charlie Lanchester
Charlie is an accomplished fund manager and investor with over 30 years active funds management experience at
leading investment organisations. Most recently Charlie was Head of Fundamental Australian Active Equities at
BlackRock. Prior to that Charlie held senior investment roles at Perpetual Investments, Platinum Asset Management
and Schroder Investment Management. Charlie is also currently the Chair of the Australian Fund Manager Awards
Foundation and Chair of Surf Aid International.
Company Secretary
Tom Bloomfield
Tom Bloomfield held the position of Company Secretary during the financial period. Tom has over fifteen years of
international Corporate Secretarial experience working for global organisations, both ‘in-house’ and for corporate
services providers. He has experience working with and consulting to a range of international and domestic clients. He
acts as Company Secretary to a number of ASX listed, unlisted and private companies in Australia in numerous industry
sectors. Tom is a Chartered Company Secretary, Fellow of ICSA (Institute of Chartered Secretaries and Administrators)
and Member of the Australian Institute of Company Directors. He holds a Law degree with Honours and a Graduate
Diploma in Applied Corporate Governance.
Members of the Investment Committee
The experience and qualifications of the members of the Investment Committee at the end of the financial period, up
to the date of this report are set out below:
Brett Paton
Brett Paton is currently Chairman of the management company of Escala Partners, an Australian wealth management
advisory group, and Chairman of Pointsbet Holdings Limited. He has worked in a range of senior positions including
Vice Chairman at UBS Australia where he spent 23 years. He also spent 5 years at Citi serving as Vice Chairman
Australia, Institutional Clients Group. He has served as a Non-Executive Director of Tabcorp and Chair of Audit and
Risk for its demerged entity, Echo Entertainment, giving him valuable insights into the functions expected of ASX 100
boards. He was previously a Council Member at RMIT University and Chair of the Risk and Audit Committee, Chairman
of PLC VC, a global venture capital investment organisation, and previously a member of the ASX Capital Markets
Advisory Committee. He is a qualified Chartered Accountant.
Christopher Cuffe AO
Christopher Cuffe is also a Director. Please refer to the Directors’ Report to Shareholders for details of Christopher
Cuffe’s experience and qualifications.
Lorraine Berends
Lorraine Berends is also a Director. Please refer to the Directors’ Report to Shareholders for details of Lorraine
Berends’ experience and qualifications.
David Wright
David Wright is also a Director. Please refer to the Directors’ Report to Shareholders for details of David Wright’s
experience and qualifications.
Matthew Grounds AM
Matthew Grounds is also a Director. Please refer to the Directors’ Report to Shareholders for details of Matthew
Ground’s experience and qualifications.
24
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Members of the Investment Committee (continued)
Paul Rayson
Paul Rayson is also Chief Executive Officer. Please refer to the Directors’ Report to Shareholders for details of Paul
Rayson’s experience and qualifications.
Members of the Conference Fund Manager Selection Committee
David Wright
David Wright is also a Director. Please refer to the Directors’ Report to Shareholders for details of David Wright’s
experience and qualifications.
Gary Weiss AM
Gary Weiss is also a Director. Please refer to the Directors’ Report to Shareholders for details of Gary Weiss’
experience and qualifications.
Michael Walsh
Michael Walsh is a founding member of the organising committee for the Sohn Hearts and Minds Investment Leaders
Conference and has been instrumental in the success of the event. Michael Walsh is currently a Senior Advisor, UBS
Global Markets and Head of Global Family Offices at UBS in Australia and New Zealand.
Charlie Lanchester
Charlie Lanchester is also Chief Investment Officer. Please refer to the Directors’ Report to Shareholders for details of
Charlie Lanchester’s experience and qualifications.
Remuneration Report (Audited)
The responsibility for the Company’s remuneration policy rests with the Board of Directors. Given the size of the
Company, its charitable nature, that the Company has only three employees and that Directors have agreed to waive
Directors’ fees on an ongoing basis, the Company has not formed a separate remuneration committee.
a) Remuneration of Directors and Other Key Management Personnel
Key management personnel (KMP) include the Directors, the Chief Executive Officer and the Chief Investment Officer.
Directors have agreed to waive their Directors’ fees on an ongoing basis. For the year ended 30 June 2023, no
Directors’ fees were paid by the Company. The remuneration of the Chief Executive Officer and the Chief Investment
Officer is set out below. The Chief Executive Officer and the Chief Investment Officer are employed under standard
employment contracts with a three month notice period. The remuneration of the Chief Executive Officer and the Chief
Investment Officer is salary based and does not include securities or options in the Company and no element of the
remuneration is tied to Company performance. The Chief Executive Officer and the Chief Investment Officer are not
provided with retirement benefits apart from statutory superannuation.
Year ended 30 June 2023
Paul Rayson
Charlie Lanchester (commenced 12/4/23)
Past Employee
Rory Lucas (employment ceased 1/2/23)
Short-term
benefits
Salary
$
274,708
66,250
Termination
Benefits
$
–
–
Post-employment
benefits
Superannuation
$
25,292
5,550
Total
Remuneration
$
300,000
71,800
188,125
205,904*
16,042
410,071
* Includes payment for notice period and statutory entitlements
25
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Remuneration Report (Audited) (continued)
a) Remuneration of Directors and Other Key Management Personnel (continued)
Year ended 30 June 2022
Paul Rayson
Rory Lucas
Company performance
measures and KMP
remuneration
Total comprehensive
income/(loss) ($)
Dividends (cents per share)
NTA after tax ($ per share)
Share Price ($ per share)
Total KMP remuneration ($)
Shareholders’ Equity ($)
Short-term
benefits
Salary
$
218,216
243,216
Termination
Benefits
$
–
–
Post-employment
benefits
Superannuation
$
19,784
19,784
Total
Remuneration
$
238,000
263,000
2023
2022
2021
2020
2019
62,953,931
13.5
2.95
2.26
781,871
675,522,876
(219,589,213)
13.5
2.81
2.02
501,000
641,129,695
157,948,475
12.0
3.92
4.32
383,175
885,999,277
117,553,802
70,453,027
3.92
4.32
383,175
750,506,830
2.85
2.95
180,219
570,453,028
b) Other KMP Related Transactions
The Company Secretary has waived his right to receive fees. The Company holds professional indemnity insurance to
his benefit. He receives an indemnity as an officer of the Company to the maximum extent permitted by law and is
entitled to be reimbursed for any external costs and expenses he incurs. The Company Secretary is a General Manager
of Boardroom Pty Limited. Boardroom Pty Limited provide company secretarial services to the Company.
Matthew Grounds is Chairman of Victor Chang Cardiac Research Institute which is a designated medical research
beneficiary of Hearts and Minds Investments Limited. Hearts and Minds Investments Limited donated $5,036,644 to
Victor Chang Cardiac Research Institute for the year ended 30 June 2023 (2022: $6,298,991).
Gary Weiss is a Non-Executive Director of Victor Chang Cardiac Research Institute which is a designated medical
research beneficiary of Hearts and Minds Investments Limited. Hearts and Minds Investments Limited donated
$5,036,644 to Victor Chang Cardiac Research Institute for the year ended 30 June 2023 (2022: $6,298,991).
Michael Traill is a Director of Paul Ramsay Foundation. Paul Ramsay Foundation held 4,270,106 shares in HM1 on
30 June 2023 (2022: 4,270,106).
Michael Traill is a Director of Australian Philanthropic Services. Australian Philanthropic Services provides due diligence
services on HM1’s medical research beneficiaries on normal commercial terms amounting to $8,800 for the year 30
June 2023 (2022: $4,400).
Christopher Cuffe is Chairman of Australian Philanthropic Services. Australian Philanthropic Services provides due
diligence services on HM1’s medical research beneficiaries on normal commercial terms amounting to $8,800 for the
year 30 June 2023 (2022: $4,400)
26
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Remuneration Report (Audited) (continued)
c) Equity Instruments Disclosures of Directors, Other Key Management Personnel and Related Parties
As the date of this report, the Directors, other key management personnel and their related parties held the following
interest in the Company:
Ordinary shares held
Christopher Cuffe AO
Lorraine Berends
Guy Fowler
Matthew Grounds AM
Michael Traill AM
Gary Weiss AM
Geoffrey Wilson AO
David Wright
Paul Rayson
Rory Lucas
Charlie Lanchester
Balance at
beginning of
the period Acquisitions
25,000
1,153,300
45,000
–
1,258,042
–
1,201,397
–
1,172,281
–
3,876
495,002
1,687,500
–
95,000
–
149,907
–
131,371
–
89,061
–
Disposals
(1,103,300)*
–
–
–
(1,100,000)*
–
–
–
–
(131,371)
–
As at the date
of this report
75,000
45,000
1,258,042
1,201,397
72,281
498,878
1,687,500
95,000
149,907
–
89,061
Directors, other key management personnel and Director related entities disposed of and acquired ordinary shares in
the Company on the same terms and conditions available to other shareholders. The Directors have not, during or
since the end of financial period, been granted options over unissued shares or interests in shares of the Company as
part of their remuneration.
*Due to an internal process and approval change made by Australian Philanthropic Services, Mr Christopher Cuffe and
Mr Michael Traill were no longer deemed to control the 1,100,000 HM1 shares held by Australian Philanthropic Services
Foundation on 30 June 2022.
For further details, please refer to the key management personnel compensation note in the financial statements.
- End of remuneration report -
27
Directors’ Meetings
Director
Christopher Cuffe AO
Lorraine Berends
Guy Fowler
Matthew Grounds AM
Michael Traill AM
Gary Weiss AM
Geoffrey Wilson AO
David Wright
Investment Committee Meetings
Member
Christopher Cuffe AO
Lorraine Berends
Brett Paton
David Wright
Matthew Grounds AM
Paul Rayson
Conference Fund Managers Selection Committee Meetings
Member
David Wright
Gary Weiss AM
Michael Walsh
Charlie Lanchester
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
No. of eligible
to attend
5
5
5
5
5
5
5
5
No. of eligible
to attend
5
5
5
5
5
5
No. of eligible
to attend
4
4
4
4
Attended
4
5
5
5
5
5
5
5
Attended
5
5
4
5
5
5
Attended
4
4
4
4
Events Occurring After the Reporting Period
The Directors are not aware of any events subsequent to 30 June 2023 that would materially affect the operations of
the Company, the results of those operations, or the state of affairs of the Company.
Future Developments
HM1’s future performance is dependent on the performance of the HM1’s investment portfolio, which in turn is impacted
by investee company-specific factors and prevailing industry conditions. In addition, a range of external factors including
economic growth rates, interest rates, exchange rates and macro-economic conditions impact the overall equity market.
Accordingly, it is not possible or appropriate to accurately predict the future performance of HM1’s investment portfolio
and HM1’s performance.
Environmental Regulation
The Company’s operations are not subject to any particular or significant environmental regulation under a law of the
Commonwealth or of a State or Territory in Australia.
Risk Management Philosophy and Approach
The Board of Directors’ risk policies and controls are designed to be robust and relevant to the investment objectives
and investment strategy. The Board of Directors is committed to robust corporate governance practices to create value
and provide accountability and a control system commensurate with the risk involved. The Board of Directors will
monitor the investment portfolio to ensure compliance with the investment strategy and the investment guidelines.
28
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Risk Management Philosophy and Approach (continued)
The Investment Committee, in conjunction with the Chief Investment Officer, is responsible for managing the investment
portfolio. The Investment Committee meets quarterly, and more frequently as required, to review the investment
portfolio and ensure that HM1 continues to deliver on its investment objective and investment strategy.
Indemnification and Insurance of Officers and Directors
The Company has entered into director protection deeds with each Director. Under these deeds, the Company has
agreed to indemnify, to the extent permitted by the Corporations Act, each Director in respect of certain liabilities which
the Director may incur as a result of, or by reason of (whether solely of in part), being or acting as a Director of the
Company. The Company has also agreed to maintain in favour of each officer of the Company, a directors’ and officers’
policy of insurance for the period that they are officers and for seven years after they cease to act as officers.
No indemnities have been given or insurance premiums paid during or since the end of the financial period, for any
person who is or has been an auditor of the Company.
Proceedings on Behalf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of
those proceedings.
The Company was not a party to any such proceedings during the year.
Non-Audit Services
During the year, Pitcher Partners, the Company’s auditor, did not perform any non-assurance services in addition to
their statutory duties for the Company. Related entities of Pitcher Partners perform certain taxation services for the
Company. Details of the amounts paid to the auditors are disclosed in Note 5 to the financial statements.
The Board of Directors is satisfied that the provision of non-audit services during the period is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that
the services disclosed in Note 6 did not compromise the external auditor’s independence for the following reasons:
all non-audit services are reviewed and approved by the Board prior to commencement to ensure they do not
adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence
in accordance with the APES 110: Code of Ethics for Professional Accountants including Independence
Standards set by the Accounting Professional and Ethical Standards Board.
Rounding of Amounts
In accordance with the ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191, the amounts
in the Directors’ Report to Shareholders and Annual Report have been rounded off in accordance with that Class Order
to the nearest dollar or unless otherwise indicated.
Corporate Governance Statement
The Company’s Corporate Governance Statement for the year ended 30 June 2023 is provided on the Company
website at heartsandmindsinvestments.com.au
29
Hearts and Minds Investments Limited
Directors’ Report to Shareholders (continued)
For the year ended 30 June 2023
Auditor’s Independence Declaration
A copy of the Auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set
out on the following page.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
Christopher Cuffe AO
Chairman and Independent Director
Sydney
29 August 2023
30
Pitcher Partners Sydney Partnership
Level 16, Tower 2 Darling Park
201 Sussex Street
Sydney NSW 2000
Postal Address
GPO Box 1615
Sydney NSW 2001
p. +61 2 9221 2099
e. sydneypartners@pitcher.com.au
Auditor’s Independence Declaration
To the Directors of Hearts and Minds Investments Limited
ABN 61 628 753 220
In relation to the independent audit of Hearts and Minds Investments Limited for the year ended 30
June 2023, to the best of my knowledge and belief there have been:
(i)
no contraventions of the auditor independence requirements of the Corporations Act 2001; and
(ii) no contraventions of APES 110 Code of Ethics for Professional Accountants (including
Independence Standards).
S M Whiddett
Partner
Pitcher Partners
Sydney
29 August 2023
Adelaide Brisbane Melbourne Newcastle Perth Sydney
31
Pitcher Partners is an association of independent firms.
Pitcher Partners Sydney Partnership. ABN 17 795 780 962. Liability limited by a scheme approved under Professional
Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the
members of which are separate and independent legal entities.
pitcher.com.au
Hearts and Minds Investments Limited
Statement of Comprehensive Income
For the year ended 30 June 2023
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
Notes
4
7
(71,485,233)
(21,713,890)
121,668,567
2,181,067
(144,485)
–
5,351,866
9,604
(115,972,088)
2,546,575
8,485,843
47
4,051,590
13,663
57,581,386
(122,588,260)
(10,090,124)
(1,651)
(950,718)
(881,633)
(12,070,528)
(52,429)
(777,069)
(878,344)
(11,924,126)
(13,778,370)
45,657,260
(136,366,630)
3
(12,930,776)
41,529,395
32,726,484
(94,837,235)
Investment loss from ordinary activities
Net realised losses on financial assets at fair value
through profit or loss
Net unrealised gains/(losses) on financial assets at fair value
through profit or loss
Net realised gains on foreign exchange transactions
Net unrealised (losses)/gains on foreign exchange transactions
Interest income
Dividend income
Sundry income
Total investment income/(loss)
Expenses
Donations
Interest expense
Employee costs
Other expenses
Total expenses
Income/(loss) before income tax
Income tax (expense)/benefit
Net income/(loss) for the year
Other comprehensive income
Items that will not be reclassified to profit or loss:
Net realised gains on investments taken to equity, net of tax
Net unrealised gains/(losses) on investments taken to equity,
net of tax
9
9
9,999,090
37,862,682
20,228,357
(162,614,660)
Net realised and unrealised gains/(losses) on investments
taken to equity, net of tax
30,227,447
(124,751,978)
Other comprehensive income/(loss) for the year, net of tax
30,227,447
(124,751,978)
Total comprehensive income/(loss) for the year
62,953,931
(219,589,213)
Earnings/(loss) per share attributable to the ordinary equity
holders of the Company:
Basic and diluted earnings/(loss) per share
Cents
Cents
12
14.35
(41.88)
The accompanying notes form part of these financial statements.
32
Assets
Current assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Current tax asset
Other receivables
Total current assets
Hearts and Minds Investments Limited
Statement of Financial Position
30 June 2023
Notes
30 June
2023
$
30 June
2022
$
10
14
3
6
59,246,589
479,951,559
–
862,881
122,026,366
187,553,443
14,825,917
165,227
540,061,029
324,570,953
Non-current assets
Financial assets at fair value through other comprehensive income
Deferred tax assets
14
3
Total non-current assets
Total assets
Liabilities
Current liabilities
Donation provision
Other payables
Total current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
7
8
9
9
129,231,792
12,056,061
284,407,363
38,114,298
141,287,853
322,521,661
681,348,882
647,092,614
5,726,006
100,000
5,875,169
87,750
5,826,006
5,962,919
5,826,006
5,962,919
675,522,876
641,129,695
574,476,801
163,156,826
(62,110,751)
572,278,169
163,688,761
(94,837,235)
675,522,876
641,129,695
The accompanying notes form part of these financial statements.
33
Hearts and Minds Investments Limited
Statement of Changes in Equity
For the year ended 30 June 2023
Investment
portfolio
Share revaluation
reserve
capital
$
$
Notes
Profits Accumulated
reserve
$
losses
$
Total
$
Balance at 1 July 2021
Net loss for the year
Other comprehensive loss, net
of tax
Transfer to profits reserve
Transactions with equity
holders in their capacity as
owners:
Shares issued
Dividends
Balance at 30 June 2022
Balance at 1 July 2022
Net income for the year
Other comprehensive income, net
of tax
Transfer to profits reserve
Transactions with equity
holders in their capacity as
owners:
Shares issued
Dividends
8
9
9
9
8
9
8
9
9
9
8
9
567,043,973 152,272,375 166,682,929
–
–
–
(94,837,235)
– 885,999,277
(94,837,235)
– (124,751,978)
–
–
(37,862,682) 37,862,682
–
–
(124,751,978)
–
5,234,196
–
–
–
–
(30,514,565)
–
–
5,234,196
(30,514,565)
572,278,169
(10,342,285) 174,031,046 (94,837,235) 641,129,695
572,278,169
–
(10,342,285) 174,031,046 (94,837,235) 641,129,695
32,726,484
32,726,484
–
–
–
–
30,227,447
(9,999,090)
–
9,999,090
–
–
30,227,447
–
2,198,632
–
–
–
–
(30,759,382)
–
–
2,198,632
(30,759,382)
Balance at 30 June 2023
574,476,801
9,886,072 153,270,754
(62,110,751) 675,522,876
The accompanying notes form part of these financial statements.
34
Hearts and Minds Investments Limited
Statement of Cash Flows
For the year ended 30 June 2023
Notes
For the
year ended
30 June
2023
$
4,662,484
–
1,332
(1,651)
(10,239,287)
(1,820,101)
14,998,758
For the
year ended
30 June
2022
$
4,157,618
47
17,734
(52,429)
(12,570,637)
(1,567,663)
(50,871,576)
Cash flows from operating activities
Dividends received
Interest received
Other income received
Interest paid
Donations paid
Payments for other expenses
Income tax refund/(paid)
Net cash provided by/(used in) operating activities
11
7,601,535
(60,886,906)
Cash flows from investing activities
Proceeds from sales of investments
Payments for purchases of investments
444,410,176
(488,267,320)
466,054,222
(392,481,146)
Net cash (used in)/provided by investing activities
(43,857,144)
73,573,076
Cash flows from financing activities
Dividends paid
8, 9
(28,560,750)
(25,280,369)
Net cash used in financing activities
(28,560,750)
(25,280,369)
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
(64,816,359)
122,026,366
(12,594,199)
123,588,147
Effect of foreign currency exchange rate changes on cash and
cash equivalents
2,036,582
11,032,418
Cash and cash equivalents at the end of the year
10
59,246,589
122,026,366
The accompanying notes form part of these financial statements.
35
Hearts and Minds Investments Limited
Notes to the Financial Statements
For the year ended 30 June 2023
1
General information
Hearts and Minds Investments Limited (the “Company”) is a company limited by shares, incorporated and domiciled in
Australia, whose shares are publicly traded. The registered office is Level 8, 210 George Street, Sydney NSW 2000.
The Company was incorporated on 12 September 2018. Its shares were admitted for quotation on the Official List of
ASX Limited (“ASX”) on 9 November 2018 and commenced operations on 14 November 2018. The financial
statements of the Company are for the year ended 30 June 2023.
The financial statements were authorised for issue on 29 August 2023 by the Board of Directors.
2
Summary of significant accounting policies
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with the Australian Accounting
Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting
Standards Board (“AASB”) and the Corporations Act 2001. The financial statements of the Company also comply with
International Financial Reporting Standards as issued by the International Accounting Standards Board. The Company
is a for-profit entity for the purpose of preparing the financial statements. Material accounting policies adopted in the
preparation of these financial statements are presented below and have been consistently applied unless stated
otherwise.
These financial statements have been prepared on an accruals basis, and are based on historical cost convention
except for the revaluation of financial assets at fair value through profit or loss, financial assets at fair value through
other comprehensive income and cash flow information.
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191, the amounts in
the financial report have been rounded to the nearest dollar, unless otherwise indicated.
The Company has adopted all of the new and amended Accounting Standards and Interpretations issued by the AASB
that are mandatory for the current reporting year and there was no material impact on adoption.
(b) Investment income
(i) Dividends
Dividends are recognised as revenue in the Statement of Comprehensive Income when the right to receive payment is
established.
(ii)
Interest income
Interest income is recognised using the effective interest rate method, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
(c) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the instrument. For financial assets, this is equivalent to the date that the Company commits itself to either
the purchase or sale of the asset (i.e. trade date accounting is adopted).
At initial recognition, the Company measures a financial asset at its fair value in the Statement of Financial Position.
Transaction costs for financial assets carried at fair value through other comprehensive income are included as part of
the initial measurement.
36
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
2
Summary of significant accounting policies (continued)
(c) Financial instruments (continued)
Classification of financial assets
Financial assets recognised by the Company are subsequently measured in their entirety at either amortised cost or
fair value, subject to their classification and whether the Company irrevocably designates the financial asset on initial
recognition at fair value through other comprehensive income (“FVTOCI”) in accordance with the relevant criteria in
AASB 9 Financial Instruments.
Financial assets not irrevocably designated on initial recognition at FVTOCI are classified as ‘Fair Value through Profit
or Loss’ (“FVTPL”).
For all investments in equity instruments (financial assets) made between 12 September 2018 and 11 October 2021
the Company made an irrevocable election to present subsequent changes in the fair value of these investments (and
the related tax thereon) in other comprehensive income. Such financial assets were classified at FVTOCI and were
considered long-term in nature and not held for trading. Some financial assets are still classified in this way at balance
date.
From 12 October 2021, the Company classifies new investments in equity instruments (financial assets) at FVTPL in
accordance with the entity’s business model test and cash flow characteristics. Gains and losses arising from changes
in fair value (and the related tax thereon) are included in the net income for the period and the corresponding basic and
diluted earnings per share in the period in which they arise.
Classification of financial liabilities
Financial liabilities recognised by the Company are subsequently measured at amortised cost.
Measurement
The fair value of financial assets is based on the price that would be received to sell an asset in an orderly transaction
between market participants at the measurement date. Usually, the quoted market prices on a recognised exchange
or, in its absence, the most advantageous market to which the Company has access at that date. The Company’s
accounting policy on fair value is disclosed in Note 14.
Changes in the fair value for financial assets at fair value through other comprehensive income are recognised through
the investment portfolio revaluation reserve after deducting a provision for the potential deferred tax liability.
Other receivables
Other receivables are non-derivative assets and are stated at their amortised cost less any provision for impairment.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Company has substantially transferred all the risks and rewards of ownership.
When a financial asset held at fair value through other comprehensive income is disposed, the cumulative gain or loss,
net of tax thereon, is transferred from the investment portfolio revaluation reserve to the profits reserve.
(d) Donation provision
In line with the Company’s philanthropic objectives, the Company donates a percentage of the Company’s net tangible
assets to leading Australian medical research organisations every six months. The donations are equal to 1.5% per
annum of the average monthly net tangible assets of the previous half-year. The donation provision represents the
amount provided for donations at the reporting date.
37
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
2
Summary of significant accounting policies (continued)
(e) Foreign currency translation
Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in
which the Company operates. The financial statements are presented in Australian dollars (“AUD” or “$”) which is the
Company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translations at year end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at
the date when fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of fair value gain or loss.
(f) Income tax
The income tax expense or benefit for the year is the tax payable on that year’s taxable income based on the applicable
income tax rate, adjusted by changes in deferred tax assets and deferred tax liabilities attributable to temporary
differences and unused tax losses, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amounts
of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to offset current tax
assets and current tax liabilities and when the deferred tax balances relate to the same taxation authority. Current tax
assets and liabilities are offset where the Company has a legally enforceable right to offset and intends to settle on a
net basis.
Current and deferred tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates
to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity as appropriate.
(g) Goods and Services Tax (“GST”)
Revenues, expenses and assets are recognised net of the amount of GST, unless GST incurred is not recoverable
from the Australian Taxation Office. In this case, it is recognised as part of the cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the Statement of
Financial Position.
(h) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
38
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
2
Summary of significant accounting policies (continued)
(i) Issued capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares have been recognised
in the Statement of Comprehensive Income, net of any tax effects.
(j) Profits reserve
A profits reserve is made up of amounts transferred from current and retained earnings and realised gains on disposal
of financial assets that are preserved for future dividend payments.
(k) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the reporting year but not distributed at the end of the reporting year.
(l) Earnings/(loss) per share
(i) Basic earnings/(loss) per share is calculated by dividing:
the profit/(loss) attributable to owners of the Company, excluding any costs of servicing equity other than
ordinary shares; and
by the weighted average number of ordinary shares outstanding during the financial year.
(ii) Diluted earnings/(loss) per share
Diluted earnings/(loss) per share adjusts the figures used in the determination of basic earnings/(loss) per share to take
into account:
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares; and
the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
(m) Critical accounting estimates and judgements
The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge
and best available current information. Estimates assume a reasonable expectation of future events and are based on
current trends and economic data.
The investments of the Company are recommended by fund managers who provide their expertise and stock
recommendations to the Company on a pro bono basis. Therefore, the investment portfolio of the Company does not
incur any fund management fees. It is estimated that the investments fees forgone by the fund managers based on
normal commercial terms for the year ended 30 June 2023 equates to $9,735,444 (2022: $12,580,000). This notional
benefit to the Company is not included in the financial statements of the Company.
During the year ended 30 June 2023, the Company made purchases of $54,625,405 into unlisted securities which are
not quoted in an active market. These investments are valued at their fair value. The methods used to determine the
fair value of these investments is outlined in Note 14(a).
Deferred tax assets are recognised for deductible temporary differences only if the Company considers if is probable
that future taxable amounts will be available to utilise those temporary differences.
Other than these estimates, there are no estimates or judgements that have a material impact on the Company’s
financial results for the year ended 30 June 2023 (2022: None).
39
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
2
Summary of significant accounting policies (continued)
(n) New standards and interpretations applicable and not yet adopted
There are no new standards or interpretations applicable and not yet adopted that would have a material impact for the
Company.
3
Income tax
(a) Income tax expense
The prima facie tax on profit or loss before income tax is reconciled to the income tax expense as follows:
Prima facie income tax expense on the net profit at 30%
Imputation credits and foreign tax credits claimed at 100%
Imputation credits gross up on dividends received
Foreign tax credits gross up dividends received
Income tax expense/(benefit) recognised in profit or loss
For the
year ended
30 June
2023
$
13,697,178
(1,094,860)
219,490
108,968
12,930,776
For the
year ended
30 June
2022
$
(40,909,988)
(884,867)
227,532
37,928
(41,529,395)
Deferred tax on net unrealised gains/(losses) on investments
Income tax on net realised gains on investments
Income tax expense/(benefit) recognised in other comprehensive
income/(loss)
8,669,296
4,285,324
(69,691,998)
16,226,863
12,954,620
(53,465,135)
Total income tax expense/(benefit)
25,885,396
(94,994,530)
(b) Total income tax expense results in a:
Current income tax benefit
Deferred tax assets
Deferred tax liabilities
Income tax expense/(benefit) recognised in profit or loss
For the
year ended
30 June
2023
$
–
(20,437,697)
33,368,473
12,930,776
For the
year ended
30 June
2022
$
(9,518,736)
298,260
(32,308,919)
(41,529,395)
Deferred tax liability on net unrealised gains/(losses) on investments
Current income tax liability on net realised gains on investments
Income tax expense/(benefit) recognised in other comprehensive
income/(loss)
8,669,296
4,285,324
(69,691,998)
16,226,863
12,954,620
(53,465,135)
Total income tax expense/(benefit)
25,885,396
(94,994,530)
40
3
Income tax (continued)
(c) Balance of current tax asset:
Current tax asset
Current tax receivable
Closing balance
Movement in current tax asset:
Opening balance
Charged to profit or loss
Tax (refund)/payment
Adjustment for prior year over provision
Closing balance
(d) Balance of deferred tax asset:
Deferred tax assets
Current year tax loss
Non deductible offer costs - balance
Donation accrual not deductible at balance date
Unrealised (gains)/losses on investment
Dividend receivable at balance date
Unrealised (gains)/losses on foreign exchange
Closing balance
Movement in deferred tax asset:
Opening balance
Charged to profit or loss
Charged to other comprehensive income
Re-allocation to deferred tax asset
Closing balance
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
30 June
2023
$
–
–
–
30 June
2022
$
14,825,917
14,825,917
14,825,917
14,825,917
–
(14,998,758)
172,841
(29,337,532)
(6,708,127)
50,871,576
–
–
14,825,917
30 June
2023
$
30 June
2022
$
12,056,061
38,114,298
16,468,964
–
1,717,802
(5,913,776)
(260,275)
43,346
–
444,680
1,762,551
39,256,093
(50,287)
(3,298,739)
12,056,061
38,114,298
38,114,298
(13,103,616)
(12,954,621)
–
1,752,506
–
–
36,361,792
12,056,061
38,114,298
41
3
Income tax (continued)
(e) Balance of deferred tax liabilities:
Deferred tax liabilities
Movement in deferred tax liabilities:
Opening balance
Charged to profit or loss
Charged to other comprehensive income/(loss)
Re-allocation to deferred tax asset
Closing balance
(f) Dividend franking account
Opening balance
Franking credits on dividends received
Franking credits on dividends paid
Tax (refund)/paid during the year
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
30 June
2023
$
–
–
–
–
–
–
For the
year ended
30 June
2023
$
81,873,826
711,702
(13,182,592)
(14,998,758)
30 June
2022
$
–
65,340,865
(48,237,522)
(53,465,135)
36,361,792
–
For the
year ended
30 June
2022
$
43,321,479
758,442
(13,077,671)
50,871,576
Closing balance of franking account
54,404,178
81,873,826
Franking credits on dividends receivable
19,931
–
Franking credits available for use in subsequent reporting periods
54,424,109
81,873,826
42
4
Dividend income
Dividend income from financial assets at fair value
Dividend income from financial assets at fair value –
Investments sold during the year
Dividend income from financial assets at fair value –
Investments held at year end1
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
863,595
1,504,974
4,851,499
2,673,042
Dividend income from financial assets at fair value
5,715,094
4,178,016
Withholding tax on dividends
(363,228)
(126,426)
Dividend income from financial assets at fair value
5,351,866
4,051,590
1 Dividend income related to investments in other comprehensive income as of 30 June 2023 is $1,103,213
(2022: 912,876).
5
Remuneration of auditors
During the year, the following fees were paid or payable for services provided by the auditor of the Company, its related
practices and non-related audit firms:
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
53,369
4,125
57,494
30 June
2023
$
854,272
8,609
52,279
8,525
60,804
30 June
2022
$
164,890
337
862,881
165,227
Audit and review of financial statements
Other services provided by related practice of the auditor
Taxation services
Total remuneration for audit and other assurance services
6
Other receivables
Dividend receivable
Other receivables
Total other receivables
43
7
Donation provision
Donation provision
Total donation provision
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
30 June
2023
$
30 June
2022
$
5,726,006
5,875,169
5,726,006
5,875,169
For the year ended 30 June 2023, the amount recognised in the Statement of Comprehensive Income as an expense
was $10,090,124 (2022: $12,070,528). This amount represents donations paid or payable to medical research
beneficiaries to advance medical research in Australia. As at 30 June 2023, the amount recorded as a donation
provision in the Statement of Financial Position of $5,726,006 (2022: $5,875,169) represents a provision for donations
payable to medical research beneficiaries at balance date.
8
Share capital
(a) Issued capital
Ordinary shares
Ordinary shares
(b) Movements in share capital
Opening balance
Shares issued at $2.31 per share
Closing balance
30 June
2023
No. of shares
30 June
2023
$
228,802,420
574,476,801
30 June
2022
No. of shares
30 June
2022
$
227,850,849
572,278,169
For the
year ended
30 June
2023
No. of shares
For the
year ended
30 June
2023
$
227,850,849
951,571
572,278,169
2,198,632
228,802,420
574,476,801
44
8
Share capital (continued)
(b) Movements in share capital (continued)
Opening balance
Shares issued at $2.88 per share
Closing balance
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
For the
year ended
30 June
2022
No. of shares
For the
year ended
30 June
2022
$
226,033,818
1,817,031
567,043,973
5,234,196
227,850,849
572,278,169
On 4 April 2023 the Company issued 951,571 fully paid ordinary shares at $2.31 pursuant to the dividend reinvestment
plan. In the prior financial year, on 12 April 2022 the Company issued 1,817,031 fully paid ordinary shares at $2.88
pursuant to the dividend reinvestment plan.
9
Reserves and accumulated losses
(a) Reserves
Investment portfolio revaluation reserve
Profits reserve
Accumulated losses
Total reserves
(b) Investment portfolio revaluation reserve
Opening balance
Net realised gains on investments
Income tax on net realised gains on investments
Net unrealised gains/(losses) on investments
Deferred income tax on unrealised gains/(losses) on investments
Transfer to profits reserve
30 June
2023
$
30 June
2022
$
9,886,072
153,270,754
(62,110,751)
(10,342,285)
174,031,046
(94,837,235)
101,046,075
68,851,526
For the
year ended
30 June
2023
$
(10,342,285)
14,284,414
(4,285,324)
28,897,653
(8,669,296)
(9,999,090)
For the
year ended
30 June
2022
$
152,272,375
54,089,546
(16,226,864)
(232,306,657)
69,691,997
(37,862,682)
Closing balance
9,886,072
(10,342,285)
45
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
9
Reserves and accumulated losses (continued)
(c) Net realised (losses)/gains on investments
During the year a number of investments held at fair value were sold realising a net loss as set out below. The
investments were sold following recommendations from our portfolio fund managers and in accordance with our
investment strategy.
Proceeds from sale of investments
Original cost of investments sold
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
444,410,176
(501,610,995)
466,054,222
(433,678,566)
Net realised (losses)/gains on investments before tax
(57,200,819)
32,375,656
(d) Profits reserve
Opening balance
Transfer to investment portfolio revaluation reserve
Dividends
Closing balance
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
174,031,046
9,999,090
(30,759,382)
166,682,929
37,862,682
(30,514,565)
153,270,754
174,031,046
During the year, the Company paid a fully franked dividend of $0.135 per share to shareholders amounting to a total
dividend payment of $30,759,382, of which $3,766,855 was reinvested by shareholders in HM1 shares via the dividend
reinvestment plan. In the prior year, the Company paid a fully franked dividend of $0.135 per share to shareholders
amounting to a total dividend payment of $30,514,565, of which $5,234,196 was reinvested by shareholders in
additional HM1 shares via the dividend reinvestment plan.
(e) Accumulated losses
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
(94,837,235)
32,726,484
–
(94,837,235)
(62,110,751)
(94,837,235)
Opening balance
Net income/(loss) for the year
Closing balance
46
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
10
Cash and cash equivalents
Cash at the end of the reporting year as shown in the Statement of Cash Flows is reconciled to the related items in the
Statement of Financial Position as follows:
Cash at bank
Cash at custodian
Total cash and cash equivalents
30 June
2023
$
30 June
2022
$
3,866,782
55,379,807
3,086,828
118,939,538
59,246,589
122,026,366
The cash at bank is denominated in AUD, is at call and is earning interest at a fixed rate of 0.01% (2022: 0.01%). The
cash at custodian is at call and denominated in AUD, United States Dollars (“USD”), Japanese Yen (“JPY”), Hong
Kong Dollars (“HKD”), Canadian Dollars (“CAD”), Euros (“EUR”) and British Pound Sterling (“GBP”) and is non-
interest bearing.
Risk exposure
The Company’s exposure to interest rate risk is discussed in Note 13. The maximum exposure to credit risk in relation
to cash at the end of the reporting year is the carrying amount of cash in bank and cash at custodian.
Cash in bank is with Commonwealth Bank of Australia that has a Standard and Poor’s short-term rating of A-1+ (2022:
A-1+) and long-term rating of AA- (2022: AA-). Cash at custodian is with JP Morgan Chase Bank that has a short-term
rating of A-1 (2022: A-1) and a long-term rating of A+ (2022: A+).
11
Reconciliation of net loss for the year to net cash provided by/(used in) operating activities
Net income/(loss) for the year
Fair value (gains)/losses and movements in financial assets at fair value
through profit or loss
Effects of foreign currency exchange rate changes on cash and cash
equivalents
Change in operating assets and liabilities:
(Increase)/decrease in other receivables
Decrease/(increase) in deferred tax assets
Decrease/(increase) in current tax asset
Decrease in donation provision
Increase in deferred tax liabilities
Increase in other payables
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
32,726,484
(94,837,235)
(50,183,334)
137,685,978
(2,036,582)
(11,032,418)
(697,654)
17,388,941
10,540,593
(149,163)
–
12,250
110,099
(36,361,792)
(60,390,312)
(500,109)
4,351,133
87,750
Net cash provided by/(used in) operating activities
7,601,535
(60,886,906)
47
12
Basic and diluted loss per share
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
Net income/(loss) for the year used in the calculation of basic and diluted loss
per share attributable to the ordinary equity holders of the Company
32,726,484
(94,837,235)
For the
year ended
30 June
2023
$
For the
year ended
30 June
2022
$
Basic and diluted earnings/(loss) per share attributable to the ordinary equity
holders of the Company
14.35
(41.88)
Weighted average number of shares used as denominator
For the
year ended
30 June
2023
No. of shares
For the
year ended
30 June
2022
No. of shares
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted earnings/(loss) per share attributable to the
ordinary equity holders of the Company
228,054,198
226,428,174
At the end of the year, there were no outstanding securities that are potentially dilutive in nature for the Company (2022:
None).
13
Financial risk management
The Company’s financial instruments consist mainly of cash and cash equivalents, other receivables, financial assets
at fair value through profit or loss, financial assets at fair value through other comprehensive income and other payables.
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk,
and equity price risk), credit risk, liquidity risk and other risks. The Board of the Company have implemented a risk
management framework to mitigate these risks.
Risks are managed in the context of the Company’s strategic objectives, the size and complexity of its operations, and
the Board’s expectations and attitude to risk. The Company has implemented a risk management framework based on
the Australian New Zealand International Standard Organisation 31000:2009 Risk management – Principles and
guidelines. Details of the Company’s risk management framework are available on the Company’s website.
48
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
13
Financial risk management (continued)
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market prices.
The investment portfolio is exposed to market risk. The market risk of securities in the Company’s investment portfolio
can fluctuate as a result of market conditions. The value of the investment portfolio may be impacted by factors such
as economic conditions, interest rates, currency exchange rates, regulations, sentiment and geopolitical events as well
as environmental, social and technological changes. In addition, as the Company is listed on the ASX, its securities are
exposed to market risks. As a result, the security price may trade at a discount or a premium to its net tangible assets.
Currency risk
The Company holds monetary assets denominated in currencies other than the Australian dollar. The Company
monitors the exposure on all foreign currency denominated assets and liabilities.
The Company does not hedge against its foreign exchange exposure, and consequently, the impact of foreign
exchange movements is directly reflected in the Statement of Comprehensive Income.
While the Company has direct exposure to foreign exchange rate changes on the price of non-Australian dollar
denominated investments, it may also be indirectly affected by the impact of foreign exchange rate changes on the
earnings of certain investments in which the Company invests, even if those investments are denominated in Australian
dollars. For that reason, the sensitivity analysis below may not necessarily indicate the total effect on the Company’s
equity of future movements in foreign exchange rates.
The table below summarises the Company’s monetary assets exposed to foreign currency risk at 30 June 2023 and
30 June 2022:
United States Dollar
Euro
Canadian Dollar
Pound Sterling
Hong Kong Dollar
Japanese Yen
Total
* As percentage of investment portfolio exposure.
30 June 2023
Net currency
exposure*
%
30 June 2022
Net currency
exposure*
%
56
10
3
2
1
–
72
60
3
4
1
3
2
73
49
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
13
Financial risk management (continued)
Market risk (continued)
Sensitivity
The following tables illustrate the sensitivities of the Company’s monetary assets and liabilities to foreign exchange risk.
The analysis is based on the assumption that the AUD weakened/strengthened by 10% against the other currencies.
30 June 2023
Impact on total comprehensive
income
30 June 2022
Impact on total comprehensive
income
Equity price risk
USD impact HKD impact EUR impact JPY impact CAD impact GBP impact
AUD
AUD
AUD
AUD
AUD
AUD
+/-25,232,459
+/-569,475 +/-4,110,730
+/- – +/-1,326,689
+/-843,704
USD impact HKD impact EUR impact JPY impact CAD impact GBP impact
AUD
AUD
AUD
AUD
AUD
AUD
+/- 24,878,177
+/- 856,475
+/- 392,231
+/- 710,585 +/- 1,226,689
+/- 550,815
The Company is exposed to price risk on its financial assets classified in the Statement of Financial Position as financial
assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. There
is a risk that securities will fall in value over short or extended periods of time. Equity markets tend to move in cycles,
and individual share prices may fluctuate and underperform other asset classes over extended periods of time. The
Company’s typical investment portfolio is expected to hold 25 to 30 securities, which represents a high level of
investment concentration. The lower the number of investments, the higher the concentration and, in turn, the higher
the potential volatility. The Company seeks to manage and constrain market risk by diversification of the investment
portfolio across a number of fund managers.
Price risk also arises from the Company’s investments in unlisted securities, whose valuation is based on the valuation
of the underlying companies or funds of those unlisted securities. All investments present a risk of loss of capital. The
Company mitigates this risk through careful selection of unlisted securities within defined limits. The underlying
companies or funds are subject to the risks inherent in their industries. Moreover, established markets do not exist for
these holdings, and they are therefore considered illiquid in nature.
The Company follows a due diligence process prior to making an investment in an unlisted security. In making an
investment decision, the Company considers both qualitative and quantitative criteria in the areas of financial
performance, business strategy and risk, such as financial information obtained through the underlying investment
manager and from information gathered from external sources. The Company also performs ongoing monitoring
procedures primarily through discussions with the underlying investment managers.
Sensitivity
The following table illustrates the effect on the Company’s equity from possible changes in the fair value of financial
assets that were reasonably possible based on the market risk that the Company was exposed to at reporting date,
assuming a tax rate of 30%.
Impacts on total profit and loss
MSCI World Index (AUD)
Change in variable +/- 5%
Change in variable +/- 10%
Impacts on total comprehensive income
MSCI World Index (AUD)
Change in variable +/- 5%
Change in variable +/- 10%
50
30 June 2023
$
30 June 2022
$
16,798,305
33,596,609
6,564,370
13,128,741
4,523,113
9,046,225
16,518,628
33,037,256
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
13
Financial risk management (continued)
Market risk (continued)
Cash flow and interest rate risk
The Company’s interest-bearing financial assets expose it to risks associated with the effects of fluctuations in the
prevailing levels of market interest rates on its financial position and cash flows. The tables below summarise the
Company’s exposure to interest rate risks:
30 June 2023
Financial assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive
income
Other receivables
Interest Non-interest
bearing
bearing
$
$
Total
$
3,866,782
–
55,379,807
479,951,559
59,246,589
479,951,559
–
–
129,231,792
862,881
129,231,792
862,881
Total financial assets
3,866,782
665,426,039
669,292,821
Financial liabilities
Donation provision
Other payables
Total financial liabilities
30 June 2022
Financial assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive
income
Other receivables
–
–
–
5,726,006
100,000
5,726,006
100,000
5,826,006
5,826,006
Interest Non-interest
bearing
bearing
$
$
Total
$
3,086,828
–
118,939,538
187,553,443
122,026,366
187,553,443
–
–
284,407,363
165,227
284,407,363
165,227
Total financial assets
3,086,828
591,065,571
594,152,399
Financial liabilities
Donation provision
Other payables
Total financial liabilities
Sensitivity
–
–
–
5,875,169
87,750
5,875,169
87,750
5,962,919
5,962,919
Profit or loss is sensitive to higher/lower interest income from cash and cash equivalents as a result of changes in
interest rates. At 30 June 2023, if interest rates had increased by 200 basis points (bps) or decreased by 200 bps from
the year end rates with all other variables held constant, post tax profit for the year would have been $1,903,366
(2022: $1,719,302) higher or $1,903,366 (2022: $1,719,302) lower, as a result of higher or lower interest income from
cash and cash equivalents.
51
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
13
Financial risk management (continued)
Market risk (continued)
Sensitivity (continued)
Interest rate risk also arises from the effects of fluctuations in the prevailing levels of market interest rates on the
Company’s financial assets at fair value through profit or loss and financial assets at fair value through other
comprehensive income. The sensitivity to changes in the value of financial assets at fair value through other
comprehensive income is set out in the price risk and currency risk sensitivity tables. The Directors do not consider it
meaningful to provide a separate analysis of the sensitivity of the investment portfolio to changes in interest rates.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to
discharge an obligation.
Credit risk primarily arises from cash and cash equivalents, deposits with banks and other financial institutions and
other receivables.
The maximum exposure to credit risk at balance sheet date of recognised financial assets is the carrying amount, net
of any provisions for expected credit losses of those assets, as disclosed in the Statement of Financial Position and
Note 10 to the financial statements.
The Company held no collateral as security or any other credit enhancements. None of the assets exposed to a credit
risk are overdue or considered to be impaired.
Liquidity risk
Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities. The Board and Investment Committee monitor the Company’s cash flow requirements in relation to the
investment portfolio taking into account dividends, tax payments and investing activity.
The Company’s inward cash flows depend on the level of dividend and interest revenue received, investment disposals
and capital raising initiatives from time to time. Should these decrease by a material amount, the Company would
amend its outward cash flows accordingly. The major cash outflows are investments, donations, general expenditure
and future dividends paid to shareholders and the level of these outflows is managed by the Board and Investment
Committee. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities. A
sufficient level of the Company’s cash is held at call to meet cash outflows and mitigate liquidity risk.
52
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
13
Financial risk management (continued)
Liquidity risk (continued)
The tables below summarise the maturity profile of the Company’s financial assets and financial liabilities based on
contractual undiscounted cash flows:
1 to 3
months
$
3 to
12 months
$
More than
12 months
$
No fixed
maturity
$
Total
$
1 to 3
months
$
3 to
12 months
$
More than
12 months
$
No fixed
maturity
$
Total
$
–
–
–
–
–
–
–
–
–
–
59,246,589
– 479,951,559 479,951,559
– 129,231,792 129,231,792
862,881
–
–
– 609,183,351 669,292,821
–
–
–
–
–
–
5,726,006
100,000
5,826,006
–
–
–
–
–
–
–
–
–
– 122,026,366
– 187,553,443 187,553,443
– 284,407,363 284,407,363
165,227
–
–
– 471,960,806 594,152,399
–
–
–
–
–
–
5,875,169
87,750
5,962,919
–
–
–
–
–
–
–
–
–
–
30 June 2023
Financial assets
Cash and cash equivalents
Financial assets at fair value
through profit or loss
Financial assets at fair value
through other comprehensive
income
Other receivables
On demand
$
59,246,589
–
–
862,881
Total financial assets
60,109,470
Financial liabilities
Donation provision
Other payables
–
100,000
5,726,006
–
Total financial liabilities
100,000
5,726,006
30 June 2022
Financial assets
Cash and cash equivalents
Financial assets at fair value
through profit or loss
Financial assets at fair value
through other comprehensive
income
Other receivables
On demand
$
122,026,366
–
–
165,227
Total financial assets
122,191,593
Financial liabilities
Donation provision
Other payables
–
87,750
5,875,169
–
Total financial liabilities
87,750
5,875,169
53
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
14
Financial assets
Fair value measurements
(a) Fair value estimation
Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at
the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset
takes place either in the principal market for the asset or, in the absence of a principal market, in the most advantageous
market for the asset. The principal or the most advantageous market must be accessible to the Company. The fair
value of an asset is measured using the assumptions that market participants would use when pricing the asset,
assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset
takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and
best use or by selling it to another market participant that would use the asset in its highest and best use.
For all other financial instruments not traded in an active market, the fair value is determined using valuation techniques
deemed to be appropriate in the circumstances. Valuation techniques include the market approach (i.e., using recent
arm’s length market transactions, adjusted as necessary, and reference to the current market value of another
instrument that is substantially the same) and the income approach (i.e., discounted cash flow analysis and option
pricing models making as much use of available and supportable market data as possible).
The fair value for financial instruments traded in active markets at the reporting date is based on their quoted closing
price, without any deduction for transaction costs.
For assets that are measured at fair value on a recurring basis, the Company identifies transfers between levels in the
hierarchy by re-assessing the categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole), and deems transfers to have occurred at the beginning of each reporting year.
(b) Fair value hierarchy
AASB 13 Fair Value Measurement requires the disclosure of fair value information using a fair value hierarchy reflecting
the significance of the inputs in making the measurements. The fair value hierarchy consists of the following levels:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (Level 2); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
The following tables present the Company’s assets and liabilities measured and recognised at fair value at:
30 June 2023
Financial assets at fair value through
profit or loss
Listed equity securities on major exchanges
Unlisted equity securities
Financial assets at fair value through other
comprehensive income
Listed equity securities on major exchanges
Level 1
$
Level 2
$
Level 3
$
Total
$
423,574,173
–
–
15,465,021
–
40,912,365
423,574,173
56,377,386
129,231,792
–
–
129,231,792
Total financial assets at fair value
552,805,965
15,465,021
40,912,365
609,183,351
54
14
Financial assets (continued)
Fair value measurements (continued)
(b) Fair value hierarchy (continued)
30 June 2022
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
Level 1
$
Level 2
$
Level 3
$
Total
$
Financial assets at fair value through
profit or loss
Listed equity securities on major exchanges
187,553,443
Financial assets at fair value through other
comprehensive income
Listed equity securities on major exchanges
284,407,363
Total financial assets at fair value
471,960,806
–
–
–
–
187,553,443
–
–
284,407,363
471,960,806
There were no transfers between levels for recurring fair value measurements during the year (2022: None).
The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the
reporting year.
The carrying amounts of other receivables and other payables are assumed to approximate their fair values due to their
short-term nature.
Valuation techniques and key inputs used in Level 2 and Level 3 fair value measurements:
Fair value as at
30 June
2023
$
Valuation
techniques
Unobservable
inputs
Range
inputs
Recurring fair value measurements
Financial assets at fair value through
profit or loss:
Unlisted equity securities
56,377,386
(c) Level 3 fair value measurements
Recent material
arm’s length
market
transaction
N/A
N/A
The table below shows reconciliation of all movements in the fair value of Level 3 investments:
At beginning of year
Purchases
Net change in unrealised gain
At end of year
2023
$
2022
$
–
39,625,405
1,286,960
40,912,365
–
–
–
–
The net change in unrealised gain on Level 3 investments still held as at year end that amounted to $1,286,960
(2022: Nil) was included in the Statement of Comprehensive Income.
55
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
14
Financial assets (continued)
Fair value measurements (continued)
(c) Level 3 fair value measurements (continued)
Valuation process for Level 3 investments
The Company holds investments in unlisted securities which are not quoted in an active market and the inputs for
measuring fair value are not based on observable market data. Transactions in such investments do not occur on a
regular basis. These investments are valued at fair value. The method that the Company uses to determine the fair
value of these investments is generally the most recent material arm’s length transaction or the latest available price
or valuation received from the underlying investment manager. The Board has determined that it is appropriate to use
these transactions or latest available prices or valuations in determining the fair value of the investments in unlisted
securities. The Company classifies the fair value of these investments as Level 3 in the fair value hierarchy.
The latest available price received from the underlying investment manager of an unlisted security is calculated by the
relevant underlying investment manager in accordance with their methodologies and assumptions to determine the fair
value of the investment in any portfolio companies. The methodologies that are used by the underlying investment
manager to determine the fair value of the Company’s investment in any unlisted portfolio companies are as follows:
market approach (whereby fair value is derived by reference to observable transactions or valuation measures
for comparable companies or assets including any recent transactions in the unlisted security);
income approach (such as the discounted projected cash flow method); or
cost approach, as the best initial approximation of fair value upon acquisition of an investment.
The Company does not utilise valuation models to calculate the fair value of its investments in unlisted securities. The
most recent material arms-length transaction or latest available price or valuation received from the underlying
investment manager are considered to be the key inputs in the determination of fair value. The Company does not have
any other key assumptions concerning the future, or other key sources of estimation uncertainty in the reporting period,
which may have a significant risk of causing a material adjustment to the Company’s net asset value within the next
financial year. However, the Company has the following control procedures in place to evaluate whether the carrying
value of the unlisted securities is calculated in a manner consistent with AASB 13 Fair Value Measurement:
Thorough initial due diligence process and ongoing monitoring procedures, primarily discussions with the
underlying investment manager;
Historical realisations or quoted market values of comparable companies to the last reported fair values;
Review of the financial statements, key assumptions and significant judgements used in determining the fair
value of each investment;
The evaluation of detailed valuation assessments provided by the investment manager, (where available).
Due to the inherent uncertainty of the valuation of the unlisted securities, the values used and the methodologies and
assumptions adopted in the valuation may differ significantly from the values that would have been used had a ready
market for the investment existed and the differences could be significant. These values may need to be revised as
circumstances change and material adjustments may still arise as a result of the revaluation of the unlisted securities
within the next financial period.
56
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
15
Segment information
The Company is solely engaged in investment activities, deriving revenue from dividend income, interest income and
from the sale of its investments. It has no reportable business or geographical segments.
The Company’s investments are listed equity securities on major exchanges. The split of the Company’s investments
by the country of listing is set out below.
30 June 2023
30 June 2022
Country of Listing Country of Listing
%
%
United States
Australia
Germany
Canada
United Kingdom
Hong Kong
56
28
10
3
2
1
58
29
–
8
4
1
100
100
16
Key management personnel compensation
The names and positions held of the Company’s key management personnel (KMP) (including Directors in office at
any time during the year ended 30 June 2023) are:
Christopher Cuffe AO
Lorraine Berends
Guy Fowler
Matthew Grounds AM
Michael Traill AM
Gary Weiss AM
Geoffrey Wilson AO
David Wright
Paul Rayson
Rory Lucas
Charlie Lanchester
(a) Remuneration
Chairman and Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Chief Executive Officer
Chief Investment Officer
Chief Investment Officer
KMP include the Directors, the Chief Executive Officer and the Chief Investment Officer. Directors have agreed to waive
their directors’ fees on an ongoing basis. For the year ended 30 June 2023, no directors’ fees were paid by the
Company. The remuneration of the Chief Executive Officer and the Chief Investment Officer are set out below. The
Chief Executive Officer and the Chief Investment Officer are employed under standard employment contracts with a
three month notice period. The remuneration of the Chief Executive Officer and the Chief Investment Officer is salary
based and does not include securities or options in the Company and no element of the remuneration is tied to Company
performance. The Chief Executive Officer and the Chief Investment Officer are not provided with retirement benefits
apart from statutory superannuation
57
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
16
Key management personnel compensation (continued)
(a) Remuneration (continued)
Year ended 30 June 2023
Paul Rayson
Charlie Lanchester (commenced 12/4/23)
Post Employee
Rory Lucas (employment ceased 1/2/23)
Short-term
benefits
Salary
$
274,708
66,250
Termination
employment
Total
benefits Remuneration
Post-
benefits Superannuation
$
$
–
–
25,292
5,550
$
300,000
71,800
188,125
205,904*
16,042
410,071
* Includes payment for notice period and statutory entitlements
Year ended 30 June 2022
Paul Rayson
Rory Lucas
(b) Shareholdings
Short-term
benefits
Salary
$
218,216
243,216
Termination
employment
Total
benefits Remuneration
Post-
benefits Superannuation
$
$
–
–
19,784
19,784
$
238,000
263,000
The Company’s KMP and their related parties held the following interests in the Company:
30 June 2023
Directors and Key Management
Opening
balance Acquisitions
Christopher Cuffe AO
Lorraine Berends
Guy Fowler
Matthew Grounds AM
Michael Traill AM
Gary Weiss AM
Geoffrey Wilson AO
David Wright
Paul Rayson
Rory Lucas
Charlie Lanchester
1,153,300
45,000
1,258,042
1,201,397
1,172,281
495,002
1,687,500
95,000
149,907
131,371
–
25,000
–
–
–
–
3,876
–
–
–
–
89,061
Disposals
(1,103,300)*
–
–
–
(1,100,000)*
–
–
–
–
(131,371)
–
Closing
balance
75,000
45,000
1,258,042
1,201,397
72,281
498,878
1,687,500
95,000
149,907
–
89,061
* Due to an internal process and approval change made by Australian Philanthropic Services, Mr Christopher Cuffe
and Mr Michael Traill were no longer deemed to control the 1,100,000 HM1 shares held by Australian Philanthropic
Services Foundation on 30 June 2022.
58
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
16
Key management personnel compensation (continued)
(b) Shareholdings (continued)
30 June 2022
Directors and Key Management
Opening
balance Acquisitions
Disposals
Christopher Cuffe AO
Lorraine Berends
Guy Fowler
Matthew Grounds AM
Michael Traill AM
Gary Weiss AM
Geoffrey Wilson AO
David Wright
Paul Rayson
Rory Lucas
1,100,000
45,000
1,258,042
1,201,397
1,172,281
495,002
1,687,500
95,000
149,907
116,041
53,300
–
–
–
–
–
–
–
–
35,330
–
–
–
–
–
–
–
–
–
(20,000)
Closing
balance
1,153,300
45,000
1,258,042
1,201,397
1,172,281
495,002
1,687,500
95,000
149,907
131,371
Directors, other KMP and Director related entities disposed of and acquired ordinary shares in the Company on the
same terms and conditions available to other shareholders. The Directors have not, during or since the end of financial
year, been granted options over unissued shares or interests in shares of the Company as part of their remuneration.
17
Related party transactions
All transactions with related entities were made on normal commercial terms and at market rates, except as noted
below.
Investment and management fees
The Company will forego any investment and management fees associated with implementing and managing the
investment strategy. Instead, donations will be paid by the Company to the designated charities every six months.
The Company Secretary has waived his right to receive fees. The Company holds professional indemnity insurance to
his benefit. He receives an indemnity as an officer of the Company to the maximum extent permitted by law and is
entitled to be reimbursed for any external costs and expenses he incurs. The Company Secretary is a General Manager
of Boardroom Pty Limited. Boardroom Pty Limited provide company secretarial services to the Company.
Matthew Grounds is Chairman of Victor Chang Cardiac Research Institute which is a designated medical research
beneficiary of Hearts and Minds Investments Limited. The Company donated $5,036,644 to Victor Chang Cardiac
Research Institute for the year ended 30 June 2023 (2022: $6,298,991).
Gary Weiss is a Non-Executive Director of Victor Chang Cardiac Research Institute which is a designated medical
research beneficiary of Hearts and Minds Investments Limited. The Company donated $5,036,644 to Victor Chang
Cardiac Research Institute for the year ended 30 June 2023 (2022: $6,298,991).
Michael Traill is a Director of Paul Ramsay Foundation. Paul Ramsay Foundation holds 4,270,106 shares in HM1 on
30 June 2023 (2022: 4,270,106).
Michael Traill is a Director of Australian Philanthropic Services. Australian Philanthropic Services provides due diligence
services on HM1’s medical research beneficiaries on normal commercial terms amounting to $8,800 for the year
30 June 2023 (2022: $4,400).
Chris Cuffe is a Director of Australian Philanthropic Services. Australian Philanthropic Services provides due diligence
services on HM1’s medical research beneficiaries on normal commercial terms amounting to $8,800 for the year
30 June 2023 (2022: $4,400).
Directors’ fees
The Directors have agreed to waive any right to be paid director fees (see Note 16).
59
Hearts and Minds Investments Limited
Notes to the Financial Statements (continued)
For the year ended 30 June 2023
18
Commitments and contingencies
The Company had no material contingent liabilities or commitments as at 30 June 2023 (2022: Nil).
19
Events occurring after the reporting year
No matter or circumstance has occurred subsequent to year end that has significantly affected, or may significantly
affect, the operations of the Company, the results of those operations or the state of affairs of the Company in
subsequent financial years.
60
Hearts and Minds Investments Limited
Directors’ Declaration
For the year ended 30 June 2023
Directors’ Declaration
In accordance with a resolution of the Directors of Hearts and Minds Investments Limited (the “Company”), the
Directors of the Company declare that:
(a) The financial report as set out in pages 33 to 58 and the additional disclosures included in the Directors’ Report
designated as ‘Remuneration Report’, as set out on pages 27 to 28, are in accordance with the Corporations Act
2001, including:
(i) complying with Australian Accounting Standards, which, as stated in Note 2 to the financial statements,
constitutes compliance with International Financial Reporting Standards, the Corporations Regulations 2001
and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the financial position of the Company as at 30 June 2023 and of its performance,
as represented by the results of the operations and the cash flows, for the year ended on that date.
(b) At the date of this declaration, in the Director’s opinion there are reasonable grounds to believe that the Company
will be able to pay its debts as and when they become due and payable.
(c) The Directors have been given the declaration required by section 295A of the Corporations Act 2001 from the
person who performs the Chief Executive Officer and Chief Financial Officer functions, for the purpose of the
Corporations Act 2001.
Signed in accordance with a resolution of the Board of Directors made pursuant to section 295(5)(a) of the Corporations
Act 2001.
Christopher Cuffe AO
Chairman and Independent Director
Sydney
29 August 2023
61
Pitcher Partners Sydney Partnership
Level 16, Tower 2 Darling Park
201 Sussex Street
Sydney NSW 2000
Postal Address
GPO Box 1615
Sydney NSW 2001
p. +61 2 9221 2099
e. sydneypartners@pitcher.com.au
Independent Auditor’s Report
To the Members of Hearts and Minds Investments Limited
ABN 61 628 753 220
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Hearts and Minds Investments Limited (“the
Company”), which comprises the statement of financial position as at 30 June 2023, the
statement of comprehensive income, the statement of changes in equity and the statement of
cash flows for the year ended 30 June 2023, and notes to the financial statements, including
a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of Hearts and Minds Investments Limited is
in accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the Company’s financial position as at 30 June 2023
and of its financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities
for the Audit of the Financial Report section of our report. We are independent of the
Company in accordance with the auditor independence requirements of the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (“the Code”) that are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the Directors of the Company, would be on the same terms if given to the
Directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Adelaide Brisbane Melbourne Newcastle Perth Sydney
62
Pitcher Partners is an association of independent firms.
Pitcher Partners Sydney Partnership. ABN 17 795 780 962. Liability limited by a scheme approved under Professional
Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the
members of which are separate and independent legal entities.
pitcher.com.au
Independent Auditor’s Report
To the Members of Hearts and Minds Investments Limited
ABN 61 628 753 220
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report of the current year. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the matter
Existence and Valuation of Financial Assets
Refer to Note 14: Financial Assets
The Company’s financial assets are its
largest asset and represent the most
significant driver of the Company’s Net
Tangible Assets and operating result.
The majority of the Company’s investments
are considered to be non-complex in
nature with fair value based on readily
observable data from the ASX and are
therefore classified as Level 1.
The Company has also made an
investment into an unlisted managed
investment scheme which involves
judgement in determining the fair value of
the investment and is considered Level 2.
The remaining investments are considered
to be Level 3, where the investment is not
traded in an active market and fair value is
determined using valuation techniques
where there are judgements involved in
determining the fair value of the
investments. For Level 3 investments the
models used to value these investments
include inputs which may not be market
observable and are therefore estimated
based on assumptions.
Given the significance of the investments
balance, the key audit matter for us was
whether the Company has accurately
recorded the fair value and has ownership
at year end
Our procedures included, amongst others:
· Obtaining an understanding of and
evaluating the investment management
processes and controls;
· Reviewing and evaluating the independent
auditors’ report on the design and operating
effectiveness of internal controls (ASAE 3402
Assurance Reports on Controls at a Service
Organisation) for the Administrator and
Custodian;
· Making enquiries as to whether there have
been any changes to these controls or their
effectiveness from the periods to which the
auditors’ report relate to and obtaining a
bridging letter;
· Obtaining confirmation of the investment
holdings directly from the Custodian;
· For level 1 securities: Comparing the
investment valuation of the Company at last
sale price ensuring that the last sale price is
within the bid-ask spread obtained from
independent pricing sources;
· For Level 2 securities: Obtaining information
on the latest reported unit price and
comparing to reported net asset values and
considered distribution statements;
· For level 3 securities: Selecting samples of
investments to review in detail, assessing
management’s assumptions and significant
judgements used in determining the fair
value of each investment;
· Evaluating the accounting treatment of
revaluations of financial assets for
current/deferred tax and unrealised gains or
losses; and
· Assessing the adequacy of disclosures in the
financial statements.
Pitcher Partners is an association of independent firms.
ABN 17 795 780 962.
Pitcher Partners Sydney Partnership.
63
Independent Auditor’s Report
To the Members of Hearts and Minds Investments Limited
ABN 61 628 753 220
Other Information
The Directors are responsible for the other information. The other information comprises the
information included in the Company’s Annual Report for the financial year ended 30 June
2023, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial report 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.
Responsibilities of the Directors for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the Directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the ability of the
Company to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a
whole is free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of
this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
·
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
· Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control.
· Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Directors.
Pitcher Partners is an association of independent firms.
64
ABN 17 795 780 962.
Pitcher Partners Sydney Partnership.
Independent Auditor’s Report
To the Members of Hearts and Minds Investments Limited
ABN 61 628 753 220
· Conclude on the appropriateness of the Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
· Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
We communicate with the Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Directors, we determine those matters that were of
most significance in the audit of the financial report of the current year and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 25 to 27 of the Directors’ Report
for the financial year ended 30 June 2023. In our opinion, the Remuneration Report of Hearts
and Minds Investments Limited, for the financial year ended 30 June 2023, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
S M Whiddett
Partner
29 August 2023
Pitcher Partners
Sydney
Pitcher Partners is an association of independent firms.
65
ABN 17 795 780 962.
Pitcher Partners Sydney Partnership.
Hearts and Minds Investments Limited
ASX Additional Information
For the year ended 30 June 2023
Additional Securities Exchange Information
In accordance with ASX Listing Rule 4.10, the Company provides the following information to shareholders not
elsewhere disclosed in this Annual Report. The information is current as at 28 July 2023 (Reporting Date).
Corporate Governance Statement
The Company has prepared a statement which sets out the corporate governance practices that were in operation
throughout the financial year for the Company, identifies any Recommendations that have not been followed, and
provides reasons for not following such Recommendations (Corporate Governance Statement).
In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will be available for
review on HM1’s website (www.heartsandmindsinvestments.com.au) and will be lodged together with an Appendix 4G
with ASX at the same time that this Annual Report is lodged with ASX.
Number of Holdings of Equity Securities
As at the Reporting Date, the number of holders in each class of equity securities on issue in HM1 is as follows:
Security type
Fully Paid Ordinary Shares
Voting Rights of Equity Securities
No. of
securities
228,802,420
No. of
shareholders
8,639
The only class of equity securities on issue in the Company which carry voting rights is ordinary shares.
At a general meeting of the Company, every holder of ordinary shares present in person or by proxy, attorney or
representative has one vote on a show of hands and on a poll, one vote for each ordinary share held. On a poll, every
member (or his or her proxy, attorney or representative) is entitled to vote for each fully paid share held and in respect
of each partly paid share, is entitled to a fraction of a vote equivalent to the proportion which the amount paid up (not
credited) on that partly paid share bears to the total amounts paid and payable (excluding amounts credited) on that
share. Amounts paid in advance of a call are ignored when calculating the proportion.
Distribution of Holders of Ordinary Shares
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
Totals:
Class of Ordinary Shares
Total
holders
1,393
2,761
1,587
2,710
188
8,639
Units
% Units
638,707
7,400,375
12,302,259
70,790,533
137,670,546
228,802,420
0.280
3.230
5.380
30.940
60.170
100.000
66
Hearts and Minds Investments Limited
ASX Additional Information (continued)
For the year ended 30 June 2023
Unmarketable Parcels
The number of holders of less than a marketable parcel of ordinary shares as at the Reporting Date is as follows:
Unmarketable Parcels as Reporting Date
Minimum $500.00 parcel at $2.38 per unit
Substantial Holders
Minimum
parcel size
210
Holders
311
Units
32,225
There are no substantial holders (voting interest greater than 5%) in Hearts and Minds Investments Limited as at
28 July 2023 (2022: Nil).
Twenty Largest Holders of Quoted Equity Securities
The Company only has one class of quoted securities, being ordinary shares. The names of the 20 largest holders of
ordinary shares, the number of ordinary shares and the percentage of capital held by each holder as at the Reporting
Date, is as follows:
Shareholder name
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Netwealth Investments Limited
Bnp Paribas Nominees Pty Ltd Barclays
Koll Pty Ltd
Beta Gamma Pty Ltd
Charles & Cornelia Goode Foundation Pty Ltd
Associated World Investments Pty Ltd
Skip Enterprises Pty Limited
Jane Hansen Super Pty Ltd
The Ian Potter Foundation Ltd
Wilson Foundation Pty Ltd
Bnp Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Kennbros Pty Limited
Navigator Australia Ltd
Bridgestar Pty Ltd
John Shearer (Holdings) Pty Limited
Australian Philanthropic Services Foundation Pty Ltd
Citicorp Nominees Pty Limited
Super Y Pty Ltd
Total number of shares of Top 20 Holders:
Total Securities:
Shares held
39,319,374
14,756,281
7,690,244
7,601,388
4,443,750
4,434,454
2,446,672
2,250,000
2,250,000
2,200,228
1,800,000
1,687,500
1,437,354
1,279,170
1,264,707
1,150,000
1,148,939
1,100,000
955,277
938,824
100,154,162
228,802,420
% Held
17.185%
6.449%
3.361%
3.322%
1.942%
1.938%
1.069%
0.983%
0.983%
0.962%
0.787%
0.738%
0.628%
0.559%
0.553%
0.503%
0.502%
0.481%
0.418%
0.410%
43.773%
100.000%
Unquoted Equity Securities
There are no unquoted equity securities.
Company Secretary
The Company Secretary is Mr Tom Bloomfield.
67
Hearts and Minds Investments Limited
ASX Additional Information (continued)
For the year ended 30 June 2023
Registered Office
The address and telephone number of the Company’s registered office is:
Level 8, 210 George Street
Sydney NSW 2000 Australia
Telephone +61 2 9290 9600
Share Registry
The address and telephone number of the Company’s share registry, Boardroom Pty Limited is:
Boardroom Pty Limited
Level 8, 210 George Street
Sydney NSW 2000 Australia
Phone No: +61 2 9290 9600
Stock Exchange Listing
The Company’s ordinary shares are quoted on the Australian Securities Exchange (ASX issuer code: HM1).
Other Information
There are no issues of securities approved for the purpose of Item 7 of Section 611 of the Corporations Act which have
not yet been completed. No securities were purchased on-market during the reporting period under or for the purposes
of an employee incentive scheme or to satisfy the entitlements of the holders of options or other rights to acquire
securities granted under an employee incentive scheme.
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