Annual Report and Financial Statements
for the period from 21 December 2017 (date of incorporation)
to 31 March 2019
INVESTMENT TRUST PLC About Us
Odyssean Investment Trust PLC (the “Company”, the “Trust” or “OIT”) is an
investment trust which is listed on the premium segment of the Official List of
the FCA and admitted to trading on the premium segment of the main market
for listed securities of the LSE. The Company had total net assets of £85.0m as at
31 March 2019.
The Board of the Company comprises four non-executive Directors, all of whom are independent of the portfolio manager,
Odyssean Capital LLP (“Odyssean” or the “Portfolio Manager”).
This is the first Annual Report and Financial Statements of the Company, covering the period from incorporation on
21 December 2017 to 31 March 2019.
ODYSSEAN INVESTMENT TRUST PLC Contents
OVERVIEW
2
3
4
Objective
Investment Policy
Financial Summary
STRATEGIC REPORT
6
8
14
15
16
18
Chairman’s Statement
Portfolio Manager’s Report
Portfolio of Investments
Distribution of Investments
Strategic Overview
Risk Management
GOVERNANCE
23
25
29
34
37
40
Board of Directors and Portfolio Manager
Directors’ Report
Corporate Governance Statement
Audit Committee Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
43
48
49
50
51
52
Independent Auditor’s Report
Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheet
Cash Flow Statement
Notes to the Financial Statements
ADDITIONAL INFORMATION
66
67
73
74
Shareholder Information
Notice of Annual General Meeting
Glossary
Corporate Information
Form of Proxy
Enclosed separately
1
ODYSSEAN INVESTMENT TRUST PLC Investment Objective
The investment objective of the Company
is to achieve attractive total returns
per share principally through capital
growth over a long-term period.
2
ODYSSEAN INVESTMENT TRUST PLC Investment Policy
The Company primarily invests in
smaller company equities quoted on
markets operated by the LSE, which
the Portfolio Manager believes are
trading below intrinsic value and where
this value can be increased through
strategic, operational, management and
financial initiatives.
It is expected that the majority of the portfolio by value
will be invested in companies too small to be considered
for inclusion in the FTSE 250 Index, although there are no
specific restrictions on the market capitalisation of issuers into
which the Company may invest.
The portfolio will typically consist of up to 25 holdings, with the
top 10 holdings accounting for the majority of the Company’s
aggregate NAV, across a range of industries.
The Company may hold cash in the portfolio from time to
time to maintain investment flexibility. There is no limit on
the amount of cash which may be held by the Company from
time to time.
Where the Company owns an influencing stake, it will
engage with other stakeholders to help improve value. The
Company may, at times, invest in securities quoted on other
recognised exchanges and/or unquoted securities.
Investment restrictions
– No exposure to any investee company will exceed
15.0% of NAV at the time of investment.
–
–
–
The Company may invest up to 20.0% of gross
assets at the time of investment in unquoted
securities where the issuer has its principal place of
business in the UK.
The Company may invest up to 20.0% of gross
assets at the time of investment in quoted securities
not traded on the LSE.
The Company will not invest more than 10.0%, in
aggregate, of gross assets at the time of investment
in other listed closed-ended investment funds.
Borrowings
The Company does not intend to incur borrowings for
investment purposes, although the Company may, from
time to time, utilise borrowings over the short term for
working capital purposes up to 10.0% of NAV at the time
of borrowing.
Derivatives and hedging
The Company will not use derivatives for investment
purposes. It is expected that the Company’s assets will be
predominantly denominated in Sterling and, as such, the
Company does not intend to engage in hedging arrangements.
However, the Company may do so if the Board deems it
appropriate for efficient portfolio management purposes.
General
The Company will not be required to dispose of any asset
or to rebalance the portfolio as a result of a change in the
respective valuations of its assets.
The Company intends to conduct its affairs so as to qualify
as an investment trust for the purposes of section 1158 of the
CTA.
Any material change to the Company’s investment policy set
out above will require the approval of shareholders by way of
an ordinary resolution at a general meeting and the approval
of the FCA. Non-material changes to the investment policy
may be approved by the Board.
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ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Financial Summary
Results for the period
Shareholders’ funds
NAV per ordinary share
Share price per ordinary share
Share price premium to NAV
Revenue return per ordinary share*
Capital return per ordinary share*
Total return per ordinary share*
* Based on the weighted average number of shares in issue during the period.
High/low
NAV
Share price
– high
– low
– high
– low
Share price premium to NAV – high
– low
Performance
NAV Total Return
NSCI ex IT plus AIM Index Total Return*
* Source: Bloomberg.
Cost of running the Company
Annualised ongoing charges*
* See glossary on page 73.
Past performance is not a guide to future performance.
4
As at 31 March 2019
£85.0m
96.3p
99.3p
3.1%
Period from IPO on
1 May 2018
to 31 March 2019
(0.6)p
(1.4)p
(2.0)p
Period from IPO on
1 May 2018
to 31 March 2019
99.8p
93.4p
107.5p
95.3p
9.7%
(1.3)%
Period from IPO on
1 May 2018
to 31 March 2019
(2.1)%
(9.0)%
Period from IPO on
1 May 2018
to 31 March 2019
1.6%
ODYSSEAN INVESTMENT TRUST PLC
Strategic Report
STRATEGIC REPORT
6
8
Chairman’s Statement
Portfolio Manager’s Report
Portfolio of Investments
14
15 Distribution of Investments
16
18
Strategic Overview
Risk Management
Chairman’s Statement
Introduction
I am pleased to present the first Annual Report and Financial
Statements for Odyssean Investment Trust PLC (“OIT”) which
covers the period from its incorporation on 21 December
2017 to 31 March 2019.
OIT was successfully launched in May 2018, raising gross
proceeds of £87.5m. This demonstrated strong investor
appetite for its concentrated, long-term, smaller company
focused strategy. As I said in the interim results, we are
extremely proud of the list of shareholders who have backed
the Company and on behalf of the Board, thank them all for
their continued support.
Performance
Since the launch of the Company, the Portfolio Manager has
built a portfolio which matches the Company’s investment
strategy and objectives. The team has worked hard to review a
large number of opportunities, completing over 130 meetings
with more than 75 companies, and carrying out detailed due
diligence to identify the most attractive investments.
This thoughtful, measured process has led the Portfolio
Manager to deploy capital progressively over the year. At
the end of the period, the Company was 78.6% invested in
15 quality quoted smaller companies, all apart from one
being quoted in the UK. This rate of deployment is broadly
in line with expectations at the time of launch. The Portfolio
Manager remains focused on finding the best opportunities
and will maintain adequate cash balances to allow flexibility
to exploit them.
In the period from IPO to the end of March 2019, the
Company has seen the NAV per ordinary share decline
by 2.1%, a creditable performance through a challenging
period for UK smaller companies which saw the comparator
index, the NSCI ex IT plus AIM, decline by 9.0%. Data
contained in the Portfolio Manager’s review indicates that the
approach and its execution has added value over and above
maintaining a cash balance in challenging markets.
6
Discount and premium management
The share price has remained resilient since IPO and at the
period end was trading at a 3.1% premium to NAV, compared
to a sector discount of 4.4%. The Board has been mindful
of premium management and has issued a further 800,000
shares since the IPO to satisfy market demand. The Board,
supported by the views of our shareholders, is keen to see
a progressive and sustainable increase in the size of the
Company over time.
The Board
We have an excellent Board of independent non-executive
Directors. They have demonstrated their commitment to the
investment strategy by undertaking to reinvest their Directors’
fees (net of applicable taxes) into the Company, thus aligning
their interests with its shareholders.
The Portfolio Manager signifies its long-term commitment to
its shareholders by reinvesting 50.0% of any performance
fee due, on top of its team's considerable investment at IPO.
26.0% of the Company is currently held internally, which
demonstrates the Portfolio Manager’s commitment to the
strategy.
Portfolio Manager update
We announced on 26 March 2019 that Stuart Widdowson
would be taking three months’ compassionate leave from
Odyssean Capital LLP. Ian Armitage, Chairman of the
Portfolio Manager, has been and will continue to provide
additional support during this period. The Board is confident
that the measures put in place, based on the foundations
and processes that the Portfolio Manager built prior to
the Company’s IPO, will ensure that the portfolio will be
managed in accordance with the same principles and
investment strategy.
ODYSSEAN INVESTMENT TRUST PLC Chairman’s Statement (continued)
Outlook
Uncertainty in markets and geopolitics is ever with us.
Nevertheless, the best long-term returns in equities tend
to be delivered by smaller companies. The quoted smaller
company investment market is much less perfect than for
larger companies. A properly executed investment strategy
at a point where valuations are not stretched, augurs well for
shareholders. Indeed, often the most rewarding long-term
investments are made when there is uncertainty and a lack of
broad market confidence.
The Portfolio Manager uses a well-defined, highly selective
investment process, detailed due diligence and ongoing
monitoring as tools to add value to shareholders. The
concentrated nature of the portfolio gives sufficient time to
conduct an in-depth analysis and consideration of each new
investment and to monitor those investments on an ongoing
basis. With the portfolio close to being fully invested, the
Portfolio Manager is likely to devote more time towards
engagement. This has the potential to deliver non-market
driven returns over the medium term.
The initial portfolio includes a number of interesting
companies with seemingly good opportunities, where
returns can be improved through management actions.
A conservative balance sheet offers shareholders some
protection against extreme market volatility, as demonstrated
in late 2018, as well as resources to invest with agility in what
can be an illiquid asset class.
Whilst the well-honed investment approach will never
guarantee that every investment performs to plan, there is
a good likelihood of the investment approach delivering
attractive and differentiated long-term returns to patient
shareholders.
Jane Tufnell
Chairman
23 May 2019
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ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Stuart Widdowson Co-fund Manager
Ed Wielechowski Co-fund Manager
Portfolio Manager’s Report
The investment approach
Our investment approach was formed following more than
30 years’ combined experience investing in quoted and
unquoted smaller companies. This experience has allowed
us to see the strengths and benefits of both the disciplines
and develop our own approach, applying the core elements
of the private equity investment philosophy – highly focused,
long-term, engaged ‘ownership’ style investment – to public
markets. We believe that well executed, this approach can
offer attractive, differentiated, risk-adjusted returns.
Our differentiated investment approach creates a portfolio
unlike that of many typical public equity funds and one
closer in nature to a private equity portfolio. We believe that
the key differences in our approach to other public equity
funds are:
– Highly concentrated portfolio: We look to
build a highly concentrated portfolio of no more
than 25 investee companies. Similar to a private
equity fund, we carry out intensive diligence on
every opportunity and then only invest behind our
highest conviction ideas. We believe that great
investment opportunities are rare, take time and
effort to identify and quality not quantity is the key
to sustainable, superior long-term returns.
– Narrow focus: Firstly, we are focused on smaller
companies typically too small for inclusion
in the FTSE 250 index. Smaller companies
offer significant opportunities to public market
investors due to poorer market coverage driving
opportunities for mis-pricing. More fundamental
than this however is the stage of life cycle of many
companies in our core size range. It is here that
you can find proven, profitable businesses of a size
which can attract high quality management teams,
but which are nimble enough to deliver rapid
growth.
–
–
Secondly, within our focused size range, we
will make the majority of investments in a small
number of industry sectors which we and our
advisors, know well (TMT, Services, Industrials
and Healthcare). We believe the best investment
decisions are made from a base of knowledge and
experience, that allows better pricing of risks and
opportunities. Fundamentally, we prefer to be
narrow and deep rather than broad and shallow in
our focus.
Targeting long-term holding periods: We will
evaluate each investment opportunity over a
three to five-year investment horizon and would
expect to hold positions for this period, or longer,
where the prospect for future returns exceeds our
target threshold. We have structured our business
to reflect this belief and do not intend to run
any capital which is redeemable over short time
periods. We see opportunity in managing long-term
capital which leaves us able to exploit irrational
behaviour by other investors in the market more
exposed to ‘hot’ money flows. We believe we
should invest your capital as if we were long-term
‘owners’ of our investee businesses.
Building influencing stakes: Our investment
approach is focused on an engaged investment
style. We particularly like investing in companies
which, whilst good, are underperforming their
potential. We see the opportunity for constructive
corporate engagement to be used to help
focus investee companies on this improvement
potential and unlock enhanced returns for all
stakeholders. In order to effect this approach, we
will typically look to build larger stakes in our
investee companies and build relationships with
management teams by being well informed and
supportive shareholders.
8
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
The Company’s investment objective is to deliver long-term
capital growth, rather than to outperform a specific index. Our
differentiated investment approach, the concentrated nature of
the portfolio and our narrower sector focus, is likely to lead to
periods of NAV per share performance materially different to
those of the broader peer group and comparator indices. We
fully anticipate this potential short-term performance variance
and will focus on comparative investment performance over a
rolling three-year basis.
The absolute return mentality of the strategy, allied with the
desire to avoid being a forced seller, may lead to net cash
balances being held over the long term. We anticipate a core
range of 8.0-12.0% over the long term. Net cash balances
will not be used as an attempt to market time, but to enable
us to invest where blocks of stock are available rather than
being required to sell a less liquid holding on short notice.
Implementing the investment strategy
There are three key factors we look for when we analyse a
potential investment: i) a valuation opportunity; ii) in a higher
quality company; and iii) with improvement potential. Our
view is that buying at a fair price and supporting improved
performance generates capital growth, while our quality filters
mitigate losses in the event of unexpected headwinds.
Valuation
We look for two factors in every investment. Firstly, what
we refer to as “static value” - does the company trade at
a discount to its current value? This is not only judged by
traditional public market ratios, we also seek to model
every company through the lens of a private equity buyer.
In addition, we evaluate whether an asset is attractive to a
trade buyer and what price they would be prepared to pay
to control it. This analysis includes valuing companies on a
break up/sum of parts basis.
Secondly, we are looking for companies which can grow
their value over time – “dynamic value”. We particularly
look for situations where there are as many as possible of
the following drivers of value growth present, specifically
i) organic growth; ii) margin growth driven by specific
management action, not merely operational gearing;
iii) free cash generation and dividends; and iv) increased
rating. We believe seeking multiple value drivers makes
an investment case more secure and less exposed to single
areas of uncertainty or misjudgement. As a result, very few
highly rated growth/momentum investments pass our criteria.
We have a strong preference for reasonably priced growth,
recovery and self-help situations.
Quality
We assess every potential investment against qualitative and
quantitative criteria, as well as providing a “Litmus test” of
whether we would be happy owning the whole company for
the mid to longer term. The quality assessment is important
to mitigate the risk of permanent capital destruction from
investments which fail to achieve their value potential, or
alternatively, experience a period of short-term earnings
weakness or under-management. In our experience, if
changes are required at board level, it is far easier to attract
high calibre individuals and teams to an underperforming
high-quality business, than an averagely performing poor
quality company.
Improvement potential and engagement
We particularly like companies which are in some way
underperforming relative to their potential and where the
current valuation does not price in improvement potential.
Once invested with a meaningful stake, constructive
corporate engagement can help to unlock value, prevent
it from being destroyed and recover it if it is temporarily
diminished. Our mantra is to buy into good businesses and
sell excellent businesses. The spectrum of areas which can
be improved is broad and includes operating performance,
asset utilisation, overly complex business structures or
organisations, strategic direction, poor M&A, investor
relations and lastly, governance and pay.
Finally, one of the benefits of having a fixed amount of
capital to manage is that we, like many of our portfolio
companies, are capital constrained. This means that once an
investment no longer looks as attractive as it used to on a risk/
reward basis, or alternatively, to the rest of the portfolio or
other investments, we move it on. The downside of this is the
risk of taking profits too early. The upside can be having the
discipline to exit whilst there is still liquidity and “something
in it for the next investor”.
Market background since launch
The period from IPO on 1 May 2018 until the end of March
2019 has witnessed considerable global and domestic
political uncertainty. This uncertainty has led to market
volatility through the period and increased investor wariness,
especially of UK equities. This coincided with what we
perceive to be a gradual further decline of the quality of
sell-side research for smaller quoted companies, as we
anticipated at the time of IPO. Whilst markets were ebullient
at the time of the Company’s IPO, ratings have fallen
considerably, bottoming out at the end of December 2018 at
levels not seen since 2012.
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ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Portfolio Manager’s Report (continued)
Progress since launch
These changing market conditions have suited our investment
approach well. We had always anticipated deploying capital
progressively, rather than quickly. Our selective investment
style, and the high levels of research we do on each
company, would typically lead to four to six new investments
being made per annum. As a result, we are pleased to have
built an initial portfolio with 15 holdings, representing 78.6%
of NAV, all of which fulfil our investment criteria.
Capital deployment into these holdings has been mostly in
small blocks, driven by liquidity and individual stock pricing,
rather than any attempts to market time. The increased market
and stock specific volatility throughout the period has meant
that the timings of some purchases have ended up being
extremely opportune, and others perhaps less so in the short
term. However overall, the data suggests that our approach
has added value over and above just buying the market.
Performance review
Since IPO, the NAV of the Company decreased by 2.1%.
This return is stated after all costs, including the costs of
purchasing the holdings, and administration charges, such as
the portfolio management fee. In comparison, the NSCI ex
IT plus AIM Index, which we use as a comparator but not a
benchmark, fell by 9.0%. The portfolio was on average 44.8%
invested over the period.
Our calculations suggest that had we bought the market on
the same days and deployed the same amount of capital
as we have spent purchasing investee companies, the NAV
would have declined 5.6% since IPO. As a result, whilst it
is disappointing to end the first period with a NAV slightly
below launch, we believe that the investment strategy and its
execution have added value.
The investment process has continued to be developed,
reflecting the decisions of the investment team which also
draws on opinions and experiences of the Panel of Advisors
and the Portfolio Manager's own non-executive directors. We
have continued meeting with existing and potential portfolio
companies. As at the end of March 2019, we had undertaken
over 130 meetings with over 75 companies, including
one-on-one meetings with executives, non-executives, site
visits and capital markets days since December 2017.
As well as the invested portfolio, we have also built up a
qualified watchlist of new potential investments, which for
any number of reasons we do not judge to be appropriate to
invest in today.
Portfolio
At the end of the period under review, the portfolio
comprised 15 companies operating in the TMT, Business
Services, Industrials, Healthcare and Consumer sectors.
We typically focus more on the first three sectors and these
account for c.68% of the NAV.
Our largest positions are SDL, Equiniti, NCC and Chemring.
The backgrounds of all except NCC were detailed in the 2018
Interim Report.
From an operating perspective, SDL and Equiniti are
performing in line with expectations. SDL’s shares have
performed well over the period and the investment is sitting
at a reasonable premium to cost. We continue to believe that
good absolute and relative upside exists. Equiniti remains very
lowly rated, reflecting concerns over short-term integration
issues with its recent US acquisition. The fundamental trading
performance of the business has been solid and we believe
that further profit improvement opportunities identified by
management support good further potential value growth in
the medium to long term.
Chemring’s operational performance has continued in line
with the guidance given following the site accident detailed
in the Company's 2018 Interim Report. However, the shares
have been de-rated as the market became more sceptical
of a rapid recovery in earnings. This has been disappointing
and the most material drag on the NAV across the period.
If the company can deliver the earnings recovery, from a
very depressed level, and growth from recently secured US
contracts, the shares should perform well over the medium
to long term. Further, the company has announced the exit
of the lower quality elements of its energetics division. Once
completed, we believe that the company is priced extremely
attractively relative to recent multiples paid for very similar
assets.
10
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
The largest new position built during the period was in NCC,
a leading provider of cyber security and software escrow
services. The cyber security division provides technical
expertise to support corporates in building, testing and
rectifying breaches in IT security. This is a fast-growing market
with structural tail-winds. We believe NCC has built a leading
portfolio of expertise and is one of the few independent
players of scale, with global footprint and capability, in a
market which continues to consolidate. The escrow business
effectively provides an ‘insurance’ service for customers of
software vendors, storing and verifying source code to ensure
critical software systems are supportable should a vendor fail.
NCC created and dominates the mature UK market for these
services and has a fast-growing position in the more highly
fragmented US market.
NCC was built through M&A with cash generated in the
highly profitable, software escrow business recycled into
the faster growing cyber security division. Poor M&A
integration led to a challenging period in 2016/17 and a
new executive team has now been installed with the aim of
driving operational improvement and much better cashflow
conversion. We see significant self-help opportunity for the
group via better integration of legacy M&A, roll-out of group
wide back office systems, a more sophisticated approach
to sales, and focus on cashflow management. Management
have targeted a 200bps margin improvement in the next three
years and we see ultimate potential significantly above these
levels.
We built our initial stake of c.4% of NAV through November
2018 following meetings with management and the new
Chairman. The interim results in February 2019 saw very
small earnings downgrades and a temporary decline in
cash conversion, which led to what we perceived to be a
disproportionate and swift de-rating. Having carried out
further due diligence in short order, we felt that this was a
great opportunity to increase the stake at very depressed
levels and almost tripled the existing holding.
We have made six mid-sized investments in Volution,
Wilmington, Devro, Flowtech Fluid Power, Benchmark
and Hill & Smith Holdings.
The backgrounds to Volution, Wilmington, Devro and
Benchmark were detailed in the 2018 Interim Report. All
have performed as expected operationally to date, with
varying short-term responses from their share prices. Volution
and Wilmington have management change underway, with
a new CFO and CEO, respectively, being sought. One of our
investment theses with Devro was that it was under-broked to
investors and as a result, the shares were trading at
a material discount to their fair value. We introduced a
third-party investor relations professional to the company
in late 2018 who has been working to help increase the
profile of the company, with some initial success. We believe
that this, combined with clear intent and actions by the
management team to improve returns, augurs well for
future performance.
Benchmark's shares have been volatile over the period.
We believe that the underlying assets of the business are
worth considerably more than the current market valuation.
However, the journey to sustainable cash generation is taking
longer than most shareholders have the patience for and this
has led to limited institutional interest in investing. A new
Chief Scientific Officer should help improve the efficacy of
R&D. We welcome the appointment of representatives from
FERD, the largest shareholder with 19.0%, to the board to
represent the voice of the shareholder. With appropriate
management execution and changed investor sentiment, it
could offer some of the best potential long-term upside of all
of the portfolio companies.
Flowtech is a niche value added distributor of fluid power
components and products. The company is the leading player
in the UK, acting as a master distributor sitting between the
large global manufacturers and the fragmented base of small
local distributors. Its broad stock range, high service level and
unique market position allow it to generate attractive margins,
and its weighting towards MRO parts reduces its cyclical
exposure. Shares in the company de-rated sharply following
a poorly handled set of interim results in Autumn 2018 and
a surprise CEO transition, dropping the market cap below
£100m. We saw the de-rating as an attractive entry point. The
company retains some challenges, but the business model
is attractive, there are significant self-help opportunities in
the cost base and working capital, due to the business being
built through un-integrated M&A. Whilst some cyclical risk
exists, the shares trade on a very low rating and it operates in
a consolidating sector.
Hill & Smith Holdings is a diversified industrial group,
manufacturing metal infrastructure and road products
and providing galvanising services. We built our position
following a share price decline through the summer of
2018 as an unsustainable rating unwound on the back of a
disappointing interim trading update. We viewed the issues
identified in the trading update as temporary in nature and
the subsequent sell-off an overreaction with shares offering
material value when we built our position.
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ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Portfolio Manager’s Report (continued)
The group is a leader in galvanising in the UK, US and
Europe and generates highly attractive margins (especially in
the highly structured US market). Demand for galvanising,
although cyclical, is exposed to structural growth in the US
where it is increasingly replacing painting as the preferred
form of corrosion protection. In its manufacturing operations,
the group has a leading position in the production of crash
barriers and other road furniture in the UK, a sector exposed to
positive midterm trends in road investment, and in the broader
infrastructure manufacturing operations we see significant
opportunity to improve margins. In the UK, it also owns
and operates a fleet of own-manufactured temporary crash
barriers, which generates c.12% of group profits and has highly
attractive unit economics. The management team have a strong
track record of delivering attractive ROCE and accretive M&A
and we believe they are well placed to continue to do so. The
shares have re-rated more quickly than anticipated and this has
tempered our enthusiasm to add to the position.
As demonstrated by the table opposite, we believe that the
portfolio valuation metrics appear attractive in absolute terms
given what we perceive to be the quality of the portfolio
holdings, as well as their growth potential. A PEG ratio of
c.1x indicates, in our view, good value. In addition, the
portfolio in aggregate is modestly geared and forecast to pay
down debt through free cashflow.
We have continued to focus on companies which have
improvement potential in their profit margins and cashflow
generation, where this improvement can be delivered by
management action, and is not reliant on end markets
improving. As a result, provided end markets remain benign,
we believe that there is significant earnings potential from
the portfolio. If end markets become more challenging, there
are more “levers” for management teams to pull to defend
current earnings levels. If end markets surprise on the upside
some of the investments could deliver exciting profit growth.
The remaining five investments represent between c.2% and
3.0% of NAV. None are especially cyclical. Two operate in
the trust and corporate services sector, a part of the market
well known to one member of the Panel of Advisors. All five
investments offer considerable scope to scale, subject to
further due diligence and pricing remaining attractive.
Portfolio valuation metrics ex Benchmark Holdings1
As at the end of the period, trailing operating margins,
excluding Benchmark, were c.15%, and forecast to rise
to 16.0% by March 2020. We believe that the underlying
operating margin potential of the portfolio is 18.0-20.0%,
indicating substantial earnings upside. In the case of
Benchmark, we believe that their two profitable divisions
have significant further margin upside and the loss-making
healthcare division should be moved into profitability soon.
83.6% of the invested portfolio is invested in companies
within the core market capitalisation range of £150-£750m.
41.6% of the portfolio’s aggregate sales are derived from the
UK. The most important overseas market is the US (23.4%).
Europe ex UK (18.6%) and the Rest of World (16.4%) are
relatively similar. We believe that the FTSE small cap index
has a much higher exposure to UK sales. As a result, domestic
challenges and Sterling weakness is relatively positive for the
portfolio asset value, and vice-versa.
Outlook
At the time of writing, markets appear benign with ratings
having rallied almost 10.0% from the depressed levels at
the beginning of 2019. However, UK equities appear to
be relatively cheap in absolute terms compared to other
international equity markets. It seems that they are shunned
by international investors, despite many UK companies
having very international earnings.
Trailing
12m
Next 12m
forecast
Forecast
growth rates
Next 12m
P/E
Dividend
yield
Net debt/
EBITDA
EV/Sales
EV/EBITDA
1.8x
9.7x
1.6x Sales
8.4x EBITDA
EV/EBITA
12.0x
10.4x EBITA
14.9x
2.9%
12.7x EPS
3.1% DPS
6.0%
10.0%
11.0%
12.0%
8.8%
1.2x
0.9x Reduction in
-13.0%
net debt
1 As at 31 March 2019. Source: Factset consensus data and estimates.
Portfolio data prepared on a weighted average basis. Benchmark Holdings
(BMK) excluded as transitioning from loss making and data skews averages
materially. Past performance is no guarantee of future performance and the
value of investments can go up and down.
12
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
It seems that the current domestic and international political
conditions are making investors extremely uncertain about
the prospects for markets and the underlying companies.
Allied to this uncertainty, the spectres of an ever-lengthening
period of economic growth and increasing debt levels seem
to continue to temper investor risk appetite.
In some situations, and with some companies, this cautious
approach is probably well founded. However, we strongly
believe that the market turmoil is presenting attractively
priced medium to long-term investment opportunities within
our target market. Where these quoted companies have
significant self-help potential to improve margins, regardless
of the state of demand in their end markets, and are rated
modestly, we become very excited. These situations tend to
offer a very good risk/reward ratio for patient investors.
There is no doubt in our minds that, properly executed,
selective constructive corporate engagement can aid or
accelerate some of this self-help. We believe that plenty of
scope for engagement exists amongst our portfolio holdings
and look forward to spending more time in this area now that
the initial portfolio is largely complete.
We anticipate some further capital deployment and then
managing the portfolio with a cash balance of between 5%
and 15%, to enable opportunistic purchases of blocks of
stock, without being forced sellers. Whilst this balance sheet
approach is more conservative than the broader peer group
with highly diversified portfolios, we believe that over the
long term it suits our selective and differentiated investment
approach well.
Odyssean Capital LLP
Portfolio Manager
23 May 2019
AGM will be held at the offices of
Odyssean Capital LLP,
6 Stratton Street,
Mayfair,
London W1J 8LD
at 10.30 am on Thursday, 27 June 2019
Notice of AGM – page 67
Glossary – page 73
13
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Portfolio of Investments
as at 31 March 2019
Company
Sector
Country of Listing
Valuation
£’000
% of
Net Assets
Top 10 Investments
SDL
Equiniti Group
NCC Group
Chemring Group
Volution Group
Wilmington
Devro
Flowtech Fluidpower
Benchmark Holdings
Hill and Smith Holdings
Other equity investments*
Total equity investments
Cash and other net current assets
Net assets
TMT
Business Services
TMT
Industrials
Industrials
TMT
Consumer
Industrials
Healthcare
Industrials
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
9,826
9,090
8,873
6,607
5,390
4,250
4,157
3,933
3,365
3,045
8,271
66,807
18,200
85,007
11.6
10.7
10.4
7.8
6.3
5.0
4.9
4.6
4.0
3.6
9.7
78.6
21.4
100.0
* Sum of equity investments in companies where the investment in each company is less than 3.0% of its net assets.
The Company has not disclosed the names of any investment where the holding is below 3.0% of its net assets on the grounds that the Company is continuing
to build positions in these portfolio companies, disclosure of which is deemed to be commercially sensitive information.
14
ODYSSEAN INVESTMENT TRUST PLC Distribution of Investments
as at 31 March 2019 (% of net assets)
Portfolio holdings
% holding by sector
21.4%
11.6%
10.7%
10.4%
7.8%
9.7%
3.6%
4.0%
4.6%
4.9%
5.0%
6.3%
SDL
Equiniti Group
NCC Group
Chemring Group
Volution Group
Wilmington
Devro
Flowtech
Fluidpower
Benchmark
Holdings
Hill and Smith
Holdings
Other equity
investments
Cash and other
net current assets
4.9%
5.9%
21.4%
28.1%
19.6%
20.1%
TMT
Industrials
Business
Services
Healthcare
Consumer
Cash and
other net
current
assets
Geographical revenue exposure
(% of invested capital)
Market capitalisation
(% of invested capital)
16.4%
18.6%
4.6%
21.4%
41.6%
UK
US
Europe Other
Rest of World
8.2%
Below £150m
£150m-£750m
Over £750m
Cash
23.4%
65.8%
As at 31 March 2019, the net assets of the Company were £85.0m.
15
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Strategic Overview
Business and status of the Company
The Company was incorporated on 21 December 2017 and
the IPO took place on 1 May 2018. It is registered in England
and Wales as a public limited company and is an investment
company within the terms of section 833 of the Act. The
principal activity of the Company is to carry on business as
an investment trust. The Company has been approved by HM
Revenue & Customs as an authorised investment trust under
sections 1158 and 1159 of the CTA, subject to there being
no subsequent serious breaches of regulations. In the opinion
of the Directors, the Company is directing its affairs so as to
enable it to continue to qualify for such approval.
Key performance indicators
At each Board meeting, the Directors consider several
performance measures to assess the Company’s success in
achieving its investment objective. The key performance
indicators used to measure the progress and performance of
the Company over time are established industry measures.
These are as follows:
Net asset value
The NAV at 31 March 2019 was 96.3p per ordinary share,
compared to 98.3p per ordinary share at launch, a decrease
of 2.0%.
The Company’s shares have a listing on the premium segment
of the Official List of the FCA and trade on the LSE’s main
market for listed securities.
A full description of the Company’s performance for the
period ended 31 March 2019 can be found in the Portfolio
Manager’s Report on pages 8 to 13.
The Company is a member of the AIC, a trade body which
promotes investment companies and also develops best
practice for its members.
Investment objective
The investment objective of the Company is to achieve
attractive total returns per share principally through capital
growth over a long-term period.
Investment policy
The Company’s full investment policy is set out on page 3
and contains information on the policies which the Company
follows, including in relation to borrowings, derivatives and
hedging. The Company invests primarily in smaller company
equities quoted on markets operated by the LSE, where
the Portfolio Manager believes the securities are trading
below intrinsic value and where this value can be increased
through strategic, operational, management and/or financial
initiatives.
Any material change to the Company’s investment policy
would require the approval of shareholders by way of an
ordinary resolution at a general meeting and the approval of
the FCA. Non-material changes to the investment policy may
be approved by the Board.
Portfolio analysis
A detailed review of how the Company’s assets have been
invested is contained in the Chairman’s Statement on pages
6 and 7 and the Portfolio Manager’s Report on pages 8 to 13.
A list of all the Company’s investments is contained in the
Portfolio of Investments on page 14.
Share price
The Company’s share price at launch was 101.5p and
decreased to 99.3p as at 31 March 2019, resulting in a
negative return of 2.2% during the period.
Share price premium to NAV
The share price premium to NAV narrowed from 3.2% at
launch to 3.1% as at 31 March 2019. During the period
ended 31 March 2019, the shares traded at an average
premium to NAV of 5.0%.
Revenue return per ordinary share
Revenue return per ordinary share in the period ended
31 March 2019 was -0.6p.
Ongoing charges
The Company’s annualised ongoing charges ratio as at
31 March 2019 was 1.6%.
Management arrangements
The Company is an internally managed investment company
for the purposes of the Alternative Investment Fund Managers
Directive and is its own alternative investment fund manager.
The Board is therefore responsible for the portfolio management
and risk management functions of the Company.
Pursuant to the terms of the Portfolio Management Agreement,
the Board has delegated responsibility for discretionary
portfolio management functions to Odyssean Capital LLP as
the Company's Portfolio Manager, subject always to the overall
supervision and control of the Board.
16
ODYSSEAN INVESTMENT TRUST PLC Strategic Overview (continued)
The Portfolio Manager is entitled to receive an annual
management fee equal to the lower of: (i) 1.0% of the NAV
(calculated before deduction of any accrued but unpaid
management fee and any performance fee) per annum; or (ii)
1.0% per annum of the Company’s market capitalisation. The
annual management fee is calculated and accrues daily and is
payable quarterly in arrears.
In addition, the Portfolio Manager is entitled to a performance
fee in certain circumstances. Further details can be found in
note 4 to the financial statements.
The Portfolio Manager is also entitled to reimbursement for all
costs and expenses properly incurred by it in the performance
of its duties under the Portfolio Management Agreement.
The initial term of the Portfolio Management Agreement is
three years commencing on the date of the Company’s launch
(the “Initial Term”). The Company may terminate the Portfolio
Management Agreement by giving the Portfolio Manager not
less than six months’ prior written notice, such notice not to be
served prior to the end of the Initial Term. The Portfolio Manager
may terminate the Portfolio Management Agreement by giving
the Company not less than six months’ prior written notice,
such notice not to be served prior to the end of the Initial Term.
Continuing appointment of the Portfolio Manager
The Board keeps the ongoing performance of the Portfolio
Manager under continual review and the Management
Engagement Committee conducts an annual appraisal
of the Portfolio Manager’s performance and makes a
recommendation to the Board about the continuing
appointment of the Portfolio Manager.
The Management Engagement Committee has reviewed
Odyssean’s performance, with respect to their provision of
portfolio management and other services. Due consideration
was given to the quality and continuity of its personnel,
succession planning and investment processes. Alongside the
performance review, the Committee completed an appraisal
of the terms of the Portfolio Management Agreement to
ensure that the terms remained competitive and in the interest
of the Company. The Portfolio Manager has executed the
investment strategy according to the Board’s expectations
and it is the opinion of the Directors that the continuing
appointment of the Portfolio Manager on the terms agreed is
in the interests of shareholders as a whole.
Employees, human rights, social and
community issues
The Board recognises the requirement under the Act to detail
information about human rights, employees and community
issues, including information about any policies it has in
relation to these matters and the effectiveness of these
policies. These requirements do not apply to the Company
as it has no employees, all the Directors are non-executive
and it has outsourced all its functions to third party service
providers. The Company has therefore not reported further in
respect of these provisions.
Board diversity
As at 31 March 2019, the Board of Directors of the Company
comprised two male and two female Directors. The Board
acknowledges the benefits of diversity, including gender
diversity, and remains committed to ensuring that the
Company’s Directors bring a wide range of skills, knowledge,
experience, backgrounds and perspectives. Further details of
the Company’s diversity policy are set out on page 32.
Environmental, social and governance issues
The Company has no employees, property or activities
other than investments, so its direct environmental impact is
minimal. In carrying out its activities and in its relationships
with service providers, the Company aims to conduct itself
responsibly, ethically and fairly.
The Board is comprised entirely of non-executive Directors
and the day-to-day management of the Company’s business
is delegated to the Portfolio Manager. The Portfolio Manager
aims to be a responsible investor and believes it is important
to invest in companies that act responsibly in respect of
environmental, ethical and social issues. The Directors
believe that proxy voting is an important part of the corporate
governance process. It is the policy of the Company to vote
at all shareholder meetings of investee companies. The
Company follows relevant regulatory requirements with an
aim to make voting decisions which will best support growth
in shareholder value and will commonly take into account
corporate governance, board composition, remuneration and
ESG issues. The Portfolio Manager also provides the Directors
with a six-monthly update regarding the voting decisions
made in respect of the investee companies.
Modern slavery
The Company is not within the scope of the Modern Slavery
Act 2015 because it has insufficient turnover and therefore,
no further disclosure is required in this regard.
17
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Risk Management
Role of the Board
The Directors have overall responsibility for risk management
and internal control within the Company. They recognise that
risk is inherent in the Company’s operation and that effective
risk management is an important element in the success of
the organisation. The Directors have delegated responsibility
for the assurance of the risk management process and the
review of mitigating controls to the Audit Committee. The
Directors, when setting the risk management strategy, also
determine the nature and extent of the significant risks and its
risk appetite in implementing this strategy.
Internal control assessment process
Robust risk assessments and reviews of internal controls
are undertaken regularly in the context of the Company’s
overall investment objective. The Board, through the Audit
Committee, has categorised risk management controls under
the following key headings: corporate strategy; published
information, compliance with laws and regulations;
relationships with service providers; and investment and
business activities. In arriving at its judgement of what risks
the Company faces, the Board has considered the Company’s
operations in the light of the following factors:
The principal risks and uncertainties which the Company
faces are set out on pages 19 and 20.
Internal control review
The Board is responsible for the internal controls relating
to the Company, including the reliability of the financial
reporting process, and for reviewing their effectiveness.
An ongoing process, in accordance with the FRC Guidance
on Risk Management, Internal Control and Related Financial
and Business Reporting, has been established for identifying,
evaluating and managing the principal risks faced by the
Company. This process, which is regularly reviewed, together
with key procedures established with a view to providing
effective financial control, has been in place throughout
the period ended 31 March 2019 and up to the date of this
Report. The internal control systems are designed to ensure
that proper accounting records are maintained, that the
financial information on which business decisions are made
and which are issued for publication is reliable and that the
assets of the Company are safeguarded.
The risk management process and systems of internal control
are designed to manage rather than eliminate the risk of
failure to achieve the Company’s investment objective. It
should be recognised that such systems can only provide
reasonable, not absolute, assurance against material
misstatement or loss.
The Directors have carried out a review of the effectiveness
of the Company’s risk management and internal control
systems as they have operated over the period and up to the
date of approval of this Report. There were no matters arising
from this review that required further investigation and no
significant failings or weaknesses were identified.
–
–
–
–
–
the nature and extent of risks which it regards as
acceptable for the Company to bear within its
overall business objective;
the threat of such risks becoming reality;
the Company’s ability to reduce the incidence and
impact of risk on its performance;
the cost to the Company and benefits related to
the review of risk and associated controls of the
Company; and
the extent to which the third parties operate the
relevant controls.
A risk matrix has been produced so that the risks identified
and the controls in place to mitigate those risks can be
monitored. The risks are assessed on the basis of the
likelihood of them happening, the impact on the business if
they were to occur and the effectiveness of the controls in
place to mitigate them. This risk register is reviewed by the
Audit Committee.
Most of the day-to-day management functions of the
Company are sub-contracted, and the Directors therefore
obtain regular assurances and information from key third
party suppliers regarding the internal systems and controls
operating in their organisations. In addition, each of the
third parties is requested to provide a copy of its report on
internal controls each year, which is reviewed by the Audit
Committee.
18
ODYSSEAN INVESTMENT TRUST PLC Risk Management (continued)
Principal risks and uncertainties
The Company is exposed to a variety of risks and uncertainties that could cause its asset price or the income from the
investment portfolio to reduce, possibly by a sizeable percentage in the most adverse circumstances. The Board, through
delegation to the Audit Committee, has undertaken a robust assessment and review of the principal risks facing the Company,
together with a review of any new risks which may have arisen during the year, including those that would threaten its business
model, future performance, solvency or liquidity. These risks are formalised within the Company’s risk matrix.
The principal financial risks and the Company’s policies for managing these risks and the policy and practice with regard to
financial instruments are summarised in note 15 to the financial statements.
The Board has also identified the following additional risks and uncertainties:
Risk
How the risk is managed
Investment performance is not comparable to the
expectations of investors
Consistently poor performance could lead to a fall in the
share price and a widening of the discount. The success of
the Company depends on the Portfolio Manager’s ability to
identify, acquire and realise investments in accordance with
the Company’s investment policy. This, in turn, depends on
the ability of the Portfolio Manager to apply its investment
processes and identify suitable investments.
The Board reviews and discusses the Company’s performance
against its investment objective and policy, as well as
reviewing performance in comparison to industry peers and
the broader comparative market. The Board also keeps the
performance of the Portfolio Manager under continual review,
along with a review of significant stock decisions and the
overall rationale for holding the current portfolio. In addition,
the Management Engagement Committee conducts an annual
appraisal of the Portfolio Manager.
Share price performance
The market price of the Company’s shares, like shares in
all investment companies, may fluctuate independently of
the NAV and thus may not reflect the underlying NAV of
the shares. The shares could trade at a discount or premium
to NAV at different times, depending on factors such as
market conditions, investors’ perceptions of the merits of
the Company’s investment objective and policy, supply and
demand for the shares and the extent investors value the
activities of the Company and/or the Portfolio Manager.
The Board monitors the relationship between the share
price and the NAV, including regular review of the level
of discount relative to that of companies in the sector. The
Company has taken powers to re-purchase shares and will
consider doing so to reduce the volatility of any share price
discount. The Company has also taken powers to issue shares
(only at a premium to NAV) to provide liquidity to the market
to meet investor demand, whether by way of the issue of
further ordinary shares or through the issue of C shares.
In addition, in the seventh year following the IPO (and every
seventh year thereafter), the Board will provide shareholders
with an opportunity to realise their shares at the applicable
NAV.
19
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Risk Management (continued)
Risk
How the risk is managed
Portfolio Manager – loss of personnel or reputation
The identification and selection of investment opportunities
and the management of the day-to-day activities of the
Company depends on the diligence, skill, judgement and
business contacts of the Portfolio Manager’s investment
professionals and the information and deal flow they
generate during the normal course of their activities. The
Company’s future success depends on the continuing ability
of these individuals to provide services and the Portfolio
Manager’s ability to strategically recruit, retain and motivate
new talented personnel as required. The departure of some or
all of the Portfolio Manager’s investment professionals could
prevent the Company from achieving its investment objective
and give rise to a significant public perception risk regarding
the potential performance of the Company.
The Board maintains a good level of communication and
has a good relationship with the Portfolio Manager, and
regularly reviews the Portfolio Manager’s performance at
Board meetings. The Portfolio Manager’s Compliance Officer
also reports to the Board regularly and the Portfolio Manager
would report to the Board immediately in the event of any
change in key personnel.
Stuart Widdowson has been on compassionate leave since
26 March 2019. The Board is reassured that he will be
resuming his role as the key man of the Company at the end
of June 2019. The Board is confident that the measures put
in place by the Portfolio Manager to cover this period ensure
that the portfolio continues to be managed in accordance
with the principles and investment strategy set out at the time
of launch.
Material changes within the Portfolio Manager’s organisation
Material changes could occur within the Portfolio Manager’s
organisation or its affiliates which are to the detriment of
the Company’s standing in respect of its competitors and its
profitability.
The Portfolio Manager has advance notice of any material
changes within its organisation and would report to the Board
immediately in the event of any such changes, including
within its organisation and affiliates or to its key personnel.
Valuation of unquoted investments
The Company may invest in unquoted companies from time
to time. Such investments, by their nature, involve a higher
degree of valuation and performance uncertainties and
liquidity risks than investments in listed and quoted securities
and they may be more difficult to realise.
Reliance on the performance of third-party service providers
The Company has no employees and the Directors have been
appointed on a non-executive basis. The Company is reliant
upon the performance of third-party service providers for its
executive function. Failure by any service provider to carry
out its obligations to the Company in accordance with the
terms of its appointment could have a material adverse effect
on the operation of the Company.
All financial information is reviewed by the Board at
regular meetings. The Portfolio Manager provides a report
on the valuation of any unquoted investments at each
Board meeting and assurances are sought from the Portfolio
Manager as to the basis for any changes in the valuation of
any unquoted investments. The Board and/or Chairman of
the Audit Committee will approve the valuation of unquoted
investments prior to their reflection in the Company’s NAV.
The Board has appointed third party service providers with
relevant experience. Each third party service provider is
monitored by the Board and their roles are evaluated at least
annually by the Management Engagement Committee.
20
ODYSSEAN INVESTMENT TRUST PLC Risk Management (continued)
Going concern
The Directors assessed the going concern of the Company in
light of its current trading performance. The Directors looked
at the forecasts for the coming year and applied stress tests
for adverse scenarios. As a result, it was determined that the
Company has sufficient liquidity to cover all anticipated
payments during that period. The Directors also considered
the regulatory capital of the Company and determined that,
based on the latest approved forecasts, the Company will
have sufficient regulatory capital for the same period. At the
time of approving the Financial Statements, the Directors
have a reasonable expectation that the Company has
adequate resources to continue in operational existence for
the foreseeable future.
Viability statement
The Board has assessed the prospects of the Company over a
three-year period. This assessment period has been chosen as
the Board believes it represents an appropriate period given
the long-term investment horizons of the Company.
As part of its assessment of the viability of the Company, the
Board has considered the principal risks and uncertainties
(as set out on pages 19 and 20), specifically key man risk,
and the impact on the Company’s portfolio of a significant
fall in the UK markets. The Directors do not expect there to
be any significant change in the current principal risks and
adequacy of the mitigating factors in place over the period of
this assessment and therefore, believe the going concern and
viability period assessment remains appropriate.
The effect on the Company and the portfolio from Brexit
has been considered. Whilst it is challenging to quantify
any impact that should arise from a change in the UK’s
relationship with the EU, it is not believed that there will be
a fundamental bearing on the business. Any change arising
from Brexit will likely bring investment opportunities as well
as headwinds and the Company’s investment strategy will
remain appropriate in such an environment.
The Board has also considered the Company’s financial
position and its ability to liquidate its portfolio to meet
expenses or other liabilities as they fall due. In considering
this, the Board notes that:
–
–
–
the Company primarily invests in companies listed
and traded on stock exchanges. These are actively
traded and, whilst perhaps less liquid than larger
quoted companies, the portfolio is well diversified;
the Company’s portfolio currently includes a large
position in cash. Cash balances can be varied
due to changes in market conditions, but positive
cash levels are expected to be maintained over the
period; and
the expenses of the Company are predictable and
modest in comparison to the assets in the portfolio.
There are no commitments that would change that
position.
Based on this assessment, the Directors are confident that the
Company’s investment approach, portfolio management and
balance sheet approach will ensure that the Company will be
able to continue in operation and meet its liabilities as they
fall due over the next three years.
Approval
This Strategic Report has been approved by the Board of
Directors and signed on its behalf by:
Jane Tufnell
Chairman
23 May 2019
21
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Governance
GOVERNANCE
Board of Directors and Portfolio Manager
23
25 Directors’ Report
29
Corporate Governance Statement
Audit Committee Report
34
37 Directors’ Remuneration Report
40
Statement of Directors’ Responsibilities
Board of Directors and
Portfolio Manager
as at 31 March 2019
Jane Tufnell
Chairman
Jane started her career in 1986 joining County NatWest, firstly in corporate
finance and then moving to fund management where she jointly ran the NatWest
pension fund's exposure to UK smaller companies.
In 1994, Jane co-founded Ruffer Investment Management Ltd where she worked
for over 20 years to build the business to an AUM of £20 billion, before leaving in
2014. Jane now has a variety of directorships including The Diverse Income Trust
plc, JPM Claverhouse Investment Trust plc, ICG Enterprise Trust plc and Record
plc, the currency management specialist.
Date of appointment: 21 December 2017
Arabella Cecil
Senior Independent Director
Arabella started working in financial services in 1987, training in Milan and Paris
before CL-Laing in London, where she headed institutional analysis of the food
manufacturing sector. In 1998, she founded a media company which specialised
in the IMAX format. Between 2008 and 2012, she worked for Culross Global
Management, ultimately as a member of the firm’s Investment and Risk Committees.
In 2012, she co-founded the investment trust BACIT Limited, which became
Syncona Limited in December 2016. She served as the chief investment officer
of Syncona Limited’s fund portfolio until 1 April 2018 and is currently Syncona’s
Head of Fund Investments.
Date of appointment: 31 January 2018
Peter Hewitt
Chairman of the Management Engagement Committee
Peter has 35 years investment management experience. In 1983, he joined Ivory
& Sime managing first US equities and then moving onto UK smaller companies
from 1987 to 1992. He then focussed on management of UK pension fund
accounts until 1996. He moved to Murray Johnstone as Head of UK Equities with
a focus on UK income funds. In 2000, he re-joined Friends Ivory & Sime and
specialised in management of investment trust funds and products.
In 2008, he launched the F&C Managed Portfolio Trust onto the LSE and remains
the current investment manager of the company. He is currently a director of
Global Equities at BMO Global Asset Management Limited.
Date of appointment: 31 January 2018
Richard King
Chairman of the Audit Committee
Richard spent 35 years with Ernst and Young LLP (EY) becoming deputy managing
partner of UK & Ireland and a member of both the Europe, Middle East, India and
Africa (EMEIA) Board and Global management group. Since leaving EY, Richard
has been involved either as chairman or non-executive director on a variety of
private and public companies and has been involved in company disposals in
excess of £400 million.
Richard is a non-executive director of GYG plc and a partner at Rockpool
Investments LLP. He is also on the advisory board of Frogmore Property Group
and is the chair of trustees for the Willow Foundation.
Date of appointment: 21 December 2017
23
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Board of Directors and
Portfolio Manager (continued)
as at 31 March 2019
Stuart Widdowson
Co-fund manager
Stuart has spent the last 18 years investing in public and private UK small and
mid-size corporates and a further two years providing investment advisory services
in the same field.
Prior to founding the Portfolio Manager, Stuart was at GVQ Investment
Management (“GVQ”), where he held the position of fund manager and head of
strategic investments for more than seven years. During his time at GVQ, Stuart
led the transformation of the performance of Strategic Equity Capital plc (“SEC”)
and significantly improved shareholder value. Stuart led SEC to win several
industry awards and was recognised as Fund Manager of the Year at both the PLC
and QCA awards in 2015.
Stuart began his career as a strategy consultant undertaking commercial due
diligence and strategy projects for private equity and corporate clients. In 2001,
he joined HgCapital and spent five years working on small and mid-cap leveraged
buyouts in the UK and Germany. During this time, he worked on a number of
public to private transactions of UK quoted companies.
Ed Wielechowski
Co-fund manager
Prior to joining Odyssean, Ed was a Principal in the technology team at HgCapital.
He joined HgCapital in 2006 and worked on numerous completed deals,
including multiple bolt-on transactions made by portfolio companies. He has
additional quoted market experience, having led the successful IPO of Manx
Telecom plc in 2014, as well as having evaluated and executed public to private
transactions.
Ed started his career as an analyst in the UK mergers and acquisitions department
of JPMorgan in 2004.
24
ODYSSEAN INVESTMENT TRUST PLC Directors’ Report
The Directors are pleased to present the Annual Report and
Financial Statements for the period ended 31 March 2019. In
accordance with the Act (as amended), the Listing Rules and
the Disclosure Guidance and Transparency Rules, the Corporate
Governance Statement, Directors' Remuneration Report, Report
from the Audit Committee and the Statement of Directors'
Responsibilities should be read in conjunction with one
another, and the Strategic Report. As permitted by legislation,
some of the matters normally included in the Directors’ Report
have instead been included in the Strategic Report, as the Board
considers them to be of strategic importance.
Directors
The Directors in office during the period and at the date
of this report, and their biographical details, are shown on
page 23.
None of the Directors or any persons connected with them
had a material interest in the transactions and arrangements
of, or the agreement with, the Portfolio Manager during the
period.
Results
A summary of the Company’s performance during the period
ended 31 March 2019 and the outlook for the forthcoming
year is set out in the Strategic Report on pages 6 to 13.
Corporate governance
The Company’s Corporate Governance Statement is set out on
pages 29 to 33 and forms part of this report. Details regarding
independent professional advice, insurance and indemnity
are set out in the Corporate Governance Statement on
page 33.
Share capital
The Company was incorporated on 21 December 2017
with 1 ordinary share of £0.01, held by Harwood Capital
Management Limited. On 7 February 2018, the Company
issued 50,000 management shares of £1.00 each, which were
also held by Harwood Capital Management Limited.
Share issues
At a general meeting of the Company held on 21 March
2018, the Directors were granted the authority to allot
and to disapply pre-emption rights in respect of up to 200
million shares in aggregate, being either ordinary shares of
£0.01 each or C shares of £0.10 each, or any combination
of ordinary shares and C shares, such authority to expire on
20 March 2019.
On 1 May 2018, 87,457,210 ordinary shares of £0.01 each
(with an aggregate nominal value of £874,572.10) were issued
under this authority at a price of £1.00 per share under the
placing and offer for subscription (including an intermediaries
offer) by the Company. The Company commenced business
on 1 May 2018 when the ordinary shares were listed on the
premium segment of the Official List of the FCA and admitted
to trading on the premium segment of the LSE’s main market
for listed securities. The 50,000 management shares were
simultaneously redeemed and cancelled.
At a general meeting of the Company held on 21 March
2018, the Directors were also granted the authority to allot
and to disapply pre-emption rights in respect of up to an
additional 17,491,442 ordinary shares, being 20.0% of
the ordinary shares in issue at the time of admission of the
ordinary shares to the LSE, such authority to expire at the
conclusion of the 2019 AGM.
On 20 June 2018, the Company was granted a block listing
of 5.0 million ordinary shares to be listed to the premium
segment of the Official List of the FCA and admitted to
trading on the premium segment of the LSE’s main market.
During the period ended 31 March 2019, a total of 800,000
ordinary shares (with a nominal value of £8,000) were issued
under this block listing for a total consideration of £828,175;
these shares were issued to satisfy market demand for the
shares and to manage the premium to NAV at which the shares
were trading at the time of issuance. All shares were issued at a
premium to NAV and at an average price of 103.5 pence.
As at the date of this report, a further 4.2 million shares
remain under the block listing.
Proposals for the renewal of the Directors’ authority to issue
shares are set out on page 27.
Cancellation of share premium
On 8 August 2018, the Company’s share premium account
of £85,475,000 was cancelled in order to create distributable
reserves.
Purchase of own shares
At a general meeting held on 21 March 2018, the Directors
were granted the authority to buy back up to 13,109,835
ordinary shares, being 14.99% of the ordinary shares in issue
at the time of admission of the ordinary shares to the LSE. No
ordinary shares have been bought back under this authority.
The authority will expire at the conclusion of the first AGM of
the Company in 2019, when a resolution for its renewal will
be proposed (see page 28 for further information).
25
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Directors’ Report (continued)
Current share capital
As at 31 March 2019, and as at the date of this report, there are
88,257,211 ordinary shares in issue, none of which are held
in treasury. At general meetings of the Company, shareholders
are entitled to one vote on a show of hands and, on a poll,
to one vote for every share held. The total voting rights of the
Company as at 31 March 2019 were 88,257,211.
There are no restrictions concerning the transfer of securities in
the Company or on voting rights; no special rights with regard
to control attached to securities; no agreements between
holders of securities regarding their transfer known to the
Company; and no agreements which the Company is party to
that might affect its control following a successful takeover bid.
Substantial shareholdings
The Company has been informed of the following latest
notifiable interests in the voting rights of the Company, in
accordance with Disclosure Guidance and Transparency Rule
5.1.2, as at 31 March 2019:
Number
of shares
% of
voting rights
The Directors confirm that there are no additional disclosures
to be made in relation to Listing Rule 9.8.4.
Auditor
The Directors who held office at the date of approval of the
Directors’ Report confirm that, so far as they are aware, there
is no relevant audit information of which the Company’s
Auditor is unaware; and each Director has taken all the
steps that they ought to have taken as a Director to make
themselves aware of any relevant audit information and
to establish that the Company’s Auditor is aware of that
information.
KPMG LLP has expressed its willingness to continue in
office as Auditor of the Company and resolutions for
its appointment and for the Directors to determine its
remuneration will be proposed at the forthcoming AGM.
Financial risk management
As noted on page 19, information about the Company’s
financial risk management objectives and policies is set out in
note 15 of the Financial Statements.
Harwood Capital LLP
Schroders plc
13,800,000
13,069,601
Brewin Dolphin Limited
8,276,500
Ian Armitage
6,600,000
15.64
14.81
9.38
7.48
Greenhouse gas emissions
The Company has no greenhouse gas emissions to report
from its operations, nor does it have responsibility for any
other emission-producing sources under the Companies Act
2006 (Strategic Report and Directors’ Report) Regulations
2013.
The Company has not been informed of any changes to the
above interests between 31 March 2019 and the date of this
Report.
Articles of Association
The Company’s Articles of Association may only be
amended by a special resolution at a general meeting of the
shareholders.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual
Report or a cross-reference table indicating where the
information is set out. The information required under:
Listing Rule 9.8.4(5) in relation to Peter Hewitt
waiving his Director’s fee is set out on page 38; and
Listing Rule 9.8.4(7) in relation to allotment of
shares is set out on page 25.
–
–
26
Annual General Meeting
The Notice of the AGM to be held on 27 June 2019 is set out
on pages 67 to 72. Shareholders are being asked to vote on
various items of business being:
(i)
the receipt and acceptance of the Strategic Report,
Directors’ Report, Auditor’s Report and the audited
Financial Statements for the period ended
31 March 2019;
(ii)
the receipt and approval of the Directors’
Remuneration Report and the Directors’
Remuneration Policy;
(iii)
the election of Directors;
(iv)
the appointment of KPMG LLP as Auditor and the
authorisation of the Directors to determine the
remuneration of the Auditor;
ODYSSEAN INVESTMENT TRUST PLC Directors’ Report (continued)
(v)
the authorisation of the Directors to allot ordinary
shares and disapply statutory pre-emption rights for
certain issues of shares;
(vi)
the authorisation of the Company to make market
purchases of ordinary shares; and
(vii)
the holding of general meetings (other than AGMs)
on not less than 14 clear days’ notice.
Resolutions 1 to 11 will be proposed as ordinary resolutions
and Resolutions 12 to 15 will be proposed as special
resolutions.
Authority to allot ordinary shares
Resolutions 10 and 11, ordinary resolutions as set out in the
Notice of AGM, if passed, will renew the Directors’ authority
to allot shares in accordance with statutory pre-emption
rights. These resolutions will authorise the Board to allot:
–
–
ordinary shares generally and unconditionally in
accordance with section 551 of the Act up to an
aggregate nominal value of £88,257, representing
approximately 10.0% of the Company’s issued
share capital (excluding treasury shares) as at the
date of the Notice of AGM or, if changed, the
number representing 10.0% of the issued share
capital of the Company at the date at which this
resolution is passed (Resolution 10); and
further ordinary shares generally and
unconditionally in accordance with section 551 of
the Act up to an additional aggregate nominal value
of £88,257, representing approximately 10.0%
of the Company’s issued share capital (excluding
treasury shares) as at the date of the Notice of AGM
or, if changed, the number representing 10.0% of
the issued share capital of the Company at the date
at which this resolution is passed (Resolution 11).
As at 23 May 2019, no shares were held in treasury.
ordinary share. If only Resolution 10 is passed and Resolution
11 is not passed, shareholders will only be granting Directors
the authority to allot up to 10.0% of the existing issued
ordinary share capital of the Company. These authorities, if
given, will lapse at the conclusion of the 2020 AGM of the
Company.
The Directors do not currently intend to allot shares other
than to take advantage of opportunities in the market as they
arise and only if they believe it would be advantageous to the
Company’s shareholders to do so.
In the event that Resolution 10 is not passed, Resolution 11
will not be proposed at the AGM.
Disapplication of pre-emption rights
Resolution 12, a special resolution, is being proposed to
authorise the Directors to disapply the statutory pre-emption
rights of existing shareholders in relation to the issue of
shares under Resolution 10, for cash or the sale of shares out
of treasury up to an aggregate nominal amount of £88,257,
being approximately 10.0% of the Company’s issued share
capital (excluding treasury shares) as at the date of the Notice
of AGM or, if changed, 10.0% of the issued share capital
immediately upon the passing of this resolution.
Resolution 13, a special resolution, is being proposed to
authorise the Directors to disapply the statutory pre-emption
rights of existing shareholders in relation to the further
issue of shares under Resolution 11, for cash or the sale of
shares out of treasury up to an aggregate nominal amount
of £88,257, being approximately 10.0% of the Company’s
issued share capital (excluding treasury shares) as at the date
of the Notice of AGM or, if changed, 10.0% of the issued
share capital immediately upon the passing of this resolution.
In respect of Resolutions 12 and 13, shares would only be
issued at a price above the prevailing NAV per share. The
Directors will only issue shares on a non-pre-emptive basis if
they believe it would be in the best interests of the Company’s
shareholders.
If both these resolutions are passed, shareholders will be
granting the Directors authority to allot up to 20.0% of the
Company’s issued share capital. The Board believes that
passing of Resolutions 10 and 11 is in the shareholders’
interests as the authority is intended to be used for funding
investment opportunities sourced by the Portfolio Manager,
thereby mitigating any potential dilution of investment returns
for existing shareholders, and the Directors will only issue
new ordinary shares at a price above the prevailing NAV per
If both these resolutions are passed, shareholders will be
granting the Directors authority to allot up to 20.0% of
the Company’s issued share capital on a non-pre-emptive
basis. Although this percentage authority is higher than the
authority typically sought by investment companies, the
Board believes that in order to have the maximum flexibility
to raise finance to enable the Company to take advantage of
suitable opportunities, the passing of Resolutions 12 and 13 is
in the shareholders’ interests.
27
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Directors’ Report (continued)
Notice period for general meetings
In terms of the Companies Act 2006, the notice period for
general meetings (other than an AGM) is 21 clear days’ notice
unless the Company: (i) has gained shareholder approval for
the holding of general meetings on 14 clear days’ notice by
passing a special resolution at the most recent AGM; and (ii)
offers the facility for all shareholders to vote by electronic
means. The Company would like to preserve its ability to
call general meetings (other than an AGM) on less than
21 clear days’ notice. The shorter notice period proposed by
Resolution 15, a special resolution, would not be used as a
matter of routine, but only where the flexibility is merited
by the business of the meeting and is thought to be in the
interests of shareholders as a whole. The approval will be
effective until the date of the AGM to be held in 2020, when
it is intended that a similar resolution will be proposed.
Directors’ recommendation
The Directors consider each resolution being proposed at
the AGM to be in the best interests of the Company and
shareholders as a whole and they unanimously recommend
that all shareholders vote in favour of them, as they intend to
do in respect of their own beneficial shareholdings.
By order of the Board
Link Company Matters Limited
Company Secretary
23 May 2019
In the event that Resolution 10 is passed and Resolution 11
is not passed (such that the Directors are only authorised to
issue ordinary shares up to 10.0% of the existing issued share
capital), Resolution 13 will not be proposed at the AGM.
These authorities, if given, will lapse at the conclusion of the
2020 AGM of the Company.
Purchase of own shares
Resolution 14, a special resolution, will renew the Company’s
authority to make market purchases of up to 13,229,755
ordinary shares (being 14.99% of the issued share capital as
at the date of the Notice of AGM or, if changed, 14.99% of
the issued share capital immediately following the passing of
the resolution), either for cancellation or placing into treasury
at the determination of the Directors. Purchases of ordinary
shares will be made within guidelines established from time to
time by the Board. Any purchase of ordinary shares would be
made only out of the available cash resources of the Company.
The maximum price which may be paid for an ordinary
share must not be more than the higher of (i) 5.0% above
the average of the mid-market value of the ordinary shares
for the five business days before the purchase is made, or (ii)
the higher of the price of the last independent trade and the
highest current independent bid for the ordinary shares. The
minimum price which may be paid is £0.01 per ordinary
share.
Whilst the Directors have no present intention of using this
authority, the Directors would use this authority in order to
address any significant imbalance between the supply and
demand for the ordinary shares and to manage the discount
to NAV at which the ordinary shares trade. Ordinary shares
will be repurchased only at prices below the NAV per
ordinary share, which should have the effect of increasing the
net asset value per ordinary share for remaining shareholders.
This authority, if approved by shareholders, will expire at the
AGM to be held in 2020, when a resolution for its renewal
will be proposed.
28
ODYSSEAN INVESTMENT TRUST PLC Corporate Governance
Statement
This Corporate Governance Statement forms part of the
Directors’ Report.
report under this section explains any deviation from its
recommendations.
Introduction
The Board is accountable to shareholders for the governance
of the Company’s affairs and is committed to maintaining the
highest standard of corporate governance for the long-term
success of the Company. In this statement, the Company
reports on its compliance with the AIC Code of Corporate
Governance (the “AIC Code”) and sets out how the Board and
its Committees have operated during the past year.
Statement of compliance with the AIC Code
The Board of the Company has considered the principles
and recommendations of the AIC Code by reference to
the AIC Corporate Governance Guide for Investment
Companies (the “AIC Guide”), published in July 2016. The
AIC Code, as explained by the AIC Guide, addresses all the
principles set out in the UK Corporate Governance Code
(“UK Code”) as well as setting out additional principles and
recommendations on issues that are of specific relevance to
the Company as an investment trust. The Board considers
that reporting against the principles and recommendations
of the AIC Code, and by reference to the AIC Guide (which
incorporates the UK Code), will provide better information to
shareholders. A copy of the UK Code can be found at
www.frc.org.uk.
The Financial Reporting Council (the “FRC”), has endorsed
the AIC Code and the AIC Guide. The terms of the FRC’s
endorsement mean that AIC members who report against
the AIC Code and the AIC Guide meet fully their obligations
under the UK Code and the related disclosure requirements
contained in the Listing Rules of the FCA. A copy of the
AIC Code and the AIC Guide can be obtained via the AIC
website, www.theaic.co.uk. A copy of the UK Code can be
obtained at www.frc.org.uk.
The Board recognises the importance of a strong corporate
governance culture and has established a framework for
corporate governance which it considers to be appropriate to
the business of the Company.
The Board considers that it has managed its affairs in
compliance with the AIC Code and the relevant provisions
of the UK Code throughout the period ended 31 March
2019, except where it has concluded that adherence or
compliance with any particular principle or recommendation
of either of the Codes would not have been appropriate to the
Company’s circumstances. Similar to the UK Code, the AIC
Code specifies a “comply or explain” basis and the Board’s
The UK Code includes provisions relating to:
–
–
the role of the chief executive; and
executive directors’ remuneration.
For the reasons set out in the AIC Guide and as explained
in the UK Code, the Board considers these provisions are
not relevant to the position of the Company, being an
externally-managed investment company. The Company
has therefore not reported further in respect of these
provisions.
The Board notes the publication of the revised AIC Code
in February 2019, which is applicable to the Company
for the financial year ending 31 March 2020. The Board is
considering the new requirements and will report further on
these in next year’s Annual Report.
The Board of Directors
The Board of Directors is collectively responsible for the
long-term success of the Company. It provides overall
leadership, sets the strategic aims of the Company and
ensures that the necessary resources are in place for the
Company to meet its objectives and fulfil its obligations
to shareholders within a framework of high standards
of corporate governance and effective internal controls.
The Directors are responsible for the determination of the
Company’s investment policy and investment strategy and
have overall responsibility for the Company’s activities,
including the review of investment activity and performance
and the control and supervision of the Portfolio Manager.
The Board consists of four non-executive Directors. It seeks
to ensure that it has an appropriate balance of skills and
experience, and considers that, collectively, it has substantial
recent and relevant experience of investment trusts and
financial and public company management.
Other than their letters of appointment as Directors, none of
the Directors has a contract of service with the Company nor
has there been any other contract or arrangement between
the Company and any Director at any time during the year.
Directors are not entitled to any compensation for loss of
office. Copies of the letters of appointment are available on
request from the Secretary and will be available at the AGM.
29
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Corporate Governance
Statement (continued)
Chairman and Senior Independent Director
The Chairman, Jane Tufnell, is deemed by her fellow
independent Board members to be independent in character
and judgement, and free of any conflicts of interest. She
considers herself to have sufficient time to spend on the
affairs of the Company. She has no significant commitments
other than those disclosed in her biography on page 23.
Arabella Cecil is the Senior Independent Director of the
Company. She provides a channel for any shareholder
concerns regarding the Chairman and will take the lead in
the annual evaluation of the Chairman by the independent
Directors.
Board operation
The Directors have adopted a formal schedule of matters
specifically reserved for their approval. These include, but are
not limited to, the following:
–
–
–
–
–
–
–
approval of the Company’s investment policy,
long-term objectives and business strategy;
approval of the policies regarding insurance,
hedging, borrowing limits and corporate security;
approval of the Company’s Annual and Half-Yearly
Reports, financial statements and accounting
policies, prospectuses, circulars and other
shareholder communications;
approval for raising new capital and major
financing facilities;
Board appointments and removals;
appointment and removal of the Portfolio Manager,
Auditor and the Company’s other service providers;
and
approval of the Company’s annual operating
budgets.
Board meetings
The Company has four scheduled Board meetings a year
with additional meetings in respect of share issuances and
regulatory matters arranged as necessary.
At each scheduled Board meeting, the Directors follow
a formal agenda which is circulated in advance by the
Secretary. The Secretary, the Administrator and the Portfolio
Manager regularly provide the Board with financial
information, including an annual expenses budget, together
with briefing notes and papers in relation to changes in the
Company’s economic and financial environment, statutory
and regulatory changes and corporate governance best
practice. A description of the Company’s risk management
and internal control systems is set out in the Strategic Report
on pages 18 to 20.
Service providers
The Company’s main functions are delegated to a number of
service providers, each engaged under separate contracts. The
management of the Company’s portfolio is delegated to the
Portfolio Manager, which manages the assets in accordance
with the Company’s objectives and policies. At each Board
meeting, representatives from the Portfolio Manager are in
attendance to present reports to the Directors covering the
Company’s current and future activities, portfolio of assets
and its investment performance over the preceding period.
The Board and the Portfolio Manager operate in a fully
supportive, co-operative and open environment and ongoing
communication with the Board is maintained between formal
meetings.
Board committees
Given the number of Directors, the Board does not consider it
necessary for the Company to establish separate nomination
and remuneration committees and all of the matters that
can be delegated to such committees are considered by the
Board as a whole. The Board considers that the combined
knowledge and experience of its members enables it to
successfully fulfil the role of these committees.
The Board has established three committees to assist with
its operations: the Audit Committee; the Management
Engagement Committee and the Disclosure Committee. Each
committee’s delegated responsibilities are clearly defined
in formal terms of reference, which are available on the
Company’s website.
30
ODYSSEAN INVESTMENT TRUST PLC Corporate Governance
Statement (continued)
Audit Committee
The Audit Committee is chaired by Richard King and
comprises all Directors. Given the small size of the Board,
it is considered appropriate for all Directors to be members
of the Committee. The Audit Committee meets formally at
least twice a year. The Board believes it is appropriate for
the Chairman of the Company to be a member of the Audit
Committee as she provides a valuable contribution to the
Committee and her membership enhances the operation of
the Committee and its interaction with the Board.
The Board considers that the members of the Audit
Committee have the requisite skills and experience to fulfil
the responsibilities of the Committee and that the Committee,
as a whole, has the competence relevant to the investment
trust sector. The Chairman of the Audit Committee has
significant recent and relevant financial experience.
The Audit Committee has direct access to the Company’s
Auditor, and provides a forum through which the Auditor
reports to the Board. Representatives of the Auditor attend
meetings of the Audit Committee at least twice a year.
Further details about the Audit Committee and its activities
during the period under review are set out on pages 34 to 36.
Management Engagement Committee
Peter Hewitt is the Chairman of the Management Engagement
Committee, which comprises all Directors. The Committee
first met following the period end and, going forward, is
scheduled to meet at least once a year to review the ongoing
performance and the continuing appointment of all service
providers of the Company, including the Portfolio Manager.
The Committee also considers any variation to the terms of all
service providers’ agreements and reports its findings to the
Board.
The performance of the Company’s service providers is
closely monitored by the Committee and in arriving at its
decisions regarding the continuing appointment of the
service providers, it is aided by the feedback received from
the Portfolio Manager on the performance of those service
providers.
Disclosure Committee
The Disclosure Committee is chaired by Jane Tufnell, the
Chairman of the Board, and includes Arabella Cecil as its
member. The Committee has been established to ensure
the identification and disclosure of inside information and
the Company’s ongoing compliance with the Market Abuse
Regulation. No meetings of the Committee were held during
the period.
Meeting attendance
The number of scheduled Board and Audit Committee
meetings held during the period ended 31 March 2019 and
the attendance of the individual Directors is shown below:
Board Meetings
Audit Committee
Number
entitled to
attend
Number
attended
Number
entitled to
attend
Number
attended
Jane Tufnell
Arabella Cecil
Peter Hewitt
Richard King
4
4
4
4
4
4
4
4
2
2
2
2
2
2
2
2
One meeting of the Management Engagement Committee was
held post period end at which all Directors were present.
A number of additional Board meetings were held by the
Company during the period ended 31 March 2019. These
meetings were held in respect of the Company’s IPO in May
2018, putting into place the blocklisting facility and other ad
hoc matters.
Performance evaluation
The Directors are aware that they need to continually monitor
and improve Board performance and recognise that this
can be achieved through regular evaluation of the Board, its
committees and the individual Directors; this will provide
a valuable feedback mechanism for improving the Board’s
effectiveness. While no formal performance evaluation took
place during the period ended 31 March 2019, being the
first reporting period of the Company, the Directors have
agreed that, going forward, this process of review will be
conducted on an annual basis by way of completion of a
formal questionnaire and discussions between the Directors.
The evaluation of the Chairman will be led by the Senior
Independent Director.
31
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Corporate Governance
Statement (continued)
Independence of Directors
The independence of the Directors was reviewed as part of
the IPO process and will be reviewed as part of the annual
evaluation process going forward. Each Director is considered
to be independent in character and judgement and entirely
independent of the Portfolio Manager. None of the Directors
sits on the boards of any other companies managed by the
Portfolio Manager.
Election of Directors
The Company has no set policy on the length of the tenure of
the Directors. Under the Company’s Articles of Association
and in accordance with the AIC Code, Directors are required
to retire at the first AGM following their appointment.
Thereafter, at each AGM, any Director who has not stood for
re-election at either of the two preceding AGMs shall retire.
In addition, one-third of the Directors eligible to retire by
rotation shall retire from office at each AGM. The Articles of
Association also require any Director, who has been on the
Board for nine years or more, to retire at each AGM.
Accordingly, all Directors will be standing for election
at the Company’s forthcoming AGM. The Board strongly
recommends the election of each of the Directors on the
basis of their experience and expertise in investment matters,
their independence and continuing effectiveness and
commitment to the Company.
Diversity
The Board has adopted a diversity policy, which
acknowledges the benefits of greater diversity, including
gender diversity, and remains committed to ensuring that the
Company’s Directors bring a wide range of skills, knowledge,
experience, backgrounds and perspectives to the Board.
Whilst the Board does not feel that it would be appropriate
to set targets as all appointments are made on merit, the
following objectives for the appointment of Directors have
been established:
–
–
all Board appointments will be made on merit, in
the context of the skills, knowledge and experience
that are needed for the Board to be effective; and
long lists of potential non-executive Directors
should include diverse candidates of appropriate
merit.
The diversity policy applies to the Board and its Committees.
The Company does not have any other administrative,
management and supervisory bodies as all its functions have
been outsourced to third party service providers.
Conflicts of interest
It is the responsibility of each individual Director to avoid
an unauthorised conflict of interest situation arising. The
Director must request authorisation from the Board as soon as
he or she becomes aware of the possibility of an interest that
conflicts, or might possibly conflict, with the interests of the
Company (“situational conflicts”). The Company’s Articles of
Association authorise the Board to approve such situations,
where deemed appropriate.
A register of conflicts is maintained by the Secretary and is
reviewed at Board meetings, to ensure that any authorised
conflicts remain appropriate. The Directors are required to
confirm at these meetings whether there has been any change
to their position.
The Board is responsible for considering Directors’ requests
for authorisation of situational conflicts and for deciding
whether or not the situational conflict should be authorised.
The factors to be considered will include: whether the
situational conflict could prevent the Director from properly
performing their duties; whether it has, or could have, any
impact on the Company; and whether it could be regarded as
likely to affect the judgement and/or actions of the Director
in question. When the Board is deciding whether to authorise
a conflict or potential conflict, only Directors who have no
interest in the matter being considered are able to take the
relevant decision, and in taking the decision the Directors
must act in a way they consider, in good faith, will be most
likely to promote the Company’s success. The Directors are
able to impose limits or conditions when giving authorisation
if they think this is appropriate in the circumstances.
Induction of new Directors
The Company has an established process in place for the
induction of new Directors. An induction pack will be
provided to new Directors by the Secretary, containing
relevant information about the Company, its constitutional
documents and its processes and procedures. New
appointees will also have the opportunity of meeting with the
Chairman and relevant persons at the Portfolio Manager.
32
ODYSSEAN INVESTMENT TRUST PLC Corporate Governance
Statement (continued)
Insurance and indemnity provisions
The Board has agreed arrangements whereby Directors may
take independent professional advice in the furtherance
of their duties. The Company has Directors’ and Officers’
liability insurance to cover legal defence costs and public
offering of securities insurance in place in respect of the IPO.
Under the Company’s Articles of Association, the Directors
are provided, subject to the provisions of UK legislation, with
an indemnity in respect of liabilities which they may sustain
or incur in connection with their appointment. The Company
has also entered into a deed of indemnity with each Director
pursuant to which it has agreed to insure, indemnify and/or
loan funds to the Director in relation to certain specific
liabilities incurred by them in the performance of their duties
as a Director of the Company.
Relations with shareholders
Communication with shareholders is given a high priority
by both the Board and the Portfolio Manager. The Portfolio
Manager and the Company’s Broker are in regular contact
with major shareholders and report the results of all
meetings and the views of those shareholders to the Board
on a regular basis. The Chairman and the other Directors
are available to attend these meetings with shareholders if
required. All shareholders are encouraged to attend and vote
at the Company’s AGM to be held on 27 June 2019, during
which the Board and the Portfolio Manager will be available
to discuss issues affecting the Company and answer any
questions. Shareholders wishing to communicate directly
with the Board should contact the Secretary at the address on
page 74.
Internal control review and assessment process
Details of the Company’s internal control review and the
assessment process are outlined in the Strategic Report on
page 18.
Company Secretary
The Board has direct access to the advice and services
of the Secretary, Link Company Matters Limited, which
is responsible for ensuring that Board and Committee
procedures are followed and that applicable regulations are
complied with. The Secretary is also responsible to the Board
for ensuring timely delivery of the information and reports
which the Directors require and that the statutory obligations
of the Company are met.
33
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Audit Committee Report
I am pleased to present the Audit Committee Report for the
period ended 31 March 2019.
Role of the Audit Committee
The primary responsibilities of the Audit Committee are:
–
–
to approve any non-audit services to be provided
by the Auditor and the fees paid for such services;
and
to ensure the effective operation of the Company’s
data protection policy.
–
–
–
–
–
–
–
–
–
–
to monitor the integrity and contents of the
Company’s half-yearly reports, annual reports and
financial statements and accounting policies, and
to review compliance with regulatory and financial
reporting requirements;
to advise the Board, where requested, on whether
the annual report and financial statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy;
to review the principal risks facing the Company
that would threaten its business model, future
performance, solvency or liquidity, and to review
the effectiveness of the Company’s internal controls
and risk management systems;
to assess the prospects of the Company for the
next twelve months and to consider its longer-term
viability;
to review the Company’s internal financial controls
and review the adequacy and effectiveness of the
Company’s risk management systems;
to consider annually whether there is a need for the
Company to have its own internal audit function;
to oversee the selection process of possible new
appointees as external auditor;
to make recommendations to the Board in relation
to the appointment, re-appointment and removal
of the Auditor, including the approval of its
remuneration and terms of engagement;
to review the adequacy and scope of the external
audit;
to consider the independence, objectivity and
effectiveness of the Auditor and the effectiveness of
the audit;
Matters considered during the period
During the period ended 31 March 2019, the Committee met
twice and each Director’s attendance at these meetings is set
out in the table on page 31. The Committee also met once
following the year end. The Committee has:
–
–
–
–
reviewed the internal controls and risk
management systems of the Company and its third
party service providers;
agreed the audit plan with the Auditor, including
the principal areas of focus, and the fees in respect
of the audit;
received and discussed with the Auditor their report
on the results of the audit; and
reviewed the Company’s Half-Yearly Report and
Annual Report and Financial Statements, discussed
the appropriateness of the accounting policies
adopted and advised the Board accordingly.
The Committee has direct access to the Auditor, KPMG LLP,
who attends Committee meetings on a regular basis. The
Committee has the opportunity to meet with the Auditor
without the Portfolio Manager being present.
The significant issues considered by the Committee in relation
to the Annual Report and Financial Statements were:
(a) Valuation of investments
The Board relies on the Administrator and the Portfolio
Manager to use correct listed prices and seeks comfort in the
testing of this process through their internal controls reports.
The Committee reviewed with the Portfolio Manager and
the Administrator the valuation process of the Company’s
investments and the systems in place to ensure the accuracy
of these valuations. The Company uses the services of an
independent custodian, RBC Investor Services Trust (UK
Branch), to hold the assets of the Company. The custodian’s
and the Portfolio Manager’s records are reconciled daily.
34
ODYSSEAN INVESTMENT TRUST PLC Audit Committee Report (continued)
(b) Internal controls
During the year, the Committee reviewed and, where
appropriate, updated the Company’s risk register. This is done
on an ongoing basis.
The Audit Committee receives a report on internal control
and compliance from the Portfolio Manager and discusses
this with the Portfolio Manager. Reports from the Company’s
other service providers are also reviewed. No significant
matters of concern arose from these discussions.
The Company does not have an internal audit function
as most of its day-to-day operations are delegated to
third parties, all of whom have their own internal control
procedures. The Committee discussed whether it would be
appropriate to establish an internal audit function, and agreed
that the existing system of monitoring and reporting by third
parties remains appropriate and sufficient.
(c) Going concern and long-term viability
In line with the AIC Code, the Committee considered the
Company’s financial requirements and viability for the
forthcoming year and over a longer period of three years.
As a result of this assessment, the Committee concluded
that the Company had adequate resources to continue in
operation and meet its liabilities as they fall due both for
the forthcoming year and over the next two years. Related
disclosures are set out on page 21.
(d) Maintenance of investment trust status
The Portfolio Manager and the Administrator have reported to
the Audit Committee to confirm continuing compliance with
the requirements for maintaining investment trust status. The
position is also discussed with the Auditor as part of the audit
process.
Following the consideration of the above issues and its
detailed review, the Committee was of the opinion that
the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s position and performance, business model and
strategy and advised the Board accordingly.
Audit fees and non-audit services
An audit fee of £29,000 has been agreed in respect of the
audit for the period ended 31 March 2019.
In accordance with the Company’s non-audit services
policy, as adopted by the Board on 28 August 2018, the
Audit Committee reviews the scope and nature of all
proposed non-audit services before engagement, to ensure
that auditor independence and objectivity are safeguarded.
The policy includes a list of non-audit services which may
be provided by the Auditor provided there is no apparent
threat to independence, as well as a list of services which are
prohibited. In respect of any permissible non-audit service
up to a fee of £10,000 or where any urgent matters arise,
the Audit Committee has delegated authority to the Portfolio
Manager to approve these between meetings. Non-audit
services are capped at 70.0% of the average of the statutory
audit fees for the preceding three years.
– During the period, the Auditor provided the
following non-audit services: reporting accountant
services for the prospectus as the time of the
Company’s launch for a fee of £30,000; and
–
review of the Half-Yearly Report for a fee of
£9,000.
These non-audit fees are significantly higher than the statutory
audit fee due to the work involved in the Company’s IPO
and its first period. The level of non-audit fees is therefore
expected to remain below this level in future.
Further information on the fees paid to the Auditor is set out
in note 5 to the Financial Statements on page 57.
Effectiveness of the external audit
The Audit Committee monitors and reviews the effectiveness
of the external audit carried out by the Auditor, including
a detailed review of the audit plan and the audit results
report, and makes recommendations to the Board on the
re-appointment, remuneration and terms of engagement of
the Auditor. This review takes into account the experience
and tenure of the audit partner and team, the nature and
level of services provided, and confirmation that the Auditor
has complied with independence standards. Any concerns
with the effectiveness of the external audit process would be
reported to the Board. No concerns were raised in respect of
the period ended 31 March 2019.
35
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Audit Committee Report (continued)
Independence and objectivity of the Auditor
The Committee has considered the independence and
objectivity of the Auditor and has conducted a review of
non-audit services which the Auditor has provided during
the period under review. The Committee receives an annual
assurance from the Auditor that its independence is not
compromised by the provision of such non-audit services.
The Committee is satisfied that the Auditor’s objectivity
and independence is not impaired by the performance of
these non-audit services and that the Auditor has fulfilled its
obligations to the Company and its shareholders.
KPMG LLP has been the Auditor to the Company since
launch in 2018. No tender for the audit of the Company has
been undertaken. The Committee will review the continuing
appointment of the Auditor on an annual basis and give
regular consideration to the Auditor’s fees and independence,
along with matters raised during each audit.
Appointment of the Auditor
Following consideration of the performance of the Auditor,
the services provided during the year and a review of
its independence and objectivity, the Committee has
recommended to the Board the re-appointment of KPMG LLP
as Auditor to the Company.
In accordance with the requirements relating to the
appointment of auditors, the Company would need to
conduct an audit tender no later than for the financial year
beginning 1 April 2028.
Richard King
Chairman of the Audit Committee
23 May 2019
36
ODYSSEAN INVESTMENT TRUST PLC Directors’ Remuneration
Report
Statement from the Chairman
I am pleased to present the Directors’ Remuneration Report
for the period ended 31 March 2019.
As the Company has no employees and the Board is
comprised wholly of non-executive Directors, the Board
has not established a separate Remuneration Committee.
Directors’ remuneration is determined by the Board as
a whole, at its discretion within an aggregate ceiling of
£300,000 per annum, as set out in the Company’s Articles
of Association. Each Director abstains from voting on their
own individual remuneration. During the period, the Board
reviewed the levels of Directors’ remuneration while having
regard to the Company’s financial position and performance,
remuneration in other companies of comparable scale and
complexity and market statistics generally.
During the period ended 31 March 2019, the annual fees
were set out at the rate of £34,000 for the Chairman, £27,500
for the Chairman of the Audit committee and £24,000 for a
Director. No changes for these fee levels are proposed for the
year ending 31 March 2020.
Each of the Directors has agreed to use their applicable
Directors’ fees (net of applicable taxes) to acquire the
Company’s ordinary shares in the secondary market, subject
to regulatory requirements. In relation to any dealings, the
Directors will comply with the share dealing code adopted
by the Company in accordance with the Market Abuse
Regulation.
Ordinary resolutions will be put to shareholders at the
forthcoming AGM to be held in June 2019 to receive and
approve the Directors’ Remuneration Report and to receive
and approve the Directors’ Remuneration Policy. If approved
by shareholders, the Directors’ Remuneration Policy will be
effective immediately upon the passing of the resolution at
the AGM. There are no significant changes expected in the
way the proposed remuneration policy, if approved, will be
implemented in the next financial year.
Remuneration policy
The Company follows the recommendation of the AIC Code
that non executive Directors’ remuneration should reflect the
time commitment and responsibilities of the role. The Board’s
policy is that the remuneration of non-executive Directors
should reflect the experience of the Board as a whole, and be
determined with reference to comparable organisations and
appointments.
All Directors are non-executive, appointed under the terms
of letters of appointment. There are no service contracts in
place. The Company has no employees.
The fees for the non-executive Directors are determined
within the limits (not to exceed £300,000 per annum) set
out in the Company’s Articles of Association, or any greater
sum that may be determined by special resolution of the
Company. Directors are not eligible for bonuses, share
options, long-term incentive schemes or other performance-
related benefits as the Board does not believe that this is
appropriate for non-executive Directors. There are no pension
arrangements or retirement benefits in place for the Directors
of the Company.
Under the Company’s Articles of Association, if any Director
is called upon to perform or render any special duties or
services outside his ordinary duties as a Director, he may be
paid such reasonable additional remuneration as the Board,
or any committee authorised by the Board, may from time to
time determine.
The Directors are entitled to be repaid all reasonable
travelling, hotel and other expenses properly incurred by
them in or about the performance of their duties as Director,
including any expenses incurred in attending meetings of the
Board or any committee of the Board or general meetings of
the Company.
Directors’ and Officers’ liability insurance cover is
maintained by the Company on behalf of the Directors.
37
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Directors’ Remuneration
Report (continued)
Company performance
The graph below compares the total return to holders of
ordinary shares since they were first admitted to trading on
the LSE, compared to the total return of the NSCI ex IT plus
AIM Index.
OIT Share Price
NSCI ex IT plus AIM Total Return Index
110
105
100
95
90
85
80
As at 31 March 2019. Performance measured from close of business on 1 May
2018. Share performance since inception assumes IPO price of 100.0p.
Source: Bloomberg, Factset. Rebased to 100.
Directors’ remuneration for the period ended
31 March 2019 (audited)
The remuneration paid to the Directors during the period
ended 31 March 2019 is set out in the single total figure table
below:
Director
Fees
Jane Tufnell1
£31,167
Arabella Cecil2,3
£17,608
Peter Hewitt2
Richard King1
–4
£25,208
£73,983
1 Appointed on 21 December 2017.
2 Appointed on 31 January 2018.
Taxable
benefits
Total
–
–
£31,167
£17,608
£723
£723
–
£25,208
£723
£74,706
3 Until 4 February 2019, Arabella Cecil invoiced her Director’s fee via Gravity
Partners Limited.
4 As noted in the Company’s 2018 Interim Report, Peter Hewitt is not
receiving a fee in respect of his services as a Director to the Company; this
is owing to his employment as a director of Global Equities in BMO Global
Asset Management Limited.
Directors’ fee levels
Component Role
Rate at
1 April
2019
Annual fee
Chairman
£34,000
Purpose of
Remuneration
Commitment as
Chairman1
£24,000
Commitment as non-
executive Director2
£3,500
Non-
executive
Director
Chairman
of the Audit
Committee
Annual fee
Additional
fee
Additional
fee
All Directors
N/A
For additional
responsibilities and
time commitments3
For extra or special
services performed
in their role as a
Director4
Reimbursement of
expenses incurred in
the performance of
duties as a Director
Expenses
All Directors
N/A
1 The Chairman of the Board is paid a higher fee than the other Directors to
reflect the more onerous role.
2 The Company’s Articles of Association limit the aggregate fees payable to
the Board of Directors to £300,000 per annum.
3 The Chairman of the Audit Committee is paid a higher fee than the other
Directors to reflect the more onerous role.
4 Additional fees would only be paid in exceptional circumstances in relation
to the performance of extra or special services.
Each of the Directors has agreed to use their applicable
Directors’ fees (net of applicable taxes) to acquire the
Company’s ordinary shares in the secondary market, subject
to regulatory requirements.
Fees are reviewed annually in accordance with the above
policy. The fee for any new Director appointed to the Board
will be determined on the same basis. The Company is
committed to ongoing shareholder dialogue and any views
expressed by shareholders on the fees being paid to Directors
would be taken into consideration by the Board when
reviewing the Directors’ remuneration policy and in the
annual review of Directors’ fees.
Compensation will not be made upon early termination of
appointment.
38
ODYSSEAN INVESTMENT TRUST PLC Directors’ Remuneration
Report (continued)
Relative importance of spend on pay
The table below shows the proportion of the Company’s
income spent on pay.
Spend on Directors’ fees*
Management fee and other expenses
Period ended
31 March 2019
£74,000
£1,165,000
* As the Company has no employees, the total spend on pay on remuneration
comprises only the Directors’ fees.
In the absence of any employees, dividend payments made
during the period and amount spent on share buybacks, the
management fee and other expenses have been included
because the Directors believe it will help shareholders’
understanding of the relative importance of the spend on pay.
The figures for this measure are the same as those shown in
notes 4 and 5 to the Financial Statements.
Directors’ interests (audited)
The Company’s Articles of Association do not require a
Director to own shares in the Company. The interests of the
Directors and any connected persons in the ordinary shares
of the Company at 31 March 2019 and 23 May 2019, the
date of this report, are shown in the table below:
31 March 2019
Number of
shares
23 May 2019
Number of
shares
519,554
114,717
35,000
38,885
519,554
119,573
35,000
42,235
Jane Tufnell
Arabella Cecil
Peter Hewitt
Richard King
None of the Directors or any person connected with them
had a material interest in the Company’s transactions,
arrangements or agreements during the period.
Approval
The Directors’ Remuneration Report was approved by the
Board and signed on its behalf by:
Jane Tufnell
Chairman
23 May 2019
39
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Statement of Directors’
Responsibilities
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the Financial Statements
comply with the Act and Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report and Corporate
Governance Statement that comply with that law and those
regulations, and for ensuring that the Annual Report includes
information required by the Listing Rules of the FCA.
The Financial Statements are published on the Company’s
website, www.oitplc.com, which is maintained on behalf
of the Company by the Portfolio Manager. The work carried
out by the Auditor does not involve consideration of the
maintenance and integrity of this website and accordingly,
the Auditor accepts no responsibility for any changes that
have occurred to the Financial Statements since they were
initially presented on the website.
Under the Portfolio Management Agreement, the Portfolio
Manager is responsible for the maintenance and integrity
of the corporate and financial information included on
the Company’s website. Visitors to the website need to be
aware that legislation in the United Kingdom covering the
preparation and dissemination of the financial statements
may differ from legislation in their jurisdiction.
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial
statements for each financial period. Accordingly, the
Directors have prepared the Financial Statements in
accordance with IFRS as adopted by the EU. Under company
law, the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of the profit or loss of
the Company for that period.
In preparing the Financial Statements, the Directors are
required to:
–
–
–
–
select suitable accounting policies in accordance
with IAS 8: “Accounting Policies, Changes in
Accounting Estimates and Errors” and then apply
them consistently;
present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
provide additional disclosures when compliance
with specific requirements in IFRS is insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on
the Company’s financial position and financial
performance;
state whether applicable IFRS have been followed,
subject to any material departures disclosed and
explained in the Financial Statements;
– make judgements and accounting estimates that
are reasonable and prudent; and
–
prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
40
ODYSSEAN INVESTMENT TRUST PLC Statement of Directors’
Responsibilities (continued)
We confirm that to the best of our knowledge:
–
–
the Financial Statements, which have been
prepared in accordance with IFRS as adopted by
the EU, give a true and fair view of the assets,
liabilities, financial position and loss of the
Company; and
the Annual Report includes a fair review of the
development and performance of the business
and the position of the Company, together with a
description of the principal risks and uncertainties
that it faces.
The Directors consider that the Annual Report and
Financial Statements, taken as a whole, is fair, balanced
and understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
On behalf of the Board
Jane Tufnell
Chairman
23 May 2019
41
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Financial Statements
FINANCIAL STATEMENTS
43
48
49
50
Independent Auditor’s Report
Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheet
Cash Flow Statement
51
52 Notes to the Financial Statements
Independent Auditor’s Report
We were first appointed as auditor by the directors on
29 November 2018. The period of total uninterrupted
engagement is for the 1 financial period ended
31 March 2019 We have fulfilled our ethical
responsibilities under, and we remain independent
of the Company in accordance with, UK ethical
requirements including the FRC Ethical Standard as
applied to listed public interest entities. No non-audit
services prohibited by that standard were provided.
Overview
Materiality
financial statements
as a whole
Key audit matters
Recurring risks
£0.85m
1.0% of Total Assets
2019
Carrying value of quoted
investments
1. Our opinion is unmodified
We have audited the financial statements of Odyssean
Investment Trust PLC (the “Company”) for the period
ended 31 March 2019 which comprise the statement of
comprehensive income, statement of changes in equity,
balance sheet, cash flow statements and the related
notes, including the accounting policies in note 2.
In our opinion, the Financial Statements:
–
give a true and fair view of the state of Company’s
affairs as at 31 March 2019 and of its loss for the
period then ended;
–
–
have been properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union; and
have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities are described
below. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our
opinion. Our audit opinion is consistent with our report
to the audit committee.
2. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement team. We summarise below the key audit matter, in arriving
at our audit opinion above, together with our key audit procedures to address this matter and, as required for public
interest entities, our results from those procedures. This matters was addressed, and our results are based on procedures
undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in
forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion
on this matter.
43
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Independent Auditor’s Report (continued)
Carrying
Value of
Quoted
Investments
(£67 million)
Refer to
page 34
(Audit
Committee
Report),
page 53
(accounting
policy) and
pages 59 and
60 (financial
disclosures)
The risk
Our response
Low risk, high value:
Our procedures included:
The Company’s portfolio of
quoted investments makes up
78.3% of the Company’s total
assets (by value) and is one of
the key drivers of results. We do
not consider these investments
to be at a high risk of significant
misstatement, or to be subject to
a significant level of judgement
because they comprise liquid,
quoted investments. However,
due to their materiality in the
context of the financial statements
as a whole, the valuation of
quoted investments had the
greatest effect on our overall
audit strategy and allocation
of resources in planning and
completing our audit.
–
–
–
–
Tests of Detail: Agreeing the valuation of 100.0% of
investments in the portfolio to externally quoted prices;
and
Enquiry of custodians: Agreeing 100.0% of investment
holdings in the portfolio to independently received third
party confirmations from investment custodians.
Analytical review: we compared the daily NAV of the
company during the period to our independent expectation
based on the actual investment portfolio of the Company.
Assessing transparency: we considered the adequacy
of disclosure of the Company’s investments against the
requirements set out in accounting standards.
Our results:
– We found the carrying amount of quoted investments to be
acceptable.
3. Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at £0.85m, determined with reference to a benchmark of total
assets, of which it represents 1.0%.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £42,000, in
addition to other identified misstatements that warranted reporting on qualitative grounds.
Our audit of the company was undertaken to the materiality level specified above and was performed at the our offices.
Total Assets
£85.3m
Materiality
£0.85m
£0.63m
Whole financial statements
materiality
Total Assets
Materiality
£42k
Misstatements reported to the
audit committee
44
ODYSSEAN INVESTMENT TRUST PLC Independent Auditor’s Report (continued)
4. We have nothing to report on going concern
The Directors have prepared the financial statements
on the going concern basis as they do not intend to
liquidate the Company or to cease its operations, and
as they have concluded that the Company’s financial
position means that this is realistic. They have also
concluded that there are no material uncertainties that
could have cast significant doubt over its ability to
continue as a going concern for at least a year from the
date of approval of the financial statements (the “going
concern period”).
Our responsibility is to conclude on the appropriateness
of the Directors’ conclusions and, had there been a
material uncertainty related to going concern, to make
reference to that in this audit report. However, as we
cannot predict all future events or conditions and as
subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at
the time they were made, the absence of reference to
a material uncertainty in this auditor's report is not a
guarantee that the Company will continue in operation.
5. We have nothing to report on the other
information in the Annual Report
The Directors are responsible for the other information
presented in the Annual Report together with the
financial statements. Our opinion on the financial
statements does not cover the other information and,
accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether, based on our financial
statements audit work, the information therein is
materially misstated or inconsistent with the financial
statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in
the other information.
Strategic Report and Directors’ Report
Based solely on our work on the other information:
– we have not identified material misstatements in
the strategic report and the Directors’ report;
In our evaluation of the Directors’ conclusions, we
considered the inherent risks to the Company’s business
model, including the impact of Brexit, and analysed
how those risks might affect the Company’s financial
resources or ability to continue operations over the
going concern period.
–
–
in our opinion the information given in those
reports for the financial period is consistent with
the financial statements; and
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Based on this work, we are required to report to you if:
– we have anything material to add or draw attention
to in relation to the Directors’ statement in note 2
to the financial statements on the use of the going
concern basis of accounting with no material
uncertainties that may cast significant doubt over
the Company’s use of that basis for a period of at
least twelve months from the date of approval of
the financial statements; or
–
the related statement under the Listing Rules set out
on page 21 is materially inconsistent with our audit
knowledge.
We have nothing to report in these respects, and we did
not identify going concern as a key audit matter.
Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our
financial statements audit, we have nothing material to
add or draw attention to in relation to:
–
–
the Directors’ confirmation within the Viability
Statement on page 21 that they have carried out a
robust assessment of the principal risks facing the
Company, including those that would threaten its
business model, future performance, solvency and
liquidity;
the Principal Risks disclosures describing these risks
and explaining how they are being managed and
mitigated; and
45
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Independent Auditor’s Report (continued)
6. We have nothing to report on the other
matters on which we are required to report
by exception
Under the Companies Act 2006, we are required to
report to you if, in our opinion:
–
–
–
adequate accounting records have not been kept,
or returns adequate for our audit have not been
received from branches not visited by us; or
the financial statements and the part of the
Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns; or
certain disclosures of Directors’ remuneration
specified by law are not made; or
– we have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out
on page 40, the Directors are responsible for: the
preparation of the financial statements including
being satisfied that they give a true and fair view;
such internal control as they determine is necessary
to enable the preparation of financial statements that
are free from material misstatement, whether due
to fraud or error; assessing the Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going
concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have
no realistic alternative but to do so.
–
the Directors’ explanation in the Viability Statement
of how they have assessed the prospects of the
Company, over what period they have done so and
why they considered that period to be appropriate,
and their statement as to whether they have a
reasonable expectation that the Company will be
able to continue in operation and meet its liabilities
as they fall due over the period of their assessment,
including any related disclosures drawing attention
to any necessary qualifications or assumptions.
Under the Listing Rules, we are required to review the
Viability statement. We have nothing to report in this
respect.
Our work is limited to assessing these matters in the
context of only the knowledge acquired during our
financial statements audit. As we cannot predict all future
events or conditions and as subsequent events may
result in outcomes that are inconsistent with judgments
that were reasonable at the time they were made, the
absence of anything to report on these statements is not a
guarantee as to the Company’s longer-term viability.
Corporate governance disclosures
We are required to report to you if:
– we have identified material inconsistencies between
the knowledge we acquired during our financial
statements audit and the Directors’ statement that
they consider that the Annual Report and Financial
Statements taken as a whole is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model and
strategy; or
–
the section of the annual report describing the work
of the Audit Committee does not appropriately
address matters communicated by us to the Audit
Committee.
We are required to report to you if the Corporate
Governance Statement does not properly disclose
a departure from the eleven provisions of the UK
Corporate Governance Code specified by the Listing
Rules for our review.
We have nothing to report in these respects.
46
ODYSSEAN INVESTMENT TRUST PLC Independent Auditor’s Report (continued)
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due to
fraud or other irregularities (see below), or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud, other
irregularities or error and are considered material if,
individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided
on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on
the financial statements from our general commercial
and sector experience, through discussion with the
Directors the manager and the administrator (as
required by auditing standards), and discussed with the
Directors and the manager the policies and procedures
regarding compliance with laws and regulations.
We communicated identified laws and regulations
throughout our team and remained alert to any
indications of non-compliance throughout the audit.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the company is subject to laws and regulations
that directly affect the financial statements including
financial reporting legislation (including related
companies legislation), and its qualification as an
Investment Trust under UK legislation, any breach
of which could lead to the Company losing various
deductions and exemptions from UK corporation tax,
and we assessed the extent of compliance with these
laws and regulations as part of our procedures on the
related financial statement items.
Secondly, the Company is subject to many other
laws and regulations where the consequences of
non-compliance could have a material effect on
amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation
We identified the following areas as those most likely
to have such an effect: the Listing Rules and certain
aspects of company legislation recognising the financial
and regulated nature of the Company’s activities and
its legal form. Auditing standards limit the required
audit procedures to identify non-compliance with these
laws and regulations to enquiry of the Directors and
management and inspection of regulatory and legal
correspondence, if any. These limited procedures did
not identify any actual or suspected non-compliance.
Owing to the inherent limitations of an audit, there
is an unavoidable risk that we may not have detected
some material misstatements in the financial statements,
even though we have properly planned and performed
our audit in accordance with auditing standards. For
example, the further removed non-compliance with
laws and regulations (irregularities) is from the events
and transactions reflected in the financial statements,
the less likely the inherently limited procedures
required by auditing standards would identify it. In
addition, as with any audit, there remained a higher
risk of non-detection of irregularities, as these may
involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.
We are not responsible for preventing non-compliance
and cannot be expected to detect non-compliance with
all laws and regulations.
8. The purpose of our audit work and to whom
we owe our responsibilities
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the
Company and the Company’s members, as a body, for
our audit work, for this report, or for the opinions we
have formed.
Jatin Patel (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GH
23 May 2019
47
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Statement of
Comprehensive Income
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
Period ended 31 March 2019
Notes
Revenue
£’000
Capital
£’000
Income
Net losses on investments at fair value
Currency exchange losses
Total income
Expenses
Portfolio management fee
Other expenses
Total expenses
Return before taxation
Taxation
Return for the period
Basic and diluted earnings per ordinary share (pence)
3
9
4
5
6
7
Total
£’000
715
(1,266)
(5)
–
(1,266)
(5)
(1,271)
(556)
–
–
–
(1,271)
–
(784)
(455)
(1,239)
(1,795)
(5)
715
–
–
715
(784)
(455)
(1,239)
(524)
(5)
(529)
(1,271)
(1,800)
(0.6)
(1.4)
(2.0)
The total column of the statement is the Statement of Comprehensive Income of the Company prepared in accordance with
IFRS as endorsed by the EU. The supplementary revenue and capital columns are presented for information purposes as
recommended by the Statement of Recommended Practice (“SORP”) issued by the AIC.
All items in the above Statement derive from continuing operations. No operations were acquired or discontinued during the period.
There is no other comprehensive income and therefore, the return for the period is also the total comprehensive income.
The notes on pages 52 to 64 form part of these Financial Statements.
48
ODYSSEAN INVESTMENT TRUST PLC Statement of
Changes in Equity
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
Period ended 31 March 2019
Opening balance as at 21 December
2017
Gross proceeds of share issue
Share issue costs
Transfer to special distributable reserve
Share premium cancellation costs
Total comprehensive income for
the period
Notes
12
12
12
12
Share
capital
£’000
Share
premium
account
£’000
Special
distributable
reserve*
£’000
Capital
reserve
£’000
Revenue
reserve*
£’000
Total
£’000
–
883
–
–
–
–
–
87,403
(1,459)
–
–
–
(85,495)
85,495
(20)
–
–
–
–
–
–
–
–
–
–
–
–
–
88,286
(1,459)
–
(20)
–
(1,271)
(529)
(1,800)
As at 31 March 2019
883
449
85,475
(1,271)
(529)
85,007
* The special distributable and revenue reserves can be distributed in the form of dividends.
The notes on pages 52 to 64 form part of these Financial Statements.
49
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Balance Sheet
as at 31 March 2019
Non current assets
Investments at fair value through profit or loss
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Total assets less current liabilities
Net assets
Represented by:
Share capital
Share premium account
Special distributable reserve
Capital reserve
Revenue reserve
Total equity attributable to equity holders of the Company
31 March
2019
£’000
Notes
9
66,807
10
11
12
298
18,219
18,517
85,324
(317)
(317)
85,007
85,007
883
449
85,475
(1,271)
(529)
85,007
Basic and diluted NAV per ordinary share (pence)
8
96.3
The Financial Statements of Odyssean Investment Trust PLC were approved by the Board of Directors on 23 May 2019 and
signed on its behalf by:
Jane Tufnell
Chairman
Company Registered Number: 11121934
The notes on pages 52 to 64 form part of these Financial Statements.
50
ODYSSEAN INVESTMENT TRUST PLC Cash Flow Statement
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
Period ended
31 March 2019
£’000
Notes
Cash flows from operating activities
Investment income received
Bank interest received
Portfolio management fee paid
Other cash payments
Cash generated by/(expended from) operations
Taxation paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Purchases of investments
Sales of investments
Currency losses on settlement
Net cash outflow from investing activities
Cash flows from financing activities
Gross proceeds of share issue
Share issue costs
Share premium cancellation costs
Net cash inflow from financing activities
Increase in cash and cash equivalents for the period
Cash and cash equivalents at the start of the period
Revaluation of foreign currency balances
Cash and cash equivalents at the end of the period
The notes on pages 52 to 64 form part of these Financial Statements.
13
6
400
49
(576)
(369)
(496)
(5)
(501)
(69,211)
1,138
(5)
(68,078)
88,286
(1,469)
(20)
86,797
18,218
–
1
18,219
51
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notes to the
Financial Statements
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
1. General information
Odyssean Investment Trust PLC is a listed public limited company incorporated in England and Wales. The registered
office of the Company is Beaufort House, 51 New North Road, Exeter, EX4 4EP.
2. Accounting Policies
a) Basis of preparation/statement of compliance
The Company's annual Financial Statements for the period from incorporation on 21 December 2017 to 31 March
2019 have been prepared in conformity with IFRS as adopted by the EU, which comprise standards and
interpretations approved by the International Accounting Standards Board ("IASB"), and as applied in accordance
with the SORP for financial statements of investment trust companies and venture capital trusts, except to any extent
where it is not consistent with the requirements of IFRS. As this is the first reporting period since the Company was
incorporated, no comparative figures have been shown.
This is the first set of the Company's Financial Statements and IFRS 15 'Revenue from Contracts with Customers'
and IFRS 9 'Financial Instruments' have been applied.
b) Functional and presentation currency
The Financial Statements are presented in GBP Sterling, which is the Company's functional currency. All amounts
have been rounded to the nearest thousand, unless otherwise indicated.
c) Measurement basis
The Financial Statements have been prepared on a going concern basis under the historical cost convention, except
for the measurement at fair value of investments classified at fair value through profit or loss.
d) Significant accounting policies and application of new and revised IFRSs
The IASB have issued and endorsed the following standards and interpretations, applicable to the Company, which
are not yet effective for the period ended 31 March 2019 and have therefore not been applied in preparing these
Financial Statements.
Amendment to IFRS 9 ‘Financial Instruments’ – relates to prepayment features with negative compensation and
modifications of financial liabilities, and is effective for reporting periods on or after 1 January 2019.
The Directors do not expect that the adoption of the standards and interpretations will have a material impact on
the Financial Statements.
Other future development includes the IASB undertaking a comprehensive review of existing IFRSs. The Company
plans to apply these standards and amendments in the reporting period in which they become effective.
e) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business, being
investment business.
52
ODYSSEAN INVESTMENT TRUST PLC Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
2. Accounting policies (continued)
f)
Investments at fair value through profit or loss
All investments held by the Company are classified as “fair value through profit or loss”. As the Company’s business
is investing in financial assets with a view to profiting from their return in the form of interest, dividends or increase
in fair value. Listed equities, unquoted equities and fixed income securities are classified as fair value through profit
or loss on initial recognition. The Company manages and evaluates the performance of these investments on a fair
value basis in accordance with its investment strategy. Investments are initially recognised at cost, being the fair
value of the consideration.
After initial recognition, investments are measured at fair value, with movements in fair value of investments and
impairment of investments recognised in the Statement of Comprehensive Income and allocated to the capital
column. For quoted equity shares, fair value is generally determined by reference to quoted market bid prices or
closing prices for SETS (LSE’s electronic trading service) stocks.
Unquoted investments are valued in accordance with the International Private Equity and Venture Capital Valuation
(“IPEV”) Guidelines. Their valuation incorporates all factors that market participants would consider in setting a
price. The primary valuation techniques employed to value the unquoted investments are earnings multiples, recent
transactions and the net asset basis.
g) Trade date accounting
All “regular way” purchases and sales of financial assets are recognised on the “trade date”, i.e., the day that the
Company commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial
assets that require delivery of the asset within a time frame generally established by regulation or convention in the
market place.
h) Dividends paid to shareholders
Dividends to shareholders are recognised as a liability in the period which they are paid or approved at general
meetings and are taken to the Statement of Changes in Equity. Dividends declared and approved after the Balance
Sheet date are not recognised as a liability of the Company at that date.
i)
j)
Income
Dividends receivable on quoted equity shares are taken into account on the ex-dividend date. Where no
ex-dividend date is quoted, they are brought into account when the Company’s right to receive payment is
established. Other investment income and interest receivable are included in the Financial Statements on an
accruals basis. Dividends receivable from UK and overseas registered companies are accounted for on a gross basis.
Expenses
All expenses are accounted for on an accruals basis and are allocated wholly to revenue with the exception of
performance fees which are allocated wholly to capital, as the fee is payable by reference to the capital
performance of the Company, and transaction costs which are also allocated to capital.
k) Trade and other receivables
Trade and other receivables do not carry any interest and are stated at their fair value as reduced by appropriate
allowances for estimated irrecoverable amounts.
l) Cash and cash equivalents
Cash and cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments
readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash in hand
and at banks and short-term deposits which are held to maturity are carried at cost.
53
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
2. Accounting policies (continued)
m) Trade and other payables
Trade and other payables do not carry any interest and are measured at fair value through profit and loss.
n) Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Corporation tax is recognised in the
Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in
which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or
substantively enacted at the Balance Sheet date and any adjustment to tax payable in respect of previous years. The
tax effect of different items of expenditure is allocated between revenue and capital on the same basis as the
particular item to which it relates, using the Company’s marginal method of tax, as applied to those items allocated
to revenue, for the accounting period.
Deferred tax is provided, using the liability method, on all temporary differences at the Balance Sheet date between
the tax basis of assets and liabilities and their carrying amount for financial reporting purposes. Deferred tax
liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based
on tax rates (and tax laws) that have been enacted or substantively enacted at the Balance Sheet date.
o) Share capital and reserves
The share capital represents the nominal value of equity shares.
The share premium account represents the excess over nominal value of the fair value of consideration received for
equity shares, net of expenses of the share issue.
The special distributable reserve was created on 7 August 2018 to create a distributable reserve that shall be
capable of being applied in any manner in which the Company's profits available for distribution (as determined in
accordance with the Act) are able lawfully to be applied.
The capital reserve represents realised and unrealised capital and exchange gains and losses on the disposal and
revaluation of investments and of foreign currency items. In addition, performance fee costs are allocated to the
capital reserve. The realised capital reserve can be used for the repurchase of shares.
The revenue reserve represents retained profits from the income derived from holding investment assets less the
costs associated with running the Company. This reserve can be distributed.
p) Use of estimates and judgements
The preparation of these Financial Statements in conformity with IFRS requires the Directors to make judgements,
estimates and assumptions that affect the application of accounting policies and therefore, the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
In particular, judgements are made when determining any deferred performance fee, this may be affected by future
changes in the Company's portfolio and other assets and liabilities. Any deferred performance fee is calculated in
accordance with note 4 below and is recognised in accordance with note 2(f) above.
These judgements and estimates are reviewed on an ongoing basis. Revisions to judgements and estimates are
reviewed on an ongoing basis. Revisions are recognised prospectively.
54
ODYSSEAN INVESTMENT TRUST PLC Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
2. Accounting policies (continued)
In particular, information about significant areas of estimation uncertainty in applying accounting policies that have
the most effect on the amounts recognised in the Financial Statements relates to the determination of fair value of
financial instruments with significant unobservable inputs. These are valued in accordance with note 2(d) above.
3.
Income
Income from investments
Dividend income
Other income
Bank interest received
Total income
4. Portfolio management fee
Management fee
Performance fee provision
Period ended
31 March
2019
£’000
666
49
715
Total
£’000
784
–
784
Period ended 31 March 2019
Revenue
£’000
Capital
£’000
784
–
784
–
–
–
The Company is liable to pay a performance fee depending on the performance of the Company over a three-year
period and thereafter a rolling three-year period as set out in the Company's prospectus dated 26 March 2018. Based on
the performance of the Company to 31 March 2019, no performance fee has been accrued in the NAV. As at 23 May
2019, being the latest date prior to release, due to the impact of market movements since the period end, the Company
has no performance fee provision included in the NAV.
55
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
4. Portfolio management fee (continued)
Pursuant to the terms of the Portfolio Management Agreement, the Portfolio Manager is entitled, with effect from IPO on
1 May 2018, to receive an annual management fee equal to the lower of: (i) 1.0% of the NAV (calculated before
deduction of any accrued but unpaid Management fee and any performance fee) per annum; or (ii) 1.0% per annum of
the Company’s market capitalisation. The annual management fee is calculated and accrues daily and is payable
quarterly in arrears.
In addition, the Portfolio Manager will be entitled to a performance fee (the “Performance Fee”) in certain circumstances.
The Company’s performance is measured over rolling three-year periods ending on 31 March each year (each a
“Performance Period”), by comparing the NAV total return per ordinary share over a Performance Period against the total
return performance of the NSCI ex IT plus AIM Index (the “Comparator Index”). The first Performance Period will run
from IPO to 31 March 2021.
A Performance Fee is payable if the NAV per ordinary share at the end of the relevant Performance Period (as adjusted
to: (i) add back the aggregate value of any dividends per ordinary share paid (or accounted as paid for the purposes of
calculating the NAV) to shareholders during the relevant Performance Period; and (ii) exclude any accrual for unpaid
Performance Fee accrued in relation to the relevant Performance Period) (the “NAV Total Return per Share”)
exceeds both:
(i)
(ii)
(a) the NAV per ordinary share at IPO, in relation to the first Performance Period; and (b) thereafter the NAV per
ordinary share on the first business day of a Performance Period; in each case as adjusted by the aggregate amount
of (i) the total return on the Comparator Index (expressed as a percentage); and (ii) 1.0% per annum over the
relevant Performance Period (the “Target NAV per Share”);
the highest previously recorded NAV per ordinary share as at the end of the relevant Performance Period in respect
of which a Performance Fee was last paid (or the NAV per ordinary share as at IPO, if no Performance Fee has
been paid) (the “High Watermark”); and
(iii) with any resulting excess amount being known as the “Excess Amount”.
The Portfolio Manager will be entitled to 10.0% of the Excess Amount multiplied by the time weighted average number
of ordinary shares in issue during the relevant Performance Period to which the calculation date relates. The Performance
Fee will accrue daily.
Payment of a Performance Fee that has been earned will be deferred to the extent that the amount payable exceeds
1.75% per annum of the NAV at the end of the relevant Performance Period (amounts deferred will be payable when,
and to the extent that, following any later Performance Period(s) with respect to which a Performance Fee is payable, it is
possible to pay the deferred amounts without causing that cap to be exceeded or the relevant NAV total return per share
to fall below both the relevant target NAV per share and the relevant High Watermark for such Performance Period, with
any amount not paid being retained and carried forward).
Subject at all times to compliance with relevant regulatory and tax requirements, any Performance Fee paid or
payable shall:
– where as at the relevant calculation date, the ordinary shares are trading at, or at a premium to, the latest published NAV
per ordinary share, be satisfied as to 50.0% of its value by the issuance of new ordinary shares by the Company to the
Portfolio Manager (rounded down to the nearest whole number of ordinary shares) (including the reissue of treasury
shares) issued at the latest published NAV per ordinary share applicable at the date of issuance;
56
ODYSSEAN INVESTMENT TRUST PLC Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
4. Portfolio management fee (continued)
– where as at the relevant calculation date, the ordinary shares are trading at a discount to the latest published
NAV per ordinary share, be satisfied as to 100.0% of its value in cash and the Portfolio Manager shall, as soon as
reasonably practicable following receipt of such payment, use 50.0% of such Performance Fee payment to make
market purchases of ordinary shares (rounded down to the nearest whole number of ordinary shares) within four
months of the date of receipt of such Performance Fee payment,
(in each case “Restricted Shares”).
Each such tranche of Restricted Shares issued to, or acquired by, the Portfolio Manager will be subject to a lock-up
undertaking for a period of three years post issuance or acquisition (subject to customary exceptions).
At no time shall the Portfolio Manager (and/or any persons deemed to be acting in concert with it for the purposes of the
Takeover Code) be obliged, in the absence of a relevant whitewash resolution having been passed in accordance with
the Takeover Code, to receive, or acquire, further ordinary shares where to do so would trigger a requirement to make a
mandatory offer pursuant to Rule 9 of the Takeover Code. Where any restriction exists on the issuance of further ordinary
shares to the Portfolio Manager, the relevant amount of the Performance Fee may be paid in cash.
In addition, the Portfolio Manager is entitled to reimbursement for all costs and expenses properly incurred by it in the
performance of its duties under the Portfolio Management Agreement.
The initial term of the Portfolio Management Agreement is three years commencing on the date of IPO (the “Initial
Term”). The Company may terminate the Portfolio Management Agreement by giving the Portfolio Manager not less than
six months’ prior written notice, such notice not to be served prior to the end of the Initial Term. The Portfolio Manager
may terminate the Portfolio Management Agreement by giving the Company not less than six months’ prior written
notice, such notice not to be served prior to the end of the Initial Term.
5. Other expenses
Director's fees*
Company secretarial fee
Administration fee
Fees paid to the Auditor with respect to:**
– Audit
– Non-audit services (interim financial statements review)
Other expenses
Period ended
31 March
2019
£’000
74
57
81
29
9
205
455
* Peter Hewitt is not receiving a Director fee in respect of his services to the Company. Each of the Directors has agreed to use their applicable
Directors' fees (net of applicable taxes) to acquire ordinary shares in the secondary market, subject to regulatory requirements. In relation to any
dealings, the Directors will comply with the share dealing code adopted by the Company in accordance with the Market Abuse Regulation. The Board
will be responsible for taking all proper and reasonable steps to ensure compliance with the share dealing code by the Directors.
** As detailed in the Audit Committee report on page 35, a further £30,000 was paid to the Auditor relating to accounting services for the prospectus at
launch, recognised in the share premium account.
57
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
6. Taxation
The current taxation charge for the period is different from the standard rate of corporation tax in the UK of 19.0%, the
effective tax rate was 0%. The differences are explained below.
Return before taxation
(524)
(1,271)
(1,795)
Period ended 31 March 2019
Revenue
£’000
Capital
£’000
Total
£’000
Corporation tax at rate of 19.0%*
Effects of:
Non-taxable gains
UK non-taxable dividend income
Foreign non-taxable dividend income
Non-deductible expenses
Irrecoverable overseas tax
Tax charge/(credit) for the period
(100)
–
(120)
(7)
227
5
5
(241)
241
–
–
–
–
–
(341)
241
(120)
(7)
227
5
5
*
The theoretical tax rate is calculated using a blended tax rate over the period.
At 31 March 2019, the Company had no unprovided deferred tax liabilities. At that date, based on current estimates and
including the accumulation of net allowable losses, the Company had unrelieved losses of £1,189,484 that are available
to offset future taxable revenue. A deferred tax asset of £202,212 has not been recognised because the Company is not
expected to generate sufficient taxable income in future periods in excess of the available deductible expenses and
accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus losses.
Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the
Trust meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an Investment
Trust company.
7. Earnings per ordinary share
Revenue
Capital
Total
Period ended 31 March 2019
Weighted
average
ordinary
shares*
Basic and
diluted
earnings
per share
pence
Net return
£’000
(529)
88,040,346
(1,271)
88,040,346
(1,800)
88,040,346
(0.6)
(1.4)
(2.0)
*
The Company’s weighted average number of ordinary shares for the period has been calculated from 1 May 2018, being the date the initial shares
were listed for trading.
58
ODYSSEAN INVESTMENT TRUST PLC Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
8. Net asset value per ordinary share
The basic NAV per ordinary share is based on net assets of £85,007,000 and on 88,257,211 ordinary shares, being the
number of ordinary shares in issue at the period end.
There is no dilution effect and therefore no difference between the diluted total net assets per ordinary share and the
basic total net assets per ordinary share.
9.
Investments at fair value through profit or loss
Quoted at fair value
Investments at fair value through profit or loss
Movements in the period:
Purchases at cost
Sale – proceeds
Sale – realised gain on sales
Change in market value
Closing fair value
As at
31 March
2019
£’000
66,807
66,807
Period ended 31 March 2019
Quoted
investments
£’000
–
69,211
(1,138)
257
(1,523)
Total
£’000
–
69,211
(1,138)
257
(1,523)
66,807
66,807
The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy consists of the following three levels:
–
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
An active market is a market in which transactions for the asset or liability occur with sufficient frequency and
volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place
between market participants at the measurement date. Quoted prices provided by external pricing services, brokers
and vendors are included in Level 1, if they reflect actual and regularly occurring market transactions on an arms
length basis.
–
–
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
59
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview
Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
9.
Investments at fair value through profit or loss (continued)
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined
on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3
measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires
judgement, considering factors specific to the asset or liability.
The determination of what constitutes ‘observable’ requires significant judgement by the Company. The Company
considers observable data from investments actively traded in organised financial markets, fair value is generally
determined by reference to Stock Exchange quoted market bid prices at the close of business on the Balance Sheet date,
without adjustment for transaction costs necessary to realise the asset.
As at 31 March 2019
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Quoted at fair value
66,807
66,807
Total
66,807
66,807
–
–
–
–
There were no transfers between levels during the period.
Analysis of capital losses and gains
Unrealised losses
Realised gains on sale of investment
Losses on investments at fair value
10. Trade and other receivables
Prepayments and accrued income
60
Period ended
31 March
2019
£’000
(1,523)
257
(1,266)
As at
31 March
2019
£'000
298
298
ODYSSEAN INVESTMENT TRUST PLC Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
11. Trade and other payables
Portfolio management and performance fee accrual
Other accruals
12. Share capital
Issued and fully paid:
Ordinary shares of 1p:
Balance at beginning of the period
Initial share issue
Subsequent share issues – block listing
Balance at end of the period
As at
31 March
2019
£'000
208
109
317
Period ended 31 March 2019
Number of
Shares
£’000
–
87,457,211
800,000
88,257,211
–
875
8
883
The Company was incorporated with 1 ordinary share and 50,000 management shares. The management shares were
cancelled on 1 May 2018. As at 31 March 2019, the Company held no management shares.
The initial placing of 87,457,210 ordinary shares took place on 1 May 2018, raising gross proceeds of £87,457,210.
The Company commenced business on 1 May 2018 when the initial ordinary shares were listed on the premium
segment of the Official List of the FCA and admitted to trading on the premium segment of the LSE's main market for
listed securities.
Following approval of the Court on 8 August 2018, the share premium account cancellation was effective. The share
premium account of £85,495,000 at 7 August 2018 was transferred to a special distributable reserve. The issue costs of
£1,451,000 relating to the initial and subsequent listings prior to cancellation were offset against the share premium
account. At 31 March 2019, the special distributable reserve was £85,475,000 after costs of £20,000 relating to
the cancellation.
61
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
13. Reconciliation of total return before taxation to cash expended from operations
Total return before taxation
Net losses on investments
Currency exchange losses
Increase in debtors and accrued income
Increase in creditors and accruals
Cash expended from operations
14. Analysis of net cash and net debt
Period ended
31 March
2019
£’000
(1,795)
1,266
4
(288)
317
(496)
Net cash
At
21 December
2017
£’000
Cash flow
£’000
Exchange
movement
£’000
At
31 March
2019
£’000
Cash and cash equivalents
–
18,218
1
18,219
15. Financial instruments
The Company's financial instruments include its investment portfolio, cash balances, trade receivables and trade
payables that arise directly from its operations. Adherence to the Company's investment policy is key to managing risk.
The Portfolio Manager monitors the financial risks affecting the Company on an ongoing basis and the Directors
regularly receive financial information, which is used to identify and monitor risk. All risks are actively reviewed and
monitored by the Board.
The main risks arising from the Company's financial instruments are:
i) market risk, including market price risk, currency risk and interest rate risk;
ii) liquidity risk; and
iii) credit risk.
62
ODYSSEAN INVESTMENT TRUST PLC Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
15. Financial instruments (continued)
(i) Market risk
Market risk is the risk of loss arising from movements in observable market variables. The fair value of future cash
flows of a financial instrument held by the Company may fluctuate because of changes in market prices.
Market price risk
The Company is exposed to price risk arising from its investments whose future prices are uncertain. The Company's
exposure to market price risk comprises movements in the value of the Company's investments. Detail of its
investments can be found in note 9 on pages 59 and 60 and details on how the investments are valued is given in
note 2(f) on page 53. A 10.0% increase in the market value of the Company's investments as at 31 March 2019
would have increased net assets by £6,681,000. An equal change in the opposite direction would have decreased
the net assets by an equal and opposite amount.
The Portfolio Manager manages this risk by following the investment objective as set out in the prospectus. The
Portfolio Manager assesses the exposure to market price risk when making each investment decision and monitors
the overall level of market price risk on the whole investment portfolio on an ongoing basis. The Portfolio Manager
maintains a net cash position and intends to maintain this for the foreseeable future.
Currency risk
Currency risk is the risk that fair values of future cash flows of a financial instrument fluctuate because of changes in
foreign exchange rates. The Company does not have any exposure to foreign currency cash balances. It has only
one investment value impacted by foreign exchange rates. A 10.0% increase in the exchange rate as at 31 March
2019 would have decreased net assets by £187,000, whilst a 10.0% decrease would have increased the net assets
by an equal and opposite amount. Whilst the majority of the investments are UK quoted, many of these investments
generate significant income from other currencies. The Portfolio Manager does not hedge underlying
portfolio companies.
Interest rate risk
Interest rate risk is the risk that fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Interest rate movements may potentially affect future cash flows from the level of
income receivable on cash deposits.
The Company's bank balances are subject to a variable rate of interest, it does not generate significant income from
interest and the Portfolio Manager does not hedge against this. The Company has no gearing and therefore there is
limited downside risk from increasing interest costs on borrowings.
(ii) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
At 31 March 2019, the Company had cash and cash equivalents of £18,219,000.
The Portfolio Manager maintains a net cash position and intends to maintain this for the foreseeable future. The
Portfolio Manager will manage the portfolio to maintain sufficient cash balances to meet its obligations or liabilities.
63
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notes to the
Financial Statements (continued)
for the period from 21 December 2017 (date of incorporation) to 31 March 2019
15. Financial instruments (continued)
(iii) Credit risk
This is the risk a counterparty of the Company will not meet their obligations to the Company.
The Company does not have any significant exposure to credit risk arising from one individual party. Credit risk is
spread across a number of counterparties, each having an immaterial effect on the Company's cash flows, should a
default happen. The Company accesses creditworthiness of its debtors from time to time to ensure they are neither
past due or impaired.
All the assets of the Company which are traded on a recognised exchange are held by the Company's custodian,
RBC Investor Services Trust ("RBC"). All the Company's cash is also held by RBC.
16. Related party transactions
The amounts incurred in respect of Portfolio Management fees during the period to 31 March 2019 was £784,000, of
which £208,000 was outstanding at 31 March 2019. The amount accrued in relation to the Performance Fee provision
as at 31 March 2019 was £nil.
17. Subsequent events
There were no subsequent events of significance up until the signing of this report.
64
ODYSSEAN INVESTMENT TRUST PLC Additional Information
ADDITIONAL INFORMATION
Shareholder Information
66
67 Notice of Annual General Meeting
73 Glossary
74
Corporate Information
Shareholder Information
Investing in the Company
The Company’s shares are traded on the LSE and can be
bought or sold through a stock broker or other financial
intermediary.
Shares in the Company are available through savings plans,
including Investment Dealing Accounts, ISAs, Junior ISAs
and SIPPs, which facilitate both regular monthly investments
and lump sum investments in the Company’s shares. The
Company’s shares are also available on various investment
platforms.
Share capital and NAV information
Ordinary 0.1p shares
SEDOL number
ISIN
Ticker
LEI
88,257,211
BFFK7H5
GB00BFFK7H57
OIT
213800RWVAQJKXYHSZ74
The Company’s NAV per share is released daily to the LSE
and published on the Company’s website.
Sources of further information
Copies of the Company’s Annual and Interim Reports, Stock
Exchange announcements and further information on the
Company can be obtained from its website: www.oitplc.com,
or from the Secretary at 01392 477 500.
Share register enquiries
The register for the ordinary shares is maintained by Equiniti
Limited. In the event of queries regarding your holding,
please contact the Registrar on 0371 384 2030. Changes
of name and/or address must be notified in writing to the
Registrar, at the address shown on page 74. You can check
your shareholding and find practical help on transferring
shares or updating your details at www.shareview.co.uk.
Key dates
Company’s year end
Annual results announced
AGM
Company’s half-year end
Half-yearly results announced
31 March
May
June
30 September
November
Association of Investment Companies
The Company is a member of the AIC, which publishes
monthly statistical information in respect of member
companies. The AIC can be contacted on 020 7282 5555,
enquiries@theaic.co.uk or visit the website: www.theaic.co.uk.
66
ODYSSEAN INVESTMENT TRUST PLC Notice of Annual
General Meeting
This document is important and requires your immediate attention. If you are in any doubt as to what action you should take,
you are recommended to seek your own financial advice from your stockbroker or other independent adviser authorised under
the Financial Services and Markets Act 2000 immediately.
If you have sold or otherwise transferred all of your shares in Odyssean Investment Trust PLC, please forward this document as
soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was
effected for transmission to the purchaser or transferee.
NOTICE IS HEREBY GIVEN that the first ANNUAL GENERAL MEETING of Odyssean Investment Trust PLC will be held at the
offices of Odyssean Capital LLP, 6 Stratton Street, Mayfair, London W1J 8LD at 10.30 am on Thursday, 27 June 2019 to consider
and vote on the resolutions below:
Resolutions 1 to 11 (inclusive) will be proposed as ordinary resolutions and resolutions 12 to 15 (inclusive) will be proposed as
special resolutions.
1.
2.
3.
4.
5.
6.
7.
8.
To receive and, if thought fit, to accept the Strategic Report, Directors’ report, Auditor‘s report and the audited
Financial Statements for the period ended 31 March 2019.
To receive and approve the Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy) for the
period ended 31 March 2019.
To receive and approve the Directors’ Remuneration Policy.
To elect Mrs Jane Tufnell as a Director of the Company.
To elect Miss Arabella Cecil as a Director of the Company.
To elect Mr Peter Hewitt as a Director of the Company.
To elect Mr Richard King as a Director of the Company.
To appoint KPMG LLP as Auditor to the Company, to hold office from the conclusion of this meeting until the
conclusion of the next general meeting at which financial statements are laid before the Company.
9.
To authorise the Directors to determine the remuneration of the Auditor of the Company.
10. THAT, the Directors be generally and unconditionally authorised in accordance with section 551 of the Companies
Act 2006 (the “Act”) to exercise all the powers of the Company to allot ordinary shares up to 8,825,700 (representing
approximately 10.0% of the ordinary shares in issue as at the date of this Notice) or, if changed, 10.0% of the ordinary
shares in issue immediately following the passing of this resolution, such authority to expire at conclusion of the
Company’s AGM to be held in 2020, unless renewed, varied or revoked by the Company in a general meeting, save
that the Company may, at any time prior to the expiry of such authority, make an offer or enter into an agreement
which would or might require ordinary shares to be allotted in pursuance of such offer or agreement as if such
authority had not expired. This resolution revokes and replaces all unexercised authorities previously granted to the
Directors to allot ordinary shares but without prejudice to any allotment of ordinary shares or grant o rights made,
offered or agreed to be made pursuant to such authorities.
11. THAT, subject to the passing of Resolution 10, the Directors be generally and unconditionally authorised in
accordance with section 551 of the Companies Act 2006 (the “Act”) to exercise all the powers of the Company to allot
ordinary shares up to 8,825,700 (representing approximately 10.0% of the ordinary shares in issue as at the date of
this Notice) or, if changed, 10.0% of the ordinary shares in issue immediately following the passing of this resolution,
such authority to expire at conclusion of the Company’s Annual General Meeting to be held in 2020, unless renewed,
varied or revoked by the Company in a general meeting, save that the Company may, at any time prior to the expiry of
such authority, make an offer or enter into an agreement which would or might require ordinary shares to be allotted
in pursuance of such offer or agreement as if such authority had not expired. This resolution revokes and replaces
all unexercised authorities previously granted to the Directors to allot ordinary shares but without prejudice to the
authority granted to the Directors pursuant to Resolution 10, or any allotment of ordinary shares or grant of rights
made, offered or agreed to be made pursuant to such authorities.
67
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notice of Annual
General Meeting (continued)
12. THAT, subject to the passing of Resolution 10, the Directors be generally empowered (pursuant to sections 570 and
573 of the Act) to allot ordinary shares and to sell ordinary shares from treasury for cash as if section 561 of the Act
did not apply to any such allotment or sale, provided that this power shall be limited to the issue of up to 8,825,700
shares (representing approximately 10.0% of the ordinary shares in issue as at the date of this Notice) or, if changed,
10.0% of the ordinary shares in issue immediately following the passing of this resolution. This power will expire at
the conclusion of the Company’s Annual General Meeting to be held in 2020 (unless previously revoked, varied or
renewed by the Company in general meeting), save that the Company may, at any time prior to the expiry of such
power, make an offer or enter into an agreement which would or might require ordinary shares to be allotted or
sold from treasury after the expiry of such power and the Directors may allot or sell from treasury ordinary shares in
pursuance of such an offer or agreement as if such power had not expired.
13. THAT, subject to the passing of Resolution 11, the Directors be generally empowered (pursuant to sections 570 and
573 of the Act) to allot ordinary shares and to sell ordinary shares from treasury for cash as if section 561 of the Act
did not apply to any such allotment or sale, provided that this power shall be limited to the issue of up to 8,825,700
shares (representing approximately 10.0% of the ordinary shares in issue as at the date of this Notice) or, if changed,
10.0% of the ordinary shares in issue immediately following the passing of this resolution. This power will expire at
the conclusion of the Company’s Annual General Meeting to be held in 2020 (unless previously revoked, varied or
renewed by the Company in general meeting), save that the Company may, at any time prior to the expiry of such
power, make an offer or enter into an agreement which would or might require ordinary shares to be allotted or
sold from treasury after the expiry of such power and the Directors may allot or sell from treasury ordinary shares
in pursuance of such an offer or agreement as if such power had not expired. This resolution is in addition to the
authority granted pursuant to, but without prejudice to that granted to, the Directors in Resolution 12 above.
14. THAT, the Company be authorised in accordance with section 701 of the Act to make market purchases (within
the meaning of section 693(4) of the Act) of ordinary shares provided that the maximum number of ordinary shares
authorised to be purchased will be up to 14.99% of the ordinary shares in issue at the date of this Notice or, if
changed, 14.99% of the ordinary shares in issue immediately following the passing of this resolution. The minimum
price which may be paid for an ordinary share is £0.01. The maximum price which may be paid for an ordinary share
must not be more than the higher of:
(i)
5.0% above the average of the mid-market value of the ordinary shares for the five business days before the
purchase is made; or
(ii)
the higher of the price of the last independent trade and the highest current independent bid for the ordinary shares.
Such authority will expire at the Annual General Meeting of the Company to be held in 2020, save that the Company
may contract to purchase ordinary shares under the authority thereby conferred prior to the expiry of such authority,
which contract will or may be executed wholly or partly after the expiry of such authority and may purchase ordinary
shares in pursuance of such contract. This resolution revokes and replaces all unexercised authorities previously granted
to the Directors to make market purchases of Ordinary Shares.
15. THAT, a general meeting, other than an annual general meeting, may be called on not less than 14 clear days’ notice.
By order of the Board
Link Company Matters Limited
Company Secretary
23 May 2019
Registered office: Beaufort House, 51 New North Road, Exeter EX4 4EP
68
ODYSSEAN INVESTMENT TRUST PLC
Notice of Annual
General Meeting (continued)
Notes
1. Holders of ordinary shares are entitled to attend, speak and vote at the Annual General Meeting. A member entitled to
attend, speak and vote at this meeting may appoint one or more persons as his/her proxy to attend, speak and vote on
his/her behalf at the meeting. A proxy need not be a member of the Company. If multiple proxies are appointed, they
must not be appointed in respect of the same shares. To be effective, the enclosed form of proxy, together with any
power of attorney or other authority under which it is signed or a certified copy thereof, should be lodged at the office
of the Company’s Registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA by no
later than 10.30 am on Tuesday, 25 June 2019.
If you return more than one proxy appointment, either by paper or electronic communication, that received last by
Equiniti before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and
conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them will
not be disadvantaged.
The appointment of a proxy will not prevent a member from attending the meeting and voting in person if he/she so
wishes. A member present in person or by proxy shall have one vote on a show of hands and on a poll every member
present in person or by proxy shall have one vote for every ordinary share of which he/she is the holder. The termination
of the authority of a person to act as proxy must be notified to the Company in writing. Amended instructions must be
received by the Company’s Registrar by the deadline for receipt of proxies.
To appoint more than one proxy, shareholders will need to complete a separate proxy form in relation to each
appointment, stating clearly on each proxy form the number of shares in relation to which the proxy is appointed. A
failure to specify the number of shares to which each proxy appointment relates or specifying an aggregate number of
shares in excess of those held by the member will result in the proxy appointment being invalid. Please indicate if the
proxy instruction is one of multiple instructions being given. If you require additional proxy forms, please contact the
Registrar’s helpline on 0371 384 2030 (+44 (0) 121 415 7047) from outside the UK). Lines are open 8.30am to 5.30pm
Monday to Friday (excluding public holidays in England and Wales). All proxy forms must be signed and should be
returned together in the same envelope if possible.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the
joint holders appear in the Company’s Register of Members in respect of the joint holders (the first named being the most
senior).
2. Only those ordinary shareholders registered in the register of members of the Company as at close of business on
Tuesday, 25 June 2019 (the “specified time”) shall be entitled to attend or vote at the aforesaid Annual General
Meeting in respect of the number of shares registered in their name at that time. Changes to entries on the relevant
register of securities after close of business on 25 June 2019 shall be disregarded in determining the rights of any
person to attend or vote at the meeting. If the meeting is adjourned to a time not more than 48 hours after the specified
time applicable to the original meeting, that time will also apply for the purpose of determining the entitlement of
members to attend and vote (and for the purpose of determining the number of votes they may cast) at the adjourned
meeting. If however the meeting is adjourned for a longer period then, to be so entitled, members must be entered on
the Company’s register of members at the time which is 48 hours before the time fixed for the adjourned meeting, or if
the Company gives notice of the adjourned meeting, at the time specified in that notice.
69
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notice of Annual
General Meeting (continued)
3.
Shareholders who hold their shares electronically may submit their votes through CREST. Instructions on how to vote
through CREST can be found by accessing the following website: www.euroclear.com.
CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may
do so for this meeting and any adjournment thereof by following the procedures described in the CREST manual. CREST
personal members or other CREST sponsored members, and those CREST members who have appointed a voting service
provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s
specifications and must contain the information required for such instructions, as described in the CREST manual
(available via www.euroclear.com). The message, in order to be valid, must be transmitted so as to be received by them
Company’s agent (ID RA19) by the latest time for receipt of proxy appointments specified in note 1 above. For this
purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the
CREST Applications Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or
voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in
CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a
CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST
sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by
means of the CREST system by any particular time.
In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred,
in particular, to those sections of the CREST manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) (a) of the
Uncertificated Securities Regulations 2001.
A person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to
enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the shareholder by
whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the
Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise
it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of
voting rights. The statements of the rights of members in relation to the appointment of proxies in note 1 above do not
apply to a Nominated Person. The rights described in those notes can only be exercised by registered members of the
Company.
Shareholders (and any proxies or representatives they appoint) agree, by attending the meeting, that they are expressly
requesting and that they are willing to receive any communications (including communications relating to the
Company’s securities) made at the meeting.
As 23 May 2019 (being the last business day prior to the publication of this notice), the Company’s issued share capital
amounted to 88,257,211 ordinary shares carrying one vote each. No shares were held in treasury. Therefore, the total
voting rights of the Company as at the date of this notice of meeting were 88,257,211.
Any corporation which is a member may appoint one or more corporate representatives who may exercise on its
behalf all of its powers as a member provided that they do not do so in relation to the same shares. To be able to
attend and vote at the meeting, corporate representatives will be required to produce prior to their entry to the meeting
evidence satisfactory to the Company of their appointment. Corporate shareholders may also appoint one or more
proxies in accordance with note 1.
4.
5.
6.
7.
70
ODYSSEAN INVESTMENT TRUST PLC Notice of Annual
General Meeting (continued)
8.
Any question relevant to the business of the Annual General Meeting may be asked at the meeting by anyone permitted
to speak at the meeting. Alternatively, you may submit your question in advance by letter addressed to the Secretary
at the registered office of the Company. The Company must answer any question asked by a member relating to the
business being dealt with at the meeting unless:
–
–
–
answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of
confidential information;
the answer has already been given on a website in the form of an answer to a question; or
it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
9. Members should note that it is possible that, pursuant to requests made by members of the Company under section
527 of the Companies Act 2006, the Company may be required to publish on a website a statement setting out any
matter relating to: (i) the audit of the Company’s financial statements (including the Auditor’s report and the conduct of
the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstances connected with an auditor
of the Company ceasing to hold office since the previous meeting at which annual financial statements and reports
were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the members
requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies
Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies
Act 2006, it must forward the statement to the Company’s Auditor no later than the time when it makes the statement
available on the website. The business which may be dealt with at the Annual General Meeting includes any statement
that the Company has been required under section 527 of the Companies Act 2006 to publish on a website.
10. Members satisfying the thresholds in section 338 of the Companies Act 2006 may require the Company to give, to
members of the Company entitled to receive notice of the Annual General Meeting, notice of a resolution which
those members intend to move (and which may properly be moved) at the Annual General Meeting. A resolution may
properly be moved at the annual general meeting unless (i) it would, if passed, be ineffective (whether by reason of
any inconsistency with any enactment or the Company’s constitution or otherwise); (ii) it is defamatory of any person;
or (iii) it is frivolous or vexatious. A request made pursuant to this right may be in hard copy or electronic form, must
identify the resolution of which notice is to be given, must be authenticated by the person(s) making it and must be
received by the Company not later than six weeks before the date of the Annual General Meeting.
11. Members satisfying the thresholds in section 338A of the Companies Act 2006 may request the Company to include
in the business to be dealt with at the Annual General Meeting any matter (other than a proposed resolution) which
may properly be included in the business at the Annual General Meeting. A matter may properly be included in the
business at the Annual General Meeting unless (i) it is defamatory of any person, or (ii) it is frivolous or vexatious. A
request made pursuant to this right may be in hard copy or electronic form, must identify grounds for the request, must
be authenticated by the person(s) making it and must be received by the Company not later than six weeks before the
date of the Annual General Meeting.
12. Any person holding 3.0% or more of the total voting rights of the Company who appoints a person other than the
chairman of the meeting as his/her proxy is to ensure that both he/she and his/her proxy comply with their respective
disclosure obligations under the UK Disclosure Guidance and Transparency Rules.
13. Copies of the letters of appointment of the Directors of the Company and the Articles of Association will be available
for inspection at the registered office of the Company during normal business hours on any weekday (Saturdays,
Sundays and public holidays excepted) from the date of this Notice until the conclusion of the Annual General
Meeting and on the date of the annual general meeting at the offices of Odyssean Capital LLP, 6 Stratton Street,
Mayfair, London W1J 8LD from 10.15 am until the conclusion of the meeting.
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ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notice of Annual
General Meeting (continued)
14. This notice, the information required by section 311A of the Companies Act 2006 and, if applicable, any members’
statements, members’ resolutions or members’ matters of business received by the Company after the date of this
notice, will be available on the Company’s website at www.oitplc.com.
15. Members may not use any electronic address provided either in the Notice of Meeting or any related documents
(including the form of proxy) to communicate with the Company for any purpose other than those expressly stated.
72
ODYSSEAN INVESTMENT TRUST PLC Glossary
Act
Companies Act 2006
AGM
Annual General Meeting
AIC
Association of Investment Companies
CTA
Corporation Tax Act 2010
Discount/premium
If the share price of an investment trust is lower than the NAV
per share, the shares are said to be trading at a discount. If the
share price is higher than the NAV per share, the shares are said
to be trading at a premium. The size of the discount/premium is
calculated by subtracting the share price from the NAV per share
and is usually expressed as a percentage of the NAV per share.
DPS
Dividends per share
EBITA
Earnings before interest, tax and amortisation
EBITDA
Earnings before interest, tax, depreciation and amortisation
EPS
Earnings per share
ESG
Environmental, social and governance
EU
European Union
EV
Enterprise value
FCA
Financial Conduct Authority
IFRS
International Financial Reporting Standards
IPO
Initial public offering
LSE
London Stock Exchange
M&A
Mergers and acquisitions
MRO
Maintenance, repairs and operations
NAV
NAV stands for net asset value and represents shareholders'
funds. Shareholders' funds are the total value of a company's
assets at current market value less its liabilities.
NAV total return
NAV total return is the closing NAV per share including
any cumulative dividends paid as a percentage over the
opening NAV.
NSCI ex IT plus AIM
Numis Smaller Companies ex-Investment Trusts plus AIM Index
Ongoing charges
Ongoing charges are the Company’s annualised expenses
(excluding finance costs and certain non-recurring items)
expressed as a percentage of the average monthly net assets
of the Company during the year.
P/E
Price earnings ratio
PEG ratio
Price earnings ratio/earnings growth
R&D
Research and development
ROCE
Return on capital employed
TMT
Technology, media and telecom
Total assets
Total assets are the sum of both fixed and current assets with
no deductions.
Total return per ordinary share
Total return per ordinary share is the total return for the
period expressed as an amount per weighted average
ordinary share.
73
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Corporate Information
Directors
Jane Tufnell (Chairman)
Arabella Cecil
Peter Hewitt
Richard King
Portfolio Manager
Odyssean Capital LLP
6 Stratton Street
Mayfair
London W1J 8LD
Tel:
Email:
020 7640 3282
info@odysseancapital.com
Company Secretary and Registered Office
Broker
Winterflood Securities Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
Solicitors
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Custodian
RBC Investor Services Trust (UK Branch)
Riverbank House
2 Swan Lane
London EC4R 3AF
Link Company Matters Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 477500
Email: odyssean_cosec@linkgroup.co.uk
Auditor
KPMG LLP
15 Canada Square
Canary Wharf
London E14 5GL
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing BN99 6DA
Tel: 0371 384 2030; +44 (0) 121 415 7047
www.shareview.co.uk
Corporate website
www.oitplc.com
74
ODYSSEAN INVESTMENT TRUST PLC Notes
75
ODYSSEAN INVESTMENT TRUST PLCStrategic ReportGovernanceFinancial StatementsAdditional InformationOverview Notes
76
ODYSSEAN INVESTMENT TRUST PLC Shareholder warning
Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. These calls typically come from fraudsters operating in ‘boiler rooms’ offering investors shares that often
turn out to be worthless or non-existent, or an inflated price for shares they own. While high profits are promised, those who
buy or sell shares in this way usually lose their money. These fraudsters can be very persistent and extremely persuasive.
Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free
company reports.
It is very unlikely that either the Company or the Company’s Registrar would make unsolicited telephone calls to shareholders
and that any such calls would relate only to official documentation already circulated to shareholders and never in respect of
investment ‘advice’.
If you have been contacted by an unauthorised firm regarding your shares, you can report this using the FCA helpline on
0800 111 6768 or by using the share fraud reporting form at www.fca.org.uk/consumers/scams.
INVESTMENT TRUST PLC