Annual Report and Financial Statements
for the year ended 31 March 2020
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 £80m as at 31 March 2020.
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”).
ODYSSEAN INVESTMENT TRUST PLC Contents
OVERVIEW
2
3
4
Objective
Investment Policy
Financial Summary
STRATEGIC REPORT
6
9
21
22
23
29
Chairman’s Statement
Portfolio Manager’s Report
Portfolio of Investments
Distribution of Investments
Strategic Overview
Risk Management
GOVERNANCE
34
35
37
42
45
49
Board of Directors
Directors’ Report
Corporate Governance Statement
Audit Committee Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
51
56
57
58
59
60
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
76
77
80
Shareholder Information
Glossary
Corporate Information
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%
of NAV at the time of investment.
– The Company may invest up to 20% 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% of gross assets at
the time of investment in quoted securities not traded
on the LSE.
– The Company will not invest more than 10%, 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% 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 Corporation Tax Act 2010.
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.
3
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Financial Summary
Results for the year
31 March 2020
31 March 2019*
Change
Shareholders’ funds
NAV per share
Share price per share
Share price (discount)/premium to NAV#
£80.1m
90.8p
90.0p
(0.9)%
£85.0m
96.3p
99.3p
3.1%
(5.8)%
(5.7)%
(9.4)%
Revenue earnings per ordinary share
Capital earnings per ordinary share
Total earnings per ordinary share
High/low
NAV
Share price
– high
– low
– high
– low
Share price premium to NAV – high
– low
Year ended
31 March 2020
Period ended
31 March 2019*
0.6p
(6.2)p
(5.6)p
(0.6)p
(1.4)p
(2.0)p
Year ended
31 March 2020
Period ended
31 March 2019*
116.5p
81.6p
117.0p
76.0p
3.1%
(15.3)%
99.8p
93.4p
107.5p
95.3p
9.7%
(1.3)%
Performance
Year ended
31 March 2020
Period ended
31 March 2019*
NAV Total Return per share#
NSCI ex IC plus AIM Total Return Index#†
(5.7)%
(23.2)%
(2.1)%
(9.0)%
Cost of running the Company
Year ended
31 March 2020
Period ended
31 March 2019*
Annualised ongoing charges#
1.7%
1.6%
* The period from incorporation of the Company on 21 December 2017 to 31 March 2019. The Company commenced trading and listed on the LSE on 1 May 2018.
# Alternative Performance Measures (see Glossary on page 77).
† Comparator Benchmark (see Glossary on page 77).
Past performance is not a guide to future performance.
4
ODYSSEAN INVESTMENT TRUST PLC
Strategic Report
STRATEGIC REPORT
Chairman’s Statement
6
Portfolio Manager’s Report
9
21
Portfolio of Investments
22 Distribution of Investments
Strategic Overview
23
29 Risk Management
Chairman’s Statement
Introduction
I am pleased to present the Annual Report and Financial
Statements for the Company covering the period from
1 April 2019 to 31 March 2020.
Since IPO, OIT’s NAV has decreased by 7.7%, this
compares to the fall in the Comparator Index of more than
30% over the same period. This differentiated performance
outcome gives the Board great confidence in the Portfolio
Manager’s investment strategy, approach and execution.
Performance
The net assets of the Company decreased by £5m to £80m
and represented a decline in net asset value per share
(“NAV”) of 5.7%. Whilst the decline is disappointing, it
represents an extremely resilient performance during a very
challenging period for UK equities. Over the same period,
the comparator NSCI ex IC plus AIM Total Return Index
(the “Comparator Index”) fell by 23.2% and the FTSE
All-Share declined by 18.5%.
the concentrated nature of
Given
the portfolio,
performance has been driven largely by individual stocks.
Portfolio companies Consort Medical and Huntsworth
were bid for during the period, accelerating returns. The
Portfolio Manager’s conservative approach to investment
(namely, running with a net cash balance) helped to defend
the NAV during the challenging markets at the end of the
period. Our NAV outperformed the Comparator Index in
each month from January to March 2020.
At the end of the period, the Company was 90% invested
in 19 quoted smaller companies, one of which is quoted
outside the UK. The takeover of Huntsworth completed
in May 2020, converted this 6% position into cash. The
Company ended the period with considerable resources to
deploy into new investments.
The team continues to identify potential new investment
opportunities as well as engaging with the ongoing due
diligence and monitoring of existing holdings. It has been
pleasing to see some of the results of the team’s engagement
becoming visible.
Discount and premium management
The share price has remained resilient since IPO and at the
period end was trading at less than a 1% discount to NAV.
The average discount across the sector at the end of the
period was c.14.5%. The Board believes that the Company’s
rating is driven by a number of factors, including but not
limited to:
–
–
–
efforts undertaken at the Company’s launch to build
the right shareholder base who share the Company’s
view that patient investors will be rewarded in the
longer term;
the differentiated investment performance;
the shareholder friendly measures in place to allow
all shareholders to opt for a cash exit at a price
based around NAV every seventh year following the
Company’s launch, allied with the commitment to
repurchase shares following a corporate action, as set
out below.
The Board and Portfolio Manager have been aware of the
discount volatility experienced over the recent quarter.
The takeover of Huntsworth gave rise to profits of c.£2.1m
compared with where the shares were trading the day
immediately before the bid announcement. The 2018
prospectus included a provision to make available 50% of
any profits made following a corporate action to buy back
shares in OIT, should the average discount exceed 5%
over a 60-day period prior to exit. The discount narrowly
exceeded 5% over this period and as a result, £1.05m will
be used at the Board's discretion to buy back shares at a
wider discount than 5%. Subsequent to the year end, we
have used this discretion as set out on page 35 of the report.
6
ODYSSEAN INVESTMENT TRUST PLC Chairman’s Statement (continued)
The Portfolio Management fee is charged on the lower of
NAV or market capitalisation. As a result, if the Company’s
shares trade at a discount to NAV, the management fee
and ongoing costs to shareholders fall. This mechanism
helps reduce fee drag in challenging markets where the
Company’s shares are likely to trade at a discount, as well as
ensuring the Portfolio Manager’s interests are aligned with
shareholders.
Dividend
The Directors expect that returns for shareholders will be
primarily driven by capital growth of the shares rather than
dividend income. The Board is not proposing to pay a final
dividend.
Service Providers
The Board has reviewed its service providers and following the
recent review at the Management Engagement Committee
meeting of 21 May 2020, it has agreed to appoint Frostrow
Capital LLP as
its company secretary, administrator
and marketing facilitator. The Company will release an
announcement upon their formal appointment which is
expected to take effect from mid-July 2020. The Board would
like to thank Link for their work and support at the time of
the IPO and to date.
Growth of the Company
The Board is aware that liquidity is important for investors
and in order to remain relevant, the Company will need to
grow. The Board believes that OIT’s investment strategy
and strong performance will have broad appeal among
investors which will enable it to grow over time, however,
the current market environment presents near-term
challenges in achieving this objective. OIT’s strong relative
rating should enable us to pursue issuance in due course
and the Board continues to consider growth options.
Annual General Meeting
The Company’s AGM is scheduled for 22 September
2020 at the offices of Odyssean Capital LLP, 6 Stratton
Street, Mayfair, London W1J 8LD at 10.30 am. The Board
looks forward to meeting shareholders. In due course, a
notice of AGM will be circulated in accordance with the
requirements of the Company’s Articles of Association.
to
Due
the current COVID-19 outbreak, many
companies have either postponed their AGMs or made
alternative arrangements for conducting these meetings.
We hope that by 22 September 2020 the Company will
be able to hold its AGM in the usual manner. However,
given the uncertain nature of this situation, should
the Company need to alter its AGM arrangements,
it will communicate these changes to shareholders
through a regulatory announcement. This information
will also be made available on the Company’s website
www.oitplc.com. Shareholders are advised to check
the website to ensure they have the most up-to-date
information available regarding the AGM.
Outlook
The coming weeks and months will determine what
sort of recovery domestic and international economies,
and individual companies, will experience following the
lockdown actions taken by numerous governments. In
spite of the considerable fiscal and monetary support, it
is highly unlikely that corporate earnings will suddenly
bounce back to historic peak levels experienced in 2019.
It is possible that the considerable change people are
experiencing, both in terms of their work and also their
consumption habits, will lead to changes in living and
buying behaviours. Agile management teams managing
high quality companies will benefit from these changes.
Less robust business models and businesses are likely to
suffer permanent damage.
One of the attractions of investing in smaller quoted
companies is that the larger number of companies affords
more choice than investing in a basket of the FTSE100.
Allied to that, the Company’s differentiated investment
approach with a concentrated portfolio enables the
Portfolio Manager to be extremely selective when
considering where to deploy the Company’s capital.
investment
the differentiated
The closed-ended nature of the Company is a key enabler
of
strategy. Inflows/
outflows are more measured and controlled by the
Board, in consultation with the Portfolio Manager, than
a daily dealing open-ended investment fund, enabling
the Portfolio Manager to take a long-term view and also
maintain cash balances should it wish to do so. In addition,
the portfolio is not subject to the UCITS concentration
7
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Chairman’s Statement (continued)
rules that open-ended investment companies must follow.
Both of these factors enable the Portfolio Manager to
invest in less liquid smaller companies for the long term
and engage effectively with the portfolio companies as an
aligned long-term stakeholder.
The Portfolio Management team has many years’ relevant
experience, which will help navigate the Company’s
existing portfolio through these difficult times. This
experience, allied with their longstanding knowledge of
many of the other quoted smaller companies eligible for
investment, and their stakeholders, means that they have
a clear plan and strategy of how to hone the portfolio as
well as selectively deploy capital over the coming weeks
and months.
The Portfolio Manager’s conservative approach to gearing
since launch and price discipline has led to the Company
having considerable cash and near cash resources to deploy
into the current dislocated market. Notwithstanding the
short-term uncertainties and volatility, long-term returns
from this point are likely to reward holders well.
As the COVID-19 crisis emerged in the UK, the Portfolio
Manager enacted its Business Continuity Plan and the team
has been working from home since 11 March 2020. The
Portfolio Manager’s remote systems are working as planned
and day-to-day portfolio management is unaffected. With
face-to-face meetings not possible, the Portfolio Manager
has been using conference and video calls to engage with
the management teams of portfolio companies.
There has continued to be regular dialogue between the
Board and the Portfolio Manager regarding the portfolio
and matters impacting the Company.
We are very grateful for the support shown by the
shareholders over the past year and their continuing
support through these unprecedented times.
Jane Tufnell
Chairman
8 June 2020
8
ODYSSEAN INVESTMENT TRUST PLC Stuart Widdowson
Ed Wielechowski
Portfolio Manager’s Report
Details of the Portfolio Manager
The Company’s Portfolio Manager is Odyssean Capital
LLP.
The Portfolio Manager was founded in 2017 by Stuart
Widdowson and Harwood Capital Management Limited,
an independently owned investment group, and is jointly
owned by both parties. The Chairman of the Portfolio
Manager is Ian Armitage, former CEO and Chairman of
HgCapital.
investment
The Portfolio Manager’s
team, Stuart
Widdowson and Ed Wielechowski, identify and undertake
research on potential investee companies as well as
managing the portfolio. They draw on the experience of a
three-strong Panel of Advisors, who have run and invested
in multiple quoted and unquoted smaller companies. In
addition, the investment team draws on the expertise and
experience of Mr Armitage and Mr Christopher Mills, who
sits on Odyssean's Board as a Non-Executive Director. Mr
Armitage and Mr Mills have more than 87 years' combined
investment experience in quoted and unquoted smaller
companies.
Stuart Widdowson
Stuart has spent the last 20 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
Ed joined the Portfolio Manager in December 2017 as a
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.
9
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
The investment approach
Our investment approach applies the core elements of the
private equity investment philosophy – highly focused,
long-term, engaged ‘ownership’ style investment - to public
markets. We believe that this approach creates a portfolio
unlike that of many typical public equity funds and that,
well executed, can offer attractive, differentiated, risk-
adjusted returns.
– Highly concentrated portfolio: We look to build
a highly concentrated portfolio of no more than 25
investee companies where we carry out intensive
diligence, only investing behind our highest conviction
ideas.
– Narrow focus: We are focused on smaller companies
typically too small for inclusion in the FTSE 250
index. We believe this market is less efficient, offering
more opportunities to find mis-pricings. Further, we
believe the best investment decisions are made from
a base of knowledge and experience, and we will
make the majority of investments in industry sectors
that we and our advisors, know well (TMT, Services,
Industrials and Healthcare).
– Targeting long-term holding periods: We will
evaluate each investment opportunity over a three to
five-year investment horizon. We have structured our
business to reflect this belief and do not intend to
run any capital which is redeemable over short time
periods. To think like an ‘owner’ of a business we
believe your capital should behave like one too.
– Engaged investment style: We are engaged investors.
We like investing in companies which, whilst good, are
underperforming their potential and where we see the
opportunity for constructive corporate engagement
to unlock
improved sustainable returns for all
stakeholders.
The Company’s investment objective is to deliver long-
term capital growth rather than outperform a specific
index. Our differentiated investment approach is likely to
lead to periods of NAV per share performance materially
different to those of the broader market. We fully anticipate
this potential short-term performance variance and will
focus on comparative investment performance on 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
10
balances being held. We anticipate a core range of 5-15%
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:
1) a valuation opportunity;
2)
in a higher-quality company; and
3) 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 valuation 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 as well as evaluating its attractiveness to strategic
trade buyers.
Secondly, we are looking for companies which can grow
their value over time – “dynamic value”. We particularly
look for situations where there are multiple, independent
drivers of value creation present, and where management
actions can unlock these. We believe seeking multiple value
drivers makes an investment case more secure and less
exposed to single areas of uncertainty or misjudgement.
Quality
We assess every potential investment against qualitative and
quantitative criteria. The quality assessment is important
to mitigate the risk of permanent capital destruction from
investments which fail to achieve their value potential.
In our experience, higher quality companies are likely to
maintain a minimum value through difficult times and are
able to attract high calibre management teams to rectify
underperformance.
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
Improvement potential and engagement
We particularly like companies that are in some way
underperforming relative to their potential, and where the
current valuation does not price in improvement. Once
invested, constructive corporate engagement can help to
unlock value. Our mantra is to buy 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/
organisation, strategic direction, poor M&A, investor
relations and finally, governance and pay.
Integration of ESG into our investment process
We have historically focused on evaluating and engaging
on corporate governance (“G”) and financial performance
as part of our investment process.
However, we have considered Environmental (“E”) and
Social (“S”) performance and sustainability of investee
companies informally for some time. After consulting with
shareholders, we have decided to integrate E&S formally
into our investment process and engagement approach.
In common with our approach to governance, we will
not use negative screening. However, our investment
approach tends to avoid companies which screen badly for
E&S factors – e.g. resources; sub prime lending, and we
aim to avoid business models which are unsustainable or
performing extremely badly on E&S issues.
We intend to take a pragmatic approach to E&S given
the more resource constrained nature of smaller quoted
companies, largely focusing on how boards approach
sustainability, where the scope for improvement is, how
progress is evaluated and how it is reported to investors.
Progress and performance in the past year
The past year has seen UK equity markets show the
extremes of sentiment. Greed after the decisive UK
election result. Fear through March 2020 as investors
began to process the likely impact that COVID-19, and
global governments’ reactions to containing it, would have
on company earnings. For investors, the year has been the
equivalent to experiencing four seasons in one day.
As an example of this changing sentiment, the NSCI ex IC
plus AIM Total Return Index rallied 12.6% during Q4 2019,
before falling almost 33% in Q1 2020. To put these sharp
moves into perspective, from 1955 to the end of March
2020, the annualised returns from the larger NSCI Index
have been c.14% per annum (source: Numis Securities).
Over the year to March 2020, the NAV of the Company
decreased by 5.7%, compared with the NSCI ex IC plus
AIM Total Return Index (which we use as a comparator
but not a benchmark) which fell by a much more significant
23.2% across the period. The portfolio was on average 88%
invested across the period.
During the many years of managing this strategy in
differing market conditions, we have typically found that
most relative outperformance is generated in periods of
down or sideways markets, whereas the NAV tends to lag,
or just about keep up, during periods when the markets are
exuberant. This has been our experience over the past year
and indeed since the Company was launched.
We believe that there are a number of factors behind this
differentiated performance profile, including but not
limited to (a) the maintenance of a net cash position in the
portfolio, (b) the investment process and stock selection
criteria, and (c) the focus on seeking absolute returns
rather than relative returns. The latter approach led us
to increase our cash position during the first half of Q1
2020, not because we saw the oncoming turmoil driven by
COVID-19, but because a number of portfolio companies
had generated strong returns through Q4 2019. This
performance was largely driven by re-ratings, and future
value growth was unlikely to meet our absolute return
requirements other than by further material re-ratings,
which appeared too optimistic. As a result, the portfolio
had considerable liquidity and cash resources as the market
turmoil accelerated.
At the end of the period, the Company was 90% invested
into a portfolio of 19 companies. Over the last year, six new
positions were added and two smaller positions exited.
Three of the new positions were added during Q1 2020,
through the market turmoil.
Two full disposals were made during the period, including
the takeover of Consort Medical, which completed in
February 2020. Both investments delivered total returns in
excess of 40%, with holding periods of less than a year.
In March 2020, Huntsworth announced a recommended
bid from a highly regarded US private equity house,
at a 50% premium to the closing share price. Whilst a
welcome uplift in current markets, we felt that the bid was
opportunistic and at a reasonable discount to intrinsic
11
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
value. Nevertheless, we were somewhat satisfied with a
c.38% IRR which was a good result given current market
conditions.
diligence supported an increased position, and actively
topping up names on share price weakness where the
investment thesis remained robust.
We believe that the two takeovers validate our investment
approach. Whilst we do not select investments anticipating
them being acquired, over the years many investee
companies have been taken over by trade and financial
buyers. We see this as either an accelerated return, or
alternatively a safety parachute when either a company
has a short term set back or is struggling to attract an
appropriate rating as a public company.
Towards the end of the period, the likely disruption from
COVID-19 became apparent. In February, we evaluated
the portfolio for likely direct and indirect impacts of the
lock down in China. As March progressed, we widened this
analysis, focusing on portfolio companies’ balance sheets,
debt facilities and available liquidity. In the vast majority
of cases, whilst short-term earnings may be impacted, we
concluded that the balance sheets in the main were strong
enough to tide over a sudden sharp deterioration in sales.
Where balance sheets were less strong, but the business
models robust and the competitive positions strong, we
have indicated a desire to back any equity raises if needed.
From the beginning of the current financial year, we have
also decided to formally integrate Environmental and Social
engagement with portfolio companies into our investment
process. Whilst we have informally considered “E&S”
alongside our typical focus on Governance and Financial
Performance, we believe that now is the appropriate time
to broaden our engagement. This has been supported by a
number of the Company’s largest shareholders.
Portfolio development
The portfolio was largely stable through the period with few
major changes. £28m was invested into stock purchases. Six
new positions were started for a total investment of £13m,
we see scope to grow these over time as we continue our
diligence. The remaining £15m was invested into existing
positions, both growing weightings in those names where
Up until the end of 2019, our focus had been on investing
in less cyclical companies with strong balance sheets. Two
of the three new investments made during March 2020
were in more cyclical companies, where the share prices
were extrapolating a pessimistic short and long-term view
of trading. The other investment was a more highly geared
non-cyclical company which had de-rated materially
on, we believed, overblown concerns around the level
of gearing. We do not think it needs to raise equity to
strengthen its balance sheet and believe it has very strong
underlying cashflows, operates in a growth market and has
robust earnings. It was purchased at a forward P/E of less
than 7x earnings, compared with a long-term trading range
of 9-23x.
Whilst a small position, the takeover of our holding
in Consort Medical was welcomed. We were part way
through our due diligence to build the position and one
of our hesitations, despite valuation, was, whether the two
disparate divisions would attract a trade bidder. We could
find multiple buyers for each business and considered
whether the company should be broken up to release
value. We also evaluated the significant de-rating that
had occurred in the months prior to our investment. The
company had experienced disrupted manufacturing and
had limited short-term earnings growth potential. This
was allied with limited free cashflow due to substantial
investments. It was notable that the company did not
attract a competing bid, despite the takeover being made at
a share price below the recent peak.
As indicated in the interim results, we have also spent more
time seeking to drive value from portfolio companies. It is
pleasing to note some early progress in this area, particularly
around investor relations and stakeholder management.
We believe that many of the portfolio companies have
multiple opportunities for improvement.
12
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
Portfolio
At the end of the period under review, the portfolio comprised 19 companies, the largest positions being NCC, SDL,
Equiniti and Chemring. Backgrounds to our investment thesis for each company have been detailed in our prior reports
and key updates through the period are detailed below:
NCC Group
% NAV: 13%
Sector: TMT
independent
Leading
software
provider of
escrow
and
cyber security consulting
provided
the
through
Assurance division.
services
Performance in period
NCC performed well during the period with trading updates broadly supporting delivery
of the key points of our investment thesis. The Assurance division delivered strong organic
growth (notably in the US market) with consultant numbers growing strongly and consultant
attrition reducing across the period.
The Escrow business performance was more disappointing. Revenues showed moderate
decline, predominantly driven by internal challenges at NCC, which have since been addressed.
With investment in the sales team and the launch of the new ‘escrow as a service’ product, the
company is confident that this division will return to growth.
The self-help programme being driven by management continues to progress, reflected by
ongoing improvements in margins which rose 200bps in the Assurance division in FY19.
Significant investment has been made in back office functions and systems. We see these as key
enablers to the group in further accelerating growth and improving margins.
Outlook
The COVID-19 crisis will impact NCC’s divisions differently. The highly recurring Escrow
business is expected to continue with limited impact. The Assurance division is more exposed
to delays in projects as end clients look to reduce spend. This impact should be short lived
and management are actively managing through this difficult time. The current situation of
increased remote working may also stimulate new business opportunities. For example, it
was recently reported that NCC had been hired to help video conferencing company Zoom
improve its cyber security.
We believe that NCC has a robust balance sheet and will trade through this period. The
markets in which it operates enjoy long-term secular growth drivers, there remains a large self-
help opportunity to be delivered and the unique assets in the group have significant value. The
long-term prospects for the company appear attractive.
SDL
% NAV: 12%
Sector: TMT
leader
in
Global
content
provision of
translation
services
and also develops and
sells a range of software
products that support
the content translation
workflow
linguists
for
and enterprises.
Performance in period
SDL continued its robust performance through the period, driving further confidence in our
investment thesis. The group delivered strong trading updates with organic revenue growth of
5%, 90bps increase in margins and strong cash generation in FY19.
More importantly, the group demonstrated continued delivery against its self-help programme.
Use of the group’s internally developed Helix workflow platform increased to 84% of
addressable volume, supporting further efficiency gains in the core Language Services division,
driving improved margins and increased customer satisfaction. Significant R&D investment
into the group’s software offering (and machine translation capabilities) are beginning to bear
fruit with key products being delivered in the year and successfully sold to clients. Finally,
the integration of the acquired US-based business, ‘Donnelly Language Services’ is largely
complete and supported a significant mix shift in group revenues to higher margin, premium
industry verticals.
13
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
Outlook
SDL is well placed to weather headwinds from COVID-19, with net cash on balance sheet and
recent back office investments supporting efficient remote working. Although demand from
end customers may slow, SDL is positioned to benefit in what remains a fragmented market
where smaller, less well capitalised competitors may struggle.
SDL’s combination of a leading position in a growth market, clear margin improvement
potential and strong cash generation have the potential to generate good returns from here
over the long term.
Performance in period
Equiniti’s performance has been mixed over the period. On the positive side, the group
demonstrated improved cash conversion with fewer exceptional costs, good progress on
delivery of $10m synergies from its US acquisition and signs of improvement in the long
challenged pensions business.
Offsetting this were headwinds from lower UK corporate activity driven by Brexit concerns
and cuts in interest rates by both the Bank of England and the Federal Reserve. Resultant
organic growth of 1.4% in FY19 was below ambitions of 3%-7%, with revenue mix holding
back the expected progression in margins.
Outlook
Equiniti is exposed to a number of short-term impacts from COVID-19. Falling interest rates,
dividends being cancelled and reduced corporate activity will all impact revenues. There is
prospect of recovering some of this lost revenue if there are widespread rights issues amongst
FTSE350 companies through the rest of the year. The company is looking to manage costs
and cash in light of this challenge. The business carries reasonable leverage but has liquidity
headroom and a robust, recurring base of core revenue to trade through the near-term
disruption.
Longer term, we continue to view the attractions of the business model as undervalued by the
market. Equiniti is a market leader, with high recurring revenue, strong cash generation and
the opportunity to accelerate organic growth, through turnaround of the pensions business
and leveraging its recently acquired US footprint. The loss of interest income caused by the cut
in rates may lead to Equiniti and its peers revisiting their pricing models for certain services.
Other activities that are suffering from the current market conditions are likely to recover as
2020 progresses.
Performance in period
Chemring showed good progress across the period – with the new CEO bedding in well.
The business completed the disposal of its lower quality commoditised energetics businesses,
leaving the continuing group focused on higher value-add products. The company saw a
successful re-start of the explosion-impacted facility in Salisbury, strengthening end demand in
the countermeasures market and continuing progress in its Sensors division against a pipeline
of key projects.
Full year results were ahead of market expectations with revenue up 13%, improving margins,
strong cash generation and a growing order book providing solid support for FY20. Post the
period end, the company has confirmed it will pay its final dividend.
Equiniti
% NAV: 11%
Sector: Business
Services
Leading provider of a
range of services that
support complex and
processes.
regulatory
These
include
shareholder registration,
remediation services and
pension administration.
Chemring Group
% NAV: 8%
Sector: Industrials
produces
Chemring
for
counter-measures
sophisticated
aircraft,
and
sensor products,
devices
energetic
rocket
including
and
components
provides
contracted
R&D for governments
– primarily serving the
defence sector.
14
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
Outlook
Chemring’s defence market exposure leaves it well placed to trade through any near term
COVID pressure. The bulk of revenue comes from already approved defence budgets. With
the exception of possible delays in customers physically signing off on orders, there is limited
expected impact on demand, and to date, Chemring has seen little disruption of its facilities or
supply chains.
Longer term, we see the disposal of the commodity energetics businesses as leaving a higher
quality group, well placed to benefit from recent investments in ramping up capacity to serve
counter-measures to the growing global F-35 fleet. We also see further upside from the pipeline
of large contracts with US Department of Defense where key decision points are expected in
the next 12-24 months.
We have six mid-sized investments in Huntsworth, Volution, Flowtech, Devro, Benchmark, and Clinigen. Clinigen is a
new position, built during the past six months. Our investment thesis is detailed below. The investment cases for the other
names have been described in prior reports.
Huntsworth
% NAV: 6%
Sector: Healthcare
on
Huntsworth is primarily
focused
the
provision of healthcare
c o m m u n i c a t i o n s
services. The
group
marketing
provides
and technical medical
c o m m u n i c a t i o n s
services
to healthcare
clients across all steps
of drug development to
commercial sale.
Volution
% NAV: 5%
Sector: Industrials
Volution
leading
is a
designer, assembler and
marketer of ventilation
fans and systems for use
in domestic households
commercial
and
environments. The group
has operations
across
Europe and Australasia.
Performance in period
The key news through the period was the announcement of a bid for the company by private
equity house CD&R in March.
The offer price of 108p, although a 50% premium to the then share price, was slightly below our
view of fair value. Despite this, the bid offered an attractive return (c.38% IRR) in a relatively
short period, which when combined with the ongoing uncertainty in markets we viewed as
attractive.
Performance in period
Volution showed a year of good progress. Operationally, the highlight of the year was the
completed relocation of two UK facilities into a single new site in Reading. Following a period
of execution challenges, this success allowed the group to focus on delivering benefits from the
increased capacity this investment offers.
Pleasingly, full year trading showed solid organic growth of 3.5% in the year ended July 2019,
boosted further by acquisitions in the Nordics and Australasia. Margins, which dipped slightly
at full year, showed a solid 70bps uplift in the first half of FY20 as the benefits from restructuring
at the Reading facility and the streamlining of back office functions came through.
Key governance developments were a new CFO being brought on board in August 2019 and
a new Chairman in January 2020. We look forward to their continuing the steady stewardship
of what is a well-run business.
15
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
Outlook
Volution’s reliance on construction and refurbishment spend has left it exposed in the near
term to the sudden drop in activity due to COVID-19. The group has limited gearing and
sufficient liquidity to cover a protracted period of minimal revenue, positioning it well to trade
through the current issues. More positively, we see significant opportunity for Volution to win
share through the crisis at the expense of smaller, more challenged competitors. It has become
a more geographically balanced business since the 2008-9 downturn, which provides more
resilience to earnings.
Over the longer term, we are excited by the prospects for Volution. Regulatory drivers for
improved energy efficiency in homes are driving increased need for ventilation, which Volution
is well placed to serve. After a period of operational investment, the company should now
see improving margins, supporting strong ongoing cash generation. With a track record of
successful bolt-on M&A in a market which remains highly fragmented there are multiple
routes to value growth open to the business.
Performance in period
Throughout calendar year 2019, Flowtech faced a deteriorating end market as Brexit concerns
drove softness in its key industrial end sectors. This slowdown accelerated into the end of
the year driving downgrades to market expectations. In addition, it is one of the portfolio
companies most impacted by the COVID-19 related lockdown.
Against this disappointing backdrop, we are pleased to note a number of actions taken by
the company in response to these challenges. Firstly, the business has announced a focus on
delivering efficiencies through better integration of legacy acquisitions. We believe there is
opportunity for cost savings through rationalising multiple separate warehousing and picking
sites into fewer, more efficient centres, alongside further savings from bringing together multiple
back office processes. In the context of the group, we believe the total potential quantum of
savings is material.
Secondly, there have been recent governance changes at the company with the appointment of
a new Chairman. We view these changes as positive and supportive of delivering the operational
transformation ongoing at the group over the next few years.
Outlook
Demand in Flowtech’s end markets has been and will be impacted by the current COVID-19
lockdown, driving a likely material short-term impact on revenues. The group will benefit
from government support schemes and has suspended dividends which will support
short-term liquidity. The group also intends to accelerate the cost savings identified as part of
managing through current issues. On a positive side, many of Flowtech’s competitors are much
smaller and are likely to struggle to conduct business in the current environment. It would not
be a surprise if Flowtech gains considerable market share through this period.
Fundamentally, we believe Flowtech occupies a unique position in its market with significant
potential to create value. The shift to a proactive focus on delivering cost savings, has the
potential to drive a material uplift in earnings as well as create a stronger operating platform
from which the group can continue to build on its market leadership position through M&A.
We remain excited by the medium to long-term prospects for the business.
Flowtech
Fluidpower
% NAV: 5%
Sector: Business
Services
Leading UK distributor
of
and
hydraulic
pneumatic components.
16
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
Devro
% NAV: 5%
Sector: Consumer
artificial
Devro is a global market
leader in the production
collagen-
of
based
for
sausages and other snack
products.
casings
Benchmark
Holdings
% NAV: 4%
Sector: Healthcare
Benchmark has leading
positions in key parts
of the growing global
aquaculture
market.
The group is a leading
provider
genetics
of
services to the salmon
market, production of
early
stage nutrition
products primarily for
the shrimp market and
a developer of health
products for the salmon
market.
Performance in period
Devro had a solid year of performance broadly in line with expectations. The business reported
flat volumes and a small revenue decline in 2019, with profit largely maintained by the
successful delivery of cost savings identified as part of management’s efficiency plan. Pleasingly,
strong cash generation saw net debt reduce through the period.
The management continues to impress by focusing on reducing costs and streamlining what
was historically a highly autonomous group of local operations. This was further demonstrated
by the announcement during the year of the planned rationalisation of one UK site with a
potential £5m p.a. cost saving as a result – further supporting a key leg of our investment case.
Delivery of sustained organic volume growth remains the key challenge for Devro, significant
investment in the commercial function in 2019, alongside roll out of the new ‘Fine Ultra’
product range, were key actions to start delivery against this goal.
Outlook
Being largely a supplier into food manufacture, Devro is reasonably insulated from the demand
shocks other companies have seen from COVID-19. The business should benefit from demand
shifting from foodservice to retail. In addition, to date it has seen little supply side disruption,
although there are raw material risks relating to the supply of collagen, a by-product of the
production of leather, for which the two largest uses are the cyclical automotive and footwear
markets. We believe the group should trade through the current turmoil, and with capex likely
to trail depreciation for several years, cash generation should be resilient.
Beyond the current short-term situation, our view on the potential for Devro remains
unchanged. The group is a clear leader in stable end markets, with a strong management team,
delivering cost reductions and strong cash generation. Successful execution on cost savings
alongside a return to volume growth would underpin a change in perception of the equity
story and support an uplift in its rating.
Performance in period
Benchmark has had a mixed year. The ongoing headwind from the deepest recession in the
shrimp market for 30 years impacted performance in the Nutrition business. Concurrently,
the early successful completion of customer funded trials of the group’s new sea lice treatment
impacted revenue in the Health business. Combined, these drove material downgrades
through the period and increasing leverage. A well supported £43m equity raise in February
2020, reduced leverage and offered improved liquidity.
On the positive side, the difficulties detailed above have driven a welcome acceleration of
the various corporate actions we have long seen as crucial to the Benchmark investment case.
Wholesale management changes have been made with a new CEO and a new CFO appointed
in the past six months, a bottom-up review of group operations identified a number of
‘non-core’ activities, which are in the process of being sold or shut down, and a detailed review
of the R&D pipeline is expected to reduce spend and focus down onto the most commercially
attractive near-term opportunities. We view all of these changes as positive steps in releasing
value in what remains a highly strategic asset.
17
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
Clinigen Group
% NAV: 4%
Sector: Healthcare
provides
a
Clinigen
range of services to the
pharmaceutical market,
focused on ensuring that
hard to access medicines
reach the right patients at
the right time. The group
supports distribution of
unlicensed medicines
into smaller or hard to
access markets, supports
c o m m e r c i a l i s a t i o n
licensed products
of
globally and
supports
clinical trials.
Outlook
Benchmark has flagged that both its Healthcare and Genetics operations are well placed to
trade through the current COVID-driven uncertainty, but that the Nutrition division may
continue to be impacted by weakness in the shrimp market. The recent equity raise, alongside
a highly flexible financing structure (via a Norwegian bond), offers considerable flexibility on
liquidity.
Near-term COVID impacts aside, and despite the challenging year, the recent actions taken at
Benchmark augur well for the future. The group now appears to be on the right path towards
focusing on its core areas of market leadership, with new management driving increased
discipline on both capital and operating cost investment. With the key new sea lice treatment
expected to receive commercial approval in the next 12 months, we see a potential step change
in the value of this key player in the growing global aquaculture market.
Clinigen is a market leader in a range of niche pharmaceutical services and products. The
group has built a market leading position in (i) Unlicensed Medicines – providing medical
professionals access to drugs currently undergoing trial or which are unlicensed in a particular
jurisdiction; (ii) Clinical Services – Clinigen is a leader in sourcing comparator drugs for use
in clinical trials and other related service areas; and (iii) Commercial Medicines – Clinigen has
a portfolio of owned and licenced medicines where it can accelerate sales through accessing
pockets of demand and jurisdictions typically too small for larger pharma companies to target.
The markets in which Clinigen operates are large and typically growing at mid to high single
digits, driven by secular tail winds from the increasing volume and diversity of new medicine
launches, and the trend for increased outsourcing across the industry. Clinigen has built
leading global platforms in its chosen markets and has strong, long-term, blue-chip clients in
markets where reach and reputation are crucial and represent significant barriers to entry. The
end markets which Clinigen addresses are well insulated from COVID-19 and the group has
seen little impact on operations to date.
Our investment case sees multiple levers for value growth. We believe the group is well placed
to grow organically at above market rates as it gains share from competitors and benefits from
recently completed M&A. Further, we believe after the recent period of building the group
through acquisition, there exists significant opportunity to improve margins through better
integrating the group – a journey which is just being started by the current management team.
Finally, although geared today, the group should generate strong free cash flow going forward
post completion of certain earnout obligations. We believe that part of the recent de-rating has
been driven by the level of gearing on the balance sheet. Given how cash generative the group
is, we see leverage reducing substantially over the next 18 months. Provided achieved earnings
are near current market forecasts, this de-gearing should catalyse a material re-rating of the
equity.
We believe that Clinigen is a higher quality, cash generative business with a complex story, somewhat
misunderstood by the investors. This is demonstrated by a rating which has been more volatile than
the earnings profile would suggest. This presented an opportunity for us to make our investment at
a value below where we see potential strategic (or private equity) interest.
The remaining nine investments represent between c.1% and 3% of NAV each. These are spread across our core focus
sectors and all offer scope to scale, subject to further due diligence and pricing remaining attractive.
18
ODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
Outlook
The new financial year has begun in an equity bear market,
driven by one of the sharpest equity market corrections
on record. The current circumstances are very unusual,
with a near simultaneous global recession triggered by
simultaneous supply and demand shocks. There are few
precedents to draw upon.
Share prices are always a leading indicator of economic
and corporate earnings, and they are giving a very strong
signal of the broad impact that companies and the global
economy will experience in 2020. Concerns about Brexit
pale into insignificance.
Despite the unprecedented fiscal and monetary stimulation
by many governments, few companies are likely to escape
unscathed. Companies with weak business models, weak
competitive positions and weak balance sheets are unlikely
to survive. We see many more similarities to the early 1990s
recession than the Great Financial Crisis of 2008-9.
We have no strong view about whether the markets have
already hit the bottom. It is also becoming clearer week-
by-week that a snap back in earnings in 2021 to levels
previously achieved in 2019 is increasingly unlikely.
Earnings forecasts are mostly irrelevant, with many
companies withdrawing guidance. One Chairman told us
it was “just impossible” to give any sensible guidance. As
a result, valuing companies has become more challenging.
We have always considered EV/Sales as being a less volatile
valuation metric than earnings or profit multiples. In
addition, particularly in asset rich companies, price to
book multiples tend to offer good indicators of compelling
long-term value opportunities.
Due to these factors, there appears to be good long-term
upside within the existing portfolio. We continue to engage
with the portfolio companies, especially where we had
already highlighted scope for improvement potential prior
to COVID-19 impacting trading. Whilst the near-term
focus will be on crisis/cash management, at some point it
will be appropriate to engage on how they capitalise on the
opportunities that the crisis will present. In one example,
a portfolio company which is a market leader, is the only
one of its close peers still open for business. We would not
be surprised if a number of its smaller, less well capitalised
peers either do not re-open, or alternatively run out of
cash when the market recovers. These types of situations
offer scope for organic market share gains and/or bargain
acquisition targets.
We intend to continue investing using our established
criteria, namely seeking out new investments in market
leaders with strong business models, with improvement
potential, international earnings and high barriers to entry.
We will continue to avoid resource companies and are
reluctant to invest in companies which have direct exposure
to discretionary consumer expenditure. Equally, we are not
focused on deep value “option” stocks. Given our good
knowledge of our investment universe, we already have a
strong view of the new investments we are likely to make
during the rest of this year. The focus now is on completing
our due diligence and determining the optimal price and
timing for investment.
Over the next 6-12 months, we expect portfolio turnover
to be higher than typical, as we will probably make more
new investments than usual. We may also realise some
of our existing holdings which, despite serving us well
through the difficult recent months, offer a less compelling
risk/reward balance than alternative investments that we
can find in the market.
The net cash balance, 10% at the period end (or 16%
including the holding in Huntsworth, which became
cash in April 2020) is likely to fall progressively through
2020. We will not attempt to market time but will invest
gradually over the period as and when suitable situations
and liquidity arise.
We anticipate that there will be many companies seeking
to raise new equity to repair their balance sheets, or
position themselves to capitalise on the opportunities
that the turmoil has caused. Currently there appears to be
widespread investor support for these fundraisings, but
this could wane if open-ended funds are subject to outflow
requests, and managers use their cash balances up. We
believe that there will be multiple attractive investment
opportunities to recapitalise quoted UK small companies
in the second half of 2020. We have identified a number
of these companies and believe, subject to an appropriate
entry price, that they have the potential to generate
compelling medium to long-term investments for the
Company's shareholders.
19
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Portfolio Manager’s Report (continued)
We are fortunate to manage our investments via a
closed-ended fund structure. This allows us high visibility
on the existing assets under our control, to think and act
for the long term and be less concerned by limited day-to-
day liquidity of the shares of portfolio companies. Allied
with our own combined investment experience of more
than three decades, we are also fortunate to be able to draw
on the insights and advice of the non-executives of the
Company and of our own Fund Management company,
as well as our three-strong panel of advisors. Whilst these
factors do not guarantee success, they provide us with
additional tools in our toolkit to navigate these uncharted
waters.
Stuart Widdowson | Ed Wielechowski
Odyssean Capital LLP
8 June 2020
AGM will be held at the offices of
Odyssean Capital LLP,
6 Stratton Street,
Mayfair,
London W1J 8LD
at 10.30 am on Tuesday, 22 September 2020
Glossary – page 77
20
ODYSSEAN INVESTMENT TRUST PLC Portfolio of Investments
as at 31 March 2020
Company
Sector
Country of Listing
Valuation
£’000
% of
Net Assets
TMT
TMT
Business Services
Industrials
TMT
Industrials
Business Services
Consumer
Healthcare
Healthcare
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Top 10 Investments
NCC Group
SDL
Equiniti
Chemring Group
Huntsworth
Volution
Flowtech Fluidpower
Devro
Benchmark Holdings
Clinigen Group
Other equity investments*
Total equity investments
Cash and other net current assets
Net assets
10,181
9,339
8,797
6,575
4,633
4,194
3,921
3,725
3,381
3,138
14,382
72,266
7,829
80,095
12.7
11.7
11.0
8.2
5.8
5.2
4.9
4.7
4.2
3.9
17.9
90.2
9.8
100.0
* Sum of equity investments in companies where the investment in each company is less than 3% of its net assets.
The Company has not disclosed the names of any investment where the holding is below 3% 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.
21
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Distribution of Investments
as at 31 March 2020 (% of net assets)
Portfolio holdings
% holding by sector
9.8%
12.7%
11.7%
11.0%
4.9%
5.2%
5.8%
8.2%
17.9%
3.9%
4.2%
4.7%
NCC Group
SDL
Equiniti
Chemring Group
Huntsworth
Volution
Flowtech
Fluidpower
Devro
Benchmark
Holdings
Clinigen Group
Other equity
investments
Cash and other
net current assets
2.0%
4.7%
9.8%
10.6%
35.1%
21.1%
16.7%
TMT
Industrials
Business
Services
Healthcare
Consumer
Other equity
investments
Cash and
other net
current
assets
Geographical revenue exposure
(% of invested capital)
Market capitalisation
(% of invested capital)
15.2%
18.0%
2.8%
10.9%
42.1%
UK
US
Europe Other
RoW
Below £150m
£150m-£750m
Over £750m
24.7%
86.3%
As at 31 March 2020, the net assets of the Company were £80m.
22
ODYSSEAN INVESTMENT TRUST PLC Strategic Overview
Business model
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 Companies Act 2006. 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 Corporation Tax Act 2010, 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.
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.
The Company is a member of the AIC, a trade body which
promotes investment companies and also develops best
practice for its members.
Purpose
The purpose of the Company is to achieve predominantly
capital growth in our shareholders’ wealth over time. It
aims to achieve this by using its closed-ended structure
to invest in a concentrated number of less liquid, higher-
quality smaller quoted companies, which the Portfolio
Manager believes are undervalued and could be generating
higher returns for their shareholders. The long-term nature
of the Company’s capital enables the Portfolio Manager to
undertake constructive corporate engagement with the
underlying portfolio companies and their stakeholders,
on financial and operating performance, strategy and
sustainability, specifically ESG practices.
Sustainable improvement in a smaller quoted company’s
financial and operational performance, and ESG practices,
not only benefit the shareholders of the Company, but
also the shareholders and stakeholders in the underlying
portfolio companies.
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 to 8 and the Portfolio Manager’s Report on pages 9
to 20. A list of all the Company’s investments is contained
in the Portfolio of Investments on page 21.
Section 172 statement
Overview
The Directors’ overarching duty is to act in good faith and
in a way that is the most likely to promote the success of the
Company as set out in Section 172 of the Companies Act
2006. In doing so, directors must take into consideration
the interests of the various stakeholders of the Company,
the impact the Company has on the community and the
environment, take a long-term view on consequences of
the decisions they make as well as aim to maintaining a
reputation for high standards of business conduct and fair
treatment between the members of the Company.
Fulfilling this duty naturally supports the Company in
achieving its investment objective and helps to ensure that
all decisions are made in a responsible and sustainable way.
In accordance with the requirements of the Companies
the
(Miscellaneous Reporting) Regulations 2018,
Company explains how the Directors have discharged
their duty under Section 172 below.
To ensure that the Directors are aware of, and understand,
their duties they are provided with the pertinent
information when they first join the Board as well as receive
regular and ongoing updates and training on the relevant
matters. Induction and access to training is provided for
23
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Strategic Overview (continued)
new Directors. They also have continued access to the
advice and services of the Company Secretary, and when
deemed necessary, the Directors can seek independent
professional advice. The schedule of Matters Reserved
for the Board, as well as the Terms of Reference of its
committees are reviewed on an annual basis and further
describe Directors’ responsibilities and obligations and
include any statutory and regulatory duties. The Audit
Committee has the responsibility for the ongoing review
of the Company’s risk management systems and internal
controls and, to the extent that they are applicable, risks
related to the matters set out in Section 172 are included
in the Company’s risk register and are subject to periodic
and regular reviews and monitoring.
Stakeholders
A company’s stakeholders are normally considered to
comprise of its shareholders, its employees, its customers,
its suppliers as well as the wider community in which
the company operates and impacts. The Company is
different in that as an investment trust it has no employees
and, significantly, its customers are synonymous with its
shareholders. In terms of suppliers, the Company receives
professional services from a number of different providers,
principal among them being the Portfolio Manager. The
Board believes that the wider community in which the
Company operates encompasses its portfolio of investee
companies and the communities in which they operate.
During the period under review, the Board discussed
which parties should be considered as stakeholders of
the Company. Following a comprehensive review, it was
concluded that, as the Company is an externally managed
investment company and does not have any employees or
customers, its key stakeholders comprise its shareholders,
its portfolio companies and its service providers, primarily
the Portfolio Manager. Details of how the Board considers
the needs and priorities of the Company’s stakeholders and
how these are taken into account during all its discussions
and as part of its decision-making are detailed below. All
discussions involve careful considerations of the longer-
term consequences of any decisions and their implications
for stakeholders.
Stakeholder
Board Engagement
Shareholders
Continued shareholder
support and engagement
are critical to existence
of the business and the
delivery of the
long-
term strategy of the
Company.
24
The Board is committed to maintaining open channels of communication and to engage
with shareholders in a manner which they find most meaningful, in order to gain an
understanding of the views of shareholders. These include:
– Annual General Meeting – The Company welcomes and encourages attendance, voting
and participation from shareholders at the AGM, during which the Directors and the
Portfolio Manager are available to discuss issues affecting the Company and answer any
questions. The Portfolio Manager provides a presentation at the AGM on the Company’s
performance and its future outlook. The Company values any feedback and questions it
may receive from shareholders ahead of and during the AGM;
– Publications – The Annual and Interim Reports of the Company are made available on
its website and the Annual Report is circulated to shareholders. These reports provide
shareholders with a clear understanding of the Company’s portfolio and financial
position. This information is supplemented by a quarterly factsheet and a quarterly
presentation which are available on the website. Feedback and/or questions the Company
receives from the shareholders help the Company evolve its reporting, aiming to render
the reports and updates transparent and understandable;
–
Shareholder meetings – The Portfolio Manager and the Company’s Broker are in regular
contact with major shareholders. The Chairman and the other Directors are available
to meet with shareholders to understand their views on governance and the Company’s
performance where they wish to do so. Shareholders are able to meet with the Portfolio
Manager throughout the year. The results from all meetings between the Portfolio
Manager, the Broker and the shareholders, and the views of the shareholders are reported
to the Board on a regular basis;
ODYSSEAN INVESTMENT TRUST PLC Strategic Overview (continued)
Stakeholder
Board Engagement
The Portfolio Manager
The Portfolio Manager’s
performance is critical
for the Company to
successfully deliver
its
investment strategy and
its objective to
meet
shareholders
provide
with
total
attractive
return over a long-term
period.
–
–
Shareholder concerns – In the event shareholders wish to raise issues or concerns with
the Directors, they are welcome to do so at any time by writing to the Chairman. Other
members of the Board are also available to shareholders if they have concerns that have
not been addressed through the normal channels. Shareholders wishing to communicate
directly with the Board should contact the Company Secretary at the registered office
address on page 80; and
Investor relations updates – At every Board meeting, the Directors receive updates
from the Company’s Broker on the share trading activity, share price performance
and any shareholders’ feedback, as well as an update from the Portfolio Manager on
any publications. To gain a deeper understanding of the views of its shareholders and
potential investors, the Portfolio Manager also meets regularly with shareholders. Any
pertinent feedback is taken into account when Directors discuss the share capital and
any possible fundraisings. The Chairman also wrote to the major shareholders of the
Company following the publication of OIT's first annual financial results in May 2019.
The willingness of the shareholders, including the partners and staff of the Portfolio
Manager, to maintain their holdings over the long-term period is another way for the
Board to gauge how the Company is meeting its objectives and suggests a presence of a
healthy corporate culture.
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.
Maintaining a close and constructive working relationship with the Portfolio Manager is
crucial as the Board and Odyssean both aim to continue to achieve consistent, long-term
returns in line with its investment objective. Important components in the collaboration
with the Portfolio Manager, representative of the Company’s culture, are:
– Operating in a fully supportive, co-operative and open environment and maintaining
ongoing communication with the Board between formal meetings;
– Encouraging open discussion with the Portfolio Manager, allowing time and space for
original and innovative thinking;
– Recognising that the interests of shareholders and the Portfolio Manager are for the
most part well aligned, adopting a tone of constructive challenge, balanced with robust
negotiation of the Portfolio Manager’s terms of engagement if those interests should not
be fully united;
– Drawing on Board members’ individual experience and knowledge to support the
Portfolio Manager in its monitoring of and engagement with portfolio companies; and
– Willingness to make the Board members’ experience available to support the Portfolio
Manager in the sound long-term development of its business and resources, recognising
that the long-term health of the Portfolio Manager is in the interests of shareholders in
the Company.
25
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Strategic Overview (continued)
Stakeholder
Board Engagement
Portfolio companies
Company
The
invests
into available
opportunities, allocating
capital across different
portfolio companies to
the Company’s
meet
objectives
investment
within the pre-defined
portfolio limits and with
a focus on portfolio level
diversification.
Other service providers
In order to function as
an investment trust with
a premium listing on
the LSE, the Company
relies on a diverse range
of reputable advisors for
support in meeting all
relevant obligations.
The relationship with the Portfolio Manager is fundamental to ensuring the Company
meets its purpose. Day-to-day engagement with portfolio companies is undertaken by the
Portfolio Manager. Details of how Odyssean carries out portfolio management, as well as
information on its differentiated investment approach and the structuring of investments
can be found in the Portfolio Manager’s report on pages 9 to 20. The Board receives updates
at each scheduled Board meeting from the Portfolio Manager on specific investments
including regular valuation reports and detailed portfolio and returns analyses. Odyssean’s
engagement with portfolio companies incorporates recurring due diligence reviews, active
voting at their annual general meetings, discussions with their stakeholders (including but
not limited to executives, non-executives, other shareholders and corporate advisors) and
on-site visits.
The Company’s main functions are delegated to a number of service providers, each
engaged under separate contracts. The Board maintains regular contact with its key
external providers and receives regular reporting from them, both through the Board
and committee meetings, as well as outside of the regular meeting cycle. Their advice and
views are routinely taken into account. The Audit Committee reviews and evaluates the
financial reporting control environments in place at each service provider. Through its
Management Engagement Committee, the Board formally assesses their performance, fees
and continuing appointment annually to ensure that the key service providers continue to
function at an acceptable level and are appropriately remunerated to deliver the expected
level of service. Post year end, the Board has approved the change of its service providers
for the provision of administration and company secretarial services from Link to Frostrow
Capital LLP. This change is expected to take effect from mid-July 2020. Frostrow Capital
LLP’s marketing and distribution capabilities will enhance the Portfolio Manager’s existing
marketing initiatives.
The above mechanisms for engaging with stakeholders are kept under review by the Directors and will be discussed on a
regular basis at Board meetings to ensure that they remain effective.
Culture
The Directors agree that establishing and maintaining a healthy
corporate culture among the Board and in its interaction with
the Portfolio Manager, shareholders and other stakeholders
will support the delivery of its purpose, values and strategy.
The Board seeks to promote a culture of openness, debate and
integrity through ongoing dialogue and engagement with its
service providers, principally, the Portfolio Manager.
The Board strives to ensure that its culture is in line with
the Company’s purpose, values and strategy. As detailed in
the Corporate Governance Statement, the Company has
a number of policies and procedures in place to assist with
maintaining a culture of good governance including those
relating to diversity, Directors’ conflicts of interest and
Directors’ dealings in the Company’s shares. The Board
assesses and monitors compliance with these policies as well
as the general culture of the Board through Board meetings
and in particular, during the annual evaluation process
which is undertaken by each Director (for more information
see the performance evaluation section on page 40).
The Board is cognisant of the nature of companies that
the Company invests in and notes that their performance
could fluctuate while the Portfolio Manager actively
engages with them. This requires a culture of patience from
the Board, supported by an orderly, disciplined investment
management process by the Portfolio Manager. The
Board pays particular attention to Odyssean’s corporate
engagement
initiatives and proxy voting policies.
Additional information on the Board’s approach to ESG
matters is detailed on page 28.
26
ODYSSEAN INVESTMENT TRUST PLC Strategic Overview (continued)
The Board seeks to appoint the best possible service
providers and evaluates their remit, performance and
cost effectiveness on a regular basis. The Board considers
the culture of the Portfolio Manager and other service
providers, including their policies, practices and behaviour,
through regular reporting from these stakeholders and, in
particular, during the annual review of the performance
and continuing appointment of all service providers
through its Management Engagement Committee.
Key performance indicators
At each Board meeting, the Directors consider several
performance measures to assess the Company’s success in
achieving its 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 2020 was 90.8p per ordinary share,
compared to 96.3p per ordinary share at the end of the
previous period, a decrease of 5.7%. The NAV total return*
since the launch of the Company on 1 May 2018 to 31 March
2020 was (7.7)%. The total return from the NSCI ex IC plus
AIM Total Return Index* was (23.2)% for the same period.
A full description of the Company’s performance for the
year ended 31 March 2020 can be found in the Portfolio
Manager’s Report on pages 9 to 20.
Share price
The Company’s share price at the previous period end
was 99.3p and decreased to 90.0p as at 31 March 2020,
resulting in a return of (9.4)% during the year.
Share price premium/(discount) to NAV*
The share price discount to NAV changed from 3.1% at
the previous period end to (0.9)% as at 31 March 2020.
During the year ended 31 March 2020, the shares traded at
an average discount to NAV of 2.4%.
Revenue return per ordinary share
In the year to 31 March 2020, the revenue return per
ordinary share increased from (0.6)p to 0.6p.
Ongoing charges*
The Company’s ongoing charges ratio for the year ended
31 March 2020 was 1.7% (period ended 31 March
2019: 1.6%).
* Alternative Performance Measures (see Glossary on page 77).
Main trends and future development
A review of the main features of the year ended 31 March
2020, the outlook for the current year and the factors
likely to affect the future development, performance and
position of the business, can be found in the Chairman’s
Statement on pages 6 to 8 and the Portfolio Manager’s
Report on pages 9 to 20. The Board’s main focus is on the
investment return and strategy, with attention paid to the
integrity and success of the investment approach and on
the factors which may have an impact on this.
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 Portfolio Manager, subject
always to the overall supervision and control of the Board.
The Portfolio Manager is entitled to receive an annual
management fee equal to the lower of: (i) 1% of the NAV
(calculated before deduction of any accrued but unpaid
management fee and any performance fee) per annum; or
(ii) 1% 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 3 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
27
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Strategic Overview (continued)
not less than six months’ prior written notice, such notice
not to be served prior to the end of the Initial Term.
Further details of the Company’s diversity policy are set
out on page 40.
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 Companies
Act 2006 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, however, it does expect its service providers and
portfolio companies to respect these requirements.
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 Portfolio Manager is specifically looking to invest
in companies which have average or above average ESG
characteristics or practices, but where
improvement
potential exists. Being mindful of the smaller company
nature of many of the portfolio companies, the Portfolio
Manager has a pragmatic engagement approach, focused
on dialogue with portfolio companies around their
performance, disclosure and general practices compared
with best-in-class peers, and seeking positive changes in
specific areas.
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, and the Board has delegated voting
activities to the Portfolio Manager. The Portfolio Manager
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
best practices regarding 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.
Board diversity
As at 31 March 2020, the Board of Directors of the
Company comprised two male and two female Directors.
The Board firmly believes in the benefits of cognitive
diversity and remains committed to ensuring that
the Company’s Directors bring a wide range of skills,
knowledge, experience, backgrounds and perspectives.
Modern slavery
While the Company is not within the scope of the Modern
Slavery Act 2015 and it is not, therefore, obliged to make
a slavery and human trafficking statement, the Company
considers its supply chains to be of low risk as its principal
service providers are the professional advisers set out in the
Corporate Information section on page 80.
28
ODYSSEAN INVESTMENT TRUST PLC Risk Management
Role of the Board
for risk
The Directors have overall responsibility
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.
The principal risks and uncertainties which the Company
faces are set out on pages 30 and 31.
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 year ended 31 March 2020 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.
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 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 regularly.
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.
29
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN 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 and emerging
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 Company’s risk matrix is formally
reviewed twice a year at each Audit Committee meeting. The
Directors formally discuss emerging risks at the other Board
meetings held during the year.
COVID-19 has had a material negative impact on the
valuation of the Company’s assets and on the performance
of a number of its underlying holdings. The Portfolio
Manager has taken steps to assess the anticipated effects on
each holding, particularly in terms of liquidity and balance
sheets.
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 12
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 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 objective and investment 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 by way of issue of
further 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.
30
ODYSSEAN INVESTMENT TRUST PLC Risk Management (continued)
Portfolio Manager – loss of personnel or reputation
Risk
How the risk is managed
and
identification
selection of
The
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 was on compassionate leave for part
of 2019 and the Board is pleased that he resumed his role
as Key Man of the Company on 31 December 2019. The
measures put in place by the Portfolio Manager to cover
Mr Widdowson’s period of absence ensured that the
portfolio continued to be managed in accordance with the
principles and investment strategy set out at the time of
the Company’s 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 Board and/or Chairman of the
Audit Committee will approve the valuation of unquoted
investments prior to their reflection in the Company’s
NAV. No unquoted investments were held by the
Company during the year.
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.
The Board has considered the operational risks associated
with COVID-19 relating to the functioning of all of the
service providers to the Company. Each service provider
has continued to operate with its employees working
remotely and service has not been disrupted. The Board
continues to monitor the performance of all service
providers given the current requirements for employees to
work remotely where they are able to do so.
31
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC 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
8 June 2020
Risk Management (continued)
Going concern
The Directors assessed the going concern of the Company
in light of its current trading performance. They 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. The Directors have considered the impact of
COVID-19 on the Company’s financial position and have
considered a detailed assessment of the Company’s ability
to meet its liabilities as they fall due. This included stress
and liquidity tests which modelled the effects of further
substantial market falls, and significantly reduced market
liquidity, to that experienced to date in connection with
the coronavirus pandemic. 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.
In considering the viability of the Company, the Directors
have conducted a robust assessment of each of its principal
risks and uncertainties (as set out on pages 30 and 31),
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 of Brexit on the Company and the portfolio
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.
32
ODYSSEAN INVESTMENT TRUST PLC Governance
GOVERNANCE
Board of Directors and Portfolio Manager
34
35 Directors’ Report
37 Corporate Governance Statement
42 Audit Committee Report
45 Directors’ Remuneration Report
49
Statement of Directors’ Responsibilities
Board of Directors
as at 31 March 2020
34
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 Limited 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 Schroder UK Public Private Trust plc and
Record plc, the currency management specialist. She is also a non-executive director and
chair-designate of ICG Enterprise Trust plc. She was previously a director of The Diverse
Income Trust plc and JPM Claverhouse Investment Trust plc.
Date of appointment: 21 December 2017
Arabella Cecil
Senior Independent Director
Arabella began working in finance in 1987, training in Milan and Paris before CL-Laing
in London, where she headed the firm's Extel-rated food producers research team.
From 1996, she worked as a freelance photojournalist and filmmaker, and 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 BACIT Limited serving as
Chief Investment Officer, and from 2015, as a non-executive director until the company
became Syncona. She served as Chief Investment officer of Syncona’s fund portfolio until
April 2019, and in May 2019, established Hyde Capital Partners.
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 BMO Managed Portfolio Trust (formerly 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. 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
ODYSSEAN INVESTMENT TRUST PLC Directors’ Report
The Directors are pleased to present the Annual Report
and Financial Statements for the year ended 31 March
2020. In accordance with Companies Act 2006 (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 year and at the date of
this report, and their biographical details, are shown on
page 34.
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 year.
Performance and outlook
A summary of the Company’s performance during the year
ended 31 March 2020 and the outlook for the forthcoming
year is set out in the Strategic Report on pages 6 to 32.
Corporate governance
The Company’s Corporate Governance Statement is set
out on pages 37 to 41 and forms part of this report. Details
regarding independent professional advice, insurance and
indemnity are set out in that statement on page 41.
Share capital
Share issues
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 year ended 31 March 2020, no
shares were issued under the block listing (period ended
31 March 2019: 800,000 shares were issued). As at the date
of this report, a balance of 4.2 million shares remain under
this block listing.
No other share issues were made during the year or since
the year end. Proposals for the renewal of the Directors’
authority to issue shares will be set out in the Notice of
AGM.
Purchase of own shares
At the AGM held on 27 June 2019, the Directors were
granted the authority to buy back up to 13,229,755
ordinary shares, being 14.99% of the ordinary shares in
issue at the time of the passing of the resolution. No shares
were bought back under this authority during the year.
Subsequent to the year end of 31 March 2020 and up to
8 June 2020, the date of signing this report, the Company
purchased in the stock market 275,000 shares (with a nominal
value of £2,750.00) for treasury, at a total cost of £230,000,
representing 0.3% of the issued share capital as at 31 March
2020. The share purchases were made with a view to reducing
discount volatility and maintaining the middle market price
at which the shares traded close to the NAV.
Current share capital
As at 31 March 2020, there were 88,257,211 ordinary
shares in issue, none of which were held in treasury. At
general meetings of the Company, shareholders were
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 2020 were 88,257,211.
As at 8 June 2020, 275,000 shares were held in treasury.
Accordingly, the total voting rights of the Company as at
the date of this report were 87,982,211.
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.
35
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Directors’ Report (continued)
Substantial shareholdings
The Company has been informed of the following
notifiable interests in the voting rights of the Company as
at 31 March 2020:
Number
of shares
% of
voting rights
KPMG LLP has expressed its willingness to continue in
office as Auditor of the Company and resolutions for its re-
appointment and for the Audit Committee to determine
its remuneration will be proposed at the forthcoming
AGM.
Schroders plc
Harwood Capital LLP
Brewin Dolphin Limited
Ian Armitage
Investec Wealth and
Investment Limited
14,406,561
13,800,000
8,276,500
6,600,000
4,471,900
16.3
15.6
9.4
7.5
5.1
instruments comprise
Financial risk management
The Company’s financial
its
investment portfolio, cash balances, debtors and creditors
that arise directly from its operations such as sales and
purchases awaiting settlement and accrued income. The
financial risk management objectives and policies arising
from its financial instruments and the exposure of the
Company to risk are disclosed in note 12 to the Financial
Statements.
The Company has not been informed of any changes to
the above interests between 31 March 2020 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 Rules 9.8.4(5) and 9.8.4(6) in relation to Peter
Hewitt waiving his Director’s fee is set out on page 46. 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 themself aware of any relevant audit
information and to establish that the Company’s Auditor
is aware of that information.
Post Balance Sheet Events
Details of the post Balance Sheet events are set out in note
14 to the Financial Statements.
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.
Annual General Meeting
The AGM of the Company will be held at 10.30 am on
Tuesday, 22 September 2020 at the offices of Odyssean
Capital LLP, 6 Stratton Street, Mayfair, London W1J 8LD.
The Notice of the AGM will be circulated to shareholders
in due course.
By order of the Board
Link Company Matters Limited
Company Secretary
8 June 2020
36
ODYSSEAN INVESTMENT TRUST PLC Corporate Governance Statement
This Corporate Governance Statement forms part of the
Directors’ Report.
Introduction from the Chairman
I am pleased to present this year’s corporate governance
statement. 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 sustainable success of the Company,
generating value for shareholders, other stakeholders and
contributing to the wider society through investing in
its portfolio companies. In this statement, the Company
reports on its compliance with the AIC Code of
Corporate Governance (the “AIC Code”), sets out how
the Board and its committees have operated during the
past year and describes how the Board exercises effective
stewardship over the Company’s activities in the interests
of shareholders and other stakeholders of the Company.
In February 2019, the AIC published a revised version of
the AIC Code to reflect the changes made to the 2018 UK
Corporate Governance Code (the “UK Code”). The 2019
AIC Code applies to accounting periods which begun on or
after 1 January 2019. The Company has therefore reviewed
its corporate governance framework to ensure compliance
with the principles and recommendations of the 2019 AIC
Code. As a result, our reporting on corporate governance is
further expanded this year. In particular, on pages 23 to 26,
we set out a full report on how we meet the duties placed
on Directors under Section 172 of the Companies Act
2006. I am confident that we have properly undertaken our
duties to shareholders and other stakeholders, and taken a
long-term approach to the management of the Company.
Statement of compliance with the AIC Code
The Board of the Company has considered the principles
and recommendations of the AIC Code which addresses
all the principles set out in the 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 (which incorporates the UK Code), will provide
better information to shareholders.
the FCA. A copy of the AIC Code can be obtained via
the AIC’s website at 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 year ended
31 March 2020, 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 report under this section
explains any deviation from its recommendations.
The UK Code includes provisions relating to:
–
–
the role of the chief executive; and
executive directors’ remuneration.
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 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 Financial Reporting Council (the “FRC”) has endorsed
the AIC Code. The terms of the FRC’s endorsement mean
that AIC members who report against the AIC Code meet
fully their obligations under the UK Code and the related
disclosure requirements contained in the Listing Rules of
The Board consists of four non-executive Directors. The
Board conducted an internal evaluation of its size, skills
and experience in January 2020. It concluded that it has
substantial recent and relevant experience of investment
trusts and financial and public company management.
37
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Corporate Governance Statement (continued)
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 Company Secretary and will
be available at the AGM.
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 leads the Board and is responsible for
its overall effectiveness in directing the Company. In
liaison with the Company Secretary, she ensures that the
Directors receive accurate, timely and clear information.
Mrs Tufnell 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 34. The role and responsibilities of the Chairman
are clearly defined and set out in writing, a copy of which is
available on the Company’s website.
Arabella Cecil is the Senior Independent Director of the
Company. She provides a sounding board for the Chairman
and serves as an intermediary for the other Directors and
shareholders. Miss Cecil also provides a channel for any
shareholder concerns regarding the Chairman and will take
the lead in the annual evaluation of the Chairman by the
other independent Directors. The role and responsibilities
of the Senior Independent Director are clearly defined
and set out in writing, a copy of which is available on the
Company’s website.
Culture
The Chairman demonstrates objective
judgement,
promotes a culture of openness and debate, and facilitates
effective contributions by all Directors. The Directors are
required to act with integrity, lead by example and promote
this culture within the Company.
The Board seeks to ensure the alignment of the Company’s
purpose, values and strategy with the culture of openness,
debate and integrity through ongoing dialogue, and
engagement with the Portfolio Manager and the Company’s
other service providers. The culture of the Board is
considered as part of the annual performance evaluation
process which is undertaken by each Director. The culture
of the Company’s service providers is also considered by
the Board during the annual review of their performance
and while considering their continuing appointment.
38
Board operation
The Directors have adopted a formal schedule of matters
specifically reserved for their approval. A copy of this
schedule is available on the Company’s website. These
matters 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 Interim
Reports, financial
accounting
statements
policies, prospectuses, circulars and other shareholder
communications;
and
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
the
Company Secretary. The Company Secretary,
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 29 to 31.
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
enable it to successfully fulfil the role of these committees.
ODYSSEAN INVESTMENT TRUST PLC Corporate Governance Statement (continued)
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.
Audit Committee
The Audit Committee is chaired by Richard King and
comprises all Directors. It 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 42 to 44.
Management Engagement Committee
Peter Hewitt is the Chairman of the Management
Engagement Committee, which comprises all Directors.
The Committee meets 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. Post year end, the
Management Engagement Committee carried out a
review of the current arrangements for the provision of
administration and company secretarial services to the
Company. Following this review, the Board approved
that Frostrow Capital LLP be appointed to provide these
services, in addition to acting as the Company's marketing
facilitator. This appointment is expected to take effect
from mid-July 2020.
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 year.
Meeting attendance
The number of scheduled Board and Audit Committee meetings held during the year ended 31 March 2020 and the
attendance of the individual Directors is shown below:
Board Meetings
Audit Committee
Management Engagement Committee
Number entitled
to attend
Number
attended
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
1
1
1
1
1
1
1
1
39
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Corporate Governance Statement (continued)
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
Board’s effectiveness.
A process of performance evaluation was undertaken
in January 2020 and its report considered by the Board
at its meeting held in February 2020. The evaluation of
the Board and its Committees, in particular, the Audit
Committee, has been carried out by way of formal
questionnaires, and the evaluation of the Chairman and
the individual Directors has been conducted verbally
by the Senior Independent Director and the Chairman,
respectively. The independence of the Directors and
their ability to commit sufficient time to the Company's
activities was considered as part of the evaluation process.
As a result of the evaluation, the Board considers that
the composition and the structure of the Board and its
committees, remained appropriate; there was an adequate
balance of skills, knowledge, experience and diversity on
the Board; and the Board members worked efficiently
together to achieve the Company’s objectives. Individual
evaluation demonstrated that each Director continued to
contribute effectively in their role.
This process is carried out on an annual basis. Although the
Company is not a constituent of the FTSE 350, the Board
has determined that in line with the recommendation of
the AIC Code, an externally facilitated Board evaluation
would be carried out in 2021, being the third year since the
Company's launch.
Independence of Directors
The independence of the Directors was reviewed as part
of the annual evaluation process and it was found that
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.
Tenure
The Company has no set policy on the length of the tenure
of the Directors. It is intended that all Directors, including
the Chairman, would remain on the Board no longer
than nine years. However, the Board has agreed that to
facilitate a phased and efficient refreshment of the Board, if
necessary, the Chairman could stay on for more than nine
years as a Director.
Re-election of Directors
Under the Company’s Articles of Association, 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. In addition, in accordance with the AIC Code, all
Directors will be subject to annual re-election.
Accordingly, all Directors will be standing for re-election
at the Company’s forthcoming AGM. As detailed on
page 40, following formal performance evaluation, it is
considered that each current Director has the necessary
skills and experience, and continues to contribute
effectively to the management of the Company. In addition,
it is believed that the Board has the relevant expertise and
sufficient time to provide the appropriate leadership and
direction for the Company. Therefore, the Board strongly
recommends the re 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 reflects
its belief in the benefits of cognitive 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 and its Committees. The
Board does not feel that it would be appropriate to set
targets as all appointments are made on merit.
The Company does not have any other administrative
and management 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 they become aware of the possibility of an interest
that conflicts, or might possibly conflict, with the interests
40
ODYSSEAN INVESTMENT TRUST PLC Corporate Governance Statement (continued)
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
Details regarding the Company’s engagement with its
shareholders are set out within the Strategic Report on
pages 24 and 25.
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 29.
Company Secretary
The Board has direct access to the advice and services
of the Company 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 Company 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.
It is expected that with effect from mid-July 2020, Frostrow
Capital LLP will act as OIT's Company Secretary.
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 Company
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 Company 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.
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
41
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Audit Committee Report
I am pleased to present the Audit Committee Report for
the year ended 31 March 2020.
–
to ensure the effective operation of the Company’s
data protection policy.
Role of the Audit Committee
The primary responsibilities of the Audit Committee are:
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 and emerging risks facing the
Company that would threaten its business model,
future performance, solvency or liquidity;
to review the Company’s internal financial controls
and review the adequacy and effectiveness of the
Company’s risk management systems;
to assess the prospects of the Company for the next
12 months and to consider its longer-term viability;
Matters considered during the period
During the year ended 31 March 2020, the Committee
met twice and each Director’s attendance at these meetings
is set out in the table on page 39. 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.
to consider annually whether there is a need for the
Company to have its own internal audit function;
The issues considered by the Committee in relation to the
Annual Report and Financial Statements were:
to oversee the selection process of possible new
appointees as external auditor;
Significant issue
(a) Valuation of investments
to make recommendations to the Board in relation to
the appointment, re-appointment and removal of the
Auditor;
to approve the Auditor’s remuneration and its 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;
to approve any non-audit services to be provided by
the Auditor and the fees paid for such services; and
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 Committee, in consultation with the Portfolio
Manager, has decided not to change any valuations in
light of COVID-19 given investments were all quoted
on recognised stock exchanges. 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.
–
–
–
–
–
–
–
–
–
–
–
–
42
ODYSSEAN INVESTMENT TRUST PLC Audit Committee Report (continued)
Other issues
(a) 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.
(b) 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. Their considerations have included the
recent impact of COVID-19 on the markets and the
Company. 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 32.
(c) 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 £30,000 has been agreed in respect of the
audit for the year ended 31 March 2020 (period ended
31 March 2019: £29,000).
In accordance with the Company’s non-audit services
policy, 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%
of the average of the statutory audit fees for the preceding
three years. No non-audit services were provided by the
Auditor during the year ended 31 March 2020 (period
ended 31 March 2019: reporting accountant services in
respect of the IPO prospectus for a fee of £30,000 and
review of the 2018 half-yearly report for a fee of £9,000).
Further information on the fees paid to the Auditor is set
out in note 4 to the Financial Statements on page 66.
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 year ended 31 March 2020.
Independence and objectivity of the Auditor
The Committee receives an annual assurance from the
Auditor that its independence is not compromised. No
non-audit services were provided by the Auditor to the
Company during the year. Following a review of the
performance of the Auditor, the Committee is satisfied
that the Auditor remains independent and objective,
and has fulfilled its obligations to the Company and its
43
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Audit Committee Report (continued)
shareholders. There are no contractual obligations that
would restrict the Committee in selecting an alternative
external auditor.
KPMG LLP has been the Auditor to the Company since
launch in 2018. The current audit partner is Jatin Patel. 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.
Re-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 accounting
period beginning 1 April 2028.
Richard King
Chairman of the Audit Committee
8 June 2020
44
ODYSSEAN INVESTMENT TRUST PLC Directors’ Remuneration Report
Statement from the Chairman
I am pleased to present the Directors’ Remuneration
Report for the year ended 31 March 2020.
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 prescribed 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 year ended 31 March 2020, 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 to these fee levels are proposed for
the year ending 31 March 2021.
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.
An ordinary resolution will be put to shareholders at
the forthcoming AGM to be held in September 2020 to
receive and approve the Directors’ Remuneration Report.
The Directors’ Remuneration Policy was approved by
shareholders at the AGM held on 27 June 2019. The
provisions of the Remuneration Policy, as detailed on
page 48, will apply until they are next put to shareholders
for renewal of that approval, which must be at intervals of
not more than three years, or earlier, if proposals are made
to vary the policy. The Remuneration Policy is binding and
sets the parameters within which Directors’ remuneration
may be set. There will be no significant change in the way
the Remuneration Policy will be implemented in the
course of the next financial year.
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 IC
plus AIM Total Return Index. Further information about
the Company's performance during the year is detailed
in the Chairman's Statement and the Portfolio Manager's
Report on pages 6 to 20.
OIT Share Price
NSCI ex IT plus AIM Total Return Index
120
110
100
90
80
70
60
M ay 2018
Jul 2018
Sep 2018
N ov 2018
Jan 2019
M ar 2019
M ay 2019
Jul 2019
Sep 2019
N ov 2019
Jan 2020
M ar 2020
As at 31 March 2020. 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.
45
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Directors’ Remuneration Report (continued)
Directors’ remuneration for the year ended 31 March 2020 (audited)
The single total figure table below details the remuneration received by the Directors who served during the year:
Director
Fees Taxable benefits
Total
Fees Taxable benefits
Total
Year ended 31 March 2020
Period ended 31 March 2019
Jane Tufnell¹
Arabella Cecil2,3
Peter Hewitt2
Richard King1
£34,000
£24,000
–4
£27,500
£85,500
–
–
£595
–
£595
£34,000
£24,000
£595
£27,500
£86,095
£31,1671
£17,608²,³
– 2,4
£25,2081
£73,983
–
–
£723
–
£723
£31,167
£17,608
£723
£25,208
£74,706
¹ Appointed on 21 December 2017.
² Appointed on 31 January 2018.
³ Until 4 February 2019, Arabella Cecil invoiced her Director’s fee through Gravity Partners Limited.
⁴ 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.
There are no variable elements in the remuneration payable to the Directors. Taxable benefits included in the above
table are in respect of the amounts reimbursed to Directors as travel and other expenses properly incurred by them in the
performance of their duties.
Relative importance of spend on pay
The table below shows the proportion of the Company’s income spent on pay.
Year ended
31 March 2020
Period ended
31 March 2019
Spend on Directors’ fees*
Management fee and other expenses
£86,000
£1,313,000
£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 year and amount spent on shares 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 3 and 4 to the Financial Statements.
46
ODYSSEAN INVESTMENT TRUST PLC Directors’ Remuneration Report (continued)
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 2020 and 8 June 2020, the date
of this report, are shown in the table below:
Jane Tufnell
Arabella Cecil
Peter Hewitt
Richard King
8 June
2020
Number of shares
31 March
2020
Number of shares
31 March
2019
Number of shares
559,086
139,021
35,000
55,935
559,086
133,636
35,000
55,935
519,554
114,717
35,000
38,885
None of the Directors or any person connected with them had a material interest in the Company’s transactions,
arrangements or agreements during the year.
Voting at AGM
The Directors’ Remuneration Report for the period ended 31 March 2019 and the Directors’ Remuneration Policy were
approved at the AGM held on 27 June 2019. The votes cast by proxy on these resolutions were:
Directors’ Remuneration Report
Directors’ Remuneration Policy
Number of votes
% of votes cast Number of votes
% of votes cast
For
Against
At Chairman’s discretion
Total votes cast
Votes withheld
26,192,463
0
0
26,192,463
0
100.0
0.0
0.0
100.0
0.0
26,192,463
0
0
26,192,463
0
100.0
0.0
0.0
100.0
0.0
47
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Directors’ Remuneration Report (continued)
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 their ordinary duties as a Director,
they 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.
insurance cover
Directors’ and Officers’
maintained by the Company on behalf of the Directors.
liability
is
48
Directors’ fee levels
Component
Role
Rate at
1 April
2020
Purpose of
Remuneration
Annual fee
Chairman
£34,000
Annual fee
Additional
fee
Additional
fee
£24,000
£3,500
Non-executive
Director
Chairman of
the Audit
Committee
All Directors
N/A
Expenses
All Directors
N/A
Commitment as
Chairman1
Commitment as
non-executive Director2
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
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.
Approval
The Directors’ Remuneration Report was approved by the
Board and signed on its behalf by:
Jane Tufnell
Chairman
8 June 2020
ODYSSEAN INVESTMENT TRUST PLC Statement of Directors’ Responsibilities
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
them
Estimates and Errors” and
consistently;
then apply
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.
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 Companies Act 2006 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.
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
8 June 2020
49
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Financial Statements
FINANCIAL STATEMENTS
Independent Auditor’s Report
51
Statement of Comprehensive Income
56
Statement of Changes in Equity
57
58
Balance Sheet
59 Cash Flow Statement
60 Notes to the Financial Statements
Independent
auditor’s report
to the members of Odyssean Investment Trust PLC
We were first appointed as auditor by the shareholders
on 29 November 2018. The period of total uninterrupted
engagement is for the financial period ended 31 March
2019 and year ended 31 March 2020. 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
Company financial
statements as a whole
£0.82m (2019: £0.85m)
1% of Total Assets (2019: 1%)
Key audit matters
2020
Recurring risk
Carrying amount of quoted
investments
1. Our opinion is unmodified
We have audited the financial statements of Odyssean
Investment Trust PLC (“the Company”) for the year
ended 31 March 2020 which comprise the statement
of comprehensive income, balance sheet, statement of
changes in equity, cash flow statement, and the related
notes, including the accounting policies in note 1.
In our opinion, the Financial Statements:
–
–
–
the financial statements give a true and fair view of
the state of the Company’s affairs as at 31 March 2020
and its return for the year then ended;
have been properly prepared in accordance with
International Financial Reporting Standards as adopted
by the European Union; and
the financial statements 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.
ODYSSEAN INVESTMENT TRUST PLC
51
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverview 2. Key audit matters: 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 (unchanged from 2019), 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 matter 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.
Carrying amount of quoted
investments
(£72m; (2019: £67m))
Refer to page 42 (Audit Committee
Report), pages 61 and 62
(accounting policy) and pages 69
and 70 (financial disclosures).
The risk
Our response
Low risk, high value:
Our procedures included:
The Company’s portfolio of quoted
investments makes up 88% (2019: 78%)
of the Company’s total assets by value
and is considered to be 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, they are considered
to be one of the areas which 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% of quoted investments in the portfolio
to externally quoted prices; and
Enquiry of custodians: Agreeing 100%
of investment holdings in the portfolio
to independently received third party
confirmations from investment custodians.
Assessing transparency: We considered
the adequacy of disclosure of the Company’s
investments against the requirements set out
in accounting standards.
Our findings: We found the carrying amount
of quoted investments to be acceptable (2019:
acceptable).
3. Our application of Company materiality and
an overview of the scope of our audit
Materiality for the financial statements as a whole
was set at £0.82m (2019: £0.85m), determined with
reference to a benchmark of total assets, of which it
represents 1% (2019: 1%).
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £42k (2019: £42k), 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 at our offices.
Total Assets
Materiality
£82.2m (2019: £85.3m)
£0.82m (2019: £0.85m)
£820K
Whole financial statements
materiality
Materiality
Total Assets
£42k
Misstatements reported to the
audit committee
52
ODYSSEAN INVESTMENT TRUST PLC 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 their 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 their
ability to continue as a going concern for at least a year from the
date of approval of the financial statements (“the going concern
period”).
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.
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. We evaluated those risks and
concluded that they were not significant enough to require us to
perform additional audit procedures.
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 1 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 12 months from the date of approval of
the financial statements; or
–
the related statement under the Listing Rules set out on page
32 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.
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 opinion the information given in those reports for the
financial year is consistent with the financial statements;
and
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
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 emerging and 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 32 that they have carried out a robust assessment
of the emerging and 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
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 longer-
term 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.
53
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC 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
and through discussion with the Directors, the Manager and
the Administrator (as required by auditing standards) 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 tax
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, the Manager and the Administrator and
inspection of regulatory and legal correspondence, if any. These
limited procedures did not identify any actual or suspected non-
compliance.
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
provisions of the UK Corporate Governance Code specified by
the Listing Rules for our review.
We have nothing to report in these respects.
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 by the
Company, 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 49,
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.
54
ODYSSEAN INVESTMENT TRUST PLC 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
8 June 2020
55
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Statement of Comprehensive Income
for the year ended 31 March 2020
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)
Year ended 31 March 2020
Period ended 31 March 2019
Notes
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
2
7
3
4
5
6
1,949
–
–
133
(5,588)
–
2,082
(5,588)
–
715
–
–
–
(1,266)
(5)
715
(1,266)
(5)
1,949
(5,455)
(3,506)
715
(1,271)
(556)
(904)
(495)
(1,399)
–
–
–
(904)
(495)
(784)
(455)
(1,399)
(1,239)
–
–
–
(784)
(455)
(1,239)
550
(7)
(5,455)
–
(4,905)
(7)
(524)
(5)
(1,271)
–
(1,795)
(5)
543
(5,455)
(4,912)
(529)
(1,271)
(1,800)
0.6
(6.2)
(5.6)
(0.6)
(1.4)
(2.0)
The total column of this statement is the Income Statement of the Company prepared in accordance with IFRS, as
adopted by the EU. The supplementary revenue and capital columns are presented in accordance with the Statement of
Recommended Practice issued by the AIC ("AIC SORP").
All revenue and capital 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 profit for the period after tax is also the total comprehensive
income.
The accompanying notes are an integral part of these financial statements.
56
ODYSSEAN INVESTMENT TRUST PLC Statement of Changes in Equity
for the year ended 31 March 2020
Share
capital
£’000
Share
premium
account
£’000
Special
distributable
reserve*
£’000
Notes
Capital
reserve
£’000
Revenue
reserve*
£’000
Total
£’000
Year ended 31 March 2020
Opening balance as at 1 April 2019
Total comprehensive income for
the year
As at 31 March 2020
Notes
10
10
10
10
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
As at 31 March 2019
883
–
883
449
85,475
(1,271)
(529)
85,007
–
–
(5,455)
543
(4,912)
449
85,475
(6,726)
14
80,095
Share
capital
£’000
Share
premium
account
£’000
Special
distributable
reserve*
£’000
Capital
reserve
£’000
Revenue
reserve*
£’000
Total
£’000
–
883
–
–
–
–
883
–
87,403
(1,459)
(85,495)
–
–
–
–
85,495
(20)
–
–
–
–
–
–
–
–
–
–
–
88,286
(1,459)
–
(20)
–
–
(1,271)
(529)
(1,800)
449
85,475
(1,271)
(529)
85,007
* The special distributable and revenue reserves can be distributed in the form of dividends.
The distributable reserves are £78,763,000 (2019: £83,675,000)
The accompanying notes are an integral part of these financial statements.
57
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Balance Sheet
as at 31 March 2020
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 liabilities
Total assets less current liabilities
Net assets
Represented by:
Share capital
Share premium account
Special distributable reserve
Capital reserve
Revenue reserve
31 March
2020
£’000
31 March
2019
£’000
Notes
7
8
72,266
66,807
187
9,800
298
18,219
9,987
18,517
82,253
85,324
9
(2,158)
(317)
(2,158)
(317)
80,095
85,007
80,095
85,007
10
883
449
85,475
(6,726)
14
883
449
85,475
(1,271)
(529)
Total equity attributable to equity holders of the Company
80,095
85,007
Basic and diluted NAV per ordinary share (pence)
11
90.8
96.3
These statements were approved and authorised for issue by the Board on 8 June 2020 and signed on its behalf by:
Jane Tufnell
Chairman
Company Registered Number: 11121934
The accompanying notes are an integral part of these financial statements.
58
ODYSSEAN INVESTMENT TRUST PLC Cash Flow Statement
for the year ended 31 March 2020
Reconciliation of total return before taxation to net cash outflows
from operating activities
Profit before tax
Losses on investments held at fair value through profit and loss
Decrease/(increase) in receivables
(Decrease)/increase in creditors
Taxation paid
Net cash inflow from operating activities
Investing activities
Purchases
Sales
Net cash outflow from investing activities
Financing activities
Gross proceeds of shares issued
Share issue costs
Share premium cancellation costs
Net cash inflow from investing activities
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
Notes
(4,905)
5,588
105
32
(10)
810
(1,795)
1,270
(288)
319
(5)
(499)
(26,405)
17,167
(9,238)
(69,217)
1,138
(68,079)
–
10
–
10
88,285
(1,469)
(20)
86,796
(Decrease)/Increase in cash and cash equivalents
(8,418)
18,218
Reconciliation of net cash flow movements in funds
Cash and cash equivalents at the beginning of the year
Exchange rate movements
Increase in cash and cash equivalents
Increase in net cash
Cash and cash equivalents at end of year
The accompanying notes are an integral part of these financial statements.
18,219
–
(1)
(8,418)
(8,419)
1
18,218
18,219
9,800
18,219
59
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements
for the year ended 31 March 2020
1. Accounting Policies
Odyssean Investment Trust PLC is a listed public company incorporated and registered in England and Wales. The
registered office of the Company is Beaufort House, 51 New North Road, Exeter EX4 4EP. The principal activity
of the Company is that of an investment trust company within the meaning of sections 1158/1159 of the
Corporation Tax Act 2010 and its investment approach is detailed in the Strategic Report.
a) Basis of preparation
The financial statements of the Company have been prepared in accordance 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 provisions of the Companies Act 2006. The annual financial
statements have also been prepared in accordance with the AIC SORP for the financial statements of
investment trust companies and venture capital trusts, except to any extent where it is not consistent with the
requirements of IFRS.
The comparatives for the period to 31 March 2019 are for the 15-month period from incorporation on
21 December 2017 to 31 March 2019.
In order to better reflect the activities of an investment trust company and in accordance with guidance issued
by the AIC, supplementary information which analyses the Income Statement between items of a revenue and
capital nature has been prepared alongside the Income Statement.
The functional currency of the Company is Sterling because this is the currency of the primary economic
environment in which the Company operates. The financial statements are also presented in Sterling rounded
to the nearest thousand, except where otherwise indicated.
b) Going concern
The financial statements have been prepared on a going concern basis that approval as an investment trust
company will continue to be met.
The Directors have made an assessment of the Company’s ability to continue as a going concern and are
satisfied that the Company has the resources to continue in business for the foreseeable future, being a period
of at least 12 months from the date these financial statements were approved. In making the assessment, the
Directors have considered the likely impacts of the current COVID-19 pandemic on the Company, operations
and the investment portfolio. The Directors noted the cash balance exceeds any short-term liabilities, the
Company has no debt and the Company holds a portfolio of investments listed on the LSE. The Company is
a closed end fund, where assets are not required to be liquidated to meet redemptions. Whilst the economic
future is uncertain, and the Directors believe it is possible the Company could experience further reductions in
income and/or market value that this should not be to a level which would threaten the Company’s ability to
continue as a going concern. The Directors, the Portfolio Manager and other service providers have put in place
contingency plans to minimise disruption. Furthermore, the Directors are not aware of any material
uncertainties that may cast doubt upon the Company’s ability to continue as a going concern, having taken into
account the liquidity of the Company’s investment portfolio and the Company’s financial position in respect
of its cash flows, debt and investment commitments. Therefore, the financial statements have been prepared on
a going concern basis.
c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of the business, being
investment business. The Company invests in small companies principally based in countries bordering the
North Atlantic Ocean.
60
ODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
1. Accounting Policies (continued)
d) Accounting developments
In the current year, the Company has applied a number of amendments to IFRS, issued by the IASB. These
include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes
in disclosure and presentation requirements. The Company has also applied, with associated amendments, for
the first time the following standards:
IFRS 16 Leases sets out the principles for the recognition, measurement, presentation and disclosure of leases
by lessors and lessees.
The adoption of the changes to accounting standards has had no material impact on the current or prior years'
financial statements.
e) Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies and the reported amounts in the Balance
Sheet, the Income Statement and the disclosure of contingent assets and liabilities at the date of the financial
statements. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The areas requiring the most significant judgement and estimation in the preparation of the financial
statements are: recognising and classifying unusual or special dividends received as either revenue or capital in
nature; when determining any deferred performance fee, this may be affected by future changes in the
Company's portfolio and other assets and liabilities; and setting the levels of dividends paid and proposed in
satisfaction of both the Company’s long-term objective and its obligations to adhere to investment trust status
rules under Section 1158 of the Corporation Tax Act 2010.
The estimates and underlying assumptions are reviewed on an ongoing basis. Any revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or
in the period of the revision and future period if the revision affects both current and future periods. There are
no significant judgements or estimates in these financial statements.
f ) Investments
The Company’s business is investing in financial assets with a view to profiting from their total return in the
form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated
on a fair value basis in accordance with the documented investment strategy and information is provided
internally on that basis to the Company’s Board of Directors and other key management personnel.
The investments held by the Company are designated by the Company as ‘at fair value through profit or loss’.
All gains and losses are allocated to the capital return within the Statement of Comprehensive Income as ‘Gains
or losses on investments held at fair value through profit or loss’. Also included within this heading are
transaction costs in relation to the purchase or sale of investments. When a sale or purchase is made under a
contract, the terms of which require delivery within the timeframe of the relevant market, the investments
concerned are recognised or derecognised on the trade date.
61
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
1. Accounting Policies (continued)
f ) Investments (continued)
All investments are designated upon initial recognition as held at fair value through profit or loss, and are
measured at subsequent reporting dates at fair value, which is either the bid price or the closing price for Stock
Exchange Electronic Trading Service (‘SETS’). The Company derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially
all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the
difference between the asset’s carrying amount and the sum of consideration received and receivable and the
cumulative gain or loss that had been accumulated is recognised in profit or loss.
Fair values for unquoted investments, or investments for which the market is inactive, are established by using
various valuation techniques in accordance with the International Private Equity and Venture Capital Valuation
(the “IPEV”) guidelines. These may include recent arm’s length market transactions, earnings multiples and the
net asset basis.
All investments for which a fair value is measured or disclosed in the financial statements are categorised within
the fair value hierarchy levels set out in note 7.
g) Foreign currency translation
Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the date of the
transaction. Items that are denominated in foreign currencies are retranslated at the rates prevailing on the
Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the
transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on
whether the gain or loss is capital or revenue in nature.
h) Cash and Cash Equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments
that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes
in value.
For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts when applicable.
i) Other receivables and payables
Trade receivables and trade payables are measured at amortised cost and balances revalued for exchange
rate movement.
j)
Income
Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable
on equity shares where no ex-dividend date is quoted are brought into account when the Company’s right to
receive payment is established. Dividends from overseas companies are shown gross of any withholding taxes
which are disclosed separately in the Statement of Comprehensive Income.
Special dividends are taken to the revenue or capital account depending on their nature. In deciding whether a
dividend should be regarded as capital or revenue receipt, the Board reviews all relevant information as to the
sources of the dividend on a case-by-case basis.
62
ODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
j)
1. Accounting Policies (continued)
Income (continued)
When the Company has elected to receive scrip dividends in the form of additional shares rather than in cash,
the amount of the cash dividend foregone is recognised as income. Any excess in the value of the cash dividend
is recognised in the capital column.
All other income is accounted on a time-apportioned accruals basis and is recognised in the Statement of
Comprehensive Income.
k) Expenses
All expenses are accounted on an accruals basis and are allocated wholly to revenue with the exception of the
Performance Fees and transaction costs which are allocated wholly to capital, as the fee payable by reference to
the capital performance of the Company.
l) Taxation
The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or
accelerated because of temporary differences between the treatment of certain items for accounting and
taxation purposes.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amount for financial reporting purposes at the reporting date. Deferred tax
assets are only recognised if it is considered more likely than not that there will be suitable profits from which
the future reversal of timing differences can be deducted. In line with recommendations of the SORP, the
allocation method used to calculate the tax relief expenses charged to capital is the ‘marginal’ basis. Under this
basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account,
then no tax relief is transferred to the capital account.
m) Dividends payable to shareholders
Dividends to shareholders are recognised as a liability in the period in which they are paid or approved in
general meetings and are taken to the Statement of Changes in Equity. Dividends declared and approved by the
Company after the Balance Sheet date have not been recognised as a liability of the Company at the Balance
Sheet date.
n) Share capital and reserves
The share capital represents the nominal value of equity shares.
The share premium account represents the accumulated premium paid for shares issued above their nominal
value less issue expenses.
The special distributable reserve was created on 7 August 2018. This reserve may be used for the costs of share
buybacks and the cancellation of shares.
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 revenue reserve represents the surplus of accumulated revenue profits being the excess of income derived
from holding investments less the costs associated with running the Company. This reserve may be distributed
by way of dividends.
63
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
2.
Income
Year ended
31 March
2020
Income
£’000
Year ended
31 March
2020
Capital
£’000
Year ended
31 March
2020
Total
£’000
Period ended
31 March
2019
Total
£’000
Income from investments
UK dividends
Unfranked investment income
Other income
Bank interest received
Other income
Total income
3. Portfolio management fee
1,922
–
24
3
133
–
–
–
2,055
–
24
3
1,949
133
2,082
Year ended 31 March 2020
Period ended 31 March 2019
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Management fee
Performance fee provision
904
–
904
–
–
–
904
–
904
784
–
784
–
–
–
632
34
49
–
715
Total
£’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 2020, no performance fee has been accrued. As at 8 June
2020, 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.
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% of the NAV (calculated
before deduction of any accrued but unpaid Management fee and any performance fee) per annum; or (ii) 1% 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.
64
ODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
3. Portfolio management fee (continued)
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 IC plus AIM Total Return 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)
(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% per
annum over the relevant Performance Period (the “Target NAV per Share”);
(ii) 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% 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% 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;
– 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% of its value in cash and the Portfolio Manager shall, as soon as
reasonably practicable following receipt of such payment, use 50% 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”).
65
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
3. Portfolio management fee (continued)
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.
4. Other expenses
Directors' fees*
Company Secretarial fee
Administration fee
Auditors remuneration – audit**
Auditors remuneration – interim review
Other expenses
Year ended
31 March
2020
£’000
Period ended
31 March
2019
£’000
86
64
85
30
–
230
495
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 43. No other fees were paid to the Auditor during the year (2019: a further £30,000 was paid to the
Auditor relating to accounting services for the prospectus at launch, recognised in the share premium account).
66
ODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
5. Taxation
Analysis of charge in year
Current tax:
Overseas tax suffered
Year ended 31 March 2020
Period ended 31 March 2019
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
7
7
–
–
7
7
5
5
–
–
5
5
The tax assessed for the year is the standard rate of Corporation Tax in the UK of 19% (2019: 19%). The differences
are explained below:
Year ended 31 March 2020
Period ended 31 March 2019
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Net return before taxation
543
(5,455)
(4,912)
(524)
(1,271)
(1,795)
Theoretical tax at UK corporation tax
rate of 19% (2019: 19%)
Effects of:
UK dividends that are not taxable
Foreign dividends that are not taxable
Non-taxable investment losses/(gains)
Irrecoverable overseas tax
Unrelieved excess expenses
103
(1,037)
(934)
(99)
(241)
(340)
(346)
(17)
(1)
7
261
-
-
1,037
-
-
(346)
(17)
1,036
7
261
(120)
(7)
-
5
226
-
-
241
-
-
(120)
(7)
241
5
226
7
-
7
5
-
5
Factors that may affect future tax charges
At 31 March 2020, the Company had no unprovided deferred tax liabilities (2019: £nil). At that date, based on
current estimates and including the accumulation of net allowable losses, the Company had unrelieved losses of
£2,564,000 (2019: £1,189,000) that are available to offset future taxable revenue. A deferred tax asset of £435,000
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.
67
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
6. Earnings per ordinary share
Year ended 31 March 2020
Period ended 31 March 2019
Weighted
average
ordinary
shares*
Basic and
diluted
earnings
per share
pence
Weighted
average
ordinary
shares*
Net return
£’000
Net return
£’000
Revenue
Capital
Total
543
88,257,211
(5,455) 88,257,211
0.6
(6.2)
(529)
(1,271)
88,040,346
88,040,346
(4,912) 88,257,211
(5.6)
(1,800)
88,040,346
Basic and
diluted
earnings
per share
pence
(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.
There are no dilutive instruments issued by the Company.
68
ODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
7.
Investments held at fair value through profit or loss
Opening book cost
Opening investment holding gains
Opening fair value
Analysis of transactions made during the year
Purchases at cost
Sales proceeds received
Gains/(losses) on investments
Decrease in investment holding gains
Closing fair value
Closing book cost
Closing investment holding gains/(losses)
Closing fair value
Analysis of capital losses
Gains on sales of investments based on historical cost
Movement in in investment holding gains for the year
Net losses on investments held at fair value
Transaction costs
As at
31 March
2020
£’000
68,330
(1,523)
66,807
28,214
(17,167)
4,342
(9,930)
As at
31 March
2019
£’000
–
–
–
69,211
(1,138)
257
(1,523)
72,266
66,807
83,719
(11,453)
68,330
(1,523)
72,266
66,807
4,342
(9,930)
257
(1,523)
(5,588)
(1,266)
140
384
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.
69
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
7.
Investments held at fair value through profit or loss (continued)
– 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).
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.
As at 31 March 2020
As at 31 March 2019
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Quoted at fair value
72,266
72,266
Total
72,266
72,266
–
–
–
–
66,807
66,807
66,807
66,807
–
–
–
–
There were no transfers between levels during the period.
8. Trade and other receivables
Other receivables
9. Trade and other payables
Due to brokers
Portfolio managers fees
Directors' fees
Other payables
70
As at
31 March
2020
£'000
As at
31 March
2019
£'000
187
187
298
298
As at
31 March
2020
£'000
As at
31 March
2019
£'000
1,808
231
–
119
2,158
–
208
6
103
317
ODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
10. Share capital
Year ended 31 March 2020
Period ended 31 March 2019
Number of
Shares
£’000
Number of
Shares
£’000
Issued and fully paid:
Ordinary shares of 1p:
Balance at beginning of the period
Initial share issue
Subsequent share issues – block listing
88,257,211
–
–
883
–
–
–
87,457,211
800,000
Balance at end of the period
88,257,211
883
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 2020, 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 £87,457,000.
A further issue of shares of 800,000 took place during the year and raised gross proceeds of £828,000 less issue costs
of £12,000.
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 £1,447,000 relating to the initial and subsequent listings prior to cancellation were offset against the
share premium account.
11. Net asset value per ordinary share
The net asset value attributable to the ordinary shareholders and the net asset value per ordinary share at the year
end were as follows:
Net asset value/shareholders funds
Number of ordinary shares in issue at the year end
Net asset value per share – Basic and diluted
As at
31 March
2020
As at
31 March
2019
£80,095,000 £85,007,000
88,257,211
88,257,211
90.8p
96.3p
71
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
12. Financial Instruments
Investment objective and 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.
The Company’s investment objective and policy are detailed on pages 2 and 3.
The Company’s financial instruments include its investment portfolios, cash balances, trade receivables and trade
payables that arise directly from its operations. Adherence to the Company’s investment policy is key to
mitigating risk.
Risks
The Portfolio Manager monitors the financial risks affecting the Company on an ongoing basis and the Board
regularly receive financial information, which is used to identify and monitor risk. All risks are actively reviewed
and managed by the Board.
The risks identified arising from the Company’s financial instruments are:
(i) market risk, including market price risk, interest rate risk and currency risk;
(ii)
liquidity risk;
(iii) credit and counterparty risk
(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. The
Portfolio Manager assesses the exposure to market risk when making each investment decision and these risks are
monitored by the Portfolio Manager on a regular basis and the Board at meetings with the Portfolio Manager.
Market price risk
The Company is exposed to market price risk (i.e. changes in market prices other than those arising from
currency or interest rate risk) which may affect the value of investments whose future prices are uncertain. The
Company’s exposure to market price risk comprises movements in the value of the Company’s investments. If
the fair value of the Company’s investments at the year-end increased or decreased by 10%, then it would have
had an impact on the Company’s capital return and equity of £7,227,000 (2019: £6,681,000).
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.
72
ODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
12. Financial instruments (continued)
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 has limited exposure to foreign currency fluctuations, it has
only one (2019: one) investment in EUR fair valued at £1,157,000 (2019: £1,873,000) impacted by foreign
exchange rates which has an immaterial effect on the investment portfolio. A 5% rise or decline in Sterling
against the foreign currency denominated investment held at year end would have increased/decreased the net
asset value by £58,000 (2019: £94,000). Whilst the Company’s other investments are denominated in Sterling,
the Company may have currency exposure through the trading activities of its investee companies.
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.
If the Company maintained the following level of cash for a year £9,800,000 (2019: £18,219,000), a 1%
increase in interest rates would increase the revenue return and net assets by £98,000 (£182,000). If there was
a fall of 1% in interest rates, it would potentially impact the Company by turning positive interest to negative
interest. The total effect would be a revenue reduction/cost increase of £98,000 (2019: £182,000).
The portfolio Manger actively manages the cash positions of the Company.
(ii) Liquidity risk
The Company’s assets mainly comprise readily realisable securities which can be easily sold to meet funding
commitments and obligations. Liquidity risk is mitigated by the fact that the Company has £9,800,000 (2019:
£18,219,000) cash at bank and the assets are readily realisable. The Company is a closed-end fund, assets do not
need to be liquidated to meet redemptions.
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 as they fall due.
(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 credit standing of all counterparties is reviewed periodically and assesses the debtors to ensure
they are neither past due or impaired.
All the investments 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. The Portfolio
Manager and the Board actively monitor the relationship with RBC and review RBC’s internal control report.
73
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Notes to the Financial Statements (continued)
for the year ended 31 March 2020
13. Related party transactions
The amounts incurred in respect of Portfolio Management fees during the period to 31 March 2020 was £904,000
(2019: 784,000), of which £231,000 (2019: £208,000) was outstanding at 31 March 2020. The amount accrued
in relation to the Performance Fee provision as at 31 March 2020 was £nil (2019: £nil).
Fees paid to the Company’s Directors and Directors shareholdings, are disclosed in the Directors’ Remuneration
Report. At the year end, there were no outstanding fees payable to Directors (2019: £6,000).
14. Subsequent events
Since the period end, the Company has bought back 275,000 Ordinary Shares with a nominal value of £2,750 at a
total cost of £230,000, which have been placed in treasury.
Since 31 March 2020, markets and operations have continued to be disrupted by the effects of the COVID-19
pandemic. However, since the year end, the NAV per share has increased by 14.7% to 5 June 2020.
74
ODYSSEAN INVESTMENT TRUST PLC Additional Information
ADDITIONAL INFORMATION
Shareholder Information
76
77 Glossary
80 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 1p shares
SEDOL number
ISIN
Ticker
LEI
88,257,211
BFFK7H5
GB00BFFK7H57
OIT
213800RWVAQJKXYHSZ74
The Company’s NAV is released daily to the LSE and
published on the Company’s website.
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 80. 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 December
31 March
June
September
30 September
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 Company Secretary at 01392 477 500.
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.
76
ODYSSEAN INVESTMENT TRUST PLC Glossary
AGM
Annual General Meeting
ESG
Environmental, social and governance
AIC
Association of Investment Companies
EU
European Union
Alternative Performance Measure (‘APM’)
An APM is a numerical measure of the Company’s current,
historical or future financial performance, financial
position or cash flows, other than a financial measure
defined or specified in the applicable financial framework.
Comparator Benchmark
The Company’s Comparator Benchmark is the NSCI
(Numis Smaller Companies Index) ex IC plus AIM Total
Return Index. The benchmark is used only as a yard stick to
compare investment performance.
Cost
The book cost of each investment is the total acquisition
value, including transaction costs, less the value of any
disposals or capitalised distributions allocated on a
weighted average cost basis.
Discount/premium
If the share price is lower than the NAV per share it is
said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per
share and is usually expressed as a percentage of the NAV
per share. If the share price is higher than the NAV per
share, this situation is called a premium.
Premium/(Discount)
Calculation
Closing NAV per share (p)
Closing share price (p)
(Discount)/Premium
(c=((b-a)/a) x 100) (%)
31 March
2020
31 March
2019
90.8p
90.0p
96.3p
99.3p
a
b
(0.9)%
3.1% c
The discount and performance are calculated in accordance
with guidelines issued by the AIC. The discount is
calculated using the net asset values per share inclusive of
accrued income with debt at market value.
FCA
Financial Conduct Authority
Gearing
Gearing refers to the ratio of the Company’s debt to its
equity capital. The Company may borrow money to invest
in additional investments for its portfolio. If the Company’s
assets grow, the shareholders’ assets grow proportionately
more because the debt remains the same. If the Company’s
assets fall, the situation is reversed. Gearing can therefore
enhance performance in rising markets but can adversely
impact performance in falling markets. The Company has
no borrowings during the year (2019:nil).
IFRS
International Financial Reporting Standards
IPO
Initial public offering
Key Performance Indicators ('KPIs')
KPIs are a shortlist of corporate attributes that are used
to assess the general progress of the Company. These are
outlined on page 27.
LSE
London Stock Exchange
Link
Link Company Matters Limited and Link Alternative
Fund Administrators Limited, the Company's current
Company Secretary and Administrator, respectively.
M&A
Mergers and acquisitions
77
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Glossary (continued)
Net Asset Value (‘NAV’)
The NAV is shareholders’ funds expressed as an amount per
individual share. Shareholders’ funds are the total value of
all of the Company’s assets, at their current market value,
having deducted all liabilities and prior charges at their par
value, or at their asset value as appropriate. The total NAV
per share is calculated by dividing shareholders’ funds
of £80,095,000 (2019: £85,007,000) by the number of
Ordinary Shares in issue 88,257,211 (2019: 88,257,211)
at the year end.
31 March
2020
31 March
2019
Net asset value/shareholders funds
£80,095,000
£85,007,000
Number of ordinary shares in issue at
the year end
Net asset value per share – Basic and
diluted
88,257,211
88,257,211
90.8p
96.3p
NAV total return
NAV total return is the closing NAV per share including
any cumulative dividends paid as a percentage over the
opening NAV.
Ongoing Charges Ratio
As recommended by the AIC in its guidance, 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 as disclosed to the LSE.
Total expenses
Less one time expenses and finance
charges
31 March
2020
31 March
2019
1,399,000
1,239,000
–
21,000
R&D
Research and development
TMT
Technology, media and telecom
Total assets
Total assets are the sum of both fixed and current assets
with no deductions.
Total Return – NAV and Share Price Returns
Total return statistics enable the investor to make
performance comparisons between investment trusts with
different dividend policies. The combined effect of any
dividends paid, together with the rise or fall in the share
price or NAV. This is calculated by the movement in the
NAV or share price plus dividend income reinvested by the
Company at the prevailing NAV or share price.
NAV Total Return
Closing NAV per share (p)
Opening NAV Per share (p)
Dividend reinvested (p)
NAV total return
31 March
2020
31 March
2019
90.8p
96.3p
–
96.3p
99.3p
a
b
–
(c= ((a-b)/b x 100) (%)
(5.7%)
(2.1%)#
c
Share Price Total Return
Closing share price (p)
Opening share price (p)
Dividend reinvested (p)
Share price total return
31 March
2020
31 March
2019
90.0p
99.3p
–
99.3p
100.0p
a
b
–
Annualised Ongoing charges (a)
1,399,000
1,328,000*
(c= ((a-b)/b x 100) (%)
(9.4%)
(0.7%)#
c
Average net asset value (b)
84,064,000
85,391,000*
# For the period from commencing trading and listed on the LSE on 1 May 2018.
Ongoing charges (a/b) expressed
as a %
1.7%
1.6%
* For the period from commencing trading and listed on the LSE on 1 May 2018.
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.
P/E
Price earnings ratio
78
ODYSSEAN INVESTMENT TRUST PLC Glossary (continued)
UCITS
Undertakings for the Collective Investment in Transferable
Securities
Volatility
The term volatility describes how much and how quickly
the share price or net asset value has tended to change in
the past. Those investments with the greatest movement
in their share prices are known as having high volatility,
whereas those with a narrow range of change are known as
having low volatility.
79
Strategic ReportGovernanceFinancial StatementsAdditional InformationOverviewODYSSEAN INVESTMENT TRUST PLC Corporate Information
Directors
Jane Tufnell (Chairman)
Arabella Cecil
Peter Hewitt
Richard King
Company Secretary and Registered Office
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
* Expected to come into effect from mid-July 2020:
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Tel: 0203 008 4910
Email: info@frostrow.com
Portfolio Manager
Odyssean Capital LLP
6 Stratton Street
Mayfair
London W1J 8LD
Tel: 020 7640 3280
Email: info@odysseancapital.com
Broker
Winterflood Securities Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
Solicitor
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
Corporate website
www.oitplc.com
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.
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ODYSSEAN INVESTMENT TRUST PLC INVESTMENT TRUST PLCCompany Registered Number: 11121934www.oitplc.com