TIDMOIT
RNS Number : 2194A
Odyssean Investment Trust PLC
28 May 2021
ODYSSEAN INVESTMENT TRUST PLC
Annual Report and Financial Statements
for the year ended 31 March 2021
Odyssean Investment Trust plc (the "Company") today announces
audited results
for the year ended 31 March 2021
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 primarily invests in smaller company equities quoted
on markets operated by the London Stock Exchange, 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.
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.
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 Net Asset Value ("NAV") across a range of industries. The
Company will adhere to an exclusion-based investment approach to
avoid investment in companies involved in activities the Company
deems unethical and/or unsustainable.
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.
Investment restrictions
- No exposure to any investee company will exceed 15 per cent.
of Net Asset Value at the time of investment.
- The Company may invest up to 20 per cent. 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 per cent. of Gross Assets at
the time of investment in quoted securities not traded on the
London Stock Exchange.
- The Company will not invest more than 10 per cent., in
aggregate, of Gross Assets at the time of investment in other
listed closed-end investment funds.
Ethical and sustainability investment restrictions
The Company will not invest (1) in companies which derive any
revenue from, or are engaged in:
- the production or direct distribution of pornography;
- the manufacture, production or retail of controversial
weapons(2) (e.g. chemical, biological or nuclear weapons, cluster
munitions, landmines), civilian firearms and ammunition;
- the manufacture of alcohol and tobacco products;
- the ownership or operation of gambling facilities;
- sub-prime and/or predatory lending;
- oil and gas production (both conventional and unconventional,
including shale oil and gas, coal seam gas, coal bed methane,
thermal coal, tar sands, Arctic onshore/offshore deepwater, shallow
water and other onshore/offshore) and includes extraction and
refining;
- animal experimentation or animal testing, (a) where there is a
proven alternative and/or where testing is not mandated by
regulation; or (b) where there is no proven alternative and/or the
experimentation or testing is mandated by regulation, but where the
investee company is not adhering to the "three Rs" ethics of
Replacement, Reduction and Refinement.
The Company will not invest more than 10 per cent., in
aggregate, of Gross Assets at the time of investment in companies
involved in distributing, licensing, retailing or supplying tobacco
and/or alcohol beverage products.
(1) The Company will base its analysis of an investee company's
revenues and activities on publicly available information, and will
exclude revenues and activities that are considered to be
de-minimis, being those that represent less than 1% of the investee
company's revenue.
(2) Controversial weapons are those that have an indiscriminate
and disproportional humanitarian impact on civilian populations,
the effects of which can be felt long after military conflicts have
ended.
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 per cent. of Net Asset Value at the time of borrowing.
Derivatives and Hedging
The Company will not use derivatives for investment purposes. It
is expected that the Company's assets will be predominantly
denominated in Sterling and, as such, the Company does not intend
to engage in hedging arrangements, however, the Company may do so
if the Board deems it appropriate for efficient portfolio
management purposes.
General
The Company will not be required to dispose of any asset or to
rebalance the Portfolio as a result of a change in the respective
valuations of its assets.
The Company intends to conduct its affairs so as to qualify as
an investment trust for the purposes of section 1158 of the CTA
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
Financial Conduct Authority. Non-material changes to the investment
policy may be approved by the Board.
Financial Summary
As at As at
Company performance 31 March 2021 31 March 2020 Change
----------------------------------------- ------------- ------------- ------
Shareholders' funds GBP122.6m GBP80.1m 53.1%
NAV per share 139.3p 90.8p 53.4%
Share price per share 129.0p 90.0p 43.3%
Share price discount to NAV per share(#) (7.4)% (0.9)%
Year ended Year ended
31 March 2021 31 March 2020
---------------------------------------- ------------- -------------
Revenue (loss)/income per ordinary
share* (0.7)p 0.6p
Capital return/(loss) per ordinary
share* 49.2p (6.2)p
Total return/(loss) per ordinary share* 48.5p (5.6)p
* Based on the weighted average number of shares in issue during
the period.
High/low during the year
ended 31 March 2021 31 March 2020
------------------------------- ------- ------------- -------------
NAV - high 140.1p 116.5p
- low 87.0p 81.6p
Share price - high 135.5p 117.0p
- low 86.0p 76.0p
Share price premium/(discount)
to NAV per share - high 6.9% 3.1%
- low (14.5)% (15.3)%
Year ended Year ended
Performance 31 March 2021 31 March 2020
--------------------------------------- ------------- -------------
NAV Total Return per share(#) 53.4% (5.7)%
NSCI ex IC plus AIM Total Return Index
(#) ** 71.3% (23.2)%
** Source: Bloomberg.
Year ended Year ended
Cost of running the Company 31 March 2021 31 March 2020
------------------------------ ------------- -------------
Annualised ongoing charges(#) 1.4% 1.7%
(#) Alternative Performance Measures (see Glossary).
Past performance is not a guide to future performance.
Chairman's Statement
Introduction
I am pleased to present the Annual Report and Financial
Statements for Odyssean Investment Trust PLC ("OIT" or "the
Company") covering the year from 1 April 2020 to 31 March 2021.
Performance
In a period marked by huge volatility and uncertainty, the net
assets of the Company increased by GBP42.5m to GBP122.6m and
represented a strong increase in net asset value per share ("NAV")
of 53.4%. Over the same period, the NSCI ex IT plus AIM Total
Return Index (the "comparator index") rose by 71.5%.
The Company has recently celebrated its third anniversary, and
as such it is worth reflecting on the incredible progress that has
been made in the years since its launch. From inception on 30 April
2018 to 31 March 2021, the NAV per share has grown by 41.7% - more
than double the return from the comparator index. More
impressively, this performance has been delivered with an average
net cash position in the portfolio of 25%, demonstrating the
underlying strength of the performance of the portfolio companies.
I am delighted that this outperformance of our NAV over its hurdle
has resulted in a performance fee of GBP1.825 million being paid to
the management company. 50% of the net sum will be invested and
held in our shares subject to a lock up for a period of 3
years.
From what began as an agreement that the UK Smaller Companies
sector suffered some key underlying inefficiencies, has emerged a
Portfolio Manager with the experience and resources to focus on
generating long-term returns by applying private equity disciplines
to public markets. The closed-ended structure of investment
companies has delivered the semi-permanent capital needed to
execute the patient investment style crucial to our success.
Since IPO, we have witnessed all 'four seasons' of market
conditions and traditional style leadership has whipsawed between
growth and value, at times in an incredibly dramatic fashion. With
this market backdrop, the Board is delighted with the progress made
since the Company's launch. The investment approach has generated
pleasing absolute and relative performance through these volatile
years, and has weathered an unprecedented global pandemic. Most
encouragingly, the approach has proven resilient in times of
extreme market stress, which has more than compensated for some
lagging of the market during more exuberant times.
Knowledge forms the backbone of the investment process. It
shapes how the team values companies and identifies opportunities
for improved performance, as well as providing a deep understanding
of the characteristics that attract buyers. It is not a surprise
that the NAV growth has benefitted from the takeover of a number of
portfolio companies, often at premiums in excess of 40% to the
market price. In addition, the team's experience working with
companies to make operational improvements gives them significant
advantage in identifying opportunities where companies are
operating below their potential. These 'self help' actions mean the
portfolio can unlock significant potential future returns from
value growth that are independent of broader market moves.
The differentiated way in which the manager has built the
portfolio and delivered returns continues to provide the Board with
confidence in the Portfolio Manager's investment strategy,
approach, and execution.
Discount and premium management
The share price has trailed the NAV growth due to a modest
increase in discount over the year closing at 7.4% and averaged 6%
over the year. The widening appears to have been driven by some
modest institutional selling due to a mandate change, which has
taken time to be absorbed by the market. Post the period end, as
this selling has abated, the discount has narrowed to low single
digits.
As detailed in the interim report, the Company repurchased
275,000 shares at a discount exceeding 12% in May 2020 and remains
open to buying shares back again should the discount become
excessive.
The appointment of Frostrow in July 2020 as a distribution
partner for institutional investors, and the Portfolio Manager's
appointment of a new PR agency in June 2020 to raise the Company's
profile with retail investors, has helped broaden the shareholder
register and improve liquidity of the shares.
With a strong three-year track record now established, there is
a prospect of attracting new institutional shareholders which
require this length of discreet performance history.
Dividend
The Board has not recommended a dividend and does not expect to
do so in the near future, as the Portfolio Manager's style is one
that focuses on uncovering long-term value. The Directors expect
that returns for shareholders will be primarily driven by capital
growth of the shares rather than dividend income. The Company will
pay a dividend only if the need arises in order to retain
investment trust status.
The Board
I would like to thank my Board colleagues for their help and
support during these unprecedented times.
There were no changes to the membership of the Board during the
year. In line with good corporate governance practice, an annual
review of the effectiveness of the Board and its committees was
performed, which is described in more detail in the Corporate
Governance Statement. The Board is satisfied that each Director has
the capacity to be fully engaged with the Company's business. All
Directors will stand for re-election at the forthcoming AGM and the
appropriate resolutions can be found in the Notice of AGM.
Portfolio Manager
Even with the extreme upheaval caused by COVID restrictions, the
Portfolio Manager has continued to work effectively and has adapted
well to revised working conditions. Meetings with portfolio
companies and existing and prospective investors have continued to
be undertaken on Zoom or Microsoft Teams. Similarly, the Portfolio
Manager has hosted quarterly reviews by webinar and we are pleased
to report that this has proven a particularly effective and
productive way of engaging with existing and potential
shareholders.
Although at an early stage, the Portfolio Manager's initiative
to increase transparency and improve disclosure of ESG reporting at
its portfolio companies has started well. The Board shares the
Portfolio Manager's view that, over time, improved disclosure and
identification and reporting against key metrics is likely to drive
improved ESG performance at portfolio companies.
The Board is also pleased to see that the Portfolio Managers
continue to add to their personal holdings in the Company which
provides continued alignment of interests with the Company's
shareholders for the long term.
Amendments to Investment Policy
In January 2021 shareholders supported the Board's proposal to
introduce additional investment restrictions to respond to growing
investor focus on ethical and sustainable investments. The
Portfolio Manager had managed its assets informally according to
many of these restrictions since the Company launched, and as such
does not believe formalising the limitations will detract from its
ability to generate attractive returns. The approval of the
additional restrictions provides clarity and certainty to
shareholders and may also broaden the appeal of the Company to
investors with a specific ethical and sustainable investment
focus.
Annual General Meeting
The third AGM of the Company will take place at 12.00 noon on
Wednesday, 22 September 2021. At the time of writing it is very
much hoped that it will be possible to hold the AGM at the offices
of Odyssean Capital LLP, 6 Stratton Street, Mayfair, London W1J
8LD. The Notice convening the AGM together with explanations of the
proposed resolutions can be found below.
Articles of Association
Shareholders will note in the Notice of AGM that the Board is
proposing changes to the Company's Articles of Association to
enable the Directors to determine the time and place of general
meetings and the manner in which they are conducted (including the
ability to hold hybrid meetings). The amendments are being sought
in response to challenges posed by the government restrictions on
social interactions as a result of the COVID-19 pandemic, which
have made it difficult or impossible for shareholders to attend
physical meetings. The proposed key changes to the Articles and
their effects are described in detail in the Directors' Report.
The Board hopes that shareholders understand why those changes
are necessary and agree that attendance at an AGM partly via
digital means is preferable to being forced to hold reduced
meetings with limited attendance to guarantee everyone's safety. Of
course, the Board still prefers to meet with shareholders in person
and will only use the powers proposed in the changes to the
Articles in the event of a further surge of Covid-19 or another
emergency.
Amendments are also being proposed to be made to the Articles to
reflect recent changes to law and regulation, including changes to
the AIC Code of Corporate Governance and to permit the Company to
request information from shareholders to satisfy due diligence and
reporting requirements under the US Foreign Account Tax Compliance
Act of 2010 ("US FATCA") or similar laws and thereby avoid adverse
tax consequences which would otherwise arise under US FATCA or
similar laws.
The proposed new Articles (marked to show the proposed changes)
will be available for inspection on the Company's website,
www.oitplc.com and at the Company's registered office and will also
be available for inspection at the AGM. Should it be impossible to
view the proposed new Articles at the registered office then an
electronic copy can also be requested from the Company Secretary by
writing to info@frostrow.com.
Outlook
The pace and progress of recovery that we are seeing is very
different across various business sectors and geographies and while
investors have priced in optimistic recovery scenarios in some
sectors, they are more cautious in others. Alongside this, growth
momentum companies, especially those quoted on AIM, have continued
to see their multiples expand.
Generating sustainable long term returns from this point
requires an experienced investment team. Since the Company's
launch, the Portfolio Manager and its investment strategy have been
proven to add value. They are adept at identifying and evaluating
opportunities which have not been recognised by the market. In an
investment world which is often focused on the short term, they
have consistently acted as long-term investors, aided by their
continued aligned interests with shareholders.
No investment strategy can outperform over every period.
However, the encouraging performance since launch, the continued
market inefficiencies identified in smaller companies and the
skills and culture of the manager give the Board confidence in the
portfolio's future. Shareholders continue to have access to a
focused portfolio of companies selected for their potential to
generate attractive and balanced returns, and an investment manager
focused on its long-term future, supported by a closed-ended
structure.
Whilst equity markets have had a strong run since the
announcement of the vaccines in November 2020, the prospects for
value creation amongst portfolio companies remain good. Since the
period end, we have seen exceptional corporate interest in our
portfolio. Elementis has received another bid approach, which has
been rejected by the Board, at a value reflecting 2.5 times the
cost of the Company's investment. Vectura has received a bid from
the private equity group Carlyle and Spire Healthcare has received
an approach from Australia's Ramsay Health Care. There are, of
course, no guarantees that portfolio company M&A will continue
to add value for shareholders, but with the high value added nature
of portfolio companies' activities and strong market positions, the
prospect for further M&A related upside appears strong.
The Portfolio Manager's skills in valuation and its quality
discipline should result in sustainable capital growth for the
Company and its shareholders over the medium to long term in what
remains an inefficient part of the equity market.
We are very grateful for the support shown by the shareholders
during what has been an unprecedented year.
Jane Tufnell
Chairman
28 May 2021
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.
The Portfolio Manager's investment 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.
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 3 to 5-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, allied with our sector focus
and the recently revised investment restrictions approved in
January 2021, 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
balances being held over the long-term. 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 valuation" - 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 (of which we
have considerable experience) as well as evaluating its
attractiveness to strategic trade buyers.
Secondly, we are looking for companies which can grow their
value over time - "dynamic valuation". 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 quality 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 more likely to maintain a
minimum value through difficult times and are more able to attract
high calibre management teams to rectify underperformance.
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 the potential for 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 governance and pay.
ESG in our investment process
We have historically focused on evaluating and engaging on
corporate governance ("G") and financial performance as part of our
investment process.
In January 2021, shareholders approved a change in the
investment policy of the Company to implement negative screening of
certain investments, deemed unethical and or involved in activities
which were deemed unsustainable. These restrictions augment our
approach to corporate engagement, provide clarity and certainty to
investors and largely formalise the approach we have taken since we
launched.
Our partnership with the specialist ESG data provider for
smaller quoted companies, announced in December 2020, has enabled
us to analyse all our portfolio companies ESG performance. Many of
these companies are too small to have attracted ratings from the
major ESG rating agencies. As at the time of preparation, we have
shared these reports with each of our portfolio companies.
This is in line with the pragmatic approach to E&S
engagement given the more resource-constrained nature of smaller
quoted companies. Our focus is on how boards approach
sustainability, where the scope for improvement is, how progress is
evaluated and how it is reported to investors. Our belief is that
performing ahead of peers and market expectations on ESG should
attract new shareholders, a higher rating and a lower cost of
equity, all things which will drive enhanced returns and benefit
the Company's shareholders.
Progress and performance in the past year
The year ending March 2021 will be remembered for the intense
and continuous disruption of the COVID pandemic, and the
unprecedented monetary, fiscal and political actions taken by
governments around the world to stabilise economies following the
sudden impact of the virus in early 2020. It was a period of great
uncertainty, yet the subsequent recovery in sentiment, and in
financial markets, has been nothing short of extraordinary.
We were pleased to see the Company's NAV per share rise 53.4% in
the year to March 2021, and consider this to be a strong
performance. Nonetheless it compared unfavourably with the
NSCI&AIM index (which we use as a comparator but not a
benchmark) which rose by an astonishing 71.3%. To put these sharp
moves in perspective, from 1955 to the end of December 2020, the
annualised returns from the larger NSCI Index have been 14.7% per
annum (source: Numis Securities).
This strong upwards trend was also reflected in AIM, which was
the strongest performing index in the UK over the period. It
delivered a return in excess of 82% after a very tough March 2020.
At the end of March 2021, the average AIM company was trading at a
forward p/e of 21.4x (source: Peel Hunt), the highest rating that
AIM has traded on since 2007.
The relative 'underperformance' of the Company's NAV compared to
the indices noted above across the period reflected the NAV giving
back some of the exceptional relative outperformance delivered in
the previous year to March 2020, much of which was generated in
March 2020 itself. The strong outperformance in the prior year has
more than compensated for the NAV lagging the explosive markets in
the period under review.
A number of factors contributed to this performance profile,
including running with a net cash balance sheet which dampens
market volatility, as well as our focused investment strategy and
stock selection process. We also avoided more volatile sectors
(e.g. resources) and those heavily impacted by the COVID shock
(e.g. discretionary consumer shares). Share prices in consumer
shares were hit hard in March 2020 and recovered strongly
throughout the second half of the period. However, in our view many
are now pricing in a flawless recovery for calendar year 2022, and
several are valued at all time high enterprise values.
An interesting facet of market performance through the period
was the relative performance of different styles - with no single
style factor delivering outperformance during 2020. The initial
phase of the pandemic through the second quarter of 2020 saw
'growth' stocks perform strongly as investors flocked to position
themselves as COVID winners, while 'value' stocks relatively
underperformed. However, the subsequent vaccine rally in the last
five months of the year saw a rapid rotation into value while the
cyclical beneficiaries of reopening, 'growth' stocks were left
behind.
Throughout this see-saw between factor leadership, our
investment style delivered a relatively stable and consistent
performance. We are neither 'growth' nor 'value' investors. Instead
we focus on delivering positive returns from each investment in
excess of our IRR target, where we believe there is an attractive
risk/reward trade off. Our detailed bottom-up investment process
seeks out stock specific, special situations to build a
substantially different portfolio to that of more style-driven
investors. We believe this approach will generate strong and steady
returns over the medium to long term without the style driven
extremes evident during the last year.
Looking to the stock level drivers of performance, positive
contributions to NAV performance were widely spread across the
portfolio. The top five positive contributors were SDL/RWS,
Elementis, Volution, NCC and Benchmark, all of which delivered more
than 450bps each to the NAV per share growth over the period. Both
SDL and Elementis attracted corporate interest from trade buyers
with the other names delivering positive trading updates.
Equiniti was the only notable negative contributor to the NAV
during the period. It was exited in full as detailed in the interim
report.
The portfolio was on average 92% invested across the period and
net cash ended the period at c.11%, having fallen as low as 2% in
December 2020.
Portfolio development
Given the dramatic movements in equity markets through the year,
portfolio activity was higher than would normally be expected as we
looked to exploit the opportunities presented and re-position the
portfolio to benefit from COVID recovery situations.
There was significant new investment throughout the year, most
notably in the first half of the period. In total GBP40.6m was
invested into stock purchases. Of this, GBP16.7m went into seven
new positions, with the remaining GBP23.9m invested into existing
positions where further research supported an increased weighting
or where share price weakness offered an opportunity to enhance
existing holdings in attractive companies with strong potential for
capital growth.
Our aim with all new investments has been to remain focused on
our core sectors of interest, identifying market leaders in GDP+
growth markets which offer self-help opportunities, but which will
also benefit from the eventual COVID bounce -back and recovery. A
prime example of this process in action is in two new material
positions initiated in the period - Euromoney, a B2B information
business, and private UK hospital operator Spire Healthcare. We
explore the investment thesis for each in the 'Portfolio detail'
section of this report.
Of the existing positions, material further investments were
made in Clinigen and Elementis as further diligence built our
conviction on the attractive investment cases following our initial
investments into each in the previous year up to March 2020. We
also made a significant further investment into Vectura, a leading
developer of inhaled medicines, which was a smaller portfolio
position we had held for some time. Our decision to build the
holding was driven by favourable news flow on a key new product
launch, the beneficial result of a material patent litigation and
our positive view on recent management change and strategic
repositioning of the business. These items saw limited reflection
in the share price but in our view have materially improved the
risk/reward profile of the shares.
As a result of this investment activity, healthcare has become
the largest sector exposure of the portfolio, reflecting the
variety of special situations we have found in this sector which we
feel have been somewhat left behind as the market focused on
specific COVID beneficiaries.
Through the period we realised GBP48.8m from stock sales, with
nine positions fully exited raising GBP21.7m as we actively pruned
back the portfolio and recycled capital into our most attractive
ideas. The majority of exited positions were smaller names in the
portfolio which had delivered ahead of expectations. The largest
single position exited was that of Equiniti which returned GBP6.3m.
Unfortunately, as flagged at the interim results, this realisation
was below cost.
In terms of corporate activity in the portfolio, the key event
during the period was the late August announcement of an all share
bid for SDL from listed peer RWS. SDL was the largest position in
the portfolio at the time, and as a result of the bid we inherited
a position in RWS - a business significantly above the market cap
range where we typically focus. We view the combination of RWS and
SDL as commercially sensible but have looked to reduce our exposure
to RWS at appropriate valuations, given its position beyond our
core remit. The approach for SDL further validates our investment
approach and focus on identifying good businesses which can do
better, and which are covetable to acquirers. Through our hold
period SDL identified and initiated a significant self-help program
driving improved efficiency, as well as significantly refreshing
its market leading technology offering. It is this combination of a
clear path for delivery of improving margins alongside an evidenced
tech roadmap which made SDL an attractive asset for RWS.
We have continued to actively engage with the portfolio where
appropriate in order to drive value and are pleased to see progress
being made. As highlighted in announcements through the year, we
have seen increasing opportunity to use ESG as a further engagement
area. ESG is high up the priority list of small cap boards, but we
observe significant confusion as to how best to disclose and report
on this issue to shareholders, particularly given the lack of
standardisation and the plethora of rating agencies available. Our
approach, benefitting from the support of an external consultant,
has been to review each company in our portfolio in order to give a
holistic view of company performance against a range of the leading
rating agencies' criteria. This single view has been well received
when shared with management and we are pleased by the level of
engagement this has started. We are hopeful that it will support a
path of improved ESG disclosure, and ultimately behaviours, across
the portfolio.
Portfolio detail
At the end of the period under review, the portfolio comprised
17 companies, the largest positions being Elementis, RWS, and
Clinigen. Backgrounds to our investment thesis for each company
have been detailed in our prior reports and key updates through the
period are detailed below:
Elementis
Elementis is a leading producer of specialty chemicals focused
on personal care, talc and coatings markets.
% NAV: 11%
Sector: Industrials
Performance in period
Elementis trading was impacted by COVID through the period but
showed sequential demand improvement through the year as the impact
of the lock downs eased. Pleasingly, despite the impact of the
pandemic, the group delivered on targeted self-help cost savings,
identified further opportunities to come and managed to drive
de-leverage as expected. These key underpinnings of our investment
case appear well supported.
Late 2020 saw a series of bid approaches by trade acquiror
Mineral Technologies Inc, the final bid at 130p per share. We
viewed these approaches as opportunistic and significantly below
fair value of the business. We were pleased to engage with
management in their rejection of this offer.
Outlook
Despite a strong performance for shares over the past 12 months,
we continue to see significant value to come from Elementis. On the
demand side, 2021 and 2022 should see a normalisation of COVID
headwinds, but beyond this we are also buoyed by the actions of
management to invest in focused new product development targeting
$100m of annualised new sales in the coming years. Management have
identified further cost saving actions which would seemingly
deliver their mid-term target of 17% margins before any further
benefit of new revenue growth is delivered - we see upside beyond
this. Combine these opportunities with strong cash generation and
unique high-quality mineral assets underpinning value and there are
multiple levers to future value growth.
RWS SDL*
A global leader in the provision of content translation
services, it also develops and sells a range of software products
that support the content translation workflow for linguists and
enterprises.
% NAV: 10%
Sector: TMT
Performance in period
We inherited our shares in RWS following the all share take-over
of SDL in August 2020. We see significant commercial logic to the
combination; firstly it creates a clear global leader in
translation services - a market where customers are increasingly
shifting demand to larger, more trusted partners; secondly SDL's
best in class technology products can be cross sold to RWS
customers; and finally we also see significant cost synergies to be
delivered from the combination, materially above those publicly
identified at the time of the deal.
Post announcement of the transaction the two businesses have
traded broadly in-line with expectations, some COVID impact on
client activity has seen revenue growth slow, but crucially
integration of the two businesses remains on track.
Outlook
The size of RWS means it is not within our core area of
investment focus, and we have looked to reduce our holding at
attractive prices. Going forward we believe there is significant
opportunity for the group as the full scope of synergies from the
SDL transaction are delivered, end customer demand recovers from
COVID and management look to further bolt-on M&A in the still
highly fragmented, growing market.
CLINIGEN GROUP PLC
Clinigen provides a 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 commercialisation of licensed products globally
and supports clinical trials.
% NAV: 10%
Sector: Healthcare
Performance in period
Clinigen saw some COVID headwinds during the period as cancer
treatments and clinical trials slowed. These headwinds reduced
through the year as lockdowns eased. Through the pandemic-impacted
period the group continued to make progress with good new business
wins (including material wins for COVID vaccine storage and
distribution) and strong operational cash generation. Pleasingly
the group is also showing early signs of progress around
revitalisation of the key recently acquired products - with supply
of Erwinase into the UK starting ahead of schedule and positive
news on demand for Proleukin for use in ongoing clinical
trials.
Outlook
We remain excited about Clinigen's prospects and see them as
undervalued at current share prices. The group has strong positions
in secular growth markets well placed to drive revenues at 5%-10%
p.a., with break out potential from both the Proleukin and Erwinase
products scaling more rapidly than expected. Cash generation should
be strong in the coming years, rapidly bringing down the currently
high leverage levels, and management appear more focused on
delivering the benefits from historic acquisition with the recent
appointment of a new COO. A weak US Dollar represents a potential
FX headwind in the near term, but we expect material earnings
growth in the coming years.
We have seven mid-sized investments in Flowtech, Chemring,
Benchmark, Vectura, Wilmington, Spire, and Euromoney. Spire 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 (Euromoney thesis set out in
the prior interim report).
FLOWTECH FLUIDPOWER
Leading UK distributor of hydraulic and pneumatic
components.
% NAV: 7%
Sector: Services
Performance in period
Flowtech is one of the more cyclically-exposed companies in our
portfolio and as a result saw a material drop off in demand as
COVID struck. Pleasingly, the business managed to trade through the
worst of the pandemic whilst maintaining a full service to its
customers and remaining cash generative in all months. We believe
this strong performance allowed the group to marginally gain share
through the period.
The group managed to continue to deliver on its operational
improvement programme through the crisis with significant cost
savings delivered and further cash recovered from working capital,
this supported the group in driving down debt through the period
despite the lock down headwinds.
Outlook
Flowtech has gone through significant change in recent periods,
with a strengthening of the board, increased focus on delivering
cost benefits from legacy M&A, improved investor disclosure and
the identification of significant digital channel revenue
opportunities.
Although COVID has been a serious headwind, we see these issues
now receding and the group is well placed to bounce back should the
UK stage a strong recovery. In this instance the stronger
operational platform the group is building stands it in good stead
to deliver improved profitability, and opportunities in digital
channels offer the opportunity to accelerate growth and build
share.
Chemring Group
Chemring produces countermeasures for aircraft, sophisticated
sensor products, and energetic devices including rocket components
and provides contracted R&D for governments - primarily serving
the defence sector.
% NAV: 7%
Sector: Industrials
Performance in period
Chemring's focus on defence end markets left it well insulated
from the pandemic and the group delivered a strong performance
through the period supporting our investment case and demonstrating
the improving quality of the business.
The Countermeasures & Energetics division saw strong
performance as the Salisbury and Australia facilities returned to
full production (following a site explosion and capex investment
respectively). F-35 demand continues to be a strong tail wind for
the division as this new platform starts its multi-year roll out.
The Sensors division saw strong progress with sales from the
initial large US DoD programme of record ('HMDS') delivering
continuing volume and the specialised cyber/electronic warfare
consultancy Roke delivering double digit growth.
Outlook
We see the performance of the group through the period as
representative of the significant progress they have made in recent
years to build a higher quality business. We see more to come from
here, as increased investment in F-35 capacity comes through, and
Roke looks to expand further having won its first US contract in
2020. With order books strong, and key further large US sensor
contract decision points in late 2021 there are significant
opportunities to look forward to.
Benchmark Holdings
Benchmark has leading positions in key parts of the growing
global aquaculture market. The group is a leading provider of
genetics 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.
% NAV: 6%
Sector: Healthcare
Performance in period
Benchmark has had a very busy period with significant progress
made against many of the areas that underpinned our investment
case.
Significant streamlining of the business was delivered with nine
disposals of non-core, operations realising GBP44m of proceeds.
Other loss-making activities were also shut down. Together these
actions have focused the group down to its core competencies around
aquaculture genetics, health and early stage nutrition. Alongside
these actions management have re-shaped the cost structure of the
business offering a clear path to profitability.
Against this positive news, COVID was a headwind through the
period with the shrimp industry significantly impacted by reduced
demand for their products from the hospitality sector.
Outlook
Although some COVID headwinds are likely to remain in the near
term, we see Benchmark at an exciting time in its development. We
believe the recent actions taken to simplify the business and
reduce costs are delivering returns and that the new management
team are taking the group in the right direction. In the near term,
we see approval of the key BMK08/Cleantreat salmon sea lice
treatment as the major potential positive for the business. This
product has the potential to significantly change the financial
shape of the group and will in turn be a key driver of the next leg
of the equity story.
VECTURA
A leading developer of inhaled pharmaceuticals.
% NAV: 6%
Sector: Healthcare
Performance in period
We significantly increased our position in Vectura during the
period primarily driven by the two key pieces of news which we felt
materially improved the risk/reward profile of the equity
story.
Firstly, the group finally received FDA approval for its generic
version of GSK's Advair product (V315). This crystallised a
material milestone payment from its development partner and adds a
further revenue stream to the group with royalties likely to start
immediately and subsequently growing to potentially material size.
Secondly, the group announced a positive court ruling on its long
running patent litigation against GSK with the outcome that Vectura
should receive c.$200m in historic underpaid royalties at some
point in FY21. The majority of this is to be returned to
shareholders Finally we are positive on the progress in the period
of the new management team's actions to pivot the group from
speculative R&D development towards a more CDMO* services
focused model, this should fundamentally de-risk the profile of the
group whilst still capitalising on its unique, industry leading IP
and knowhow.
Outlook
We continue to see significant value in Vectura. The group
offers an attractive mix of stable cash generation from already in
market products, a strong balance sheet supportive of M&A and
the potential for accelerating growth as the new CDMO strategy
delivers. We see the unique IP of the group and its market position
as highly valuable to the right acquiror.
* CDMO = Contract Development and Manufacturing Organisation
Wilmington plc
B2B information, training and media provider focused on the
compliance, healthcare and professional business markets.
% NAV: 5%
Sector: TMT
Performance in period
Wilmington benefitted from a strong and stable performance from
its core data and information businesses through the COVID impacted
period even as its in-person training and events businesses were
put on hold by lockdowns. Importantly, the group used the enforced
shift to remote working to accelerate its long-planned move to
digital provision of its training services, we believe allowing the
group to gain share and emerge from the pandemic stronger than when
it went in. Despite the headwinds, Wilmington continued to
deleverage through the period and with the new management having
reviewed existing business operations and identified those that are
non-core, further M&A is now back on the agenda.
Outlook
We believe that Wilmington will benefit from the changes to its
end markets that COVID has accelerated. Significant digital
investment by the new management team put in place the platform to
deliver content online, and drive an improved sales process. These
investments will bear further fruits alongside the more obvious
benefits of the return of in person events as economies reopen. The
robustness of the group's business model, with significant
subscription revenue, and the opportunity coming from the increased
shift to digital appear well placed to drive value from here.
New Position
Spire Healthcare
Leading UK operator of private hospitals, serving NHS and
private pay patients
% NAV: 5%
Sector: Healthcare
Spire Healthcare is the leading UK operator of private hospitals
(by revenue) with 39 locations across the UK and market leading
care quality ratings. The group generates revenue from a balanced
mix of NHS, private insured and self-pay patients. We think the
business is well placed to benefit from a COVID recovery and
self-help actions under a new, high quality management team.
The group (and the whole private hospital sector) saw
significant disruption from the initial COVID lockdown, with the
NHS effectively commandeering all private hospital capacity in the
UK to manage demand. In return, the sector saw their costs covered
by the NHS - effectively putting the sector into 'deep freeze'.
Spire is poised to see significant benefit coming out of the
pandemic as these activities return, and the NHS has already
started releasing private hospital capacity.
Covid has driven a significant back log in demand for elective
medical procedures - NHS waiting lists are estimated to have grown
to 10m+ procedures, alongside significant build up in self-paid and
insured demand as people avoided hospitals through the initial
phases of the pandemic. This back log will need to be processed,
with NHS waiting list clearance in particular likely to increase
demand for private sector capacity to drive down this politically
sensitive number. It is also likely that local NHS trusts will be
able to access central funding rather than use their own budgets to
utilise the private sector to reduce the backlog, removing a
significant barrier to uptake. The expected increased level of
demand working through the system will be a multi-year positive
story for Spire allowing more efficient utilisation of its well
invested estate, and crucially increased visibility, allowing
improved efficiency of staffing rotas.
On top of this, we are impressed by the significant scope for
self-help under the recently installed management team at the
group. The private healthcare sector is a laggard in the use of
digital technologies to streamline its business, something which
the pandemic has forced to change. Spire's new management team have
identified significant opportunities from digital efficiencies with
initial successes in rolling out online pre-assessment of patients,
reducing nursing time focused on this largely administrative task.
Further opportunities to digitise the patient journey exist as well
as accelerating private customer acquisition through use of digital
channels.
Our initial purchases of Spire were made at a significant
discount to tangible book value, which is well supported by free
hold property.
Euromoney Institutional Investor PLC
Global B2B information business providing data, pricing
information and insight to the asset management,
commodities and a range of financial services markets.
% NAV: 5%
Sector: TMT
Performance in period
Similar to Wilmington, Euromoney saw trading through the period
impacted by COVID restricting in-person events but below this were
a number of positive underlying trends. Full year performance came
in ahead of COVID reduced expectations. The group demonstrated the
robustness of its business model with subscription revenues
delivering growth supported by strong performance in the Pricing
and DMI divisions. The group also made good progress in offsetting
the decline in physical events by monetising virtual events where
possible
On an operational level the group continued to see improving
momentum in its Asset Management division, indicative that the
turnaround of this business is gathering momentum. Through the
pandemic management acted quickly to deliver GBP15m of operational
cost savings, alongside further savings to come which offers
significant scope to reinvest in areas to drive incremental growth.
These developments continue to support our investment thesis.
Outlook
We continue to believe Euromoney is an exciting investment
proposition with multiple value growth drivers and a downside
protected by the robustness of the business and a net cash balance
sheet.
The group is well positioned to see a COVID recovery as in
person events return, but also has further growth opportunities as
it sees benefits from management's investment into improving the
technology platforms underlying its unique data assets. We also see
further opportunities to reduce costs in what was a business run in
a highly silo'd nature historically.
Finally, we see the current share price as a discount to a sum
of the parts value, with the value of the high growth, high quality
market data business underestimated in particular. We note that
significant PE activity in the B2B media space offers an obvious
solution should listed markets fail to reflect the true value of
the underlying assets.
The remaining seven investments represent between c.1% and 4% 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.
Outlook
The beginning of the new financial year has started in a similar
vein to when OIT launched in May 2018. Whilst there is a prevailing
narrative of UK equity markets being inexpensive compared with
global equities, this view seems to stem more from large swathes of
the FTSE 100 being unloved and lowly rated - namely resource and
financial companies - rather than any accurate perception of the
wider market, particularly in the small cap space.
In reality, many quoted UK companies are trading at high
ratings, either driven by perceived safety, a generous rating for
assumed growth, or where the market is pricing in recovered
earnings potential rather than the current earnings level. There is
limited room for disappointment in these ratings. It seems that
with Brexit resolved and the apparent success of the vaccination
programme, UK equities may well be off the "naughty step" with
international investors.
As we enter the next period for OIT, three big issues are on
investors' minds. Namely, capturing the COVID recovery, concerns
over inflation, and the battle between growth and value.
On the first issue, we note that unlike a "normal" recession,
the COVID pandemic has negatively impacted not just cyclical
companies but also non-cyclical companies, due to the physical
inability to trade. Recovery in sectors impacted by COVID is
proving to be asymmetric, determined by the progressive staged
lifting of lockdown restrictions. We believe that many consumer and
leisure companies appear to be pricing in a full recovery already
in 2022 based almost solely on the "reopening" trade. However, in
our view these companies have limited opportunity to improve their
financial performance in a sustainable way over the long term.
Whilst some may return to rolling out new units, taking advantage
of vacant space, with the cost of borrowing remaining so low. These
situations are not a focus for us.
Instead, we are specifically seeking out situations outside the
consumer sector, where earnings recovery is not just driven by
sales but is also augmented by self-help. Self-help initiatives can
include measures to improve efficiency, as well as targeted
incremental sales growth, and the benefits to investors are
two-fold. Firstly, it creates incremental earnings growth over and
above the COVID recovery. Secondly, if the wider recovery stalls,
self-help will ensure that previous peak earnings have the
potential to be achieved sooner than previous peak sales.
On the second concern, there is much commentary about whether
the macroeconomic policies of many governments are deliberately
positioned to create higher inflation to inflate away the excess
debts which have been exacerbated by the pandemic. Our belief is
that despite the prospect of heightened inflation, companies with
strong business models, enjoying higher margins and market leading
positions have better prospects of maintaining and growing their
profits in real terms than lower margin companies with limited
competitive advantage and poor business models. In addition,
companies which are well invested, capex light and backed by other
long term fixed assets such as property, should perform better than
companies which are underinvested and/or require considerable capex
to "stand still".
Many of the latter companies are also highly dependent on
commodity prices and their prospects rely on their ability to pass
input prices on. Where their value add is limited, as reflected by
low margins and ROCE, their business models are at risk from rising
inflation. We will continue to avoid these companies as well as
contracting companies which tie up considerable assets in working
capital.
We do however remain open to investing in companies with more
than 1.5x net debt/EBITDA, where there is clear asset backing
(fixed or IP), as provided the debt is reasonable, able to be
serviced/refinanced and paid down by free cashflow, some
indebtedness in periods of inflation can create considerable equity
value.
Finally, there is much debate about the performance of growth vs
value investment styles, and which is ideally placed to lead the
market over the short, medium and long term. We regard ourselves as
neither traditional growth nor value investors and have built a
portfolio that aims to avoid the impact of extreme swings between
the two styles. We are looking for multiple drivers of capital
increase in our portfolio companies during our period of ownership,
leading to a balanced return, not just reliant on sales-driven
earnings growth. Likewise, we are not interested in "cheap" stocks
with problems, instead looking to pay below our view of the
intrinsic value for higher quality companies.
Moreover, we will sell down and exit positions in portfolio
companies when their market value exceeds our view of their
intrinsic value and their likely value as a takeover target to a
trade buyer. Maintaining this discipline of pegging intrinsic value
to a takeover valuation, and selling as our opinion of fair value
is exceeded is critical, in our view, to delivering attractive
returns.
During a period when valuations are generous, as has been the
case most recently, valuation discipline is all the more important.
Over the long term we have found it is preferable to be patient to
wait for the right investment opportunity at the right price,
rather than compromise on our return targets. In our experience the
path of recovery can be uncertain and often takes longer than
expected, whilst valuations often experience a trough of
disillusionment after an initial wave of hope. Many recovery stocks
in our universe are trading at multiples which imply that
expectations are exuberant, and we are content to wait for a period
that can provide more interesting risk/reward investment
opportunities.
We are fortunate to manage an unconstrained mandate which is not
benchmarked and provides us the opportunity to wait patiently for
compelling investments. The closed-ended structure allows us to
invest in a highly concentrated portfolio of less liquid companies,
enabling us to select a small number of investments each year which
we believe offer an attractive risk/reward balance. As we cross the
third anniversary of the launch of the Company we continue to be
optimistic for the future potential of the portfolio as well as our
ability to find and execute attractive new investments with the
potential for superior long-term growth.
Stuart Widdowson | Ed Wielechowski
Odyssean Capital LLP
28 May 2021
Portfolio of Investments
as at 31 March 2021
Country of Cost Valuation % of
Company Sector Listing GBP'000 GBP'000 Net Assets
--------------------------- ------------------ ----------- ------- --------- ----------
Elementis Industrials UK 6,692 13,052 10.7
RWS Holdings TMT UK 7,645 12,180 9.9
Clinigen Group Healthcare UK 9,377 11,632 9.5
Flowtech Fluidpower Business Services UK 9,349 8,987 7.3
Chemring Group Industrials UK 6,157 7,980 6.5
Vectura Group Healthcare UK 6,819 7,514 6.1
Benchmark Holdings Healthcare UK 6,369 7,411 6.1
Wilmington TMT UK 4,762 6,187 5.0
Spire Healthcare Group Healthcare UK 4,352 5,906 4.8
Euromoney Institutional
Investor TMT UK 5,243 5,724 4.7
--------------------------- ------------------ ----------- ------- --------- ----------
Top ten equity investments 66,765 86,573 70.6
------------------------------------------------------------ ------- --------- ----------
Other equity investments* 17,133 22,686 18.5
------------------------------------------------------------ ------- --------- ----------
Total equity investments 83,898 109,259 89.1
------------------------------------------------------------ ------- --------- ----------
Cash and other net current
assets 13,301 10.9
------------------------------------------------------------ ------- --------- ----------
Net assets 122,560 100.0
------------------------------------------------------------ ------- --------- ----------
* Other equity investments include seven investments, each
representing between c.1% and 4% of NAV. These are spread across
our core focus sectors and all offer scope to scale, subject to
further due diligence and pricing remaining attractive.
Business Review
The Strategic Report contains a review of the Company's business
model and strategy, an analysis of its performance during the
financial year ended 31 March 2021 and its future developments and
details of the principal risks and challenges it faces. In
particular, the Chairman's Statement and the Portfolio Manager's
Report concentrate on the outlook for the current year and the
factors likely to affect the position of the busines. The Strategic
Report has been prepared solely to provide information to
shareholders to enable them to assess how the Directors have
performed their duty to promote the success of the Company.
The Strategic Report contains certain forward-looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the date of
this report and such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
Further information on how the Directors have discharged their
duty under Section 172 of the Companies Act 2006 can be found
below.
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 above 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.
During the year under review, at a General Meeting held on 11
January 2021, shareholders approved changes to the investment
policy to restrict investment in certain sectors or businesses that
the Board, as advised by the Portfolio Manager, deems unethical
and/or unsustainable. The Board was pleased to see that 99.93% of
all shareholders who cast their vote at the General Meeting, agreed
with the proposed changes.
Portfolio analysis
A detailed review of how the Company's assets have been invested
is contained in the Chairman's Statement and the Portfolio
Manager's Report. A list of all the Company's investments is
contained in the Portfolio of Investments above.
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 (Miscellaneous Reporting) Regulations
2018, the 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 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.
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 The Board is committed to maintaining open channels of
support and engagement communication and to engage with shareholders in a manner
are critical to which they find most meaningful, in order to gain an
existence of the understanding of the views of shareholders. These include:
business and the * Annual General Meeting - The Company welcomes and
delivery of the encourages attendance, voting and participation from
long-term strategy shareholders at the AGM, during which the Directors
of the Company. 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. Whilst at
the AGM held in September 2020 normal shareholder
attendance was not possible due to Covid-19
restrictions, a webinar was held following the formal
proceedings of the AGM during which the Portfolio
Manager provided an update on the Company and
shareholders' questions sent in prior to the AGM were
answered;
* 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 monthly factsheet and regular presentations
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. Furthermore, on
13 July 2020, the Board appointed Frostrow Capital
LLP ("Frostrow") as Company Secretary, Administration
Manager and Marketing Specialist. Shareholders are
able to meet with the Portfolio Manager and with
Frostrow throughout the year. The results from all
meetings between the Portfolio Manager, Frostrow, the
Broker and shareholders, and the views of the
shareholders are reported to the Board on a regular
basis;
* 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; 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 updates from the Portfolio Manager and from
Frostrow. To gain a deeper understanding of the views
of its shareholders and potential investors, the
Portfolio Manager and Frostrow also meet regularly
with shareholders. Any pertinent feedback is taken
into account when Directors discuss the share capital
and any possible fundraisings. 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 Portfolio Manager
------------------------ ------------------------------------------------------------------
The Portfolio Manager's The management of the Company's portfolio is delegated
performance is to the Portfolio Manager, which manages the assets in
critical for the accordance with the Company's objectives and policies.
Company to successfully At each Board meeting, representatives from the Portfolio
deliver its investment Manager are in attendance to present reports to the Directors
strategy and meet covering the Company's current and future activities,
its objective to portfolio of assets and its investment performance over
provide shareholders the preceding period.
with attractive Maintaining a close and constructive working relationship
total return over with the Portfolio Manager is crucial as the Board and
a long-term period. 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.
The management arrangements are set out in greater detail
below. In addition to the management fee, the Portfolio
Manager also receives a performance fee if certain circumstances
are met. In respect of the year ended 31 March 2021,
a performance fee of GBP1,825,000 has been accrued. The
Board is very happy with the outperformance which is
being rewarded in this fashion and it should be noted
that 50% of the performance fee will be invested by the
Portfolio Managers in purchasing shares in the Company,
thus further aligning their interests with those of other
shareholders.
------------------------ ------------------------------------------------------------------
Portfolio companies
------------------------ ------------------------------------------------------------------
The Company invests The relationship with the Portfolio Manager is fundamental
into available to ensuring the Company meets its purpose. Day-to-day
opportunities, engagement with portfolio companies is undertaken by
allocating capital the Portfolio Manager. Details of how Odyssean carries
across different out portfolio management, as well as information on its
portfolio companies differentiated investment approach and the structuring
to meet the Company's of investments can be found in the Portfolio Manager's
investment objectives report. The Board receives updates at each scheduled
within the pre-defined Board meeting from the Portfolio Manager on specific
portfolio limits investments including regular valuation reports and detailed
and with a focus portfolio and returns analyses. Odyssean's engagement
on portfolio level with portfolio companies incorporates recurring due diligence
diversification. 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.
In particular, the Board strongly supports the Portfolio
Managers in engaging with portfolio companies on ESG
issues with the aim of improving operations, ESG standards
and performance as well as company culture.
------------------------ ------------------------------------------------------------------
Other service providers
------------------------ ------------------------------------------------------------------
In order to function The Company's main functions are delegated to a number
as an investment of service providers, each engaged under separate contracts.
trust with a premium The Board maintains regular contact with its key external
listing on the providers and receives regular reporting from them, both
LSE, the Company through the Board and committee meetings, as well as
relies on a diverse outside of the regular meeting cycle. Their advice and
range of reputable views are routinely taken into account.
advisors for support The Audit Committee reviews and evaluates the financial
in meeting all reporting control environments in place at each service
relevant obligations. 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.
During the year, the Board terminated the contract with
Link as administrator and company secretary, and appointed
Frostrow Capital LLP as the Company's Administration
Manager, Company Secretary and Marketing Specialist.
------------------------ ------------------------------------------------------------------
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.
Key topics of engagement with stakeholders and outcomes
Key topics of engagement with investors Actions taken and principal decisions
---------------------------------------------------------- -----------------------------------------------------------
* Ongoing dialogue with shareholders concerning the * The Portfolio Manager, Frostrow and the Broker meet
strategy of the Company, performance, the portfolio regularly with shareholders and potential investors
and ESG issues. to discuss the Company's Strategy, performance, the
portfolio and any ESG issues which might be raised.
* During the year the decision was taken to amend the
investment guidelines restrict investment in certain
sectors and businesses that the Board deems unethical
and/or unsustainable. Shareholders approved the
changes at the general meeting held on 11 January
2021.
---------------------------------------------------------- -----------------------------------------------------------
Key topics of engagement with the Actions taken and principal decisions
Portfolio Manager on an ongoing basis
---------------------------------------------------------- -----------------------------------------------------------
* Portfolio composition, performance, outlook and * Updates are received by the Board at every Board
business updates as well as ESG engagement with meeting.
portfolio companies.
* No specific action on Brexit is required.
* The impact of Brexit on their business and the
portfolio.
* Regular updates were received by the Board throughout
the year in respect of the impact of the pandemic on
* The impact of Covid-19 on their business and the investment decision making and working practices.
portfolio.
---------------------------------------------------------- -----------------------------------------------------------
Key topics of engagement with other Actions taken and principal decisions
service providers
---------------------------------------------------------- -----------------------------------------------------------
* The Directors have frequent engagement with the * During the year, the decision was taken to appoint
Company's other service providers through the annual Frostrow as Company Secretary, Administration Manager
cycle of reporting and due diligence meetings and and Marketing Specialist for the Company.
conversations with the Portfolio Manager. Since the
appointment of Frostrow as Company Secretary,
Frostrow has regular conversations with all other * No other specific action was required in respect of
service providers on behalf of the Board and the the other service providers, as the reviews of their
Management Engagement Committee. services have been positive and the Directors believe
that their continued appointment is in the best
interest of the Company.
* This engagement is completed with the aim of
maintaining an effective working relationship and
oversight of the services provided.
---------------------------------------------------------- -----------------------------------------------------------
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 supports the
delivery of the Company's goals. 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 in the Corporate Governance
Statement).
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 below.
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 2021 was 139.3p per ordinary share, compared
to 90.8p per ordinary share at the end of the previous period, an
increase of 53.4%. The NAV total return* since the launch of the
Company on 1 May 2018 to 31 March 2021 was 41.7%. The total return
from the NSCI ex IC plus AIM Total Return Index* was 19.8% for the
same period.
A full description of the Company's performance for the year
ended 31 March 2021 can be found in the Portfolio Manager's
Report.
Share price total return*
The Company's share price at the previous year end was 90.0p and
increased to 129.0p as at 31 March 2021, resulting in a return of
43.3% during the year.
Share price premium/(discount) to NAV*
The share price discount to NAV changed from (0.9)% at the
previous year end to (7.4)% as at 31 March 2021. During the year
ended 31 March 2021, the shares traded at an average discount to
NAV of 6%.
(* Alternative Performance Measures, see Glossary)
Revenue return per ordinary share
In the year to 31 March 2021, the Company made a revenue loss of
0.7p per share (2020: revenue return of 0.6p per share).
Ongoing charges*
The Company's ongoing charges ratio for the year ended 31 March
2021 was 1.4% (year ended 31 March 2020: 1.7%).
Management arrangements - Portfolio Manager
The Company is an internally managed investment company for the
purposes of the UK's 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 initial term of the Portfolio Management Agreement is three
years commencing on the date of the Company's launch (the "Initial
Term"). The Company may terminate the Portfolio Management
Agreement by giving the Portfolio Manager not less than six months'
prior written notice such notice not to be served prior to the end
of the Initial Term. The Portfolio Manager may terminate the
Portfolio Management Agreement by giving the Company not less than
six months' prior written notice, such notice not to be served
prior to the end of the Initial Term.
Management Fee
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.
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.
Performance Fee
In addition, the Portfolio Manager is entitled to a performance
fee in certain circumstances.
The Company's performance is measured over rolling three-year
periods ending on 31 March each year (each a "Performance Period"),
by comparing the NAV total return per ordinary share over a
Performance Period against the total return performance of the NSCI
ex IC plus AIM Total Return Index (the "Comparator Index"). The
first Performance Period runs 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.
Each such tranche of 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.
Based on the performance of the Company to 31 March 2021, a
performance fee of GBP1,825,000 has been accrued (2020: GBPnil) and
is expected to be cash settled upon approval of the annual report
in respect of the year ended 31 March 2021.
Administration Manager, Company Secretary and Marketing
Specialist
During the year under review, with effect from 13 July 2021, the
Board appointed Frostrow Capital LLP ('Frostrow') as the Company's
Administration Manager and Company Secretary as well as Marketing
Manager. Frostrow is an independent provider of services to the
investment companies sector and currently has a total of 16
investment trust and investment company clients whose assets
totalled approximately GBP15 billion as at the date of this
report.
Administrative, company secretarial and marketing services are
provided by Frostrow under an agreement dated 23 June 2020. An
annual administration and management services fee of 22.5 basis
points of the market capitalisation of the Company up to (but not
including) GBP150 million, charged monthly in arrears, is payable.
Frostrow's fees will reduce from 22.5 basis points to 20 basis
points on market capitalization of the Company in excess of GBP150
million in size up to and including GBP500 million, and to 17.5
basis points on market capitalisation in excess of GBP500 million.
The agreement may be terminated by either party on six months'
written notice. Further details can be found in note 4 to the
financial statements.
Custodian
RBC Investor Services Trust was appointed as the Company's
Custodian pursuant to an agreement dated 22 March 2018. RBC is in
charge of, inter alia, safekeeping and custody of the Company's
assets, investments and cash, processing transactions and foreign
exchange services, if necessary. The Company and the Custodian may
terminate the Custody Agreement with 90 days' written notice.
Portfolio Manager evaluation and continuing appointment
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.
Frostrow's evaluation and continuing appointment
The review of the performance of Frostrow as Administration
Manager, Company Secretary and Marketing Specialist is a continuous
process carried out by the Board and a formal evaluation was
undertaken by the Management Engagement Committee in May 2021. The
Board believes that the continuing appointment of Frostrow Capital
LLP under the terms described above, is in the interests of
shareholders. In coming to this decision, the Board also took into
consideration the quality and depth of experience of the
management, administrative and company secretarial team that
Frostrow allocates to the Company.
Company promotion
The Company has appointed Frostrow to promote the Company's
shares to professional investors in the UK and Ireland. As
Investment Company Specialists, the Frostrow team provides a
continuous, pro-active marketing, distribution and investor
relations service that aims to promote the Company by encouraging
demand for the shares.
Frostrow actively engages with professional investors, typically
discretionary wealth managers, some institutions and a range of
execution-only platforms. Regular engagement helps to attract new
investors and retain existing shareholders, and over time results
in a stable share register made up of diverse, long-term
holders.
Frostrow arranges and manages a continuous programme of
one-to-one meetings with professional investors around the UK.
These include regular meetings with "gate keepers", the senior
points of contact responsible for their respective organisations'
research output and recommended lists. The programme of regular
meetings also includes autonomous decision makers within large
multi-office groups, as well as small independent organisations.
Some of these meetings involve Odyssean Capital LLP, but most of
the meetings do not, which means the Company is being actively
represented both to existing and potential investors, while the
Portfolio Managers concentrate on the portfolio. Due to the
Covid-19 pandemic, most of these meetings have been held via video
conference.
The Company also benefits from involvement in the regular
professional investor seminars run by Frostrow in major centres,
notably London and Edinburgh, and webinars which are focused on
buyers of investment companies.
Frostrow produces many key corporate documents, monthly
factsheets, annual and half-yearly reports. All Company information
and invitations to investor events, including updates from the
Portfolio Managers on portfolio and market developments, are
regularly emailed to a growing database, overseen by Frostrow,
consisting of professional investors across the UK and Ireland.
Frostrow maintains close contact with all the relevant
investment trust broker analysts, particularly those from
Winterflood Securities Limited, the Company's corporate broker, but
also others who publish and distribute research on the Company to
their respective professional investor clients.
The Company further benefits from regular press coverage, with
articles appearing in respected publications that are widely read
by both professional and self-directed private investors. The
latter typically buy their shares via retail platforms, which
account for a significant proportion of the Company's share
register.
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.
Board diversity
All through the year ended 31 March 2021, 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.
Further details of the Company's diversity policy are set out in
the Corporate Governance Statement.
Integrity and business ethics
The Company is committed to carrying out business in an honest
and fair manner with a zero-tolerance approach to bribery, tax
evasion and corruption. As such, policies and procedures are in
place to prevent the above. The Board's expectations are that its
principal service providers have similar governance policies in
place. The Company Secretary, on behalf of the Board, will seek
assurances from service providers on a regular basis.
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. However, following
the amendment of the investment guidelines during the year under
review, the Portfolio Managers will not invest in non-ethical or
unsustainable businesses as set out in the Investment Policy.
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.
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
below.
Risk Management
Principal Risks, Emerging Risks and Risk Management
The Board considers that the risks detailed within this report
are the principal risks currently facing the Company to deliver its
strategy.
The Board is responsible for the ongoing identification,
evaluation and management of the of the principal risks faced by
the Company and the Audit Committee, on behalf of the Board, has
established a process for the regular review of these risks and
their mitigation. This process accords with the UK Governance Code
and the FRC's Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting. The impact of the global
Covid-19 pandemic on the operations of the Company and its service
providers was also considered as part of this process.
During the year ended 31 March 2021, the Audit Committee has
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
Committee also considered the controls in place to mitigate the
inherent risks and whether additional controls or actions were
required to bring the residual risk down to an acceptable level.
The Committee was satisfied with the controls that are in place. In
respect of the ongoing impact of Covid-19 on business everywhere,
the Committee was reassured that all service providers of the
Company had adequate business continuity measures in place to
ensure that no operational issues would arise out of new
working-from-home practices and that cyber and IT risks were
properly addressed.
Further details as well as a summary of the Company's approach
to risk and how principal risks and uncertainties were dealt with
during the year under review, are set out below.
Internal control review
The Board is also responsible for the internal controls relating
to the Company, including the reliability of the financial
reporting process, and for reviewing their effectiveness.
Key procedures established with a view to providing effective
financial control, have been in place throughout the year ended 31
March 2021 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 during the year 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. During the year, the Board - through the
Audit Committee and together with Frostrow - has re-categorised its
risk management controls under the following key headings:
Corporate Strategy; Accounting, Legal and Regulatory; Operational;
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.
An updated risk matrix has been produced by Frostrow Capital LLP
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 at every meeting.
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.
Principal risks and uncertainties Mitigation
----------------------------------------- -------------------------------------------------
Investment performance is not
comparable to the expectations
of investors
----------------------------------------- -------------------------------------------------
Consistently poor performance The Board reviews and discusses the Company's
could lead to a fall in the share performance against its investment objective
price and a widening of the discount. and policy, as well reviewing performance
The success of the Company depends in comparison to industry peers and the
on the Portfolio Manager's ability broader comparative market. The Board
to identify, acquire and realise also keeps the performance of the Portfolio
investments in accordance with Manager under continual review, along
the Company's investment policy. with a review of significant stock decisions
This, in turn, depends on the and the overall rationale for holding
ability of the Portfolio Manager the current portfolio. In addition, the
to apply its investment processes Management Engagement Committee conducts
and identify suitable investments. an annual appraisal of the Portfolio Manager.
----------------------------------------- -------------------------------------------------
Share price performance
----------------------------------------- -------------------------------------------------
The market price of the Company's The Board monitors the relationship between
shares, like shares in all investment the share price and the NAV, including
companies, may fluctuate independently regular review of the level of discount
of the NAV and thus may not reflect relative to that of companies in the sector.
the underlying NAV of the shares. The Company has taken powers to re-purchase
The shares could trade at a discount shares and will consider doing so to reduce
or premium to NAV at different the volatility of any share price discount.
times, depending on factors such The Company has also taken powers to issue
as market conditions, investors' shares (only at a premium to NAV) to provide
perceptions of the merits of the liquidity to the market to meet investor
Company's objective and investment demand by way of issue of further shares.
policy, supply and demand for In May 2020, the Company undertook a buyback
the shares and the extent investors of 275,000 shares in order to help narrow
value the activities of the Company the gap between NAV per share and the
and/or the Portfolio Manager. share price at the time. These shares
are currently held in treasury, but will
be re-issued once the shares start trading
at a premium again.
The Board and the Portfolio Managers all
own shares in the Company, by way of aligning
their own interests with those of all
other shareholders. The Directors invest
their Directors' fees in shares, which
are bought at the end of every quarter,
and the Portfolio Managers invest at least
50% of any performance fee in shares.
For more details about the performance
fee, please see above.
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.
----------------------------------------- -------------------------------------------------
Portfolio Manager - loss of personnel
or reputation
----------------------------------------- -------------------------------------------------
The identification and selection The Board maintains a good level of communication
of investment opportunities and and has a good relationship with the Portfolio
the management of the day-to-day Manager, and regularly reviews the Portfolio
activities of the Company depends Manager's performance at Board meetings.
on the diligence, skill, judgement The Portfolio Manager's Compliance Officer
and business contacts of the Portfolio also reports to the Board regularly and
Manager's investment professionals the Portfolio Manager would report to
and the information and deal flow the Board immediately in the event of
they generate during the normal any change in key personnel. Odyssean
course of their activities. The Capital LLP as Portfolio Manager has appointed
Company's future success depends an investment team consisting of Stuart
on the continuing ability of these Widdowson and Ed Wielechowski, both of
individuals to provide services whom are very experienced in managing
and the Portfolio Manager's ability the portfolio in accordance with the Company's
to strategically recruit, retain principles and investment strategy.
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.
----------------------------------------- -------------------------------------------------
Material changes within the Portfolio
Manager's organisation
----------------------------------------- -------------------------------------------------
Material changes could occur within The Portfolio Manager has advance notice
the Portfolio Manager's organisation of any material changes within its organisation
or its affiliates which are to and would report to the Board immediately
the detriment of the Company's in the event of any such changes, including
standing in respect of its competitors within its organisation and affiliates
and its profitability. or to its key personnel.
----------------------------------------- -------------------------------------------------
Valuation of unquoted investments
----------------------------------------- -------------------------------------------------
The Company may invest in unquoted All financial information is reviewed
companies from time to time. Such by the Board at regular meetings. The
investments, by their nature, Board and/or Chairman of the Audit Committee
involve a higher degree of valuation will approve the valuation of unquoted
and performance uncertainties investments prior to their reflection
and liquidity risks than investments in the Company's NAV. No unquoted investments
in listed and quoted securities were held by the Company during the year.
and they may be more difficult
to realise.
----------------------------------------- -------------------------------------------------
Reliance on the performance of
third-party service providers
----------------------------------------- -------------------------------------------------
The Company has no employees and The Board has appointed third party service
the Directors have been appointed providers with relevant experience. Each
on a non-executive basis. The third party service provider is monitored
Company is reliant upon the performance by the Board and their roles are evaluated
of third-party service providers at least annually by the Management Engagement
for its executive function. Failure Committee.
by any service provider to carry During the year, Frostrow Capital LLP
out its obligations to the Company was appointed as the new Company Secretary,
in accordance with the terms of Administration Manager and Marketing Specialist
its appointment could have a material following an evaluation of the services
adverse effect on the operation provided by the previous company secretary
of the Company. and administrator.
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.
----------------------------------------- -------------------------------------------------
Emerging Risks
The Company has carried out a detailed assessment of its
emerging and principal risks. The International Risk Governance
Council's definition of an "emerging" risk is one that is new, or
is a familiar risk in a new or unfamiliar context or under new
context conditions (re-emerging). Failure to identify emerging
risks may cause reactive actions rather than being proactive and,
in a worst case scenario, could cause the Company to become
unviable or otherwise fail or force the Company to change its
structure, objective or strategy.
The Audit Committee reviews the Company's risk register at its
half-yearly meetings. Emerging risks are discussed in detail as
part of this process to try to ensure that emerging as well as
well-known risks are identified and mitigated as far as possible.
The emerging risks identified during the year were the Covid-19
pandemic, the impact of which is dealt with below, as well as risks
related to the environment, social issues and governance (ESG) such
as the impact of climate change or bad governance of portfolio
companies. All ESG-related risks are constantly being assessed by
the Investment Managers and reported to the Board.
The experience and knowledge of the Directors is useful in these
discussions, as are update papers and advice received from the
Board's key service providers such as the Portfolio Manager,
Frostrow and the Company's brokers. In addition, the Company is a
member of the AIC, which provides regular technical updates, draws
members' attention to forthcoming industry and regulatory issues
and advises on compliance obligations.
Brexit
The Board has considered whether the United Kingdom's exit from
the European Union ("Brexit") poses a discrete risk to the Company.
At the date of this report, the UK has left the EU and has come out
of the "transition period" with a trade and security deal finalised
with the EU on 24 December 2020, the exact impact of which remains
to be seen.
As the Company and its portfolio companies are priced in
sterling, movements in exchange rates should not affect the net
asset value. However, whilst the Company's current shareholders are
predominantly UK based, sharp or unexpected changes in investor
sentiment, or tax or regulatory changes, could lead to short-term
selling pressure on the Company's shares which potentially could
lead to the share price discount widening.
Overall, however, the Board believes that over the longer term,
Brexit is unlikely to affect the Company's business model or
whether the Company's shares trade at a premium or discount to the
net asset value per share. The Board will continue to monitor
developments as they occur.
Impact of Covid-19
The Board recognises that the emergence and spread of Covid-19
represents a new area of risk, both to the Company's investment
performance and to its operations. During the year under review,
the Portfolio Managers successfully continued their dialogue with
investee companies and the Board has stayed in close contact with
the portfolio managers and has been continuously monitoring
portfolio and share price developments. The Board has also received
assurances from all of the Company's service providers in respect
of:
- their business continuity plans and the steps being taken to
guarantee the ongoing efficiency of their operations while ensuring
the safety and well-being of their employees;
- their cyber security measures including improved user-access
controls, safe remote working and evading malicious attacks;
and
- any increased risks of fraud as a result of decreased
operations and possible employee terminations and weakness in
user-access controls resulting in the potential for management
overrides.
With the emergence of several vaccines, the outlook is
cautiously positive, but the Board will continue to monitor
developments as they occur.
Going Concern
The content of the Company's portfolio, trading activity, the
Company's cash balances and revenue forecasts, and the trends and
factors likely to affect the Company's performance are reviewed and
discussed at each Board meeting. For the year ended 31 March 2021,
the emergence of Covid-19 has added the factor of a global pandemic
and
its effect on the investment management and the general
operations of the Company and its service providers to the
deliberations of the Board, which will also remain an influencing
factor for the year ending 31 March 2022.
The Board has considered a detailed assessment of the Company's
ability to meet its liabilities as they fall due, including tests
which modelled the effects of further substantial falls in markets
and significant reductions in market liquidity to that experienced
to date in connection with the coronavirus pandemic, on the
Company's NAV, its cash flows and its expenses. Further information
is provided in the Audit Committee report.
Based on the information available to the Directors at the date
of this report, including the results of these stress tests, the
conclusions drawn in the Viability Statement, the Company's cash
balances, and the liquidity of the Company's listed investments,
the Directors are satisfied that the Company has adequate financial
resources to continue in operation for at least the next 12 months
and that, accordingly, it is appropriate to continue to adopt the
going concern basis in preparing the financial statements.
Long Term Viability Statement
In accordance with the UK Corporate Governance Code, the
Directors have carefully assessed the Company's position and
prospects as well as the principal risks and have formed a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the next
three financial years. The Board has chosen a three-year horizon in
view of the long-term nature and outlook adopted by the Investment
Manager when making investment decisions.
To make this assessment and in reaching this conclusion, the
Audit Committee has considered the Company's financial position and
its ability to liquidate its portfolio and meet its liabilities as
they fall due:
- the portfolio is principally comprised of investments 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 portfolio is typically run with a net cash position
(average of 9.3% in net cash over the past two years) and as a
result there is ample liquidity on a day-to-day basis for the
Company to meet its obligations;
- the expenses of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
foreseen which would alter that position; and
- the Company has no employees, only its non-executive
Directors. Consequently, it does not have redundancy or other
employment related liabilities or responsibilities.
The Audit Committee, as well as considering the potential impact
of the Company's principal risks and various severe but plausible
downside scenarios, has also considered the following assumptions
in considering the Company's longer-term viability:
- there will continue to be demand for investment trusts;
- the Board and the Portfolio Manager will continue to adopt a
long-term view when making investments;
- the Company invests principally in the securities of UK listed
companies to which investors will wish to continue to have
exposure;
- regulation will not increase to a level that makes running the Company uneconomical; and
- the performance of the Company will continue to be satisfactory.
Covid-19 was also factored into the key assumptions made by
assessing its impact on the Company's key risks and whether the key
risks had increased in their potential to affect the normal,
favourable and stressed market conditions. As part of this review
the Board considered the impact of a significant and prolonged
decline in the Company's performance and prospects. This included a
range of plausible downside scenarios such as reviewing the effects
of substantial falls in investment values and the impact of the
Company's ongoing charges ratio, which were the subject of stress
testing.
Furthermore, the Audit Committee considered the operational
resilience of the Company's service providers, and thereby the
operational viability of the Company. During the year under review,
the majority of meetings were held online, and all key service
providers have been contacted with regard to their business
continuity systems in place due to the pandemic as well as their IT
and cyber security systems to prevent fraudulent activity of any
kind. There have been no issues raised and the Audit Committee was
reassured that all key service providers were operating well and to
their normal high service standards while ensuring the safety of
their employees by enabling them to work remotely.
Approval
This Strategic Report has been approved by the Board of
Directors and signed on its behalf by:
Jane Tufnell
Chairman
28 May 2021
Board of Directors
as at 31 March 2021
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 GBP20 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 chairman 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(R) 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 GBP400 million.
Richard is a non-executive director of GYG plc. He is also the
chair of trustees for the Willow Foundation and a director of
Fareshare.
Date of appointment: 21 December 2017
Directors' Report
The Directors are pleased to present the Annual Report and
Financial Statements for the year ended 31 March 2021. 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 above.
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 2021 and the outlook for the forthcoming year is set out in
the Strategic Report.
Corporate governance
The Company's Corporate Governance Statement is set out below
and forms part of this report. Details regarding independent
professional advice, insurance and indemnity are set out in that
statement.
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
2021, no shares were issued under the block listing (year ended 31
March 2020: none). As at the date of this report, a balance of 4.2
million shares remain under this block listing.
At the AGM held on 22 September 2020, the Directors were granted
authority to issue up to 17,596,442 ordinary shares, being 20% of
the ordinary shares in issue at the time of the passing of the
resolution.
No 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 22 September 2020, the Directors were granted
the authority to buy back up to 13,188,533 ordinary shares, being
14.99% of the ordinary shares in issue at the time of the passing
of the resolution (less 275,000 shares held in treasury).
During the year ended 31 March 2021, the Company purchased in
the stock market 275,000 shares (with a nominal value of
GBP2,750.00) for treasury, at a total cost of GBP230,000. 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. No further shares were bought back during the
year and up to the date of this report.
Current share capital
As at 31 March 2021, there were 88,257,211 ordinary shares in
issue, 275,000 of which were held in treasury. The total voting
rights of the Company as at 31 March 2021 and 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.
Substantial shareholdings
The Company has been informed of the following notifiable
interests in the voting rights of the Company:
Number of
31 March 2021 ordinary % of voting
Shareholder shares held rights
--------------------------------------- ----------- -----------
Harwood Capital 13,500,000 15.34
Cazenove Capital Management 10,239,659 11.64
Brewin Dolphin, stockbrokers 7,148,828 8.13
Mr Ian Armitage 6,675,000 7.58
Investec Wealth & Investment 5,589,846 6.36
Schroder Investment Management 3,551,728 4.03
Close Brothers Asset Management 3,187,621 3.63
Raymond James Investment Services 3,072,357 3.49
Charles Stanley 2,704,774 3.07
Hargreaves Lansdown, Stockbrokers (EO) 2,685,056 3.06
Number of
30 April 2021 ordinary % of voting
Shareholder shares held rights
--------------------------------------- ----------- -----------
Harwood Capital 13,500,000 15.34
Cazenove Capital Management 10,158,031 11.55
Brewin Dolphin, stockbrokers 7,116,577 8.09
Mr Ian Armitage 6,675,000 7.58
Investec Wealth & Investment 5,645,472 6.42
Schroder Investment Management 3,507,728 3.99
Raymond James Investment Services 3,270,205 3.72
Close Brothers Asset Management 3,205,177 3.64
Charles Stanley 2,777,193 3.15
Hargreaves Lansdown, Stockbrokers (EO) 2,761,868 3.14
Interests of key management personnel in the shares of the
Company as at 31 March 2021:
Ordinary % of voting
Shares rights
----------------- --------- -----------
Stuart Widdowson 1,472,507 1.67
Ed Wielechowski 223,588 0.25
Beneficial Owners of Ordinary Shares - Information Rights
The beneficial owners of ordinary shares who have been nominated
by the registered holder of those shares to receive information
rights under Section 146 of the Companies Act 2006 are required to
direct all communications to the registered holder of their shares
rather than to the Company's registrar, Equiniti, or to the Company
directly.
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 in the Directors' Remuneration Report. The Directors
confirm that there are no additional disclosures to be made in
relation to Listing Rule 9.8.4.
Anti-Bribery and Corruption Policy
The Board has adopted a zero-tolerance approach to instances of
bribery and corruption. Accordingly, it expressly prohibits any
Director or associated persons when acting on behalf of the
Company, from accepting, soliciting, paying, offering or promising
to pay or authorise any payment, public or private, in the United
Kingdom or abroad to secure any improper benefit for themselves or
for the Company.
The Board applies the same standards to its service providers in
their activities for the Company.
A copy of the Company's Anti Bribery and Corruption Policy can
be found on its website at www.oitplc.com. The policy is reviewed
annually by the Audit Committee.
Prevention of the Facilitation of Tax Evasion
In response to the implementation of the Criminal Finances Act
2017, the Board has adopted a zero-tolerance approach to the
criminal facilitation of tax evasion. A copy of the Company's
policy on preventing the facilitation of tax evasion can be found
on the Company's website www.oitplc.com. The policy is reviewed
annually by the Audit Committee.
Political Donations
The Company has not made any political donations in the past,
nor does it intend to do so in the future.
Corporate Governance
The Corporate Governance report, which includes the Company's
Corporate Governance policies is set out below.
Global Greenhouse Gas Emissions for the Year ended 31 March
2021
The Company is an investment trust, with neither employees nor
premises, nor has it any financial or operational control of the
assets which it owns. It has no greenhouse gas emissions to report
from its operations nor does it have responsibility for any other
emissions producing sources under the Companies Act 2006 (Strategic
Report and Directors' Report) Regulations 2013, including those
within the Company's underlying investment portfolio. Consequently,
the Company consumed less than 40,000 kWh of energy during the year
in respect of which the Directors' Report is prepared and therefore
is exempt from the disclosures required under the Streamlined
Energy and Carbon Reporting criteria.
Common Reporting Standard (CRS)
CRS is a global standard for the automatic exchange of
information commissioned by the Organisation for Economic
Cooperation and Development and incorporated into UK law by the
International Tax Compliance Regulations 2015. CRS requires the
Company to provide certain additional details to HMRC in relation
to certain shareholders. The reporting obligation began in 2016 and
will be an annual requirement going forward. The Registrars,
Equiniti Limited, have been engaged to collate such information and
file the reports with HMRC on behalf of the Company.
Other Statutory Information
The following information is disclosed in accordance with the
Companies Act 2006:
- The rules on the appointment and replacement of directors are
set out in the Company's articles of association (the "Articles").
A change to the Articles would be governed by the Companies Act
2006.
- Subject to the provisions of the Companies Act 2006, to the
Articles, and to any directions given by special resolution, the
business of the Company shall be managed by the Directors who may
exercise all the powers of the Company. The powers shall not be
limited by any special powers given to the Directors by the
Articles and a meeting of the Directors at which a quorum is
present may exercise all the powers exercisable by the Directors.
The Directors' powers to buy back and issue shares, in force at the
end of the year, are recorded in the Directors' Report.
There are no agreements:
(i) to which the Company is a party that might affect its
control following a takeover bid; and/or
(ii) between the Company and its Directors concerning
compensation for loss of office.
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.
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.
Financial risk management
The Company's financial instruments comprise 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.
Post Balance Sheet Events
Details of the post Balance Sheet events are set out in note 14
to the Financial Statements.
Articles of Association
The Company's Articles of Association may only be amended by a
special resolution at a general meeting of the shareholder.
Proposed amendments to the Articles of Association
The Board of Directors (the "Board") is proposing to make
amendments to the Company's Articles of Association (the
"Articles") to enable the Directors of the Company (the
"Directors") to determine the time and place of general meetings
and the manner in which they are conducted (including the ability
to hold hybrid meetings). The amendments are being sought in
response to challenges posed by the government restrictions on
social interactions as a result of the COVID--19 pandemic, which
have made it difficult or impossible for shareholders to attend
physical meetings. The key changes proposed to be introduced in the
Articles and their effect are set out below.
Further amendments are also being proposed to be made to the
Articles to reflect recent changes to law and regulation (including
changes to the AIC Code of Corporate Governance (the "AIC Code") as
described below) and to permit the Company to request information
from shareholders to satisfy due diligence and reporting
requirements under the US Foreign Account Tax Compliance Act of
2010 ("US FATCA") or similar laws and thereby avoid adverse tax
consequences which would otherwise arise under US FATCA or similar
laws. In addition, the Company is seeking an amendment to the
Articles to permit the Company to require the transfer of shares
where the shareholder in question fails to comply with such request
or may cause the Company issues under US FATCA or any similar
laws.
(i) Electronic participation in general meetings
The Board will have the ability to determine whether a general
meeting shall be held as either a 'physical meeting' or as a
'hybrid meeting', with the latter involving both the physical
attendance of members and participation by members via electronic
means. It is the current expectation of the Directors that hybrid
meetings would only be used where a solely physical meeting is
impracticable or unworkable.
(ii) Postponement of general meetings and alternative
arrangements for general meetings
The Board's existing ability to postpone the time at which a
general meeting is to be held, or change the place of the general
meeting, will be updated, including to allow changes to the
electronic facility or facilities to be used, in the event that
they decide it has become impracticable or undesirable to hold the
meeting at the declared time and place or using the declared
facility or facilities.
(iii) Power to adjourn
The chairman of a general meeting (with the consent of the
meeting) will have the ability to adjourn the meeting from time to
time and from place to place (or in the case of a meeting held at a
principal meeting place and one or more satellite meeting places,
such other places) and/or from such electronic facility or
facilities for the attendance and participation to such electronic
facility or facilities as determined by the chair of the meeting
(or, in default, the Board) in his/her or its absolute discretion.
Further, the chairman of a general meeting will have the ability to
interrupt or adjourn the meeting without the consent of the meeting
if it appears to the chairman that the facilities at the principal
meeting place or any satellite meeting place or an electronic
facility or facilities or security at the general meeting have
become inadequate or are otherwise not sufficient to allow the
meeting to be conducted substantially in accordance with the
provisions set out in the notice of meeting.
(iv) Accommodation of members and security arrangements
The Board will have the ability to put in place security
measures where considered appropriate in the circumstances, and to
take such action, give such directions or put in place such
arrangements as are considered appropriate to secure the safety of
those attending the meeting and to promote the orderly conduct of
the meeting in relation to both physical attendance and attendance
by electronic facility.
(v) Method of voting
A resolution put to vote at a general meeting held partly by
means of electronic facility or facilities shall be decided on a
poll, which poll votes may be cast by such electronic means as the
Board deems appropriate.
(vi) Information rights and forced transfers
The Board will have the ability, at any time, to serve notice on
any member requiring that member to promptly provide the Company
with any information, representations, certificates, waivers or
forms relating to such member to enable the Company to satisfy its
diligence and reporting requirements in relation to the US FATCA
and the requirements of similar laws which the Company may be
subject from time to time.
(vii) Retirement at annual general meetings
In accordance with the AIC Code, all of the Directors shall
retire from office at each annual general meeting of the Company
except any Director appointed by the Board after the notice of that
annual general meeting has been given and before the annual general
meeting has been held.
This summary is intended only to highlight the principal
amendments which are likely to be of interest to shareholders and
there are additional consequential changes which will be required
as result of the principal amendments being made. It is not
intended to be comprehensive and cannot be relied upon to identify
amendments or issues which may be of interest to shareholders.
The proposed new Articles (marked to show the proposed changes)
will be available for inspection on the Company's website,
www.oitplc.com and at the Company's registered office, from the
date of this document until the close of the annual general
meeting, and will also be available for inspection at the venue of
the annual general meeting from fifteen minutes before and during
the annual general meeting. Should it be impossible to view the
proposed new Articles at the registered office then an electronic
copy can also be requested from the Company Secretary by writing to
info@frostrow.com.
Annual General Meeting (AGM)
The third AGM of the Company will be held at 12.00 noon on
Wednesday, 22 September 2021 at the offices of Odyssean Capital
LLP, 6 Stratton Street, Mayfair, London W1J 8LD. The full text of
the Notice of the AGM together with explanatory notes can be found
below.
Resolutions relating to the following items of special business
will be proposed at the forthcoming Annual General Meeting.
Resolution 9: Authority to allot shares up to approximately 10%
of the ordinary shares in issue.
Resolution 10: Authority to allot shares up to approximately a
further 10% of the ordinary shares in issue;
Resolution 11: Authority to disapply pre-emption rights in
respect of the shares to be allotted under Resolution 9;
Resolution 12: Authority to disapply pre-emption rights in
respect of the shares to be allotted under Resolution 10;
Resolution 13: Authority to buy back up to 14.99% of shares in
issue;
Resolution 14: Authority to hold General Meetings (other than
the AGM) on at least 14 clear days' notice; and
Resolution 15: To adopt the draft Articles of Association
produced to the meeting as the Articles of Association of the
Company in substitution for, and to the exclusion of, the Company's
existing Articles of Association. Please see above for the detailed
changes.
Resolutions 9 and 10 will be put to shareholders as ordinary
resolutions and Resolutions 11 to 15 will be asked as special
resolutions.
Ordinary resolutions require that more than 50% of the votes
cast at the relevant meeting must be in favour of the resolutions.
Special resolutions require that at least 75% of the votes cast
must be in favour of the resolution to be passed.
Recommendation
The Directors consider that all the resolutions to be proposed
at the AGM are in the best interests of the Company and its members
as a whole. The Directors unanimously recommend that shareholders
vote in favour of all the resolutions, as they intend to do in
respect of their own beneficial holdings.
AGM Arrangements
The Board hopes that it will be possible to hold the AGM in
person on 22 September 2021. However, shareholders should note that
at the time of writing this annual report, it is not clear whether
it will be possible to hold a physical AGM or whether renewed
social distancing rules will necessitate a much pared-down AGM in
order to guarantee everyone's safety and well-being in view of
Covid-19. In case the decision has to be made that it will not be
possible for shareholders to meet with the Board in person and that
the Board can only conduct the minimal statutory business at the
AGM, then arrangements will be made for shareholders to attend via
a webinar, view the Managers' presentation and ask questions in
advance.
Shareholders are encouraged to view the Company's website,
www.oitplc.com for further information nearer the time. Questions
can be submitted to the Company Secretary at info@frostrow.com.
Shareholders are also strongly encouraged to exercise their
votes in respect of the meeting in advance by returning their forms
of proxy. This will ensure that all shareholders' votes are
registered in the event that attendance is not possible or
restricted or if the meeting is postponed. Further details about
the voting process can be found in the Notice of Meeting.
By order of the Board
Frostrow Capital LLP
Company Secretary
28 May 2021
Corporate Governance Statement
This Corporate Governance Statement forms part of the Directors'
Report.
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 published in February 2019 (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. The AIC Code addresses all the
principles set out in the UK Corporate Governance Code (the "UK
Code"), as well as setting out additional provisions on issues that
are of specific relevance to the Company as an investment
trust.
The Board is confident that is has properly undertaken its
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 and considers that reporting
against the principles and recommendations of the AIC Code (which
incorporates the UK Code), will provide better information to
shareholders.
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 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 2021, 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 Board consists of four non-executive Directors, who have
substantial recent and relevant experience of investment trusts and
financial and public company management.
Other than their letters of appointment as Directors, none of
the Directors has a contract of service with the Company nor has
there been any other contract or arrangement between the Company
and any Director at any time during the year. Directors are not
entitled to any compensation for loss of office. Copies of the
letters of appointment are available on request from the 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 in the Directors' Report. 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.
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 statements and accounting policies, prospectuses,
circulars and other shareholder communications;
- approval for raising new capital and major financing facilities;
- Board appointments and removals;
- appointment and removal of the Portfolio Manager, Auditor and
the Company's other service providers; and
- approval of the Company's annual operating budgets.
Board meetings
The Company has four scheduled Board meetings a year with
additional meetings in respect of share issuances and regulatory
matters arranged as necessary.
At each scheduled Board meeting, the Directors follow a formal
agenda which is circulated in advance by the Company Secretary. The
Company Secretary, the Administration Manager 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.
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.
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 year under review are set out in the Audit Committee
Report.
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. During the year, the Management
Engagement Committee carried out a review of the 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 took effect from 13 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 and
the Company Secretary 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 2021 and the attendance of the
individual Directors is shown below:
Management Engagement
Board Meetings Audit Committee Committee
Number entitled Number Number entitled Number Number entitled Number
to attend attended to attend attended to attend attended
--------------- --------------- -------- --------------- -------- --------------- --------
Jane Tufnell 4 4 2 2 1 1
Arabella Cecil 4 4 2 2 1 1
Peter Hewitt 4 4 2 2 1 1
Richard King 4 4 2 2 1 1
In addition, five ad hoc committee and Board meetings were held
during the year, and one Strategy meeting after the year-end. All
meetings were attended by all Directors.
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 provides a valuable feedback
mechanism for improving Board's effectiveness.
An evaluation of the Board and its Committees as well as the
Chairman and the individual Directors is carried out annually.
The Chairman acts on the results of the Board's evaluation by
recognising the strengths and addressing the weaknesses of the
Board and recommending any areas for development.
During the year ended 31 March 2021, the performance of the
Board, its committees and individual Directors (including each
Director's independence) was evaluated through a formal assessment
process led by the Chairman. This involved the circulation of a
Board and Committee evaluation checklist, tailored to suit the
nature of the Company, followed by discussions between the Chairman
and each of the Directors. The performance of the Chairman was
evaluated by the Senior Independent Director.
Although the Company is not a constituent of the FTSE 350 Index,
the Board had determined in the previous year that in line with the
recommendation of the AIC Code, an externally facilitated Board
evaluation would be carried out during 2021, being the third year
since the Company's launch. Such an external review of the Board's
working processes and efficiency was undertaken by Frostrow as the
new Administrator and Company Secretary during the year.
As part of the Board evaluation discussions, each of the
Directors also assessed the overall time commitment of their
external appointments and it was concluded that all Directors have
sufficient time to discharge their duties. During the year and
since the year-end, all Directors have without fail attended all
Board and Committee meetings.
The Chairman is satisfied that the structure and operation of
the Board continues to be effective and relevant and that there is
a satisfactory mix of skills, experience and knowledge of the
Company. The Board has considered the position of all the Directors
including the Chairman as part of the evaluation process and
believes that it would be in the Company's best interests to
propose them for re-election.
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
In accordance with the AIC Code, all Directors are subject to
annual re-election.
Accordingly, all Directors will be standing for re-election at
the Company's forthcoming AGM. As detailed above, 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
Company Directors have a statutory obligation to avoid a
situation in which they (and connected persons) have, or can have,
a direct or indirect interest that conflicts, or may possibly
conflict, with the interests of the Company.
In line with the Companies Act 2006, the Board has the power to
sanction any potential conflicts of interest that may arise and
impose such limits or conditions that it thinks fit. A register of
interests and external appointments is maintained by the Company
Secretary and is reviewed at every Board meeting to ensure that all
details are kept up to date. Should a conflict arise, the Board has
the authority to request that the Director concerned abstains from
any relevant discussion, or vote. Appropriate authorisation will be
sought prior to the appointment of any new directors or if any new
conflicts or potential conflicts arise.
No conflicts of interest arose during the year under review.
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.
Training and Advice
On an ongoing basis, and further to the annual evaluation
process, the Company Secretary will make arrangements for Directors
to develop and refresh their skills and knowledge in areas which
are mutually identified as being likely to be required, or of
benefit to them, in carrying out their duties effectively.
Directors will endeavour to make themselves available for any
relevant training sessions which may be organised for the
Board.
The AIC holds regular Director Roundtable events throughout the
year, which are designed to cover the latest issues and regulatory
developments affecting the investment company sector. The Director
Roundtables are open to all member investment company
directors.
Insurance and indemnity provisions
The Board has agreed arrangements whereby Directors may take
independent professional advice in the furtherance of their duties.
The Company has Directors' and Officers' liability insurance to
cover legal defence costs and public offering of securities
insurance in place in respect of the IPO. Under the Company's
Articles of Association, the Directors are provided, subject to the
provisions of UK legislation, with an indemnity in respect of
liabilities which they may sustain or incur in connection with
their appointment. The Company has also entered into a deed of
indemnity with each Director pursuant to which it has agreed to
insure, indemnify and/or loan funds to the Director in relation to
certain specific liabilities incurred by them in the performance of
their duties as a Director of the Company.
Relations with shareholders
Details regarding the Company's engagement with its shareholders
are set out within the Strategic Report.
Internal control review and assessment process
Details of the Company's internal control review and the
assessment process are outlined in the Strategic Report.
Company Secretary
The Board has direct access to the advice and services of the
Company Secretary, Frostrow Capital LLP, 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.
UK Stewardship Code and Exercise of Voting Powers
The Board and the Investment Manager support the UK Stewardship
Code, issued by the FRC, which sets out the principles of effective
stewardship by institutional investors. The Company's investment
portfolio is managed by Odyssean Capital LLP who have extensive
experience and a strong commitment to effective stewardship.
The Board has delegated discretion to Odyssean Capital LLP to
exercise voting powers on its behalf in respect of shares owned by
the Company.
Nominee Share Code
Where the Company's shares are held via a nominee company name,
the Company undertakes:
- to provide the nominee company with multiple copies of
shareholder communications, so long as an indication of quantities
has been provided in advance; and
- to allow investors holding shares through a nominee company to
attend general meetings, provided the correct authority from the
nominee company is available.
Nominee companies are encouraged to provide the necessary
authority to underlying shareholders to attend, speak and vote at
the Company's general meetings.
Significant Holdings and Voting Rights
Details of the shareholders with substantial interests in the
Company's shares, the Directors' authorities to issue and
repurchase the Company's shares, and the voting rights of the
shares are set out in the Report of the Directors.
Audit, Risk and Internal Control
The Statement of Directors' Responsibilities below describes the
Directors' responsibility for preparing this annual report.
The Audit Committee Report explains the work undertaken to allow
the Directors to make this statement and to apply the going concern
basis of accounting. It also sets out the main roles and
responsibilities and the work of the Audit Committee throughout the
year, and describes the Directors' review of the Company's risk
management and internal control systems.
A description of the principal risks facing the Company and an
explanation of how they are being managed is provided in the
Strategic Report.
The Board's assessment of the Company's longer-term viability is
set out in the Business Review.
Remuneration
The Directors' Remuneration Report sets out the levels of
remuneration for each Director and explains how Directors'
remuneration is determined.
Frostrow Capital LLP
Company Secretary
28 May 2021
Audit Committee Report
I am pleased to present the Audit Committee Report for the year
ended 31 March 2021.
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;
- to consider annually whether there is a need for the Company
to have its own internal audit function;
- to oversee the selection process of possible new appointees as external auditor;
- to make recommendations to the Board in relation to the
appointment, re-appointment and removal of the Auditor;
- 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
- to ensure the effective operation of the Company's data protection policy.
Matters considered during the period
During the year ended 31 March 2021, the Committee met twice and
each Director's attendance at these meetings is set out in the
Corporate Governance Statement. The Committee also met once
following the year end. The Committee has:
- reviewed the internal controls and risk management systems of
the Company and its third party service providers;
- agreed the audit plan with the Auditor, including the
principal areas of focus, and the fees in respect of the audit;
- received and discussed with the Auditor their report on the results of the audit; and
- reviewed the Company's Half-Yearly Report and Annual Report
and Financial Statements, discussed the appropriateness of the
accounting policies adopted and advised the Board accordingly.
The Committee has direct access to the Auditor, KPMG LLP, who
attends Committee meetings on a regular basis. The Committee has
the opportunity to meet with the Auditor without the Portfolio
Manager being present.
The issues considered by the Committee in relation to the Annual
Report and Financial Statements were:
Significant issue
(a) Valuation of investments
The Board relies on the Administrator and the Portfolio Manager
to use correct listed prices and seeks comfort in the testing of
this process through their internal controls reports. The Committee
reviewed with the Portfolio Manager and the Administrator the
valuation process of the Company's investments and the systems in
place to ensure the accuracy of these valuations. The 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.
Other issues
(a) Internal controls
During the year, the Committee reviewed and re-worked the
Company's risk register. The register is updated on an ongoing
basis and reviewed at every meeting of the Committee.
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 impact of COVID--19 on the markets, society as a
whole 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 in the Risk Management section of the
Strategic Report.
(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 GBP37,600 has been agreed in respect of the
audit for the year ended 31 March 2021 (year ended 31 March 2020:
GBP30,000).
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 GBP10,000 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 2021 (2020: none).
Further information on the fees paid to the Auditor is set out
in note 4 to the Financial Statements.
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 2021.
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 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 auditor is required to rotate the audit partner every
five years and the current audit partner is Jatin Patel, who has
been in place for three years. It is therefore anticipated that Mr
Patel will serve as audit partner for two more years until
completion of the audit process in 2023. 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
28 May 2021
Directors' Remuneration Report
Statement from the Chairman
I am pleased to present the Directors' Remuneration Report for
the year ended 31 March 2021.
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 GBP300,000 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 2021, the annual fees were set
out at the rate of GBP34,000 for the Chairman, GBP27,500 for the
Chairman of the Audit committee and GBP24,000 for a Director.
For the year ending 31 March 2022, it is proposed that all
Directors' fees be increased by 3.5% and rounded up to the nearest
GBP500 with effect from 1 April 2021 in order to bring them more in
line with the market. The new annual fee rates for the year ending
31 March 2022 are GBP35,500 for the Chairman, GBP28,500 for the
Chairman of the Audit Committee and GBP25,000 for a Director.
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 on 22 September 2021 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 below, 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.
Directors' remuneration for the year ended 31 March 2021
(audited)
The single total figure table below details the remuneration
received by the Directors who served during the year:
Year ended 31 March 2021 Year ended 31 March 2020
------------------------------ ------------------------------
Taxable Taxable
Director Fees benefits Total Fees benefits Total
------------------ --------- -------- --------- --------- -------- ---------
Jane Tufnell(1) GBP34,000 - GBP34,000 GBP34,000 - GBP34,000
Arabella Cecil(2) GBP24,000 - GBP24,000 GBP24,000 - GBP24,000
Peter Hewitt(2) - (3) - - -(3) GBP595 GBP595
Richard King(1) GBP27,500 - GBP27,500 GBP27,500 - GBP27,500
------------------ --------- -------- --------- --------- -------- ---------
GBP85,500 - GBP85,500 GBP85,500 GBP595 GBP86,095
------------------ --------- -------- --------- --------- -------- ---------
(1) Appointed on 21 December 2017.
(2) Appointed on 31 January 2018.
(3) 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 Year ended
31 March 2021 31 March 2020
--------------------------------- ------------- -------------
Spend on Directors' fees* GBP85,500 GBP86,095
Management fee and other expenses GBP1,442,000 GBP1,313,000
* 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.
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 2021 and 28 May 2021, the date of this report, are shown in
the table below:
28 May 31 March 31 March
2021 2021 2020
Number of shares Number of shares Number of shares
--------------- ---------------- ---------------- ----------------
Jane Tufnell 576,695 572,910 559,086
Arabella Cecil 156,205 152,618 133,636
Peter Hewitt 35,000 35,000 35,000
Richard King 67,800 67,800 55,935
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 year ended 31 March
2020 was approved at the AGM held on 22 September 2020. The votes
cast by proxy on the resolution were:
Directors' Remuneration
Report
% of votes
Number of votes cast
----------------- --------------- ----------
For 39,725,249 100.0
Against 999 0.0
Total votes cast 39,726,248 100.0
Votes withheld 4,537 0.0
Any proxy votes which were at the discretion of the Chairman
were included in the "For" total.
A vote withheld is not a vote in law and is not counted in the
calculations of votes cast by proxy.
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 GBP300,000 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.
Directors' and Officers' liability insurance cover is maintained
by the Company on behalf of the Directors.
Directors' fee levels
Rate at
1 April Purpose of
Component Role 2021 Remuneration
-------------- ---------------------- --------- ----------------------------------
Annual fee Chairman GBP35,500 Commitment as Chair man (1)
Annual fee Non-executive Director GBP25,000 Commitment as non-executive
Director (2)
Additional fee Chairman of the GBP3,500 For additional responsibilities
Audit Committee and time commitments(3)
Additional fee All Directors N/A For extra or special services
performed in their role as
a Director(4)
Expenses All Directors N/A 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 GBP300,000 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
28 May 2021
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 Estimates and Errors"
and then apply them consistently;
- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
- provide additional disclosures when compliance with specific
requirements in IFRS is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the Company's financial position and financial performance;
- state whether applicable IFRS have been followed, subject to
any material departures disclosed and explained in the Financial
Statements;
- make judgements and accounting estimates that are reasonable and prudent; and
- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
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
28 May 2021
Independent auditor's report
to the members of Odyssean Investment Trust PLC
1. Our opinion is unmodified
We have audited the financial statements of Odyssean Investment
Trust PLC("the Company") for the year ended 31 March 2021 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 give a true and fair view of the
state of the Company's affairs as at 31 March 2021 and its return
for the year then ended;
- have been properly prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006; and
- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
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 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. Non on-audit services prohibited
by that standard were provided.
Overview
--------------------------------- -------------------------------------
Materiality: GBP1.25m (2020: GBP0.82m)
Company financial statements as a
whole 1% of Total Assets(2020: 1%))
--------------------------------- -------------------------------------
Recurring risk: Risk related to carrying value
--------------------------------- -------------------------------------
Key audit matter: Carrying amount of quoted investments
--------------------------------- -------------------------------------
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 2020), 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.
The risk Our response
------------------------- ------------------------------ --------------------------------------
Carrying amount Low risk, high value: We performed the detailed tests
of quoted investments The Company's portfolio below rather than seeking to
(GBP109m; (2020: of quoted investments rely on controls, because the
GBP72m)) makes up 87% (2020: 88%) nature of the balance is such
Refer to Audit Committee of the Company's total that detailed testing is determined
Report, accounting assets by value and is to be the most effective manner
policy and financial considered to be one of of obtaining audit evidence.
disclosures. the key drivers of results. Our procedures included:
We do not consider these Tests of detail: Agreeing
investments to be at a the valuation of 100% of quoted
high risk of significant investments in the portfolio
misstatement, or to be to externally quoted prices;
subject to a significant and
level of judgement because Enquiry of custodians: Agreeing
they comprise liquid, investment holdings in the
quoted investments. However, portfolio to independently
due to their materiality received third party confirmations
in the context of the from investment custodians
financial statements as or performed alternate procedure
a whole, they are considered on unconfirmed balances.
to be one of the areas Our findings: We found the
which had the greatest carrying amount of quoted investments
effect on our overall to be acceptable (2020: acceptable).
audit strategy and allocation
of resources in planning
and completing our audit.
------------------------- ------------------------------ --------------------------------------
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
GBP1.25m (2020: GBP0.82m), determined with reference to a benchmark
of total assets, of which it represents 1% (2020: 1%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance
materiality was set at 75% (2020: 75%) of materiality for the
financial statements as a whole, which equates to GBP0.94m (2020:
GBP0.62m). We applied this percentage in our determination of
performance materiality because we did not identify any factors
indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding GBP63k (2020:
GBP42k), 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 by a single audit team.
4. 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").
We used our knowledge of the Company, its industry, and the
general economic environment to identify the inherent risks to its
business model and analysed how those risks might affect the
Company's financial resources or ability to continue operations
over the going concern period. The risks that we considered most
likely to adversely affect the Company's available financial
resources and its ability to operate over this period were:
- the impact of a significant reduction in the valuation of investments;
- the liquidity of the investment portfolio and its ability to
meet the liabilities of the Company as and when they fall due;
and
- the operational resilience of key service organisations.
We considered whether these risks could plausibly affect the
liquidity in the going concern period by assessing the degree of
downside assumption that, individually and collectively, could
result in a liquidity issue, taking into account the Company's
liquid investment position (and the results of their reverse stress
testing).
We considered whether the going concern disclosure in note 1 to
the financial statements gives a full and accurate description of
the Directors' assessment of going concern, including the
identified risks and related sensitivities.
Our conclusions based on this work:
- we consider that the directors' use of the going concern basis
of accounting in the preparation of the financial statements is
appropriate;
- we have not identified, and concur with the directors'
assessment that there is no material uncertainty related to events
or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as a going
concern for the going concern period;
- we have nothing 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 the going concern period, and we
found the going concern disclosure in note 1 to be acceptable;
and
- the related statement under the Listing Rules is materially
consistent with the financial statements and our audit
knowledge
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the
Company will continue in operation.
5. Fraud and breaches of laws and regulations - ability to
detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud ("fraud
risks") we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
- enquiring of Directors as to the Company's high-level policies
and procedures to prevent and detect fraud, as well as whether they
have knowledge of any actual, suspected or alleged fraud;
- assessing the segregation of duties in place between the
Directors, the Administrator and the Company's Investment Manager;
and
- reading Board and Audit Committee minutes.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in particular
to the risk that management may be in a position to make
inappropriate accounting entries. We evaluated the design and
implementation of the controls over journal entries and other
adjustments and made inquiries of the Administrator about
inappropriate or unusual activity relating to the processing of
journal entries and other adjustments. We substantively tested all
material post-closing entries and, based on the results of our risk
assessment procedures and understanding of the process, including
the segregation of duties between the Directors and the
Administrator, no further high-risk journal entries or other
adjustments were identified.
On this audit we have rebutted the fraud risk related to revenue
recognition because the revenue is non-judgemental and
straightforward, with limited opportunity for manipulation. We did
not identify any significant unusual transactions or additional
fraud risks.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience and
through discussion with the Directors, the Investment Manager and
the Administrator (as required by auditing standards) and discussed
with the Directors the policies and procedures regarding compliance
with laws and regulations.
As the Company is regulated, our assessment of risks involved
gaining an understanding of the control environment including the
entity's procedures for complying with regulatory requirements.
The 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),
distributable profits legislation, and its qualification as an
Investment Trust under UK taxation 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: money laundering, data protection, bribery
and corruption legislation and certain aspects of company
legislation recognising the financial and regulated nature of the
Company's activities and its legal form. Auditing standards limit
the required audit procedures to identify non-compliance with these
laws and regulations to enquiry of the Directors and the
Administrator and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6. 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
We are required to perform procedures to identify whether there
is a material inconsistency between the Directors' disclosures in
respect of emerging and principal risks and the viability
statement, and the financial statements and our audit
knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
- the directors' confirmation within the principal risks,
emerging risks and risk management section 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 Emerging and 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.
We are also required to review the Viability Statement under the
Listing Rules. Based on the above procedures, we have concluded
that the above disclosures are materially consistent with the
financial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements audit.
As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgments that were reasonable at the time they were made, the
absence of anything to report on these statements is not a
guarantee as to the Company's longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there
is a material inconsistency between the Directors' corporate
governance disclosures and the financial statements and our audit
knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
- 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;
- the section of the annual report describing the work of the
Audit Committee, including the significant issues that the audit
committee considered in relation to the financial statements, and
how these issues were addressed; and
- the section of the annual report that describes the review of
the effectiveness of the Company's risk management and internal
control systems.
We are required to review the part of Corporate Governance
Statement relating to the Company's compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review. We have nothing to report in this respect
7. 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.
8. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement, 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.
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.
9. 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
28 May 2021
Statement of Comprehensive Income
for the year ended 31 March 2021
Year ended 31 March 2021 Year ended 31 March 2020
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----- -------- -------- -------- -------- -------- --------
Income 2 852 - 852 1,949 133 2,082
Net gains/(losses) on
investments at fair
value 7 - 45,113 45,113 - (5,588) (5,588)
-------------------------------- ----- -------- -------- -------- -------- -------- --------
Total income/(loss) 852 45,113 45,965 1,949 (5,455) (3,506)
Expenses
Portfolio management
fee 3 (943) (1,825) (2,768) (904) - (904)
Other expenses 4 (499) - (499) (495) - (495)
-------------------------------- ----- -------- -------- -------- -------- -------- --------
Total expenses (1,442) (1,825) (3,267) (1,399) - (1,399)
-------------------------------- ----- -------- -------- -------- -------- -------- --------
(Loss)/return before
taxation (590) 43,288 42,698 550 (5,455) (4,905)
Taxation 5 (3) - (3) (7) - (7)
-------------------------------- ----- -------- -------- -------- -------- -------- --------
(Loss)/return for the
period (593) 43,288 42,695 543 (5,455) (4,912)
-------------------------------- ----- -------- -------- -------- -------- -------- --------
Basic and diluted (loss)/return
per ordinary share (pence) 6 (0.7) 49.2 48.5 0.6 (6.2) (5.6)
-------------------------------- ----- -------- -------- -------- -------- -------- --------
The total column of this statement is the Income Statement of
the Company prepared in accordance with International Financial
Reporting Standards ("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.
Statement of Changes in Equity
for the year ended 31 March 2021
Share Special
Share premium distributable Capital Revenue
capital account reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------ ------- ------- ------------- ------- ------- -------
Year ended 31 March
2021
Opening balance as
at 1 April 2020 883 449 85,475 (6,726) 14 80,095
Total comprehensive
income for the year - - - 43,288 (593) 42,695
Share repurchases
into treasury - - (230) - - (230)
------------------------------- ------- ------- ------------- ------- ------- -------
As at 31 March 2021 883 449 85,245 36,562 (579) 122,560
------------------------------- ------- ------- ------------- ------- ------- -------
Share Special
Share premium distributable Capital Revenue
capital account reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------ ------- ------- ------------- ------- ------- -------
Year ended 31 March
2020
Opening balance as
at 1 April 2019 883 449 85,475 (1,271) (529) 85,007
Total comprehensive
income for the period - - - (5,455) 543 (4,912)
------------------------------- ------- ------- ------------- ------- ------- -------
As at 31 March 2020 883 449 85,475 (6,726) 14 80,095
------------------------------- ------- ------- ------------- ------- ------- -------
The accompanying notes are an integral part of these financial
statements.
Balance Sheet
as at 31 March 2021
31 March 31 March
2021 2020
Notes GBP'000 GBP'000
------------------------------------------------- ----- -------- --------
Non current assets
Investments at fair value through profit or loss 7 109,259 72,266
------------------------------------------------- ----- -------- --------
Current assets
Trade and other receivables 8 143 187
Cash and cash equivalents 15,689 9,800
------------------------------------------------- ----- -------- --------
15,832 9,987
Total assets 125,091 82,253
------------------------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 9 (2,531) (2,158)
------------------------------------------------- ----- -------- --------
Total liabilities (2,531) (2,158)
Total assets less current liabilities 122,560 80,095
------------------------------------------------- ----- -------- --------
Net assets 122,560 80,095
------------------------------------------------- ----- -------- --------
Represented by:
Share capital 10 883 883
Share premium account 449 449
Special distributable reserve 10 85,245 85,475
Capital reserve 36,562 (6,726)
Revenue reserve (579) 14
------------------------------------------------- ----- -------- --------
Total equity attributable to equity holders of
the Company 122,560 80,095
------------------------------------------------- ----- -------- --------
Basic and diluted NAV per ordinary share (pence) 11 139.3 90.8
------------------------------------------------- ----- -------- --------
The accompanying notes are an integral part of these financial
statements.
These statements were approved and authorised for issue by the
Board on 28 May 2021 and signed on its behalf by:
Jane Tufnell
Chairman
Company Registered Number: 11121934
Cash Flow Statement
for the year ended 31 March 2021
Year ended Year ended
31 March 31 March
2021 2020
Notes GBP'000 GBP'000
------------------------------------------------------ ------ ---------- ----------
Reconciliation of total return/(loss) before
taxation to net cash (outflow)/inflow from operating
activities
Return/(loss) before tax 42,698 (4,905)
(Gains)/losses on investments held at fair value
through profit and loss (45,113) 5,588
Decrease in receivables 44 105
Increase in payables 1,881 32
Taxation paid (3) (10)
-------------------------------------------------------------- ---------- ----------
Net cash (outflow)/inflow from operating activities (493) 810
-------------------------------------------------------------- ---------- ----------
Investing activities
Purchases (42,138) (26,405)
Sales 48,758 17,167
-------------------------------------------------------------- ---------- ----------
Net cash inflow/(outflow) from investing activities 6,620 (9,238)
-------------------------------------------------------------- ---------- ----------
Financing activities
Shares repurchased into treasury (230) -
Share issue costs - 10
-------------------------------------------------------------- ---------- ----------
Net cash (outflow)/inflow from investing activities (230) 10
-------------------------------------------------------------- ---------- ----------
Increase/(decrease) in cash and cash equivalents 5,897 (8,418)
-------------------------------------------------------------- ---------- ----------
Reconciliation of net cash flow movements in
funds
Cash and cash equivalents at the beginning of
the year 9,800 18,219
Exchange rate movements (8) (1)
Increase/(decrease) in cash and cash equivalents 5,897 (8,418)
-------------------------------------------------------------- ---------- ----------
Increase/(decrease) in net cash 5,889 (8,419)
-------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at end of year 15,689 9,800
-------------------------------------------------------------- ---------- ----------
The accompanying notes are an integral part of these financial
statements.
Notes to the Financial Statements
for the year ended 31 March 2021
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 25 Southampton Buildings, London WC2A 1AL.
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.
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.
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 adoption of the changes 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.
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 a bove,
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.
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, the
cancellation of shares, and distribution by way of dividends.
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.
2. Income
Year ended Year ended Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March 31 March 31 March
2021 2021 2021 2020 2020 2020
Income Capital Total Income Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Income from investments
UK dividends 852 - 852 1,922 133 2,055
------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Other income
Bank interest received - - - 24 - 24
Other income - - - 3 - 3
------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Total income 852 - 852 1,949 133 2,082
------------------------ ---------- ---------- ---------- ---------- ---------- ----------
3. Portfolio management fee
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- -------- -------- -------- --------
Portfolio management
fee 943 - 943 904 - 904
Performance fee - 1,825 1,825 - - -
--------------------- -------- -------- -------- -------- -------- --------
943 1,825 2,768 904 - 904
--------------------- -------- -------- -------- -------- -------- --------
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 2021, a performance fee of GBP1,825,000 has been accrued
(2020: GBPnil) and is expected to be cash settled upon approval of
this Annual Report in accordance with details set out below.
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 in certain circumstances.
The Company's performance is measured over rolling three-year
periods ending on 31 March each year (each a "Performance Period"),
by comparing the NAV total return per ordinary share over a
Performance Period against the total return performance of the NSCI
ex 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.
Each such tranche of 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
Year ended Year ended
31 March 31 March
2021 2020
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Directors' fees* 86 86
Company Secretarial and Administration fee - Link** 43 149
Frostrow Capital*** 164 -
Auditors remuneration 38 30
Other expenses 168 230
---------------------------------------------------- ---------- ----------
499 495
---------------------------------------------------- ---------- ----------
* 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.
** Link Company Matters Ltd was appointed as Company Secretary
and Administrator until 12 July 2020.
*** Frostrow Capital LLP was appointed with effect from 13 July 2020.
5. Taxation
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- -------- -------- --------
Analysis of charge in
year
Current tax:
Overseas tax suffered 3 - 3 7 - 7
---------------------- -------- -------- -------- -------- -------- --------
3 - 3 7 - 7
---------------------- -------- -------- -------- -------- -------- --------
The tax assessed for the year is the standard rate of
Corporation Tax in the UK of 19% (2020: 19%). The differences are
explained below:
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- -------- -------- -------- -------- --------
Net (loss)/return before
taxation (590) 43,288 42,698 550 (5,455) (4,905)
-------------------------------------- -------- -------- -------- -------- -------- --------
Theoretical tax at UK corporation
tax rate of 19% (2020: 19%) (112) 8,225 8,113 105 (1,037) (932)
Effects of:
UK dividends that are not
taxable (162) - (162) (346) - (346)
Foreign dividends that are
not taxable - - - (17) - (17)
Non-taxable investment losses/(gains) - (8,572) (8,572) (1) 1,037 1,036
Irrecoverable overseas tax 3 - 3 7 - 7
Unrelieved excess expenses 274 347 621 259 - 259
-------------------------------------- -------- -------- -------- -------- -------- --------
3 - 3 7 - 7
-------------------------------------- -------- -------- -------- -------- -------- --------
Factors that may affect future tax charges
At 31 March 2021, the Company had no unprovided deferred tax
liabilities (2020: GBPnil). At that date, based on current
estimates and including the accumulation of net allowable losses,
the Company had unrelieved losses of GBP5,828,000 (2020:
GBP2,564,000) that are available to offset future taxable revenue.
A deferred tax asset of GBP1,107,000 (2020: GBP435,000) 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.
6. (Loss)/return per ordinary share
The capital, revenue and total return per ordinary share are
based on the net (loss)/return shown in the Income Statement and
the weighted average number of ordinary shares during the period of
88,020,635 (2020: 88,257,211).
There are no dilutive instruments issued by the Company.
7. Investments held at fair value through profit or loss
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
-------------------------------------------------- ---------- ----------
Opening book cost 83,719 68,330
Opening investment holding losses (11,453) (1,523)
-------------------------------------------------- ---------- ------------
Opening fair value 72,266 66,807
-------------------------------------------------- ---------- ----------
Analysis of transactions made during the year
Purchases at cost 40,637 28,214
Sales proceeds received (48,758) (17,167)
Gains on sales of investments 8,298 4,342
Gains/(losses) on investment holding 36,816 (9,930)
-------------------------------------------------- ---------- ------------
Closing fair value 109,259 72,266
-------------------------------------------------- ---------- ----------
Closing book cost 83,896 83,719
Closing investment holding gains/(losses) 25,363 (11,453)
-------------------------------------------------- ---------- ------------
Closing fair value 109,259 72,266
-------------------------------------------------- ---------- ----------
Transaction costs 269 140
-------------------------------------------------- ---------- ----------
The Company is required to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
consists of the following three levels:
- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
An active market is a market in which transactions for the asset
or liability occur with sufficient frequency and volume on an
ongoing basis such that quoted prices reflect prices at which an
orderly transaction would take place between market participants at
the measurement date. Quoted prices provided by external pricing
services, brokers and vendors are included in Level 1, if they
reflect actual and regularly occurring market transactions on an
arms length basis.
- Level 2 - Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices).
- Level 3 - Inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
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 2021 As at 31 March 2020
Level Level Level Level Level Level
Total 1 2 3 Total 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
Quoted at fair value 109,259 109,259 - - 72,266 72,266 - -
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total 109,259 109,259 - - 72,266 72,266 - -
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
There were no transfers between levels during the period.
8. Trade and other receivables
As at As at
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------ -------- --------
Other receivables 143 187
------------------ -------- --------
143 187
------------------ -------- --------
9. Trade and other payables
As at As at
31 March 31 March
2020 2021
GBP'000 GBP'000
------------------------------------------ -------- --------
Due to brokers 300 1,808
Portfolio management and performance fees 2,106 231
Other payables 125 119
------------------------------------------ -------- --------
2,531 2,158
------------------------------------------ -------- --------
10. Share capital
Year ended 31 March Year ended 31 March
2021 2020
Number of Number of
Shares GBP'000 Shares GBP'000
----------------------------------- ------------ ------- ------------ -------
Issued and fully paid:
Ordinary shares of 1p:
Balance at beginning of the period 88,257,211 883 88,257,211 883
----------------------------------- ------------ ------- ------------ -------
Balance at end of the period 88,257,211 883 88,257,211 883
----------------------------------- ------------ ------- ------------ -------
Special distributable reserve
Upon initial placing and subsequent issuance of the Company's
ordinary shares on 1 May 2018 and 27 June 2018 respectively, the
Company accumulated a premium account of GBP85,495,000. Following
approval of the Court, effective on 8 August 2018, the share
premium account was cancelled and the balance after cancellation
cost of GBP20,000 was transferred to the special distributable
reserve.
On 22 May 2020, the Company purchased 275,000 of its own
ordinary shares at a total cost of GBP230,000 and these shares have
been placed into treasury.
11. Net asset value per ordinary share
The basic net asset value per ordinary share is based on net
assets of GBP122,560,000 (2020: 80,095,000) and the number of
ordinary shares in issue of 87,982,211 (2020: 88,257,211).
There are no dilutive instruments issued by the Company.
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
above.
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 GBP10,926,000 (2020:
GBP7,227,000).
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.
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 (2020: one) investment in
EUR fair valued at GBP2,226,000 (2020: GBP1,157,000) 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
decreased/increased the net asset value by GBP106,000 (2020:
GBP58,000). 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
GBP15,689,000 (2020: GBP9,800,000), a 1% increase in interest rates
would increase the revenue return and net assets by GBP157,000
(2020: GBP98,000). 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 GBP157,000 (2020: GBP98,000).
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 GBP15,689,000 (2020: GBP9,800,000) 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.
13. Related party transactions
The amounts incurred in respect of Portfolio Management fees
during the period to 31 March 2021 was GBP943,000 (2020: 904,000),
of which GBP281,000 (2020: GBP231,000) was outstanding at 31 March
2021. The amount accrued in relation to the performance fee
provision as at 31 March 2021 was GBP1,825,000 (2020: GBPnil).
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 (2020: GBPnil).
14. Subsequent events
There have been no events with material impact on the Company
since the Balance Sheet date.
Shareholder Information
Share capital and NAV information
Ordinary 1p shares 88,257,211
SEDOL number BFFK7H5
ISIN GB00BFFK7H57
Ticker OIT
LEI 213800RWVAQJKXYHSZ74
The Company's NAV is released daily to the LSE and published on
the Company's website.
Sources of further information
Copies of the Company's Annual and Interim Reports, Stock
Exchange announcements and further information on the Company can
be obtained from its website: www.oitplc.com.
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. 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 31 March
Annual results announced June
AGM September
Company's half-year 30 September
end
Half-yearly results November/December
announced
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.
Glossary
AGM
Annual General Meeting
AIC
Association of Investment Companies
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 (APM)
A description of the difference between the share price and the
net asset value per share. 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 net asset value per share the result
is a premium. If the share price is lower than the net asset value
per share, the shares are trading at a discount.
31 March 31 March
Premium/(Discount) Calculation 2021 2020
------------------------------- -------- -------- ---
Closing NAV per share (p) 139.3 90.8 a
Closing share price (p) 129.0 90.0 b
Discount
(c=((b-a)/a) x 100) (%) (7.4)% (0.9)% 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.
ESG
Environmental, social and governance
EU
European Union
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 had no borrowings during the year (2020:nil).
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 in
the Business Review.
LSE
London Stock Exchange
M&A
Mergers and acquisitions
Net Asset Value ('NAV') per Share
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 GBP122,560,000(2020:
GBP80,095,000) by the number of Ordinary Shares in issue 87,982,211
(2020: 88,257,211) at the year end.
NAV Total Return (APM)
NAV total return is the closing NAV per share including any
cumulative dividends paid as a percentage over the opening NAV. NAV
total return is an alternative way of measuring investment
management performance of investment trusts which is not affected
by movements in the share price.
31 March 31 March
NAV Total Return 2021 2020
-------------------------- -------- --------
Closing NAV per share (p) 139.3 90.8 a
Opening NAV Per share (p) 90.8 96.3 b
Dividend reinvested (p) - -
NAV total return
(c= ((a-b)/b x 100) (%) 53.4% (5.7%) c
-------------------------- -------- --------
NSCI ex IT plus AIM Index
Numis Smaller Companies ex Investment Trust plus AIM Index.
Ongoing Charges Ratio (APM)
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.
31 March 31 March
2021 2020
----------------------------------- ----------- ----------
Ongoing charges (a) 1,442,000 1,399,000
Average net asset value (b) 101,160,000 84,064,000
Ongoing charges (a/b) expressed as
a % 1.4% 1.7%
----------------------------------- ----------- ----------
P/E
Price earnings ratio
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.
Share Price Total Return (APM)
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. This is calculated by the
movement in the share price plus dividend income reinvested by the
Company at the prevailing share price.
31 March 31 March
Share Price Total Return 2021 2020
------------------------- -------- -------- ---
Closing share price (p) 129.0 90.0 a
Opening share price (p) 90.0 99.3 b
Dividend reinvested (p) - -
Share price total return
(c= ((a-b)/b x 100) (%) 43.3% (9.4%) c
------------------------- -------- -------- ---
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.
Notice of Annual General Meeting
This document is important and requires your immediate
attention. If you are in any doubt as to what action you should
take, you are recommended to seek your own financial advice from
your stockbroker or other independent adviser authorised under the
Financial Services and Markets Act 2000 immediately.
If you have sold or otherwise transferred all of your shares in
Odyssean Investment Trust plc, please forward this document as soon
as possible to the purchaser or transferee or to the stockbroker,
bank or other agent through whom the sale or transfer was effected
for transmission to the purchaser or transferee.
NOTICE IS HEREBY GIVEN that the third ANNUAL GENERAL MEETING of
Odyssean Investment Trust plc will be held at the offices of
Odyssean Capital LLP, 6 Stratton Street, Mayfair, London W1J 8LD at
12 noon on Wednesday, 22 September 2021 to consider and vote on the
resolutions below:
Resolutions 1 to 10 (inclusive) will be proposed as ordinary
resolutions and resolutions 11 to 15 (inclusive) will be proposed
as special resolutions.
1. To receive and, if thought fit, to accept the Strategic
Report, Directors' Report, Auditors Report and the audited
Financial Statements for the year ended 31 March 2021.
2. To receive and approve the Directors' Remuneration Report for the year ended 31 March 2021.
3. To re-elect Mrs Jane Tufnell as a Director of the Company.
4. To re-elect Miss Arabella Cecil as a Director of the Company.
5. To re-elect Mr Peter Hewitt as a Director of the Company.
6. To re-elect Mr Richard King as a Director of the Company.
7. To re-appoint KPMG LLP as Auditor to the Company, to hold
office from the conclusion of this meeting until the conclusion of
the next general meeting at which financial statements are laid
before the Company.
8. To authorise the Audit Committee to determine the remuneration of the Auditor of the Company.
9. THAT, the Directors be generally and unconditionally
authorised in accordance with section 551 of the Companies Act 2006
(the "Act") to exercise all the powers of the Company to allot
ordinary shares up to 8,798,221 (representing approximately 10% of
the ordinary shares in issue as at the date of this Notice,
excluding treasury shares) or, if changed, 10% of the ordinary
shares in issue immediately following the passing of this
resolution, such authority to expire at conclusion of the Company's
AGM to be held in 2022, unless renewed, varied or revoked by the
Company in a general meeting, save that the Company may, at any
time prior to the expiry of such authority, make an offer or enter
into an agreement which would or might require ordinary shares to
be allotted in pursuance of such offer or agreement as if such
authority had not expired. This resolution revokes and replaces all
unexercised authorities previously granted to the Directors to
allot ordinary shares but without prejudice to any allotment of
ordinary shares or grant of rights made, offered or agreed to be
made pursuant to such authorities.
10. THAT, subject to the passing of Resolution 9, the Directors
be generally and unconditionally authorised in accordance with
section 551 of the Companies Act 2006 (the "Act") to exercise all
the powers of the Company to allot ordinary shares up to 8,798,221
(representing approximately 10% of the ordinary shares in issue as
at the date of this Notice, excluding treasury shares) or, if
changed, 10% of the ordinary shares in issue immediately following
the passing of this resolution, such authority to expire at
conclusion of the Company's AGM to be held in 2022, unless renewed,
varied or revoked by the Company in a general meeting, save that
the Company may, at any time prior to the expiry of such authority,
make an offer or enter into an agreement which would or might
require ordinary shares to be allotted in pursuance of such offer
or agreement as if such authority had not expired. This resolution
revokes and replaces all unexercised authorities previously granted
to the Directors to allot ordinary shares but without prejudice to
the authority granted to the Directors pursuant to Resolution 9, or
any allotment of ordinary shares or grant of rights made, offered
or agreed to be made pursuant to such authorities.
11 THAT, subject to the passing of Resolution 9, the Directors
be generally empowered (pursuant to sections 570 and 573 of the
Companies Act 2006 (the "Act")) to allot ordinary shares and to
sell ordinary shares from treasury for cash as if section 561 of
the Act did not apply to any such allotment or sale, provided that
this power shall be limited to the issue of up to 8,798,221 shares
(representing approximately 10% of the ordinary shares in issue as
at the date of this Notice, excluding treasury shares) or, if
changed, 10% of the ordinary shares in issue immediately following
the passing of this resolution. This power will expire at the
conclusion of the Company's AGM to be held in 2022 (unless
previously revoked, varied or renewed by the Company in general
meeting), save that the Company may, at any time prior to the
expiry of such power, make an offer or enter into an agreement
which would or might require ordinary shares to be allotted or sold
from treasury after the expiry of such power and the Directors may
allot or sell from treasury ordinary shares in pursuance of such an
offer or agreement as if such power had not expired.
12. THAT, subject to the passing of Resolution 10, the Directors
be generally empowered (pursuant to sections 570 and 573 of the
Companies Act 2006 (the "Act")) to allot ordinary shares and to
sell ordinary shares from treasury for cash as if section 561 of
the Act did not apply to any such allotment or sale, provided that
this power shall be limited to the issue of up to 8,798,221 shares
(representing approximately 10% of the ordinary shares in issue as
at the date of this Notice, excluding treasury shares) or, if
changed, 10% of the ordinary shares in issue immediately following
the passing of this resolution. This power will expire at the
conclusion of the Company's AGM to be held in 2022 (unless
previously revoked, varied or renewed by the Company in general
meeting), save that the Company may, at any time prior to the
expiry of such power, make an offer or enter into an agreement
which would or might require ordinary shares to be allotted or sold
from treasury after the expiry of such power and the Directors may
allot or sell from treasury ordinary shares in pursuance of such an
offer or agreement as if such power had not expired. This
resolution is in addition to the authority granted pursuant to, but
without prejudice to that granted to, the Directors in Resolution
11 above.
13. THAT, the Company be authorised in accordance with section
701 of the Companies Act 2006 (the "Act") to make market purchases
(within the meaning of section 693(4) of the Act) of ordinary
shares provided that the maximum number of ordinary shares
authorised to be purchased will be up to 14.99% of the ordinary
shares in issue at the date of this Notice (excluding treasury
shares) or, if changed, 14.99% of the ordinary shares in issue
immediately following the passing of this resolution. The minimum
price which may be paid for an ordinary share is GBP0.01. The
maximum price which may be paid for an ordinary share must not be
more than the higher of:
(i) 5% above the average of the mid-market value of the ordinary
shares for the five business days before the purchase is made;
or
(ii) the higher of the price of the last independent trade and
the highest current independent bid for the ordinary shares on the
trading venue where the purchase is carried out.
Such authority will expire at the AGM of the Company to be held
in 2022, save that the Company may contract to purchase ordinary
shares under the authority thereby conferred prior to the expiry of
such authority, which contract will or may be executed wholly or
partly after the expiry of such authority and may purchase ordinary
shares in pursuance of such contract. This resolution revokes and
replaces all unexercised authorities previously granted to the
Directors to make market purchases of ordinary shares.
14. THAT, a general meeting, other than an AGM, may be called on
not less than 14 clear days' notice.
15. THAT with effect from the conclusion of the meeting the
draft Articles of Association produced to the meeting and, for the
purposes of identification, initialled by the chairman of the
meeting be adopted as the Articles of Association of the Company in
substitution for, and to the exclusion of, the Company's existing
Articles of Association.
Shareholders should note that, should recurring restrictions in
view of the Covid-19 pandemic make it impossible to hold a physical
meeting without endangering the wellbeing of shareholders and other
attendees, then the Board will only conduct the statutory, formal
business this year in order to meet the minimum legal requirements.
In that case arrangements will be made for shareholders to attend
via a webinar, view a presentation by the Investment Managers and
ask questions in advance. Shareholders are encouraged to view the
Company's website, www.oitplc.com for further information nearer
the time. Questions to the Board and the Portfolio Managers can be
submitted to the Company Secretary at info@frostrow.com. Should
time pressures make it impossible to answer all questions during
the webinar, then an effort will be made to answer them on the
website afterwards.
All shareholders should look on the Company's website,
www.oitplc.com, for any final changes to the AGM arrangements and
whether attendance will be possible. In any case, all shareholders
are strongly advised to exercise their votes in advance of the
meeting by proxy, by following the voting instructions
overleaf.
By order of the Board
Frostrow Capital LLP
Company Secretary
28 May 2021
Registered Office: 25 Southampton Buildings, London WC2A 1AL
Notes
1. Holders of ordinary shares are entitled to attend, speak and
vote at the AGM, subject to the restrictions due to the Covid-19
pandemic as set out in the Directors' Report. A member entitled to
attend, speak and vote at this meeting may appoint one or more
persons as his/her proxy to attend, speak and vote on his/her
behalf at the meeting. A proxy need not be a member of the Company.
If multiple proxies are appointed, they must not be appointed in
respect of the same shares. To be effective, the enclosed form of
proxy, together with any power of attorney or other authority under
which it is signed or a certified copy thereof, should be lodged at
the office of the Company's Registrar, Equiniti Limited, Aspect
House, Spencer Road, Lancing, West Sussex BN99 6DA by no later than
12.00 noon on Monday, 20 September 2021.
If you return more than one proxy appointment, either by paper
or electronic communication, that received last by Equiniti before
the latest time for the receipt of proxies will take precedence.
You are advised to read the terms and conditions of use carefully.
Electronic communication facilities are open to all shareholders
and those who use them will not be disadvantaged.
The appointment of a proxy will not prevent a member from
attending the meeting and voting in person if he/ she so wishes. A
member present in person or by proxy shall have one vote on a show
of hands and on a poll every member present in person or by proxy
shall have one vote for every ordinary share of which he/she is the
holder. The termination of the authority of a person to act as
proxy must be notified to the Company in writing. Amended
instructions must be received by the Company's Registrar by the
deadline for receipt of proxies.
To appoint more than one proxy, shareholders will need to
complete a separate proxy form in relation to each appointment,
stating clearly on each proxy form the number of shares in relation
to which the proxy is appointed. A failure to specify the number of
shares to which each proxy appointment relates or specifying an
aggregate number of shares in excess of those held by the member
will result in the proxy appointment being invalid. Please indicate
if the proxy instruction is one of multiple instructions being
given. If you require additional proxy forms, please contact the
Registrar's helpline on 0371 384 2030 (+44 (0) 121 415 7047 from
outside the UK). Lines are open 8.30 am to 5.30 pm Monday to Friday
(excluding public holidays in England and Wales). All proxy forms
must be signed and should be returned together in the same envelope
if possible.
In the case of joint holders, where more than one of the joint
holders purports to appoint a proxy, only the appointment submitted
by the most senior holder will be accepted. Seniority is determined
by the order in which the names of the joint holders appear in the
Company's Register of Members in respect of the joint holders (the
first named being the most senior).
2 . Only those ordinary shareholders registered in the register
of members of the Company as at 6.30 pm on Monday, 20 September
2021 (the "specified time") shall be entitled to attend or vote at
the aforesaid AGM in respect of the number of shares registered in
their name at that time. Changes to entries on the relevant
register of securities after 6.30 pm on 20 September 2021 shall be
disregarded in determining the rights of any person to attend or
vote at the meeting. If the meeting is adjourned to a time not more
than 48 hours after the specified time applicable to the original
meeting, that time will also apply for the purpose of determining
the entitlement of members to attend and vote (and for the purpose
of determining the number of votes they may cast) at the adjourned
meeting. If however the meeting is adjourned for a longer period
then, to be so entitled, members must be entered on the Company's
register of members at the time which is 48 hours before the time
fixed for the adjourned meeting, or if the Company gives notice of
the adjourned meeting, at the time specified in that notice.
3 . Shareholders who hold their shares electronically may submit
their votes through CREST. Instructions on how to vote through
CREST can be found by accessing the following website:
www.euroclear.com.
CREST members who wish to appoint a proxy or proxies by
utilising the CREST electronic proxy appointment service may do so
for this meeting and any adjournment thereof by following the
procedures described in the CREST manual. CREST personal members or
other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of
CREST to be valid, the appropriate CREST message (a "CREST Proxy
Instruction") must be properly authenticated in accordance with
Euroclear UK & Ireland Limited's specifications and must
contain the information required for such instructions, as
described in the CREST manual (available via www.euroclear.com).
The message, in order to be valid, must be transmitted so as to be
received by them Company's agent (ID RA19) by the latest time for
receipt of proxy appointments specified in note 1 above. For this
purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST
Applications Host) from which the Company's agent is able to
retrieve the message by enquiry to CREST in the manner prescribed
by CREST. After this time, any change of instructions to proxies
appointed through CREST should be communicated to the appointee
through other means. CREST members and, where applicable, their
CREST sponsors or voting service providers should note that
Euroclear UK & Ireland Limited does not make available special
procedures in CREST for any particular messages. Normal system
timings and limitations will therefore apply in relation to the
input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST
personal member or sponsored member or has appointed a voting
service provider(s), to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system
by any particular time.
In this connection, CREST members and, where applicable, their
CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST manual concerning
practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in
the circumstances set out in Regulation 35(5) (a) of the
Uncertificated Securities Regulations 2001.
4 . A person to whom this notice is sent who is a person
nominated under section 146 of the Companies Act 2006 to enjoy
information rights (a "Nominated Person") may, under an agreement
between him/her and the shareholder by whom he/she was nominated,
have a right to be appointed (or to have someone else appointed) as
a proxy for the AGM. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, he/she may,
under any such agreement, have a right to give instructions to the
shareholder as to the exercise of voting rights. The statements of
the rights of members in relation to the appointment of proxies in
note 1 above do not apply to a Nominated Person. The rights
described in those notes can only be exercised by registered
members of the Company.
5 . Shareholders (and any proxies or representatives they
appoint) agree, by attending the meeting, that they are expressly
requesting and that they are willing to receive any communications
(including communications relating to the Company's securities)
made at the meeting.
6. As 28 May 2021 (being the date of the publication of this
notice), the Company's issued share capital amounted to 88,257,211
ordinary shares carrying one vote each. 275,000 shares were held in
treasury. Therefore, the total voting rights of the Company as at
the date of this notice of meeting were 87,982,211.
7. Any corporation which is a member may appoint one or more
corporate representatives who may exercise on its behalf all of its
powers as a member provided that they do not do so in relation to
the same shares. To be able to attend and vote at the meeting,
corporate representatives will be required to produce prior to
their entry to the meeting evidence satisfactory to the Company of
their appointment. Corporate shareholders may also appoint one or
more proxies in accordance with note 1.
8. Any question relevant to the business of the AGM may normally
be asked at the meeting by anyone permitted to speak at the
meeting. You can also submit your question in advance by letter
addressed to the Secretary at the registered office of the Company
or by email to info@frostrow.com. The Company must answer any
question asked by a member relating to the business being dealt
with at the meeting unless:
- answering the question would interfere unduly with the
preparation for the meeting or involve the disclosure of
confidential information;
- the answer has already been given on a website in the form of an answer to a question; or
- it is undesirable in the interests of the Company or the good
order of the meeting that the question be answered.
9. Members should note that it is possible that, pursuant to
requests made by members of the Company under section 527 of the
Companies Act 2006, the Company may be required to publish on a
website a statement setting out any matter relating to: (i) the
audit of the Company's financial statements (including the
Auditor's report and the conduct of the audit) that are to be laid
before the AGM; or (ii) any circumstances connected with an auditor
of the Company ceasing to hold office since the previous meeting at
which annual financial statements and reports were laid in
accordance with section 437 of the Companies Act 2006. The Company
may not require the members requesting any such website publication
to pay its expenses in complying with sections 527 or 528 of the
Companies Act 2006. Where the Company is required to place a
statement on a website under section 527 of the Companies Act 2006,
it must forward the statement to the Company's Auditor no later
than the time when it makes the statement available on the website.
The business which may be dealt with at the AGM includes any
statement that the Company has been required under section 527 of
the Companies Act 2006 to publish on a website.
10. Members satisfying the thresholds in section 338 of the
Companies Act 2006 may require the Company to give, to members of
the Company entitled to receive notice of the AGM, notice of a
resolution which those members intend to move (and which may
properly be moved) at the AGM. A resolution may properly be moved
at the AGM unless (i) it would, if passed, be ineffective (whether
by reason of any inconsistency with any enactment or the Company's
constitution or otherwise); (ii) it is defamatory of any person; or
(iii) it is frivolous or vexatious. A request made pursuant to this
right may be in hard copy or electronic form, must identify the
resolution of which notice is to be given, must be authenticated by
the person(s) making it and must be received by the Company not
later than six weeks before the date of the AGM.
11. Members satisfying the thresholds in section 338A of the
Companies Act 2006 may request the Company to include in the
business to be dealt with at the AGM any matter (other than a
proposed resolution) which may properly be included in the business
at the AGM. A matter may properly be included in the business at
the AGM unless (i) it is defamatory of any person, or (ii) it is
frivolous or vexatious. A request made pursuant to this right may
be in hard copy or electronic form, must identify grounds for the
request, must be authenticated by the person(s) making it and must
be received by the Company not later than six weeks before the date
of the AGM.
12. Any person holding 3% or more of the total voting rights of
the Company who appoints a person other than the chairman of the
meeting as his/her proxy is to ensure that both he/she and his/her
proxy comply with their respective disclosure obligations under the
UK Disclosure Guidance and Transparency Rules.
13. Copies of the letters of appointment of the Directors of the
Company and the Articles of Association will be available for
inspection at the registered office of the Company during normal
business hours on any weekday (Saturdays, Sundays and public
holidays excepted) from the date of this Notice until the
conclusion of the AGM and on the date of the AGM at the offices of
Odyssean Capital LLP, 6 Stratton Street, Mayfair, London W1J 8LD
from 11.45 a.m. until the conclusion of the meeting. Alternatively,
should Covid restrictions continue, the above documents can be
requested from the Company Secretary by writing to
info@frostrow.com.
14. This notice, the information required by section 311A of the
Companies Act 2006 and, if applicable, any members' statements,
members' resolutions or members' matters of business received by
the Company after the date of this notice, will be available on the
Company's website at www.oitplc.com.
15. Members may not use any electronic address provided either
in the Notice of Meeting or any related documents (including the
form of proxy) to communicate with the Company for any purpose
other than those expressly stated.
Explanatory Notes to the Resolutions
Resolutions 1 to 10 will be proposed as ordinary resolutions and
Resolutions 11 to 15 will be proposed as special resolutions.
Resolution 1 - To receive the Annual Report and Financial
Statements
The Annual Report and Financial Statements for the year ended 31
March 2021 will be presented to the AGM and shareholders will be
given an opportunity at the meeting to ask questions. The Annual
Report and Financial Statements have already been mailed to
shareholders and can also be found on the Company's website at
www.oitplc.com under Corporate Information.
Resolution 2 - To receive and approve the Directors'
Remuneration Report
The Directors' Remuneration Report is set out in full above.
Resolutions 3 to 6 - Re-election of Directors
Resolutions 3 to 6 deal with the re-election of each Director.
Biographies of each of the Directors can be found at the beginning
of the Directors' Report.
The Board has confirmed, following a performance review, that
the Directors standing for re-election continue to perform
effectively.
Resolutions 7 and 8 - Re-appointment of auditors
Resolution 7 relates to the re-appointment of KPMG LLP as the
Company's independent auditors to hold office until the next Annual
General Meeting of the Company and Resolution 8 authorises the
Audit Committee to set their remuneration. Following the
implementation of the Competition and Markets Authority order on
Statutory Audit Services only the Audit Committee may negotiate and
agree the terms of the auditors' service agreement.
Resolutions 9 and 10 - Authority to allot ordinary shares
Resolutions 9 and 10, ordinary resolutions as set out in the
Notice of AGM, if passed, will renew the Directors' authority to
allot shares in accordance with statutory pre-emption rights. These
resolutions will authorise the Board to allot:
- ordinary shares generally and unconditionally in accordance
with section 551 of Companies Act 2006 up to an aggregate nominal
value of GBP87,982, representing approximately 10% of the Company's
issued share capital (excluding treasury shares) as at the date of
the Notice of AGM or, if changed, the number representing 10% of
the issued share capital of the Company at the date at which this
resolution is passed (Resolution 9); and
- further ordinary shares generally and unconditionally in
accordance with section 551 of Companies Act 2006 up to an
additional aggregate nominal value of GBP87,982, representing
approximately 10% of the Company's issued share capital (excluding
treasury shares) as at the date of the Notice of AGM or, if
changed, the number representing 10% of the issued share capital of
the Company at the date at which this resolution is passed
(Resolution 10).
As at 28 May 2021, 275,000 shares were held in treasury.
If both these resolutions are passed, shareholders will be
granting the Directors authority to allot up to 20% of the
Company's issued share capital. The Board believes that passing of
Resolutions 9 and 10 is in the shareholders' interests as the
authority is intended to be used for funding investment
opportunities sourced by the Portfolio Manager, thereby mitigating
any potential dilution of investment returns for existing
shareholders, and the Directors will only issue new ordinary shares
at a price above the prevailing NAV per ordinary share. If only
Resolution 9 is passed and Resolution 10 is not passed,
shareholders will only be granting Directors the authority to allot
up to 10% of the existing issued ordinary share capital of the
Company. These authorities, if given, will lapse at the conclusion
of the 2022 AGM of the Company.
The Directors do not currently intend to allot shares other than
to take advantage of opportunities in the market as they arise and
only if they believe it would be advantageous to the Company's
shareholders to do so.
In the event that Resolution 9 is not passed, Resolution 10 will
not be proposed at the AGM.
Resolutions 11 and 12 - Disapplication of pre-emption rights
Resolution 11, a special resolution, is being proposed to
authorise the Directors to disapply the statutory preemption rights
of existing shareholders in relation to the issue of shares under
Resolution 9, for cash or the sale of shares out of treasury up to
an aggregate nominal amount of GBP87,982, being approximately 10%
of the Company's issued share capital (excluding treasury shares)
as at the date of the Notice of AGM or, if changed, 10% of the
issued share capital immediately upon the passing of this
resolution.
Resolution 12, a special resolution, is being proposed to
authorise the Directors to disapply the statutory preemption rights
of existing shareholders in relation to the further issue of shares
under Resolution 10, for cash or the sale of shares out of treasury
up to an aggregate nominal amount of GBP87,982, being approximately
10% of the Company's issued share capital (excluding treasury
shares) as at the date of the Notice of AGM or, if changed, 10% of
the issued share capital immediately upon the passing of this
resolution.
In respect of Resolutions 11 and 12, shares would only be issued
at a price above the prevailing NAV per share. The Directors will
only issue shares on a non-pre-emptive basis if they believe it
would be in the best interests of the Company's shareholders.
If both these resolutions are passed, shareholders will be
granting the Directors authority to allot up to 20% of the
Company's issued share capital on a non-pre-emptive basis. Although
this percentage authority is higher than the authority typically
sought by investment companies, the Board believes that in order to
have the maximum flexibility to raise finance to enable the Company
to take advantage of suitable opportunities, the passing of
Resolutions 11 and 12 is in the shareholders' interests.
Resolution 13 - Purchase of own shares
Resolution 13, a special resolution, will renew the Company's
authority to make market purchases of up to 13,188,533 ordinary
shares (being 14.99% of the issued share capital as at the date of
the Notice of AGM), either for cancellation or placing into
treasury at the determination of the Directors. Purchases of
ordinary shares will be made within guidelines established from
time to time by the Board. Any purchase of ordinary shares would be
made only out of the available cash resources of the Company. The
maximum price which may be paid for an ordinary share must not be
more than the higher of (i) 5% above the average of the mid-market
value of the ordinary shares for the five business days before the
purchase is made, or (ii) the higher of the price of the last
independent trade and the highest current independent bid for the
ordinary shares on the trading venue where the purchase is carried
out. The minimum price which may be paid is GBP0.01 per ordinary
share.
The Directors would only use this authority in order to address
any significant imbalance between the supply and demand for the
ordinary shares and to manage the discount to NAV at which the
ordinary shares trade. Ordinary shares will be repurchased only at
prices below the NAV per ordinary share, which should have the
effect of increasing the NAV per ordinary share for remaining
shareholders.
This authority, if approved by shareholders, will expire at the
AGM to be held in 2022, when a resolution for its renewal will be
proposed.
Resolution 14 - Notice period for general meetings
In terms of the Companies Act 2006, the notice period for
general meetings (other than an AGM) is 21 clear days' notice
unless the Company: (i) has gained shareholder approval for the
holding of general meetings on 14 clear days' notice by passing a
special resolution at the most recent AGM; and (ii) offers the
facility for all shareholders to vote by electronic means. The
Company would like to preserve its ability to call general meetings
(other than an annual general meeting) on less than 21 clear days'
notice. The shorter notice period proposed by resolution 14, a
special resolution, would not be used as a matter of routine, but
only where the flexibility is merited by the business of the
meeting and is thought to be in the interests of shareholders as a
whole. The approval will be effective until the date of the AGM to
be held in 2022, when it is intended that a similar resolution will
be proposed.
Resolution 15 - Amendment to the Articles of Association
The Directors are proposing to make amendments to the Company's
Articles of Association (the "Articles") to enable them to
determine the time and place of general meetings and the manner in
which they are conducted (including the ability to hold hybrid
meetings). The amendments are being sought in response to
challenges posed by the government restrictions on social
interactions as a result of the COVID-19 pandemic, which have made
it difficult or impossible for shareholders to attend physical
meetings. The key changes proposed to be introduced in the Articles
and their effect are set out in detail in the Directors'
Report.
Further amendments are also being proposed to be made to the
Articles to reflect recent changes to law and regulation, including
changes to the AIC Code of Corporate Governance (the "AIC Code")
and to permit the Company to request information from shareholders
to satisfy due diligence and reporting requirements under the US
Foreign Account Tax Compliance Act of 2010 ("US FATCA") or similar
laws and thereby avoid adverse tax consequences which would
otherwise arise under US FATCA or similar laws. In addition, the
Company is seeking an amendment to the Articles to permit the
Company to require the transfer of shares where the shareholder in
question fails to comply with such request or may cause the Company
issues under US FATCA or any similar laws.
The proposed new Articles (marked to show the proposed changes)
will be available for inspection on the Company's website,
www.oitplc.com and at the Company's registered office, from the
date of this document until the close of the annual general
meeting, and will also be available for inspection at the venue of
the annual general meeting from fifteen minutes before and during
the annual general meeting. Should it be impossible to view the
proposed new Articles at the registered office then an electronic
copy can also be requested from the Company Secretary by writing to
info@frostrow.com.
Directors' Recommendation
The Directors consider each resolution being proposed at the AGM
to be in the best interests of the Company and shareholders as a
whole and they unanimously recommend that all shareholders vote in
favour of them, as they intend to do in respect of their own
beneficial shareholdings.
The Annual Report will be posted to shareholders in mid-June
2021.
Further copies may be obtained from the Company Secretary:
Frostrow Capital LLP, 25 Southampton Buildings, London WC2A
1AL.
A copy of the Annual Report will be submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report will also be available on the Company's
website at www.oitplc.com where up-to-date information on the
Company, including daily NAV, share prices and fact sheets, can
also be found.
- END -
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(END) Dow Jones Newswires
May 28, 2021 06:45 ET (10:45 GMT)
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