OIT Odyssean Investment Trust Plc

11 June 2024

ODYSSEAN INVESTMENT TRUST PLC

Annual Report and Financial Statements

for the year ended 31 March 2024

This announcement contains regulated information

Odyssean Investment Trust plc (the "Company" or "OIT") today announces

audited results for the year ended 31 March 2024

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 invest¹ 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 weapons² (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) 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

As a Small Registered AIFM, the Company may not employ borrowings .

Derivatives and Hedging

The Company will not use derivatives for investment purposes. It is expected that the Company's assets will be predominantly denominated in Sterling and, as such, the Company does not intend to engage in hedging arrangements, however, the Company may do so if the Board deems it appropriate for efficient portfolio management purposes.

General

The Company will not be required to dispose of any asset or to rebalance the Portfolio as a result of a change in the respective valuations of its assets.

The Company intends to conduct its affairs so as to qualify as an investment trust for the purposes of section 1158 of the Corporation Tax Act 2010.

Any material change to the Company's investment policy set out above will require the approval of shareholders by way of an ordinary resolution at a general meeting and the approval of the Financial Conduct Authority (the "FCA"). Non-material changes to the investment policy may be approved by the Board.

Financial Summary

#    Alternative Performance Measures (see Glossary).

*     Used by the Company as comparator, not a Benchmark. Source: Bloomberg.

Past performance is not a guide to future performance.

Chairman's Statement

Introduction

I am pleased to present the Company's Annual Report and Financial statements for the year ended 31 March 2024. This is my first report as Chairman of the Company following Jane Tufnell's retirement from the Board on 31 March 2024. Jane was Chairman from the launch of the Company.

Performance

Over the year, the net asset value per share ('NAV per share') of your Company fell by 3.7%, in a year where the NAV per share was more volatile than normal. The Company's performance reflected markets and volatility driven by stock specific issues, but was below the broader market return of c.3%. Unlike in previous years, none of the portfolio companies benefited from takeover activity, which in a concentrated portfolio can make a significant difference to returns.

Equity markets have been coping with considerable uncertainties - geopolitical, monetary policy, asymmetric economic growth around the world, as well as entering a period where political change is likely. Equity returns were dominated by the performance of the largest US tech stocks. US equities as a whole have remained favoured by investors, with capital continue to flow into that region such that US equities account for c.70% of global equities by market value.

The net assets of your Company increased modestly during the year due to a small number of new shares being issued. It is encouraging to continue to see support for the Company and its differentiated investment strategy even during times of uncertainty.

Discount and Premium Management

The share price has tracked in line with the NAV per share over the period, albeit with continued volatility. The Company's shares ended the period trading around its NAV.

In response to buying demand exceeding selling demand over the period, the Company issued a total of 8,507,000 shares at a premium to NAV, which meant that there was no dilution to existing shareholders. Since the year end and up to 10 June 2024, the latest practicable date prior to the publication of this report, a further 2,075,000 shares have been issued at a premium to NAV.

The Company's average discount since IPO has been 0.1%. The Board believes that the Company's strong absolute and relative rating is driven by a number of factors including good performance, a differentiated strategy (only accessible to investors via the Company), effective communication with existing and potential investors, a clear discount control policy (including a periodic redemption facility), a well-balanced register of long-term shareholders and (multiple) features which align the interests of all stakeholders.

Dividend

The Directors expect that returns for shareholders will be driven primarily by capital growth of the shares rather than dividend income. No dividend is proposed for the year ended 31 March 2024.

Board of Directors

As I mentioned earlier, Jane Tufnell had been Chairman of the Company since its inception in 2018. In her Chairman's Statement at the half-year stage Jane mentioned that it was appropriate to identify a new Chairman at an early stage as, in addition to Board succession, the Company was also moving towards the period when it would be honouring its commitment to provide an exit opportunity for shareholders. This has allowed me to be in a position to take the Company through the exit opportunity and, prior to making any election, investors now also know who the Chairman would be for the next investment period.

On behalf of the Board, I would like to thank Jane for her leadership and wise counsel during her time on the Board, a period during which the Company achieved strong performance for shareholders.

Company Strategy

In April 2024 the Board reviewed the Company's strategy against the assumptions and proposition presented to shareholders in the IPO Prospectus. It is pleasing to note that, with the exception of unsupportive markets and a de‑rating of UK equities, many of the assumptions have been proven and the proposition allowed the Company to navigate six years of quite extraordinary events.

As well as the Board review, I have taken the opportunity to meet with a number of the Company's largest shareholders to hear their views on the Company and its prospects.

The concentrated investment strategy of the Company is less impacted than much more diversified peers. As a result, whilst the well-publicised shrinkage of the UK equity market reduced choice for all investors, it has much less impact on the Company's investment strategy. Moreover, the Board remains of the view that the addressable market is substantial and the Portfolio Manager's investment approach should continue to deliver attractive differentiated returns.

After careful consideration and in light of the feedback from major shareholders, the Board concluded that the purpose and strategy of the Company remained highly relevant, the prospects for future returns remain attractive, and that little or no change to the key features was necessary. However, the Board will continue to review the strategy regularly.

Redemption Event

The Board believes that the Redemption facility set out in the IPO Prospectus has been one of the key factors in helping the Company's shares trade at or around NAV. On 21 May the Company announced that it was running the first periodic Tender Offer enabling shareholders to exit their investment.

On 5 June the Company announced that 785,596 shares had been tendered by shareholders, representing 0.6% of the Company's issued share capital. On 7 June, the Company announced that all of these shares had been resold to institutional shareholders. As a result, the share count of the Company has remained flat.

The Board believes that the low level of participation in the Tender Offer reflects the performance delivered by the portfolio management team in a challenging market since launch as well as a recognition of the Company's unique investment approach.

The Board shares the views of the Portfolio Manager and major shareholders that the Redemption facility is a key positive attribute and differentiator of the Company. As a result, I am pleased to confirm that the Board intends to continue to offer this facility every seventh year as set out in the original prospectus.

Growth of the Company

Since launch, the majority of the growth in the Company has been organic due to performance delivered by the Portfolio Manager. However as previously mentioned the Company has also taken the opportunity to issue new shares at a premium to net asset value. The growth has been measured and spread across wealth managers, retail investors and high net worth individuals. It has also led to the shareholder base continuing to diversify.

The Board continues to believe that the growth in the Company provides a number of benefits to shareholders including greater liquidity in the shares and a lower ongoing charges ratio as the fixed costs of the Company are spread over a larger asset base.

Wealth managers represent c.50% of the shareholder base of the Company. The Board remains mindful of the continued consolidation of the very large wealth managers, where some investment managers are restricted to only purchasing securities approved by a central research team. These tend to be larger investment companies than the Company. The Company has only a very limited proportion of its shareholder base which is subject to such consolidation and therefore potentially subject to this risk. The Board also continues to believe that organic growth over the next three to five years alone will help propel the Company to a size where it is a more attractive prospect for investors from larger wealth managers.

The Company has found continued success in attracting shareholders from small and mid-sized wealth managers, and new startups where the ethos is counter central-buy lists, as well as retail investors. One of the many advantages of this shareholder base is that the register is well balanced and the shares have the potential to be more liquid than a similar sized investment company with a more concentrated shareholder base.

The Board is also aware that the investment strategy is not infinitely scalable. However, it shares the Portfolio Manager's view that there appears to be considerable room for the Company to grow before returns from the investment strategy risk being diminished.

Annual General Meeting ("AGM")

The sixth AGM of the Company will take place at 12.00 noon on Wednesday, 4 September 2024. The AGM will be held 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 in the Notice of Meeting.

Outlook

For much of the period since the Company launched UK equities, particularly UK Smaller Companies, have been out of favour, despite the compelling value they have been offering for the past couple of years. Whilst the Portfolio Manager and my predecessor must have felt like lone voices at times, pleasingly over recent months there has been a much broader recognition of this anomaly and opportunity.

It's impossible to predict the timing of any reassessment and re-rating of UK equities, nor the specific catalyst or catalysts driving this. Assuming we are at the peak of the interest rate cycle, the first interest rate cut might be one such catalyst. The Board shares the Portfolio Manager's belief that the Company's portfolio companies should be major beneficiaries of this change.

Whilst we wait for this re-evaluation, further M&A activity is possible. The portfolio was not a major beneficiary of M&A in the year under review, potentially due to its skew towards industrial companies - a sector where there was limited M&A during 2023. However, it is notable that M&A activity among industrial companies has appeared to re-emerge in 2024, just as trading conditions appear to be on the cusp of recovering. The recent bid interest for portfolio company XP Power is more evidence of this emerging trend.

Alongside the potential optionality from M&A, whilst we wait for sentiment to change, many portfolio companies have the scope to drive improved operating profits from strategic and operational initiatives which are in the control of their management teams. Elementis and Spire are good examples where the respective executives have announced structural cost savings and efficiencies to drive an increase in EBIT (Earnings Before Interest and Taxes) of at least 30%, alongside initiatives to improve sales growth. Such examples of self help at these companies, and others in the portfolio, have been masked or seemingly not reflected in share prices due to depressed sentiment. This augurs well for future returns as the investment market improves.

The closed ended fund structure has been a good match for the investment strategy since the Company launched, offering the Portfolio Manager certainty of capital in difficult times, and allowing them the luxury of buying or adding to stakes in less liquid quoted companies at attractive valuations. As markets rebound, it also enables the Portfolio Manager to manage capacity and capital carefully to optimise returns to existing shareholders.

We are grateful for the ongoing support and patience shown by shareholders during the period.

Linda Wilding

Chairman

11 June 2024

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 Odyssean Capital LLP 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 Advisers, 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 Capital's Board as a Non-Executive JV Partner. Mr Armitage and Mr Mills have more than 85 years' combined investment experience in quoted and unquoted smaller companies.

Stuart Widdowson, Co-fund Manager

Stuart has spent the last 23 years investing in public and private UK small and mid-size corporates and a further two years providing investment advisory services in the same field.

Prior to founding the Portfolio Manager, Stuart was at GVQ Investment Management ("GVQ"), where he held the position of fund manager and head of strategic investments for more than seven years. During his time at GVQ, Stuart led the transformation of the performance of Strategic Equity Capital plc ("SEC") and significantly improved shareholder value. Stuart led SEC to win several industry awards and was recognised as Fund Manager of the Year at both the PLC and QCA awards in 2015.

Stuart began his career as a strategy consultant undertaking commercial due diligence and strategy projects for private equity and corporate clients. In 2001, he joined HgCapital and spent five years working on small and mid-cap leveraged buyouts in the UK and Germany. During this time, he worked on a number of public to private transactions of UK quoted companies.

Ed Wielechowski, Co-fund Manager

Ed joined the Portfolio Manager in December 2017 as a Fund Manager.

Prior to joining Odyssean Capital, 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 to 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 and provide clarity and certainty to investors and largely formalises 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 to March 2024 was ultimately a positive one for equity markets, albeit another year of continued volatility. Markets grappled with coping with the highly anticipated recession questioning the narrative of whether economies experiencing a sharp rise and normalisation of interest rates could genuinely escape with only a soft landing. Whilst the UK has endured a mild recession, fiscal largesse in the USA led to the economy continuing to power ahead. As the year progressed, expectations of the scope of monetary loosening in the US and UK fell, largely driven by the continued strong US economy.

Geopolitical events in Ukraine and the Middle East, alongside forthcoming elections (including in the UK) also continued to drive uncertainty.

UK equities remained unloved, with UK All Cap and Small and Mid Cap OEICs continuing to see client redemptions, despite increasing commentary and acknowledgement that UK equities are trading at considerable discounts to other major equity markets. M&A picked up materially through the end of 2023, with bid premia being above long-term averages.

M&A activity helped the performance of the major indices, with mid caps gaining c.10%, small caps gaining c.11% but with AIM continuing its poor recent run delivering a decline of c.6%. The DNSCX (formerly NSCI) ex IC plus AIM Total Return (which we use as a comparator and not a benchmark) rose by 3.0%.

It was not a vintage year for our performance, with Company's NAV per share falling 3.7%. As is ever the case with the concentrated portfolio, individual holdings are the major determinant of performance rather than the broader market. Whilst there was no shortage of positive newsflow, this was more than counterbalanced by negative newsflow. In the short term, the higher weighting towards the industrials sector, where there have been short-term destocking issues, has been a dampener on performance. We believe that the valuations of these companies are extremely low compared with their strategic value and short term trading will have little impact on the long-term value creation potential. Liquidity in these companies is generally low, and in many cases we have taken a long-term view to facilitate getting the positions we want to own when liquidity is available. In our experience it is very hard to catch the bottom, not least because at this point in such holdings there is often little or no liquidity.

Unlike in previous years, none of the Company's holdings were subject to takeover activity, which was another absence of a positive driver.

The top three positive contributors to performance were Ascential, Elementis and NCC, all of which generated returns in excess of 24% over the year.

Ascential's performance was driven by the surprise announcement in October that the group was selling two of its three divisions, with the Product Design and Digital Commerce businesses being exited for a combined consideration of £1.2billion. Proceeds from these disposals would be used to pay down debt and return £850m to shareholders (c.89% of the group market cap prior to the announcement). Our original investment in Ascential had been underpinned by a view that the shares were trading at a material discount to the sum-of-the-parts value of the group, and it was pleasing to see this view vindicated. The outcome of the disposal process was positive in our view and broadly in-line with our expectations of value despite the challenging market conditions at the time of the transactions. The shares rose 26% over the period.

Elementis continued to trade well, demonstrating its ability to price effectively in its coatings business, benefit from strong demand for personal care products and see a recovery in its more challenged talc operations. During the year, the largest investor wrote an open letter to the board calling for the business to be sold. This appears to have catalysed a process of the Company committing to and communicating substantial opportunities to improve profitability through $30m structural cost savings and $90m additional sales through new product launches, which we believe has the potential to deliver at least a further $30m operating profit. These initiatives, material given the c.$103m profit base, were announced at the Capital Markets Day in November 2023. We hold a long standing view that Elementis was underearning compared with its potential and look forward to the company delivering on its promises. Although the improved share price performance (up 25% over the year to March) is pleasing, we still believe that the company's shares are undervalued and underowned.

NCC's financial and share price performance in the period began a multi year recovery from the profit warning on the last day of the prior year. The shares rose 27% over the year, as the company communicated the delivery of cost savings, alongside a stabilisation of end market demand weakness in US West coast tech clients, and strong growth of other parts of the cyber security division (notably the higher quality, recurring managed services offer). The new management team demonstrated progress with a recovery of consultant utilisation and gross margins close to target levels, a new vertical market focused sales structure put in place and the delivery of an offshore delivery centre in Manilla ahead of plan. We believe that NCC is now well placed to drive its cyber consulting business towards a more diverse, and attractive revenue mix whilst delivering its services in a more flexible and cost-effective way. Although the shares have recovered, we believe the company is still valued at a very material discount to its sum of parts valuation.

The top three negative contributors to performance were Xaar, XP Power and Videndum, each of which fell in excess of 40% over the year.

Xaar released a 2023 full year trading update in late November that flagged performance for the year was expected to be in‑line with expectations, but also made a material reduction in expectations for 2024 with performance expected to be effectively flat year on year. This negative shift in outlook was driven by a combination of factors largely outside of the company's control with ongoing macro headwinds in China impacting demand for ceramics printers and delays to certain OEM (Original Equipment Manufacturer) machine launches following geopolitical events (notably the situation in Israel/Gaza) pushing back expected revenue generation. We have continued our detailed diligence following this update. Whilst short term timing is uncertain, we remain of the view that there is significant potential for future value creation.

The group has unique IP which is challenging and expensive for competitors to replicate. The turnaround team appointed in 2020 have been successful in leveraging this IP into new products that will greatly expand Xaar's addressable market (and create new markets for digital printing), which will over time reduce its dependency on the cyclical ceramic tile printing market. Despite the delays impacting 2024, the pipeline of expected new machine launches using Xaar printheads is strong and growing - delivery of any or all of these gives the group good runway for significant growth over the next five years. When this revenue growth comes through, the group's operating gearing has the potential to lead to exciting bottom line growth. We believe that little of this upside, or the potential value of the IP is in the share price today.

As mentioned in our interim results, XP Power has been through a challenging period with downgrades initially driven by slowing demand from semi-conductor customers and more recently de-stocking in its healthcare and industrials customers. These topline pressures drove a material drop in profitability and the company completed an equity raise to strengthen its balance sheet, a move which we supported. Following these updates, we spent more time with the business, board and did further work on the outlook for key end markets notably semi-conductor manufacturing equipment. On the back of this work, we remain convinced of the potential opportunity from here. The business is exposed to attractive end markets, the semi-conductor industry in particular is exposed to long run growth driven by demand for AI and the global build out of additional semiconductor manufacturing capacity as nations look to 'near shore' production of these critical components. Alongside secular market tailwinds, we see significant scope for operational improvement at the company. With the fund raise the group announced a material - £8m-£10m - cost savings program (now executed), as well as initiatives to reduce inventory, and beyond this we see significant scope for further operational improvement through the roll-out of lean manufacturing across the group. An improvement in end markets allied with these operational improvements should return operating margins to at least the 20% seen historically and support strong profit progression in the coming years. Whilst improved trading is unlikely to see the valuation recover to the dizzy heights of more than 4.5x EV/Sales (Enterprise Value-to-Sales) achieved in 2021, we believe a return to normal end market conditions should see the EV/Sales improve from the level of 1.5x at the end of the period" to its long term average of c.2.5x. If the market recovery is as sudden and material as it has been in previous upswings, there is upside to this rating. After the end of the period XP Power announced it had received a number of takeover approaches from an industry peer at significant premiums to the prevailing share price. The board has not engaged with these approaches feeling they do not reflect the intrinsic value in the group. We are supportive of the board's action, and note the strategic interest further underpins our view that the market has undervalued the potential recovery at XPP.

Videndum downgraded expectations through 2023 as it was hit by the combination of channel de-stocking and the unprecedentedly long Hollywood writers' and actors strikes which shut down much of the movie and high-end TV production ecosystem for a prolonged period. With the business relatively geared, following historic M&A, the company completed a material rights issue in December 2023 to strengthen its balance sheet. We believe that the 'perfect storm' that hit Videndum in 2023 was a one off and these headwinds should dissipate through the coming year as de-stocking completes and with the strikes now ended. The group maintains leading positions in markets exposed to strong growth drivers (internet usage, vlogging, subscription TV) and should benefit from significant operational leverage as its end markets return.

Portfolio development

In the absence of M&A, portfolio turnover was much lower than prior years.

During the period £49m was invested into stock purchases. This level of investment was funded through realisations and investment income of £44m as well as cash inflows of £13m following the issuance of new shares. Overall net cash weighting increased from 0.4% to 2.8% over the year and averaged 2% across the year.

Two new investments totalling £5m were made across the period. This is a level of new position investment below our expected trend (typically we would expect c.4-6 new positions per year), in part reflecting the high number of new positions initiated in the prior year. Both the new positions are currently smaller weights, outside of the portfolio top 10, but we see scope to scale these materially as we continue our diligence and if market prices remain attractive.

In total c.£44m was invested into existing positions. Significant further investments were made into XP Power, NCC, Dialight and Xaar all of which experienced weak share prices driven by soft ended market demand, which drove earnings downgrades. Our due diligence suggested market reactions were overly severe and represented attractive risk/reward opportunities.

Material additional investments were also made into Gooch and Housego and James Fisher which were built to mid weights as we were able to identify and purchase significant blocks of stock where trading liquidity is notoriously poor.

Through the period we realised £43m from disposals and dividends. Four positions were fully exited raising c.£23m.

The bulk of proceeds from full realisations came from RWS and Wilmington, two positions we had been invested in since 2018 (in the case of RWS through our holding in SDL subsequently acquired by RWS in 2020). Wilmington performed strongly during our investment period, with a new management team simplifying a complex business, driving improved growth, raising margins and strengthening cash generation all of which delivered a 23%+ annualised IRR and 2x cash on our investment. The market return over this period is negligible. In comparison, in spite of the weak share price performance and lowly rating of RWS, we decided to exit the position as we believe that there were more attractive investment opportunities elsewhere in the market and within our existing portfolio.

We also continued to take profits from investments which have performed well. Notable material realisations were taken from our position in Ascential which benefited from the announcement of the successful disposal of two of its three divisions with significant proceeds to come to shareholders, and Chemring which continued to see strong demand across its divisions.

Following this investment activity, industrials remains the largest sector exposure of the portfolio, with a significant portion of this exposure in the B2B electronics sector. Whilst this exposure has not helped performance in the period, we believe that all of these holdings are likely to see improved market conditions through 2024 and 2025, have substantial self-help potential, and are valued on the basis that neither scenario is likely to pass.

We continued to actively engage with portfolio companies through the year with an ongoing focus on corporate governance, investor relations and ESG disclosure. We continue to engage an external consultant to conduct a review of each of our investments against a proprietary ESG scoring system. We use this to measure progress of the portfolio against ESG disclosure over time as well as an entry point for discussions with boards on these issues where appropriate. It remains pleasing to see ongoing improvements in these scores over time, something which we believe will also ultimately flow through to improved performance.

Portfolio detail

At the end of the period under review, the portfolio comprised 16 companies.

Key updates through the period for each of our top 10 positions are detailed below:

Elementis

A leading producer of specialty chemicals focused on personal care, talc and coatings markets.

% NAV: 16%

Sector: Industrials

Performance in period

Elementis delivered a solid performance through 2023, slightly ahead of expectations demonstrating strong pricing in its Coatings division offsetting volume weakness, demand growth in the Personal Care division and some recovery in the more challenged Talc division. Shareholder pressure has coincided with the company announcing plans to substantially increase profits by 2025 through initiatives independent of end market demand.

Outlook

We see the market as currently undervaluing the earning potential of Elementis. Alongside the self help potential, end markets appear to be recovering following a protracted period of destocking by customers. This augurs well for future profit growth, due to operational gearing. These levers support the potential for the group to generate materially higher earnings than current levels and those expected by the market. We believe that little of this potential is reflected in the share price.

NCCGROUP

A leading independent provider of software escrow services and cyber security consulting provided through the Assurance division.

% NAV: 13%

Sector: TMT

Performance in period

The last year have seen NCC make solid progress to rehabilitate its cyber security division and demonstrate the inherent value of the group. Trading updates have shown that the turn-around instigated by the new management team is well underway. The stable and lower growth escrow business continues its recent journey of a return to moderate top line growth.

Outlook

The company recently held earnings forecasts despite disposing of a small subsidiary which would have been earnings dilutive. This is a strong indication that forecasts are now appropriately set and we believe that the company is in the early foothills of an earnings upgrade cycle. We believe that the shares continue to trade at a material discount to the sum of parts valuation and action will be taken to narrow this discount.

ASCENTIAL

A Provider of B2B data, events and digital commerce support platforms

% NAV: 11%

Sector: TMT

Performance in period

The key update from Ascential during the period was the October announcement of the disposals of both its product design division and its digital commerce division for total value of c.£1.2bn with £850m to be returned to shareholders (c.89% of market cap prior to the announcement) through a combination of tender offer, special dividend and share buyback. With these disposals Ascential is now a pure play events business focused on two market leading, scale platforms - Marketing (the Cannes Lions business) and FinTech (the Money2020 business).

Outlook

The remaining events platform is high quality with a track record of organic growth, high margins and strong cash generation. The implied value of this business, remains in our view, too low at current share prices and we note significant trade and PE activity in the sector means any continuing public market under valuation may not be sustainable.

XP Power

A leading manufacturer of power supplies and power converters

% NAV: 9%

Sector: Industrials

Performance in period

XP's trading and share price performance was disappointing across the year, driven by a combination of destocking and weak end markets. Adverse litigation left the balance sheet in a weaker than ideal position, culminating in a need to undertake a moderate equity raise in Q4 2023.Whilst demand from the cyclical semiconductor clients appears to have bottomed (and is poised in our view to benefit from a multi year boom period), the company has experienced other customers from its healthcare and industrial sectors destocking to reduce safety stock build up in the wake of supply chain issues following COVID.

Outlook

We expect that the company's order book will begin to grow in absolute terms through Q3, perhaps with semiconductor starting to see an improvement through Q2 2024. Historically when demand comes back on stream, sales have recovered as quickly as they fell. With shares currently trading on c.1.5x EV/Sales compared to long run averages of 2.5x, the market is currently ignoring the potential in such a recovery. The news post period end of a takeover approach from an industry peer at a material premium to the prevailing share price, further supports our view of value in shares at the current price.

We materially grew our position on the share price weakness during the period.

XAAR

A leading independent designer and manufacturer of industrial inkjet print heads

% NAV: 7%

Sector: Industrials

Performance in period

Xaar delivered full year 2023 performance with profits ahead of expectations but alongside this downgraded the outlook for 2024 to performance being largely flat year on year. This downgrade to outlook was driven by a combination of market factors including ongoing tough macro conditions in end markets (notably construction in China) and delays to launches of new print machines by certain OEMs as a result of geo-political events. These issues were arguably outside of the company's control and likely represented a delay to, rather than a loss of, future demand. Despite this, shares fell materially on the news.

Outlook

The group has built significant IP over many years which gives Xaar's products fundamental advantages over competitors, notably in the jetting of highly viscous fluids. Under the current management team the group has been developing this IP for use in new products in new applications that will have the potential to greatly expand the company's addressable market (as well as create new markets for the application of digital printing). Whilst enhanced products in its core ceramics market is likely to see the company gain share, the biggest driver of future returns will be traction of recently launched and pending new products addressing non ceramics markets - both existing markets as well as new applications for Xaar's technology. Over time this will reduce the group's dependency on the cyclical ceramic tile printing market, building a more diverse, resilient and significantly larger business. Successful execution could generate exciting returns over the next three to five years. The EV/Sales multiple is just above half of its long term rating.

We materially grew our position on the share price weakness during the period.

GOOCH & HOUSEGO

Manufacturer of photonics solutions for a variety of industrial end markets

% NAV: 5%

Sector: Industrials

Performance in period

Gooch delivered a strong set of 2023 results with revenues up 13% organically with margins increasing 60bps. Alongside this the company completed small bolt-ons to strengthen their offer in the growth areas of polymer optics and optical coatings. The start of 2024 saw the group downgrade expectations on the back of ongoing de-stocking at industrial and medical customers and the surprise cancellation of certain defence programs. The latter activities have subsequently been disposed of, which unusually was earnings enhancing. Recent announcements have flagged a stabilisation of demand trends with a more positive outlook for the second half of the year expecting an improvement in end market demand.

Outlook

Despite the short-term headwinds flagged earlier in 2024 we continue to see Gooch as making good progress. The new CEO's strategic review set out the ambition of doubling group margins through a mix of self-help actions and re-shaping of the portfolio. On both counts we can see early signs of success despite the mixed macro environment. Fundamentally Gooch has world leading IP in growth sectors, which will recover and grow. Combined with the margin plan being delivered by management we see significant value creation to come. The EV/Sales multiple is around half of its long term average rating.

SPIRE HEALTHCARE

A leading provider of private hospitals in the UK

% NAV: 6%

Sector: Healthcare

Performance in period

Spire delivered a strong 2023 with revenues up 13% led by growing demand from NHS and insured customers with self-pay demand maintaining the strong levels seen in the prior year. Group hospital margins showed improvement as cost savings and price rises more than offset the reducing impact of input cost inflation. Alongside the full year results the company flagged a further £60m of cost savings to come in the next two years (from an operating profit base of c£130m), supporting management's ambition to move hospital margins from current levels of c.17% to a targeted 21% by end of 2026. Through the year the group completed the bolt-on acquisition of Vita Health, expanding Spire's offer in mental and occupational health and further progressing the group's ambition to diversify its revenue streams into higher ROCE (Return On Capital Employed) areas. Of course, critically for a business active in healthcare services, it was particularly pleasing to see Spire maintain its exemplary patient care quality with 98% of its sites rated 'good' or 'outstanding' during the year.

Outlook

We believe Spire is well placed for the medium term. The demand environment for the group's services is set to remain strong as high NHS waiting lists drive demand from private patients and from the NHS looking to reduce their backlog (a trend likely to continue regardless of the party in power in Westminster). There remains a strong self-help story, the management team have proven their ability to drive efficiency through rolling best practices and shared services across a historically independently run portfolio of sites, with the recently announced further targeted £60m of offering a material uplift in profitability. The group's strong cash generation should support the potential for further, diversifying M&A which will help the group drive material ROCE uplifts.

Despite this potential and the strong performance across recent years, shares have remained range bound. We see good upside when the market realises the significant changes at the group in recent years. If this does not happen we note historical trade approaches for Spire at valuations materially above current levels.

DIALIGHT

Global leader in LED lighting for hazardous and industrial environments

% NAV: 6%

Sector: Services

Performance in period

Dialight faced tough end markets through 2023, with de-stocking and a lower level of large capex driven orders impacting group revenues, which were down 12% overall but only 5% in the core lighting business. Against this challenging backdrop the group took significant steps to drive future value creation.

During the last year there has been significant board change with new Chairman, CEO and CFO appointed. Under the guidance of this new team, a revised strategic plan has been initiated which will focus the group onto its core lighting activities with disposals of non-core activities to come. Within the lighting business significant operational improvement has been identified through production site consolidation and automation - this is targeted to move the lighting business back to at least 10%+ EBIT (Earnings Before Interest and Taxes) margins by 2026. Finally, sales force improvement and product investment are targeted to drive a return to revenue growth. We have been supportive of the changes at Dialight and see the new team as credible and capable. The company undertook a capital raise to help accelerate the proposed restructuring in which we were happy to take part.

Outlook

Dialight has been through a period of significant change in the past 12 months after many years of what we believe to be suboptimal performance. The new team have a proven track record of delivering positive change and shareholder value. With a strategy and execution plan in place we are now optimistic for the future. The group maintains product leadership in a market benefiting from secular growth as conversion to LED lighting continues. Arguably the group has not historically made the most of this opportunity with poor manufacturing and sales execution. Their remains work to be done, but the size of the prize for the company could be considerable if the team executes their plan.

JAMES FISHER

A leading global provider of a range of niche marine services to renewable, energy and defence sectors

% NAV: 5%

Sector: Services

Performance in period

James Fisher continued on its transformation journey through 2023. Underlying performance for the year was broadly in-line with expectations with strong demand in the energy and transport markets offsetting slower progress on larger orders in the defence market.

Under the new management team the group continued its restructuring. Through the year a review of all business units led to disposals or shuttering of operations which either did not fit the go forward strategy, or were seen as unable to meet the targeted return hurdle - the most significant disposal being the recent £90m sale of the RMS Pump tools business. The proceeds of disposals were used to pay down debt, and with the most recent exit the group has now largely reached its target of 1.5x leverage, a much more comfortable level for the go forward business.

Outlook

We view 2023 as a transitional year at the start of James Fisher's transformation journey. The initial focus from management on pruning the portfolio and reducing the balance sheet risk has been sensible and well executed. With this now complete, we see the focus shifting to delivery of the self-help opportunity at the group. The company is active in secularly growing markets where it provides high IP services, but historically this opportunity has been underexploited in a group which has been run as a collection of small, independent business units. Going forward the new management team has a clear plan to drive synergies across the disparate organisation, focusing on the most profitable areas of activity, sharing best practices and increasing efficiency. The initial targets of 10% EBIT margins would be a material uplift on current levels and we believe are readily achievable. Delivery of this self-help opportunity will support potential growth in equity value from here.

BENCHMARK

Leading provider of healthcare, genetics and nutrition services and products to the global aquaculture industry

% NAV: 5%

Sector: Healthcare

Performance in period

Benchmark's trading through the period was solid with revenues up 7%, driven by a notably strong performance from its genetics and health businesses offsetting a decline in the nutrition business which was impacted by a weak shrimp market. Profit performance came in ahead of expectations and pleasingly the group generated positive cash flow.

The most important news from the Benchmark during the period was the announcement in January 2024 that the board was commencing a strategic review, including a formal sales process for all, or some, of the group's business units. We support this move by management to crystallise the value we have long seen in the group.

Outlook

Over the past three years Benchmark has made great strides to simplify and improve the quality of its business, delivering strong growth and improving profitability from its genetics and nutrition divisions and successfully launching its potentially game changing Cleantreat / Ectosan sea lice treatment in its health division. These successes have not been reflected in the price of the company's shares and we welcome management's pro-active actions to drive value. Although there is no certainty of any transaction being delivered, we see the group's assets as worth considerably more than the current share price to the right buyer or buyers.

The remaining six investments represent between c.1% and c.5% 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

At the time of preparation, there is growing awareness of the attractive valuation of UK equities and the low ebb of UK equity markets. We are optimists - such pessimism tends to be around inflection points - in the words of Mark Twain "The reports of my death are greatly exaggerated".

During a period of zero interest rates, private markets have prospered, driven by extremely low borrowing costs unlikely to be seen again in many people's life times. Historically what was a private market discount to public valuations, became a private market premium to public market valuations. This illiquidity premium seems anomalous and counter intuitive. Over time, we expect that public market valuations will probably increase, and private market valuations will probably fall.

It is difficult to predict what will drive a re-appraisal of UK equities by the marginal buyer. However, we believe it will happen.

There are multiple potential catalysts. Firstly, we believe we are at the peak of the interest rate cycle. UK inflation is due to ease materially during Q2 2024, which should support interest rates being cut through the rest of 2024 and 2025. Risk assets such as smaller company equities tend to re-rate when interest rates fall. UK growth and inflation appear to be decoupled from North America, so it will be interesting to see if the Bank of England begins to cut rates before the Federal Reserve.

Secondly, any positive change in flows to UK equity open ended funds is likely to transform marginal selling to marginal buying. The low liquidity of smaller quoted companies allows the potential of such a change in buying behaviour to drive a sharp re-rating. The change in flows could be driven either by a natural change in asset allocators views of the UK, and/or be prompted or even encouraged by some form of government intervention.

Asset allocators appear to be more intrigued by UK equities, particularly small and mid caps, than they have been for some time. As Tesla has begun to underperform, there are more voices highlighting how narrow global equity performance has become, especially in the US. This has yet to translate into re-allocating capital away from the US, but history suggests it will happen. The exact catalyst is always difficult to predict. From an intervention perspective, both the Edinburgh Reforms and Mansion House Compacts demonstrate awareness at the highest level that change is required to support UK capital markets. In the absence of a naturally driven rating recovery for UK equities, further intervention is likely.

Thirdly there is M&A. The well-acknowledged UK market discount continues to attract both trade and private equity bidders for UK quoted companies. Absent a re-rating, M&A is likely to continue. To date the proceeds of which have satisfied fund outflows. However if flows neutralise, capital being returned will need to be re-invested in other quoted companies.

For OIT holders, we look forward to a change in sentiment towards the asset class we invest in. Whilst we are happy to have delivered a decent positive return in the six years post IPO, the absence of a headwind of de-rating could have led to improved returns.

As readers of our presentations and views of our webinars are familiar, we use a valuation tool called Quest^® to help us consider and spot valuation anomalies. In our experience it is an excellent long term fundamental valuation tool. Our most recent quarterly presentation shows that UK Smaller Companies in aggregate trade at >30% discount to their Quest fair values. This is a material outlier compared with history and other equity markets. Were these companies in aggregate to trade at fair value, this would imply a re-rating of more than 40%. But there is even more potential re-rating than this, as historically UK Smaller Companies have traded at a significant premium to their Quest fair values. In short, we believe that the next six years should see markets re-rate, providing a tail wind to absolute returns that can be generated from the portfolio.

OIT's absolute performance since IPO has been delivered we believe through the special situations approach - of finding decent quality companies, trading at discounts, which have the potential to improve their performance through specific management actions, as opposed to just waiting for a magical re-rating.

After some pockets of disappointing news in 2023, we see significant scope for value recovery and growth from current levels. We believe we have built a hard to replicate portfolio of material positions in companies where management action and self-help. As we review the portfolio on an ongoing basis, we are excited to see the number of companies which are undergoing significant operational improvement programs. As management drive these efforts over the coming years the companies in which we are invested should emerge as higher quality, more profitable and more valuable enterprises regardless of the wider market.

The positions in our portfolio are trading at significant discounts to their long run valuations. Any broader market recovery offers the prospects of significant portfolio returns - were the portfolio to trade on the long term average EV/Sales or Price to Book, the average share price upside across the portfolio would have been in excess of 80% at the end of the period. Whilst we are not reliant on M&A, if markets do not re-rate we would not be surprised to see potential takeover interest in portfolio companies from overseas peers.

Stuart Widdowson | Ed Wielechowski

Odyssean Capital LLP

11 June 2024

Portfolio of Investments

as at 31 March 2024

*       Other equity investments include six investments, each represents between 0.9% and 4.6% 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 2024 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 business. 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.

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 London Stock Exchange'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.

Strategy for the year ended 31 March 2024 and Strategic Review

Throughout the year ended 31 March 2024, the Company continued to operate as an approved investment trust, following its investment objective and policy.

During the year, the Board made all strategic decisions for the Company. Odyssean Capital LLP and Frostrow Capital LLP undertook all strategic and administrative activities on behalf of the Board, which retained overall responsibility.

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 contains information on the policies which the Company follows, including in relation to borrowings, derivatives, hedging as well as ethical and sustainability investment restrictions. The Company invests primarily 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.

Any material change to the Company's investment policy would require the approval of shareholders by way of an ordinary resolution at a general meeting and the approval of the FCA. Non-material changes to the investment policy may be approved by the Board.

Portfolio analysis

A detailed review of how the Company's assets have been invested is contained in the Chairman's Statement and the Portfolio Manager's Report.

Dividend Policy

It is the Company's policy to pursue attractive total returns principally through growth over the long term. The Company will comply with the investment trust rules regarding distributable income, which require investment trusts to retain no more than 15% of their investment income each year. The Company will only pay the minimum dividend required to maintain investment trust status. No dividend will be proposed for the year ended 31 March 2024.

The Board

The Board of the Company comprises Linda Wilding (appointed to the Board on 25 October 2023) (Chairman), Arabella Cecil, Peter Hewitt, Richard King and Neil Mahapatra, all of whom are independent non-executive Directors and, with the exception of Linda Wilding, served during the whole year under review and up to the date of signing the report. All Directors will stand for election or re‑election at the forthcoming Annual General Meeting.

Board Focus and Responsibilities

With the day to day management of the Company outsourced to service providers the Board's primary focus at each Board meeting is reviewing the investment performance and associated matters, such as, inter alia, future outlook and strategy, gearing, asset allocation, investor relations, marketing, and industry issues.

In line with its primary focus, the Board retains responsibility for all the key elements of the Company's strategy and business model, including:

●    Investment Objective and Policy, incorporating the investment guidelines and limits, and changes to these;

●    whether the Manager should be authorised to gear the portfolio up to a pre-determined limit;

●    review of performance against the Company's key performance indicators ("KPIs");

●    review of the performance and continuing appointment of service providers; and

●    maintenance of an effective system of oversight, risk management and corporate governance.

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 receiving 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 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.

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.

The above mechanisms for engaging with stakeholders are kept under review by the Directors and are discussed on a regular basis at Board meetings to ensure that they remain effective.

Key topics of engagement with stakeholders and outcomes

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 of the Annual Report).

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 Capital's corporate engagement initiatives and proxy voting policies.

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.

Responsible and Sustainable Investing

It is the Board's view that, in order to achieve long-term success, companies need to maintain high standards of corporate governance and corporate responsibility. More information is given in the Portfolio Manager's Report.

*       Alternative Performance Measures (see Glossary).

Climate Change

The risks associated with climate change represent an increasingly important issue and the Board and the Portfolio Manager are aware that the transition to a low-carbon economy will affect all businesses, irrespective of their size, sector or geographic location. Therefore, no company's revenues are immune and the assessment of such risks must be considered within any effective investment approach.

Key Performance Indicators ("KPIs")

At each Board meeting, the Directors consider several performance measures to assess the Company's success in achieving its objective. The KPIs used to measure the progress and performance of the Company over time are established industry measures. These are as follows:

Net asset value total return*

The NAV per share at 31 March 2024 was 154.4p, compared to 160.4p per share at the end of the previous year, a decrease of 3.7% (2023: a decrease of 2.2%). The NAV total return since the launch of the Company on 1 May 2018 to 31 March 2024 was 54.4% (to 31 March 2023: 60.4%). The total return of the DNSC (formerly NSCI) ex IC plus AIM Total Return Index was +3.0% (to 31 March 2023: -13.4%) for the same period.

A full description of the Company's performance for the year ended 31 March 2024 can be found in the Portfolio Manager's Report.

Share price total return*

The Company's share price at the previous year end was 164.0p and decreased to 155.5p as at 31 March 2024, resulting in a return of -5.2% (2023: -1.2%) during the year.

Share price premium to NAV per share*

The share price premium to NAV per share changed from 2.2% at the previous year end to premium of 0.7% as at 31 March 2024. During the year ended 31 March 2024, the shares traded at an average premium to NAV per share of 1.4% (2023: 1.1%).

Revenue return per share

In the year to 31 March 2024, the Company made a revenue return of -0.4p per share (2023: +0.2p per share).

Ongoing charges ratio*

The Company's ongoing charges ratio for the year ended 31 March 2024 was 1.48% (2023: 1.45%).

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 Company may terminate the Portfolio Management Agreement by giving the Portfolio Manager not less than six months' prior written notice. The Portfolio Manager may terminate the Portfolio Management Agreement by giving the Company not less than six months' prior written notice.

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 DNSC (formerly NSCI) ex IC plus AIM Total Return Index (the "Comparator Index"). The first Performance Period ran 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 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)    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 (the "High-Water Mark"); 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-Water Mark 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 be satisfied 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 the performance fee payment as a collective group rather than as individuals. The collective group includes Ian Armitage, Harwood Capital Management Limited, Stuart Widdowson and Ed Wielechowski.

Each such tranche of shares 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 2024, no performance fee has been accrued in respect of the year ended 31 March 2024 (2023: no performance fee).

Administrator, Company Secretary, Investor Relations and Marketing Adviser

Frostrow Capital LLP ("Frostrow") has been appointed as the Company's Administrator and Company Secretary as well as Investor Relations and Marketing Adviser. Frostrow is an independent provider of services to the investment companies sector and currently has a total of 15 investment company clients whose assets totalled approximately £9.7 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) £150 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 £150 million in size up to and including £500 million, and to 17.5 basis points on market capitalisation in excess of £500 million. The agreement may be terminated by either party on six months' written notice.

Custodian

RBC Investor Services Trust ("RBC") was appointed as the Company's Custodian pursuant to an agreement dated 22 March 2018. RBC was responsible for, inter alia, the safekeeping and custody of the Company's assets, investments and cash, processing transactions and foreign exchange services, if necessary. On 3 July 2023, CACEIS completed the acquisition of RBC Investor Services' activities in Europe and Malaysia, which have been rebranded CACEIS Investor Services Bank S.A. ("CACEIS"). Subsequently on 23 March 2024, the Company's client accounts held with RBC were migrated to CACEIS Bank. 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 Administrator, Company Secretary and Investor Relations and Marketing Adviser is a continuous process carried out by the Board and a formal evaluation was undertaken by the Management Engagement Committee in May 2024. 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 Manager concentrates on the portfolio.

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 Manager on portfolio and market developments, are regularly emailed to a growing database, overseen by Frostrow, consisting of professional investors.

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.

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 ("ESG") issues

The Company has no employees, property or activities other than investments, so its direct environmental impact is minimal. In carrying out its activities and in its relationships with service providers, the Company aims to conduct itself responsibly, ethically and fairly.

The Board is comprised entirely of non-executive Directors and the day-to-day management of the Company's business is delegated to the Portfolio Manager. The Portfolio Manager aims to be a responsible investor and believes it is important to invest in companies that act responsibly in respect of environmental, ethical and social issues.

The Portfolio Manager is specifically looking to invest in companies which have average or above average ESG characteristics or practices, but where improvement potential exists. Being mindful of the smaller company nature of many of the portfolio companies, the Portfolio Manager has a pragmatic engagement approach, focused on dialogue with portfolio companies around their performance, disclosure and general practices compared with best-in-class peers, and seeking positive changes in specific areas. The Portfolio Managers will not invest in non-ethical or unsustainable businesses.

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.

Taskforce for Climate-Related Financial Disclosures ("TCFD")

The Company notes the TCFD recommendations on climate-related financial disclosures. The Company is an investment trust with no employees, internal operations or property and, as such, it is exempt from the Listing Rules requirement to report against the TCFD framework.

Modern Slavery Act 2015

The Company does not provide goods or services in the normal course of business, and as a financial investment vehicle does not have customers. The Directors do not therefore consider that the Company is required to make a statement under the Modern Slavery Act 2015 in relation to slavery or human trafficking.

The Company's suppliers are typically professional advisers and the Company's supply chains are considered to be low risk in this regard.

In light of the nature of the Company's business there are no relevant human rights issues and the Company does not have a human rights policy.

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.

During the year ended 31 March 2024, the Audit Committee has again 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.

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 2024 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 confirmed its risk management controls under the key headings of: Corporate Strategy; Accounting, Legal and Regulatory; Operational; Investment and Business Activities. In evaluating the risks the Company faces, the Board has considered the Company's operations in the light of the following factors:

-    the nature and extent of risks which it regards as acceptable for the Company to bear within its overall business objective;

-    the threat of such risks becoming reality;

-    the Company's ability to reduce the incidence and impact of risk on its performance;

-    the cost to the Company and benefits related to the review of risk and associated controls of the Company; and

-    the extent to which the third parties operate the relevant controls.

A risk matrix helps to monitor the risks which have been identified and the controls in place to mitigate those risks. 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.

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.

Any emerging risks and mitigations are added to the risk register, an example being conflict in the Middle East, which may result in supply emergencies, distribution problems and price increases ensued and the Board and all its advisers continue to keep developments under close review.

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.

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.

The Company's financial statements for the year ended 31 March 2024 have been prepared on a going concern basis.

In reaching this conclusion, 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 substantial falls in markets and significant reductions in market liquidity, on the Company's NAV, its cash flows and expenses. The assessments also factored in the Company's Redemption Event, and the ongoing and potential further risks arising from the conflicts in Ukraine and the Middle East. Further information is also 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.

Longer-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 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.

Redemption Event

As set out in the Company's Prospectus, the Board has committed to provide shareholders with an opportunity to elect to realise the value of their ordinary shares at close to NAV during the seventh year following the initial admission of the Company's shares. The details of the first realisation opportunity were published on 21 May 2024.

The Board noted that the Company's share price has frequently traded at premium to NAV per share, and demand for its shares remains strong. This is demonstrated by the issuance of 8.5 million ordinary shares in the year ended 31 March 2024, and nearly 29 million shares since the Annual General Meeting in September 2021.

Following an extensive programme of meetings with the Company's major shareholders, it was the Board's expectation that the number of shares that would be elected for realisation would be small and would not impact the Company in any material way. This was proved correct as on 5 June the Company announced that 785,596 shares had been tendered by shareholders, representing 0.6% of the Company's issued share capital. On 7 June, the Company announced that all of these shares had been resold to institutional shareholders. As a result, the share count of the Company has remained flat.

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.

The ongoing and potential further risks arising from the conflicts in Ukraine and the Middle East were also factored into the key assumptions made by assessing its impact on the Company's key risks and whether they had increased in their potential to affect the normal, favourable and stressed market conditions.

Looking to the Future

The Board concentrates its attention on the Company's investment performance and Odyssean Capital LLP's investment approach and on factors that may have an effect on this approach.

The Board is regularly updated by Frostrow Capital LLP on wider investment trust industry issues and regular discussions are held concerning the Company's future development and strategy.

A review of the Company's year ended 31 March 2024, its performance and the outlook for the Company can be found in the Chairman's Statement and in the Portfolio Manager's Review.

The Company's overall strategy remains unchanged.

Approval

This Strategic Report has been approved by the Board of Directors and signed on its behalf by:

Linda Wilding

Chairman

11 June 2024

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 United Kingdom. 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 Frostrow Capital LLP. 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 United Kingdom, 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

Linda Wilding

Chairman

11 June 2024

Statement of Comprehensive Income

for the year ended 31 March 2024

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 United Kingdom. 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 net return for the period 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 2024

The accompanying notes are an integral part of these financial statements.

Statement of Financial Position

as at 31 March 2024

The accompanying notes are an integral part of these financial statements.

These statements were approved and authorised for issue by the Board on 11 June 2024 and signed on its behalf by:

Linda Wilding

Chairman

Company Registered Number: 11121934

Cash Flow Statement

for the year ended 31 March 2024

The accompanying notes are an integral part of these financial statements.

Notes to the Financial Statements

for the year ended 31 March 2024

1.   Material 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 United Kingdom 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 Statement of Comprehensive Income between items of a revenue and capital nature has been prepared alongside the Statement of Comprehensive Income.

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 ongoing and potential further risks arising from the conflicts in Ukraine and the Middle East on the Company, operations and the investment portfolio.

The Directors noted the net cash balance exceeds any short-term liabilities, the Company has no debt and the Company holds a portfolio of investments listed on the London Stock Exchange. 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 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 in accordance with its Investment Objective and Policy.

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 Statement of Financial Position, the Statement of Comprehensive Income 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.

No critical accounting judgments or significant estimations were made by the Company in the preparation of its financial statements for the year ended 31 March 2024.

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.

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 bid price for investments traded in active markets. 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.

All gains and losses are allocated to the capital return within the Statement of Comprehensive Income. 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.

Fair values for unquoted investments 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. The Company held no unquoted investments as at 31 March 2024 (2023: none).

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)   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.

h)   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.

i)    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. This reserve is not distributable.

The special distributable reserve was created on 8August 2018 following approval of the Court to cancel the Company's share premium account, accumulated through initial placing and subsequent issuance of the Company's ordinary shares over the period between 1 May 2018 and 27 June 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 amount within the capital reserve less unrealised gains is available for distribution. The realised gains within the capital reserve amounted to £57,437,000 as at 31 March 2024 (2023: £56,516,000). The Company does not intend to make distributions out of its 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, to the extent realised.

2.   Income

3.   Portfolio management fee

The Company may be liable to pay a performance fee depending on the performance of the Company over a rolling three- year period. Based on the performance of the Company to 31 March 2024, no performance fee has been accrued (2023: £nil).

Further details of the Company's management fee and performance fee arrangements can be found in Business Review.

4.   Other expenses

*       Peter Hewitt does not receive a Director fee in respect of his services to the Company, owing to his employment as a Director of Global Equities at Columbia Threadneedle. The increase in total Directors' fees from 2023 is mainly due to the addition of two Directors to the Board during the current year. Further details can be found in the Directors' Remuneration Report on page 60 of the Company's Annual Report.

**     Exclusive of VAT. The Company's auditor provided no non-audit services (2023: none) during the year.

5.   Taxation

The tax charged for the period is lower than the standard rate of corporation tax in the UK of 25% (2023: 19%). The differences are explained below:

Factors that may affect future tax charges

At 31 March 2024, the Company had no unprovided deferred tax liabilities (2023: £nil). At that date, based on current estimates and including the accumulation of net allowable losses, the Company had unrelieved losses of £15,244,000 (2023: £12,759,000) that are available to offset future taxable revenue. A deferred tax asset of £3,811,000 (2023: £3,190,000) 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 Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an Investment Trust company.

6.   Return per ordinary share

The capital, revenue and total return per ordinary share are based on the net return for the period shown in the Statement of Comprehensive Income and the weighted average number of ordinary shares during the period of 116,957,728 (2023: 104,414,502).

There are no dilutive instruments issued by the Company.

7.   Investments held at fair value through profit or loss

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.

During the year ended 31 March 2024, £8,685,000 of level 2 investments were transferred to level 1 (2023: £5,562,000) of level 1 investments were transferred to level 2.

8.   Trade and other receivables

9.   Trade and other payables

10. Share capital

The Company currently has no shares in treasury. During the year, the Company issued 8,507,000 new ordinary shares (2023: 16,697,000).

11. Net asset value per ordinary share

The basic net asset value per ordinary share is based on net assets of £187,557,000 (2023: £181,205,000) and the number of ordinary shares in issue of 121,452,053 (2023: 112,945,053).

There are no dilutive instruments issued by the Company.

12. Financial Instruments

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 receives 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 £18,230,000 (2023: £18,039,000).

The Portfolio Manager manages this risk by following the investment objective and policy 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 held one investment in foreign currencies as at 31 March 2024 (2023: two). 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.

Foreign currency exposures

Fair values of the Company's investments denominated in foreign currencies are shown below. The Company has no other foreign currency denominated assets or liabilities.

Foreign currency sensitivity

The table below shows the impact on the Company's net loss after taxation for the year ended and net assets, if sterling had strengthened/weakened by 10% against the Euro and Norwegian krone.

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.

Based on the Company's cash balance as at 31 March 2024 of £4,935,000 (2023: £1,370,000), a 1% increase in interest rates would increase the revenue return and net assets by £49,000 (2023: £14,000) and a fall of 1% in interest rates would have the opposite effect on the Company's revenue return and net assets.

The Portfolio Manager 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 £4,935,000 (2023: £ 1,370,000) cash at bank and the assets are readily realisable. The Company is a closed-end fund and 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, CACEIS Investor Services Bank S.A. (London Branch). All the Company's cash is also held by CACEIS. The Portfolio Manager and the Board actively monitor the relationship with CACEIS and review its internal control report.

13. Related party transactions

The amount incurred in respect of Portfolio Management fees during the period to 31 March 2024 was £1,801,000 (2023: 1,718,000), of which £463,000 (2023: £483,000) was outstanding at 31 March 2024.

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 (2023: £nil).

14. Subsequent events

On 3 June 2024, the Company received a special dividend of £7.7m from Ascential PLC, one of the investments in the Company's portfolio, following the disposal of Ascential's product design and digital commerce divisions. The ex-dividend date was 20 May 2024.

On 5 June the Company announced that 785,596 shares had been tendered by shareholders, representing 0.6% of the Company's issued share capital. On 7 June, the Company announced that all of these shares had been resold to institutional shareholders. As a result, the share count of the Company has remained flat. Further details can be found in the Chairman's Statement.

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 Index Total Return

The Company's Comparator Index is the DNSC (formerly NSCI) (Deutsche 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.

ESG

Environmental, social and governance

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 (2023: nil).

IPO

Initial public offering

M&A

Mergers and acquisitions

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.

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 London Stock Exchange. Performance fees are excluded from the calculation.

P/E

Price earnings ratio

R&D

Research and development

TMT

Technology, media and telecom

Share price premium/discount to NAV per share (APM)

A description of the difference between the share price and the net asset value per share. The size of the premium/ 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.

The premium/discount is calculated in accordance with guidelines issued by the AIC.

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.

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.

The Annual Report, which includes the notice of the Company's forthcoming Annual General Meeting, will be posted to shareholders on or around 18 June 2024.

The Annual General Meeting will be held on Wednesday, 4 September 2024.

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.

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Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

For Further Information please contact

Mark Pope

Frostrow Capital LLP

Company Secretary

0203 008 4913