TIDMGMP TIDMGMPP
RNS Number : 7187Q
Gabelli Merger Plus+ Trust PLC
19 October 2023
GABELLI MERGER PLUS+ TRUST PLC
(the Company)
Financial Results for the year ended 30 June 2023
19(th) October 2023
LEI: 5493006X09N8HK0V1U37
The Company today, are pleased to announce their financial
results for the year ended 30 June 2023. A copy of the full Annual
Report & Accounts will be published and mailed to shareholders
on 26(th) October together with the Notice of Annual General
Meeting. Further information with further instruction will be
posted via RNS on the same day.
Gabelli Merger Plus+ Trust Plc's primary investment objective is
to seek to generate total return consisting of capital appreciation
and current income for the long term.
Financial Highlights
As at 30 June As at 30
Performance 2023 June 2022
============================================== ============================ ======================
Net asset value per share (cum income)(1,2) $10.22 $9.35
Net asset value per share (ex income)(3) $10.52 $9.78
Dividends per share paid during the year(2,4) $0.12 $0.48
Share price $9.00 $9.00
Discount to Net Asset Value (5,6) (11.94)% (3.74)%
============================================== ============================ ======================
Year ended Year ended
Total returns 30 June 2023 30 June
2022
================================= ====================== ================
Net asset value per share(6,7) 10.54% (1.37)%
U.S. 3-month Treasury Bill Index 3.80% 1.69%
Share price(6,8) 1.33% 29.06%
================================= ====================== ================
Year ended Year ended
Income 30 June 2023 30 June
2022
======================== ==========================
Revenue return per share $0.39 ($0.09)
======================== ==========================
Year ended Year ended
Ongoing charges(6,9) 30 June 2023 30 June
2022
========================== =========================
Annualised ongoing charges 2.17% 1.67%
========================== =========================
Source: Portfolio Manager (Gabelli Funds, LLC), verified by the
Administrator (State Street Bank and Trust Company).
1 Net Asset Value (NAV) includes balance sheet adjustments
resulting from the Company now being a close company. Such
adjustments include deferred tax assets as per Note 8 and Note 9,
pages 55 to 57.
2 Cum-income net asset value includes all income, less the value
of any dividends paid together with the value of any dividends
which have been declared and marked ex dividend but not yet paid.
Where the cum-income NAV is lower than the ex-income NAV, this
reflects the revenue deficit.
3 Ex-Income NAV: Ex-income net asset value is the Cum-income NAV
excluding net income (net income being all income, less the value
of any dividends paid together with the value of any dividends
which have been declared and marked ex-dividend but not yet
paid).
4 The dividend paid during the year ended 30 June 2023 was the
fourth interim dividend for the year ended 30 June 2022. Following
the Tranche Two Tender Offer the Board has continued to review and
assess the Company's distribution policy. The Company paid the
first interim dividend for the fiscal year ended 30 June 2023 on 8
September 2023.
5 The amount by which the market price per share is lower than
the cum-income NAV per share, expressed as a percentage of the
cum-income NAV per share. Figures are inclusive of income and
dividends paid, in line with the Association of Investment
Companies (the "AIC") guidance.
6 These key performance indicators are alternative performance
measures. Further information regarding the use of alternative
performance measures can be found on page 12 and in the glossary on
page 68.
7 Net Asset Value per ordinary share, total return represents
the theoretical return on NAV per ordinary share, assuming that
dividends paid to shareholders were reinvested at the NAV per
ordinary share at the close of business on the day shares were
quoted ex-dividend.
8 Share Price Total Return represents the theoretical return to
a shareholder, on a closing market price basis, assuming that all
dividends received were reinvested, without transaction costs, into
the ordinary shares of the Company at the close of business on the
day the shares were quoted ex-dividend.
9 Ongoing Charges are operating expenses incurred in the running
of the Company, whether charged to revenue or capital, but
excluding financing costs. These are expressed as a percentage of
the average net asset value during the period and this is
calculated in accordance with guidance issued by the Association of
Investment Companies.
Chairman's Statement
We share this Annual Report to Shareholders, encompassing the
period from July 2022 through June 2023, and note certain
developments post financial year end. Gabelli Merger Plus+ Trust
Plc (the "Company") operates globally in the highly specialised
investment discipline of value investing utilising the Gabelli
Private Market Value with a Catalyst(TM) methodology. The
objectives are to compound and preserve wealth over time, while
remaining non-correlated to the broad equity and fixed income
markets. The investment programme is global, with an emphasis on
Private Market Value.
The Company's primary objective is to seek to generate total
return, consisting of capital appreciation and current income for
the long term. The Company will seek a secondary objective of the
protection of capital, uncorrelated to equity and fixed income
markets. The Fund utilises the Gabelli Private Market Value (PMV)
with a Catalyst(TM) investment methodology, and has built a
diversified portfolio using PMV catalyst event merger arbitrage
strategies to create an optimal risk/reward profile. The Company's
activities encompass a broad spectrum of special situation event
driven opportunities with an emphasis on PMV discount opportunities
inclusive of announced merger transactions. Value appreciation is
derived through the narrowing of PMV discount spreads as a function
of their catalyst. The value spread is a function of three primary
elements: the risk free rate, the risk premium associated with the
fundamentals, and the time value of money. The dynamic interplay
across these components is evaluated within every investment by the
Portfolio Manager. Position sizing will vary according to a
probabilistic assessment of the risk and may include minority or
majority controlling operating interests through the market cycle
with an effort to generate long term shareholder returns.
The manager has broad investment flexibility to implement the
investment policy. The inherent risk in all PMV with a CatalystTM
investing is a broken deal rather than the standard deviation or
price variance of the market price movements over the deal
timeline.
Gabelli Funds LLC, the Portfolio Manager, employs an active
approach to analysing the fundamentals of a merger investment and
has a long history of implementing such a programme. At its core,
this differentiated investment approach utilises the Gabelli
analytical methodology to manage risk amongst other inputs and
factors. Further details are available on the Portfolio
Manager's website at www. gabelli.com.
The Board is always receptive to feedback and is available
should you have any questions or comments via the Portfolio
Manager's Investor Relations group directly. We thank you, our
shareholders, for your confidence in entrusting a portion of your
assets to our team.
The Investment Environment
We as a society may have moved past COVID, but its aftereffects
are still felt. Uncertainty surrounding the current state of the
global macroeconomic environment, taxed supply chains coupled with
inflationary pressures and rising interest rates against the
backdrop of war has plagued the pace of global deal making. This
adds an element of uncertainty to capital allocation decisions.
Political, corporate and individual actors still need to sort
through a variety of issues. Economic and market conditions may
worsen before they improve, and there may be volatility in currency
markets as Central Banks adjust interest rate policies. The risks
to equity market corrections and a structural financial crisis have
increased as the US banking system is stressed with a changing
yield curve. The Company is positioned to pursue opportunities for
the long term in this potentially generationally changing market
environment.
Performance
The Company's net asset value (NAV) plus dividends paid
delivered a total return to shareholders during the year under
review of 10.54% in U.S. dollars. This performance compared to the
equivalent 13-week U.S. Treasury Bill which yielded 5.32% as of
30 June 2023, and also relative to the IQ Merger Arbitrage ETF,
S&P Merger Arbitrage Index, and Credit Suisse Merger Arbitrage
Liquid Index, which returned
-0.80%, -3.46%, and 5.67%, respectively. The share price total
return with dividends reinvested was 1.33%. The performance for
shareholders at IPO through the end of the fiscal year was 31.77%
with dividends reinvested, versus a return of 24.64% for the Credit
Suisse Merger Arbitrage Liquid Index.
The company may take advantage of market dislocations and
establish controlling and operating positions in businesses and may
also invest occasionally in other forms of relative value
investing, such as such as share class arbitrage and holdco
arbitrage. The Company's portfolio today is largely
focused on the Catalyst events where the terms are known and
transparent to the market and the holdings are liquid.
Dividends
In order to allow the Shareholders to realise a predictable, but
not assured, level of cash flow and some liquidity periodically on
their investment, the Company has adopted a "managed dividend
policy". This policy seeks to pay Shareholders a quarterly dividend
in relation to the Net Asset Value of the Company at the time,
which may be changed at any time by the Board. Between inception
and 30 June 2023, the Company returned $2.39 per share to
shareholders, consistent with its dividend policy. Additionally,
the Company paid the first interim dividend in respect of the year
ended 30 June 2023 on 8 September 2023, in the amount of
$0.12 per Ordinary Share. Dividends are paid only when declared
by the Board subject to the Board's assessment of the Company's
financial position and only if the Company has sufficient income
and distributable reserves to make the dividend payment, and the
level of dividend may vary over time. As such, the portfolio's
managed distribution of capital through the payment of quarterly
dividends is under review as we enter the new Fiscal Year.
Organisational Matters
The company completed its Fifth year since listing on the London
Stock Exchange's Special Fund Market segment which set forth
certain actions in accordance with its shareholder Loyalty
Programme, including completing a Fifth Anniversary Tender Offer,
resulting in the single participator Associated Capital Group,
Inc., controlling over 90% of the shares in issue. The Company
notified shareholders via an RNS announcement on 19 October 2022
that the Board of Directors determined that the Company now
operates as a Close Company for the purposes of taxation and no
longer avails itself of investment trust status, as per Section
1158 of the Corporation Tax Act 2010. Net Asset Value (NAV)
includes balance sheet adjustments resulting from the Company now
being a close company. Such adjustments include deferred tax
assets.
This report includes the Fifth Anniversary Tender Offer for
Qualifying Registered Shares via two tranches beginning in
September 2022 and ending February 2023. Shareholders whose shares
were registered in the Loyalty Programme for five years were
eligible to participate in the Company's tender offer. The
Company
purchased 3,387,414 shares, resulting in 6,850,792 shares in
issue at 30 June 2023 versus 10,238,206 shares in issue in July
2022. The Board of Directors acknowledges that the largest
shareholder, Associated Capital Group, Inc., the legal and
beneficial owner of 6,210,619 shares at the time of this writing,
elected not to tender and has expressed its view that the Company
should continue. Associated Capital Group, Inc. also agreed to
subscribe for Special Voting Loyalty Shares, which will increase
its voting interest when issued, with issuance pending. As a
result, the Company will operate as a Close investment company, and
therefore will be subject to UK corporate taxes, and thus no longer
avail itself to investment trust status. The Board of Directors
will assess shareholder considerations and undertake the analysis
of options for the continuing Company, including operational and
structural alternatives oriented towards expense and tax savings,
as it progresses. Finally, in accordance with the charter,
remaining registered Loyalty Programme Five year shareholders are
eligible to receive an additional vote per individual share held.
The Loyalty Programme has been implemented in accordance with the
offering prospectus. The Board expects a tender offer to be
implemented in 2024, in the range of approximately 5% of the
Ordinary Shares not owned by Associated Capital Group, Inc. Any
such offer is under further review and analysis.
The company is expected to implement its investment policy to
also include the acquisition of shares for control which may
require of the Company to operate such investments to enhance its
objective of total returns for the long term while also seeking to
enhance current income. As such in a subsequent event, the Board
has appointed executive management to help efficiently implement
the company's growth plans. In context, in 2022 shareholders
authorised the allotment of additional Ordinary Shares which can be
utilised for acquisitions to further expand and develop shareholder
value in accordance with the investment programme.
The Company has elected continued adherence to the AIC's SORP.
Although no longer a trust, the Company has elected to continue to
prepare the financial statements on a basis compliant with the
recommendations of the SORP. The SORP is issued by the AIC and it
sets out recommendations, intended to represent current best
practice, on the form and
contents of the financial statements of Investment Companies.
Investment Companies include investment trust companies that have
been, currently are, or are directing its affairs so as to enable
it to obtain or retain approval under Section 1158 of the
Corporation Tax Act 2010. Although the Company no longer meets the
requirements of Section 1158 of the Corporation Tax Act 2010 to be
an investment trust, it continues to conduct its affairs as an
investment company.
Final Thoughts
We reiterate today's post World War II order is facing intense
challenges, yet this Company has performed consistently and
non-correlated to the broader indices since inception. It has
endured COVID-19, the onset of inflation and higher interest rates,
and a fragile regulatory environment lead by the geo-political
wrangling between the US and China. The list continues, as will the
Gabelli Merger Plus+ Trust Plc in the United Kingdom.
John Birch Marc Gabelli
Co-Chairman Co-Chairman 19 October 2023
The Search For Value - Gabelli Merger Plus+ Investment
Methodology
Process in Action
Gabelli Funds approach the global marketplace in a similar
fashion; we invest like owners. Our clients own businesses through
the fractional interest of a share. We are not index benchmarked,
and construct portfolios agnostic of market capitalisation and
index weightings. We seek long term capital appreciation for our
clients relative to inflation over the long term, regardless of
market cycles. We have invested this way since 1977.
The Gabelli Merger Plus portfolio offers access to companies
that have been identified to have substantial disconnects between
market price and our estimate of the business value (PMV), and
where catalyst events exist that may narrow these discounts for the
benefit of GMP shareholders. We thus establish a "Margin of Safety"
for our investors by identifying differences between our estimate
of PMV and the stock market price. The process seeks to identify
businesses undergoing some form of strategic change, typically with
strong organic cash flow characteristics, balance sheets
reorganizational opportunities, and strategic operational
flexibility accelerated with the prospect of management capital
allocation actions.
Catalyst merger events can come in many forms including, but not
limited to, corporate restructurings (such as demergers and asset
sales), operational improvements, regulatory or managerial changes,
special situations (such as liquidations), and mergers and
acquisitions. Corporate mergers provide valuable insights into
corporate capital allocation decisions and therefore help in our
assessment of long term valuations. Our proprietary research data
bases track thousands of announced deals globally and utilises that
compounded knowledge in the continued refinement of Private Market
Valuations. PMV's will change over time, and while our analysis is
long term, it is through this consistent process of bottom up stock
selection and the implementation of disciplined portfolio
construction that we expect to create value for our shareholders
annually.
In this process, we do sector-by-sector analysis, assessing the
PMV of a business, and identifying the catalyst in place to realise
returns. A company's PMV is not constant, and changes as a function
of many variables. Our analysis emphasizes balance sheets, cash
flows, and the long term defendable position of a corporation. We
achieve returns through investing in businesses utilising our
proprietary Private
Market Value ("PMV") with a Catalyst(TM) methodology. We PMV is
the value that we believe an informed buyer would be willing to pay
to acquire an entire company in a private transaction. Our team
arrives at a PMV valuation by a rigorous assessment of fundamentals
from publicly available information. Further, PMV's are enhanced
through the analysis of announced corporate mergers and acquisition
activity. Mergers offer tangible insights into the long term
capital allocation decisions of global corporations. We focus on
the balance sheet, earnings, free cash flow, and the management,
the stewards of corporates assets, of prospective companies. The
judgement gained from our comprehensive, accumulated knowledge
across a variety of sectors is deployed for investors in a
portfolio. Our analysts typically forecast model company operations
5 years into the future. Unlike Wall Street's earnings momentum
players, we do not try to forecast earnings with accounting
precision and then trade stocks based on quarterly expectations and
realities. We simply try to position ourselves in front of
long-term earnings trends. Throughout our research process, the
focus is on free cash flow: earnings before interest, taxes,
depreciation and amortization ("EBITDA") minus the capital
expendituresnecessary to grow the business. We believe free
cash
flow is the best barometer of a business' value. Deteriorating
or rising free cash flow often foreshadows net earnings changes. We
also look at earnings per share trends. In addition, we analyse on
and off balance sheet assets and liabilities such as property,
plant and equipment, inventories, receivables, and legal,
environmental and health care issues. We want to know everything
and anything that will add to, or detract from, our valuation
models. This method of analysis involves looking at businesses as a
function of their assets and earnings power. We examine businesses
as if we were owners of those businesses, and we believe that we
can do that in a rational way by looking at industries on a global
basis. Our investment professionals visit with hundreds of
companies each year. Our work is proprietary, bottom up, and
involves the full utilisation of public resources.
Our analysts follow industries on a global basis, and narrow the
universe of potential investment candidates to a short list of the
most attractive companies. All publicly available company material
is reviewed, including annual and quarterly reports, 10-Ks, 10-Qs,
and proxy statements.
Each analyst develops an operational understanding of their
industry, effectively becoming an expert in that industry. The
analysts hone this expertise by continually visiting companies and
their senior managements, and by talking to competitors, suppliers
and customers. They also develop and maintain government and trade
sources to derive an overall understanding of their industry. In
addition, our firm hosts a number of industry seminars, where the
top executives of the leading firms share their insights with the
investment community.
The objective of this process is to identify companies that
trade at significant differences to their intrinsic or private
market values.
We continually visit the management of hundreds of companies and
integrate their input with our knowledge base. Our goal is to
understand management's motivations and expectations. Given our
approach, we want to know who our partners are and if they are
working to enhance shareholder value. This process, coupled with
our financial analysis, helps us select the most attractive
investment candidates for our portfolios.
We employ a three-dimensional approach to valuation:
--
Manager History
The Gabelli organisation, of which Gabelli Funds, LLC is an affiliate, began in the
U.S. in
1976 as an institutional value investing research firm. Mario Gabelli, the firm's
founder,
is credited by the academic community for establishing the notion of Private Market
Value
("PMV"), the value an informed industrialist would pay for an entire business in a
negotiated
transaction. This is a long term oriented bottom-up investment process based on the
fundamental
investment principles first articulated in 1934 by Graham and Dodd, the founders of
modern
security analysis, and further augmented by Mario Gabelli in 1977 with his introduction
of
the concepts of PMV into equity analysis. Gabelli has added the element of a catalyst
event
to generate long term returns. The Gabelli method, PMV with a Catalyst(TM) , is part of
the
Value Investing Curriculum at many major business schools and is thus applied in the
analysis
of public equity securities by Gabelli Funds for shareholders.
Earnings per share
-- Free cash flow
-- Private market value
The first step is to analyse the income statement and cash flow.
Cash flow is viewed as a barometer of financial health, and often
foreshadows earnings trends. We attempt to forecast the direction
and growth rates of the earnings and cash flow streams.
The second step is to examine the balance sheet. The corporate
balance sheet is recast, assessing real-world values of
inventories, property, plant and equipment and stated book
value.
To these two analytical processes, dynamic forecasting and
static asset and liability valuation, we add our assessment of the
PMV of the business. In other words, what would this company be
worth to an informed business person attempting to create or
purchase a business with similar characteristics?
Catalyst: Identification of a mispriced situation, however, does
not necessarily guarantee a rewarding investment. The next step is
to determine events in businesses undergoing some form of strategic
change that will help narrow the spread between a stock's public
market price and our determination of its PMV. We call these events
catalysts. Catalysts include industry events such as consolidation,
changes in the regulatory or accounting environment, new
technologies, or be indigenous to the company itself such as
financial engineering, demergers, acquisitions or sales.
Results: After we have identified and selected stocks that
qualify as candidates based on these fundamental and conceptual
considerations, our objective is to structure a diversified
portfolio. This has been a proven long-term method for creating
wealth, risk adjusted, in the stock market.
Investment Objective and Policy
Investment objective
The Company's primary investment objective is to seek to
generate total return, consisting of capital appreciation and
current income for the long term. The Company will seek a secondary
objective of the protection of capital, uncorrelated to equity and
fixed income markets.
Investment policy
The Company will seek to meet its long term investment objective
by utilising the Gabelli Private Market Value (PMV) with a
Catalyst(TM) , investment methodology, maintaining a diversified
portfolio of event merger arbitrage strategies to seek to create an
optimal risk/ reward profile for the portfolio. The company invests
for the long term as owners with an emphasis on cash generating,
franchise companies, selling at a significant discount to our
appraisal of their Private Market Value. We define Private Market
Value (PMV) as the value an informed industrialist would pay to
purchase assets with similar characteristics in a privately
negotiated transaction.
"Event Driven Merger Arbitrage" is a highly specialised active
investment approach designed principally to profit from the
differences between PMV estimates and public market price with
returns realised through the price achieved through corporate
catalyst events. Catalysts are utilised to earn returns independent
of the broad markets' direction. This includes corporate events
such as, but not limited to, management changes, announced mergers,
acquisitions, takeovers, tender offers, leveraged buyouts,
restructurings, demergers and other types of reorganisations and
corporate actions ("deals").
The Company will invest and operate globally although it is
expected to have an emphasis on predominantly equity securities
issued by companies in the United States of any market
capitalisation. The Company is permitted to use a variety of
investment strategies and instruments, including but not limited
to: minority or majority controlling operating interests in equity;
convertible and non-convertible debt securities; asset-backed and
mortgage-backed securities; fixed interest securities; preferred
stock, non- convertible preferred stock, depositary receipts;
shares or units of UCIs or UCITS as an investment or by management
contract; rights qualifying as transferable securities; when
issued, delayed delivery transferable securities; forward
contracts; swaps; recently issued transferable securities;
repurchase agreements, money market instruments and warrants.
The Company may invest part of its net assets in cash and cash
equivalents, money market instruments, bonds, commercial paper or
other debt obligations with banks or other counterparties having at
least a single A (or equivalent) credit rating from an
internationally recognised rating agency or government and other
public securities, if the Portfolio Manager believes that it would
be in the best interests of the Company and its Shareholders. This
may be the case, for example, if the Portfolio Manager believes
that adverse market conditions justify a temporary defensive
position. Any cash or surplus assets may also be temporarily
invested in such instruments pending investment in accordance with
the Company's investment policy.
The Company may take both long and short positions in equity and
debt securities. For shorting purposes, the Company may use
indices, individual stocks, or fixed income securities. The Company
is a long-term investor and does not seek to generate short-term
returns or profits from trading or hedging. While taking a
long-term view, the Company will realise opportunities from hedging
or for shorter-term gains when appropriate.
The Company may utilise financial derivative instruments to
create both long and synthetic covered short positions with the aim
of maximising positive returns. The Company may use strategies and
techniques consisting of options, futures contracts, and currency
transactions and may enter into total rate of return, credit
default, or other types of swaps and related derivatives for
various purposes, including to gain economic exposure to an asset
or group of assets that may be difficult or impractical to
acquire.
The Company may also use derivatives for efficient portfolio
management purposes including, without limitation, hedging and risk
management and leverage.
The Company has broad and flexible investment authority and,
accordingly, it may at any time have investments in other related
or unrelated areas. Strategies and financial instruments utilised
by the Company may include, but are not limited to: (i) purchasing
or writing options (listed or unlisted) of any and all types
including options on equity securities, stock market and commodity
indices, debt securities, futures contracts, future contracts on
commodities and currencies; (ii) trading in commodity futures
contracts, commodity option contracts and other commodity interests
including physical commodities; (iii) borrowing money from
brokerage firms and banks on a demand basis to buy and sell short
investments in excess of capital; (iv) entering into agreements to
acquire operating businesses including managing assets for third
parties and (v) entering into swap agreements (of any and all types
including commodity swaps, interest rate swaps and currency swaps),
forward contracts, currencies, foreign exchange contracts,
warrants, credit default swaps, synthetic derivatives (for example,
CDX), collateralised debt obligations tranches, and other
structured or synthetic debt obligations, partnership interests or
interests in other investment companies and any other financial
instruments of any and all types which exist now or are hereafter
created.
No material change will be made without shareholder
approval.
Portfolio Manager's Review
Methodology and Market Opportunity
In this context, let us outline the investment landscape during
the year to 30 June 2023 and the environment ahead. We are
especially enthusiastic about the opportunities to grow client
wealth in the decades to come, and we highlight below several
factors that should help drive results. These include:
-- Increased market volatility, which enhances our ability to
establish positions for the prospect of improved returns;
-- A robust market for corporate deal making as conditions
continue to provide an accommodative market for mergers and
acquisitions;
-- A rising interest rate environment, providing attractive merger spread opportunities;
-- The Fund's experienced investment team, which pursues
opportunities globally through the disciplined application of the
Gabelli investment methodology.
Global Deal Activity(1)
Global deal merger and acquisition activity ("M&A") totaled
$3.6 trillion during 2022, a year-over-year decrease of 37% (30%
decrease if SPACs are excluded). Deal activity began to slow down
in the second half of the year, as the third quarter was the first
in two years that did not surpass $1 trillion in announced deal
activity. The total number of deals
1 Thomson Reuters M&A Review - Second Half 2022 and First
Half 2023
worldwide decreased only 17% compared to 2021. Mega deals-those
greater than
$10 billion-totaled $787 billion, while deals with values
between $1 billion and
$5 billion accounted for $1.0 trillion during the year, down 31%
and 44% year over year, respectively.
Cross border M&A activity totaled $1.1 trillion for the
calendar year, a decrease of 46% from last year's all-time high.
Private equity deals decreased 36% year over year; however, these
buyouts accounted for a record 20% of total deal activity.
During the first half of 2023, global M&A activity totaled
$1.3 trillion, a year-over- year decrease of 37%, the slowest first
half since the COVID pandemic. Deal activity did start to pick up
in the second quarter, increasing 33% sequentially. Additionally,
the number of deals in the first half was only down 9% compared to
last year. This dichotomy was driven by the lack of mega
deals-those greater than $10 billion-which totaled $259 billion,
down 53% year over year.
Cross border M&A activity totaled $494 billion through June,
a decrease of 25%. Private equity deals decreased 49% year over
year; however, these buyouts accounted for 21% of total deal
activity.
While deals involving United States- based targets declined 40%
in the first half, they still accounted for 43% of global deal
activity. European M&A tallied $263 billion of transactions
over the same period, a decrease of 49%. Asia Pacific targets
totaled $294 billion in the first half of 2023, a 35% decrease year
over year.
In the first half, the Healthcare sector was the biggest
contributor to merger activity, totalling $188 billion and
accounting for 14% of total announced deal volume. The Energy and
Power and Technology sectors were also large contributors, each
accounting for 14% of M&A activity.
Portfolio in Review
Marked by stubborn inflation, conflict in Europe, and the
Federal Reserve's war on inflation, 2022 was a difficult year for
risk assets, marked. Higher interest rates and the prospect of a
recession spared neither stocks nor bonds, as the S&P 500 and
investment grade bonds were down 18% and 13%, respectively. As we
have noted in the past, our merger arbitrage portfolios generate
returns from taking idiosyncratic deal risk and not market risk,
and thus were able to earn a positive return for our clients,
despite the volatile markets. Uncertainty in the boardroom,
elevated borrowing costs, and a bid-ask divide- that often persists
until market participants can digest a sharp decline in asset
values- all contributed to a 30% decline in M&A volumes
(ex-SPACs) in 2022. However, despite the sharp decline from record
2021 levels, volumes only declined mid-single digits from more
normalized 2018 and 2019 levels. The fourth quarter did enjoy an
uptick in announced M&A with a healthy
$800 billion in deal activity. We expect
M&A to remain fairly robust on a historical basis. In terms
of merger arbitrage spreads, they remain wide and attractive
compared to recent history. There are three main reasons for this:
(1) market volatility; (2) perceived regulatory risk; and
(3) interest rates. Deals close in all market environments, and
volatility provides
us with an opportunity, as it is often indiscriminate. Mispriced
risk allows us to add to our highest conviction positions at lower
prices-the benefits of which will be apparent as these transactions
progress towards closing. Regarding regulatory risk, the aggressive
policy reform rhetoric we have written about in the past has
translated in some cases into aggressive action. Some deals were
able to close in spite of regulatory action (Change Healthcare) and
some were able to find alternative, less problematic suitors
(Aerojet Rocketdyne). We feel as though this regulatory regime has
created unique investment opportunities and an attractive
risk/reward. Lastly, the merger arbitrage strategy is a beneficiary
of rising rates, as the risk free rate is one of the components of
a deal spread. As rates rise, nominal spreads should widen, all
things being equal. With the 3 month U.S. Treasury bill yielding
well over 5%, this should continue to create a more compelling
spread environment going forward. We continue to find attractive
investment opportunities in newly announced and pipeline deals. We
remain focused on investing in highly strategic, well-financed
deals with an added focus on near-term catalysts, and are upbeat
about our prospects to generate absolute returns.
U.S. capital markets rebounded significantly in the first half
of 2023 despite headwinds. The S&P 500 finished the first half
up 16.8% against the backdrop of a debt ceiling drama, a U.S.
banking crisis, geopolitical uncertainty, and a Fed that has so far
been unwavering in its commitment to fight inflation.
M&A volumes did not prove as resilient, as economic
uncertainty and combative regulators contributed to a 37% year-
over-year decline in the first half. Despite this sharp decrease in
dollar volumes, the number of transactions was only down 9%
compared to last year. Deals are still getting done-albeit, smaller
in size. The second quarter did begin to show some green shoots, as
volumes totaled $750 billion, a 33% sequential improvement. We
expect this momentum to continue as the year progresses.
The aggressive policy stance of regulators has persisted in
2023, but companies are adapting and showing a willingness to fight
back when case law supports their cause. Regulators' efforts to
bring cases with more novel theories of harm thus far have not
translated into much success in court. While this has created
volatility in certain arbitrage spreads, it has provided
unique investment opportunities with an attractive
risk/reward.
A company's PMV is not constant, and changes as a function of
many variables. Our analysis emphasizes balance sheets, cash flows,
and the long term defendable position of a corporation. We achieve
returns through investing in businesses utilising our proprietary
Private Market Value ("PMV") with a Catalyst(TM) methodology. We
PMV is the value that we believe an informed buyer would be willing
to pay to acquire an entire company in a private transaction. Our
team arrives at a PMV valuation by a rigorous assessment of
fundamentals from publicly available information. Further, PMV's
are enhanced through the analysis of announced corporate mergers
and acquisition activity. Mergers offer tangible insights into the
long term capital allocation decisions of global corporations. We
highlight several investments across sectors which have offered
insights to the corporate allocation process below.
Notable contributors to performance include:
Defense Infrastructure
The strategic rational around US defense spending as a long term
investment continues, notably in the race to develop hypersonic
weapons capabilities as seen in Aerojet Rocketdyne Holdings, Inc.
(AJRD-NYSE) agreement to be acquired by L3Harris Technologies, Inc.
(LHX- NYSE). Aerojet Rocketdyne Holdings, Inc. (AJRDNYSE), which
designs and manufactures specialised power and propulsion systems
for space and defense applications, agreed to be acquired by
L3Harris Technologies for $58 cash per share, or about $5 billion.
In December 2020, Aerojet agreed to be acquired by Lockheed Martin
for $51 cash per share, but that deal was terminated in February
2022 after the U.S. Fair Trade Commission sued to block the
transaction, claiming that Lockheed would be able to raise the
prices the U.S. government pays for rocket engines, and potentially
deliver a lower quality product Portfolio Manager's review
continued Half-Yearly Financial Report (Unaudited) for the six
months ended 31 December 2022 11 to Lockheed's rival defense
contractors that utilise Aerojet's propulsion systems. We believe
the acquisition by L3Harris provides fewer antitrust risks than the
Lockheed transaction did. L3Harris primarily produces electronics
and communications systems, so there is no horizontal overlap with
Aerojet's business
and no benefit from bundling the two companies' products. An
important distinction from the Lockheed deal is that there is also
no vertical integration, as Aerojet does not supply L3Harris with
any products used in L3's programs, and Aerojet will become a new
business unit for L3 as a merchant supplier of engines to prime
contractors. We believe shares of Aerojet Rocketdyne were
inexpensive after the deal with Lockheed Martin was called off and
certain shareholders were forced to sell their position. At the
time, shares traded at less than 10x EBITDA, a significant discount
to its historical valuation, and Tony Bancroft, Gabelli's defense
analyst, thought other buyers for Aerojet would emerge and that
shares were worth more than $60 in a takeover. We expect the
L3Harris deal to close in mid-2023.
Food Distribution
The attributes of consumer food distribution benefits through
scale synergies and as such our investment in Albertsons Companies,
Inc. (ACI- NYSE) entered a new stage as they agreed to be acquired
by The Kroger Co. (KR-NYSE). Albertsons operates food and drug
retail stores in the U.S. under banners such as Albertsons,
Safeway, Vons, Tom Thumb, ACME and more. Under terms of the
agreement Albertsons' shareholders will receive $34.10 cash per
share (inclusive of a special dividend and potential spin-off),
valuing the transaction at approximately
$25 billion.
Biotech Pharma
Undervalued and fairly unique and well positioned business in
our portfolio continued to attract suitors and as such Dechra
Pharmaceuticals plc (DPH LN-London) agreed to be acquired by EQT
and Abu Dhabi Investment Authority. Dechra is a global veterinary
pharmaceuticals and products business. Under terms of the
agreement, Dechra shareholders will receive GBP38.75 cash per
share, valuing the transaction at approximately GBP4.8 billion
Gaming and Entertainment Fundamentals for the online gaming
industry continued to accelerate as Activision Blizzard Inc. (ATVI-
NASDAQ) agreed to be acquired by Microsoft Corp. (MSFT-NASDAQ).
Activision Blizzard develops and
publishes interactive entertainment content and services. Under
the terms
of the agreement Activision shareholders will
receive
$95.00 cash per share, valuing the transaction at approximately
$74 billion.
Portfolio Manager's Review continued
Financial Services
Access to the US financial investor is increasingly becoming a
valuable asset and as such Focus Financial Partners, Inc.
(FOCS-NASDAQ) received an offer to be acquired by Clayton, Dubilier
& Rice, LLC. Focus provides wealth management, investment
advice, financial and tax planning, consulting, tax return
preparation, and family office services to ultra-high and high net
worth individuals, families, and business entities. Under terms of
the offer, Focus shareholders will receive $53.00 cash per share,
valuing the transaction at approximately $7 billion.
Biotech Pharma
The rationale for buy vs. build where developer costs are always
increasing led to Horizon Therapeutics plc (HZNP- NASDAQ) agreeing
to be acquired by Amgen, Inc. (AMGN-NASDAQ). Horizon is a
biotechnology company that focuses on the discovery, development,
and commercialization of medicines for rare, autoimmune, and severe
inflammatory diseases. Under terms of the agreement, Horizon
shareholders will receive $116.50 cash per share, valuing the
transaction at approximately $28 billion.
Energy Infrastructure
US energy PNM Resources, Inc. (PNM- NYSE) agreed to be acquired
by Avangrid, Inc. (AGR-NYSE). PNM Resources engages in the energy
and energy-related businesses in the U.S. Under terms of the
agreement, PNM shareholders will receive $50.30 cash per share,
valuing the transaction at approximately $8 billion.
Infrastructure and Engineering
Our analysis and understanding of PMV multiples benefit when our
portfolio holdings are subject to bidding wars. CIRCOR
International, Inc. (CIR-NYSE), which designs, manufactures, and
distributes flow and motion control products globally, was the
subject of a bidding war. Under terms of the original agreement,
dated June 5, 2023, CIRCOR shareholders would have received $49.00
cash per share, for approximately $1.4 billion. Later, on June 27,
2023, CIRCOR agreed to be acquired by KKR under improved terms of
$51.00 cash per share, after CIRCOR received an unsolicited bid of
$52.65 cash per share from an unnamed third party. Subsequently, on
June 28, 2023, Arcline Investment Management LP was revealed as the
unnamed third party
with an all-cash proposal to buy CIRCOR for $57.00 cash per
share. In response, on June 29, 2023, CIRCOR entered into an
agreement to be acquired by KKR for $56.00 cash per share, valuing
the transaction at approximately $1.6 billion. CIRCOR accepted
KKR's lower price due to more certain financing and a better
antitrust profile.
Portfolio Summary
Largest Portfolio Security holdings (excluding cash and cash
equivalents)
As at 30 June 2023
================ ========================= =================================== ====== ====================================
% of total Offsetting % of total
portfolio(6) market portfolio(3)
(gross)
Market value(5) (net)
value(4)
Security(1) Offsetting position(2) $000 $000
================ ========================= ======================== ========= ======================== ==================
Horizon Therapeutics plc 5.4 3,425 5.4
Activision Blizzard Inc 4.4 2,770 4.4
IVERIC Bio Inc 4.3 2,722 4.3
PNM Resources Inc 4.3 2,692 4.3
Univar Solutions Inc 3.9 2,477 3.9
=========================================== ======================== ========= ======================== ==================
National Instruments Corp 3.9 2,448 3.9
Aerojet Rocketdyne Holdings
Inc 3.6 2,251 3.6
Tegna Inc 2.9 1,821 2.9
Albertsons Companies Inc 2.7 1,733 2.7
Focus Financial Partners LLC 2.7 1,728 2.7
=========================================== ======================== ========= ======================== ==================
VMWare Inc Broadcom Inc 2.7 1,724 (1,074) 1.0
Tower Semiconductor
Ltd 2.1 1,358 2.1
Seagen Inc 2.1 1,299 2.1
Radius Global Infrastructure 2.0 1,293 2.0
Lennar Corp
Class Lennar Corp Class
B A 1.9 1,221 (1,081) 0.2
================ ========================= ======================== ========= ======================== ==================
Uni-Select Inc 1.9 1,172 1.9
Triton
International Brookfield
Ltd Infrastructure 1.7 1,064 (113) 1.5
Liberty Media Corp 1.5 981 1.5
NuVasive Inc Globus Medial Inc 1.5 978 (898) 0.1
VectivBio Holding
AG 1.5 943 1.5
=========================================== ======================== ========= ======================== ==================
Sub-total 57.0 36,100 (3,166) 52.0
Other holdings(7) 43.0 33,712 (3,340) 48.0
=========================================== ======================== ========= ======================== ==================
Total holdings 100.0 69,812 (6,506) 100.0
=========================================== ======================== ========= ======================== ==================
(1) Long position.
(2) Offsetting position taken, based on the acquirer of the
security when acquirer stock is being offered in whole, or in part,
to finance the transaction. Lennar Corp is a share class
arbitrage.
(3) Represents the total position value (market value plus the
offsetting market value) as a percentage of the total portfolio
value.
(4) Market value of the long position.
(5) Market value of the offsetting position.
(6) Represents the market value as a percentage of the total portfolio value.
(7) Including derivatives and equity short positions and excluding U.S. Treasuries.
Strategy
Our Key Performance Indicators ("KPIs") The Company's strategy
is to generate returns for its shareholders by pursuing its
investment objective while mitigating shareholder risk, by
investing in a diversified spread of equity investments. Through a
process of bottom-up stock selection and the implementation of
disciplined portfolio construction, we aim to create value for the
Company's shareholders.
The largest holdings in the Company's portfolio are listed on
page 11.
Gearing Policy
At the sole discretion of the Portfolio Manager, the Company may
use leverage as part of its investment programme. It is anticipated
that the Company will structurally gear and use tactical leverage
or portfolio borrowings in an amount (calculated at the time of
investment) of around 2 times of the Net Asset Value, subject to
maximum gearing of 2.5 times the Net Asset Value. Please refer to
page 69 in the Glossary for further discussion of gearing.
Leverage
Leverage is calculated using two methods:
i) Gross method and ii) Commitment method. For further details
please see the Glossary on page 69.
Business Model
Please see the Methodology in Action on page 5.
Board Diversity
Please see the "Board Diversity" section on page 26.
Key Performance Indicators ("KPIs")
The Board recognises that it is share price performance that is
most important to the Company's shareholders. Fundamental to share
price performance is the performance of the Company's net asset
value. The central priority is to generate returns for the
Company's shareholders through net asset value and share price
total return, and discount management.
For the year ended 30 June 2023, the Company's KPIs, as
monitored closely by the Board at each meeting, are listed
below:
Net Asset Value Total Share Price Total Return Discount to Net Asset
Return Year ended 30 June Year ended 30 June 2023(2) Value Year ended 30 June
2023(1) 2023(3)
10.54% 1.33% (11.94)%
(30 June 2022: (1.34)%) (30 June 2022: 29.06%) (30 June 2022: (3.74)%)
The above table sets out the key KPIs for the Company. These
KPIs fall within the definition of 'Alternative Performance
Measures' (APMs) under guidance issued by the European Securities
and Markets Authority (ESMA). Information explaining how these are
calculated is set out in the Glossary. These KPIs including APMs
have been carefully selected by the Board on discussion with the
Portfolio Manager, to give the most appropriate overview of
performance in the financial year to shareholders and other
stakeholders.
Performance measured against The Company does not use a benchmark. However,
various indices at each meeting the Board reviews and compares
portfolio performance in the context of the performance
of the ETF MNA and Credit Suisse Merger Arb Liquid
Indices.
Information on the Company's performance is given
in the Chairman's Statement and the Portfolio
Manager's Review.
Share Price Total Return The Company's primary investment objective is
to seek to generate total return consisting of
capital appreciation and current income for the
long term.
In order to allow the Shareholders to realise
a predictable, but not assured, level of cash
flow and some liquidity periodically on their
investment, the Company has adopted a "managed
dividend policy". This policy seeks to pay Shareholders
a quarterly dividend in relation to the Net Asset
Value of the Company at the time, which may be
changed at any time by the Board. Between inception
and 30 June 2023, the Company returned
$2.39 per share to shareholders, consistent with
its dividend policy. Dividends are paid only
when declared by the Board subject to the Board's
assessment of the Company's financial position
and only if the Company has sufficient income
and distributable reserves to make the dividend
payment, and the level of dividend may vary over
time. As such, the portfolio's managed distribution
of capital through the payment of quarterly dividends
is under review as we enter the new Fiscal Year.
Additional information can be found in the Glossary
on page 71.
========================================================
1 Net Asset Value per ordinary share, total return represents
the theoretical return on NAV per ordinary share, assuming that
dividends paid to shareholders were reinvested at the NAV per
ordinary share at the close of business on the day shares were
quoted ex-dividend.
2 Share Price Total Return represents the theoretical return to
a shareholder, on a closing market price basis, assuming that all
dividends received were reinvested, without transaction costs, into
the ordinary shares of the Company at the close of business on the
day the shares were quoted ex-dividend.
3 The amount by which the market price per share is lower than
the cum-income NAV per share, expressed as a percentage of the
cum-income NAV per share. Figures are inclusive of income and
dividends paid, in line with the Association of Investment
Companies ("AIC") guidance.
Share price discount to The NAV per share is published on a daily basis
net asset value (NAV) per on the London Stock Exchange and The International
share Stock Exchange. The NAV is calculated in accordance
with the Association of Investment Companies
(AIC) formula.
At each Board meeting, the Board monitors the
level of the Company's discount to NAV, the changes
thereto and the reason for such changes. The
Directors recognise the importance to investors
that the shares should not trade at a significant
discount to NAV. Accordingly, the Board would
consider implementing a share buy back programme
to ensure that the share price does not trade
at a significant discount to the NAV.
In the year under review, the Company's shares
traded at a discount of (3.74)% as of 30 June
2022 and at a discount of (11.94)% as of 30 June
2023.
Performance is assessed on a total return basis for the NAV and
share price.
Dividend History
Rate ($) Ex dividend Record date Payment date
date
==================== ======== =================== ============= =============
Fourth interim 2022 $0.12 6 April 2023 11 April 2023 25 April 2023
Third interim 2022 0.12 18 April 2022 19 April 2022 28 April 2022
Second interim 2022 0.12 20 January 21 January 03 February
2022 2022 2022
First interim 2022 0.12 18 November 19 November 03 December
2021 2021 2021
==================== ======== =================== ============= =============
Total 0.36
==================== ======== =================== ============= =============
The Company paid the fourth interim dividend for the fiscal year
ended 30 June 2022 on 25 April 2023. Following the Tranche Two
Tender Offer the Board has continued to review and assess the
Company's distribution policy. The Company paid the first interim
dividend for the fiscal year ended 30 June 2023 on 8 September
2023.
Principal Risks
The Company continues to have exposure to a variety of risks and
uncertainties, and the Audit & Risk Committee has focused
attention on identifying and mitigating key risks likely to
crystallise in the current economic environment. The Board
continues to prioritise a robust system of controls to minimise
exposure to global macro events in particular, which remains
highlighted as a generic risk as in recent Annual Reports.
The Directors confirm that they have carried out a further
robust assessment of the principal risks facing the Company during
the year, including those that would threaten its investment
objective, business
model, future performance, solvency or liquidity. The Company
maintains a risk register which sets out the risks facing the
Company, the likelihood and potential impact of each risk and the
controls established for mitigation. The risk register is reviewed
by the Audit & Risk Committee on a regular basis throughout the
financial year and was specifically refreshed in 2023 to introduce
more stringent risk ratings for each risk and to reflect the impact
of related mitigating controls.
The core principle risks set out in the 2023 Annual Report
remain largely unchanged, however there are some risks that have
emerged which are set out in the following
table with an explanation of how they are mitigated. On review
during the year, the Board re-rated several principal risks and
considered the adequacy of mitigating controls in place across the
Company's operations and those of its key third party providers.
The Audit & Risk Committee has also specifically considered the
risks associated with the Portfolio Manager's use of Contracts for
Difference within the investment strategy which on review, were
felt to continue to be appropriate. The risk narrative in the table
below includes a summary of the actions taken to position the
Company to withstand the related effects for markets and
investments:
Risk Mitigation
Investment Portfolio Risks
===============================================================================================
Decline in the U.S. equity markets. By investing in a diversified portfolio and
adhering to a carefully monitored series of
investment restrictions, enabled by automated
Excessive Portfolio Concentration pre-trade compliance features and daily review
of trade tickets. These strictures mandate
that no single security purchase can, at the
time of investment, account for more than
15% of the gross assets of the Company. The
Board meets the portfolio management team
quarterly at the Board meetings to review
Deal Failure Risk the risk factors and their effects on the
portfolio, and a thorough analysis of the
investment strategy is undertaken.
The increased scrutiny by U.S. and UK anti-trust
authorities on M&A cross border transactions
Counterparty Risk represents an additional source of deal failure
risk which the Investment Manager can mitigate
via appropriate portfolio diversification
and careful stock picking.
The Board and the Portfolio Manager regularly
monitor the Company's exposure to its counterparties.
This oversight is intended to minimize the
likelihood of loss to the Company resulting
from a counterparty's failure to meet its
obligations.
======================================= ======================================================
Global Macro Events Risks
Sharp Interest Rate Changes The Portfolio Manager monitors the interest
rate environment and how those changes would
potentially impact the Company's investment
strategy.
======================================================
Operational Risks
Outsourcing
The operational functions of the All third party service providers report to
Company are outsourced to third the Board on a regular basis and their reports
parties. Systems disruptions, control and representations are reviewed by the Board,
failures, fraud or inadequate disaster the AIF Manager and the Portfolio Manager.
recovery provisions at key service
providers could adversely impact
the Company.
======================================================
A state-backed cyberattack could Whilst the Board takes all reasonable endeavours
also result in widespread disruption to safeguard the Company from a cyberattack
across the financial industry. on this scale, complete mitigation of this
external risk cannot be guaranteed; however
the Board, together with its' service providers
remain vigilant to the likelihood of such
an event in the current climate and have improved
the company's readiness to reduce disruptions
to the company's activities, in the event
of such threat.
======================================================
Fraud and cybersecurity vulnerability The Board relies on assurances from the Company's
could increase for key service key third-party providers that they have appropriate
providers. Such events are external and adequate cybersecurity policies in place
to the management and beyond the to mitigate the risk of a cyberattack. The
control of the Company. Board keep these policies under review by
receiving regular presentations from the Heads
of cybersecurity of its service providers,
who describe in detail the efforts they take
to secure the company's data and to mitigate
the risks of loss or potential damages that
could result from such attacks.
======================================================
Risk Mitigation
Unforeseen global events such as Global economic, geopolitical, and financial
geopolitical crisis, war, act of conditions are constantly monitored. Diversification
terrorism or outbreak of pandemics of Company assets is incorporated into the
could lead to dramatically increased investment strategy and, if disruptive events
market instability and Company occur, the Manager is prepared to adopt a
share price volatility a decline temporary defensive position and invest some
in cross-border M&A activity. or all of the Company's portfolio in cash
or cash equivalents, money market instruments,
bonds, commercial paper, or other debt obligations
with banks or other counterparties, with appropriate
ratings as determined by an internationally
recognised rating agency and approved by the
Board. Another option is the investment in
"government and public securities" as defined
for the purposes of the Financial Conduct
Authority Handbook.
The Manager continues to carefully manage
the Company's investments to protect shareholders'
interests and to position the Company to benefit
from future performance of markets in line
with its key investment principles.
=====================================================
Equity Market Volatility
Equity Market Volatility, which To address a discount, the Board may consider
may cause a widening of bid-ask using share buybacks, through which shares
spreads and a wider price discount would be repurchased when trading at a discount
to NAV. from NAV, up to a maximum percentage of 14.99%
of the issued share capital. The Company has
continued its shareholder engagement programmes
to increase its visibility and interaction
with existing and potential investors.
=====================================================
Financial Risks
Comprise: (i) share price risk Further details of these risks are disclosed
(comprising interest rate risk, in Note 12 to the financial statements together
currency risk and other price related with a summary of the policies for managing
risks); (ii) liquidity risk; (iii) these risks.
credit risk and (iv) Derivative
risk.
=====================================================
Tax Risks
The Company is no longer eligible The Company has engaged reputable, external
to avail itself of Investment Trust tax consultants with whom the management team
Status as per Section 1158 of the consults with on a regular basis and from
Corporation Tax Act 2010 and is whom the Board now receives periodic updates
consequentially exposed to UK corporation to ensure the Company remains compliant with
tax payments. any tax-related payments and disclosures.
=====================================================
Corporate Governance and Regulatory Compliance Risks
Damage to the Company's reputation The Board complies with good governance practices
through inadequate corporate governance in accordance with the Association of Investments
arrangements. Companies" ("AIC") Code of Corporate Governance
guidelines which endorse the UK Corporate
Governance Code. The Board and its Committees
actively perform self-assessments of compliance
through the annual effectiveness evaluations
and receive regular advice from by the Company
Secretary in relation to any regulatory changes
within the corporate governance landscape
that may impact the company.
=====================================================
Failure to comply with legal and The Company receives and responds to guidance
regulatory requirements. from both its external and internal advisors
on compliance with the Listing Rules, the
Financial Conduct Authority's Disclosure and
Transparency Rules, UK Companies Act 2006,
and other applicable regulations.
=====================================================
Emerging Risks Mitigation
Geopolitical Risks
====================================================
Geopolitical risks have risen with The Board is keeping these evolving risks
Russia's invasion of Ukraine. The and market pressures under constant review
impact of sanctions and the rise and will continue to monitor the volatility
in commodity prices are likely around investee company valuations and implications
to be primary influences on markets. for the Company's likely future dividend income
Rising commodity prices and further stream.
disruption to supply chains shall
exacerbate inflationary pressure
and may also create a negative
impact on global growth, with Europe
at particular risk.
====================================================
Viability & Going Concern Statement
In accordance with the provisions of the UK Corporate Governance
Code, the Directors have assessed the prospects of the Company over
a longer period than the 12 months referred to in the 'Going
Concern' guidelines.
The Board conducted this review focusing on a period of five
years. This period was selected as it is aligned with the Company's
investment objective of generating total return, consisting of
capital appreciation and current income for the long term. In
making this assessment the Board also considered the Company's
principal risks.
Investment Companies in the UK operate in a well established and
robust regulatory environment and the Directors have assumed
that:
-- Investors will continue to want to invest in closed-end
investment companies because the fixed capitalisation structure is
suited to pursuing the Portfolio Manager's proprietary long-term
PMV with a Catalyst(TM) investment strategy;
-- The Company's remit of investing globally with an emphasis on
securities traded in the U.S., and predominantly equity securities
issued by companies of any market capitalisation will continue to
be attractive to investors.
-- The UK's well established investment and robust regulatory
environment will continue as such and will remain an attractive
global domicile for the Company's remit.
-- The recent period of UK political instability as reflected in
the Sterling exchange rate relative to the US Dollar, the interplay
of parliamentary politics with the Bank of England, and the
regulatory unravelling of Brexit relative to the European Union,
will pass in the medium term and return to a period of marketplace
stability and instill domicile confidence for global investors.
As with all investment vehicles, there is a risk that the
performance of individual investments will vary and that capital
may be lost, but this is not regarded as a threat to the viability
of the Company.
Operationally, the Company retains title to all assets, and cash
and securities are held with a custodian bank approved by the
Portfolio Manager and the Board.
The nature of the Company's investments means that solvency and
liquidity risks are low because:
-- The Company's portfolio is invested in readily realisable, listed securities;
-- The closed-end nature of the Company means that, unlike an
open-ended fund, it does not need to liquidate positions when
shareholders wish to sell their shares; and
-- The expenses of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
currently foreseen which would alter that position.
-- The taxation of the Company as a close investment company is
predictable and modest in comparison with the return profile of the
investment programme and as a result of regular consultation with
shareholders, an effort to undertake the mitigation of such close
status taxation, such as a re-domiciliation, is not expected in the
next 12 months.
-- The Company conducted and completed the Fifth Anniversary
Tender Offer, as set out in the circular published on 19 August
2022. The Company purchased 3,387,414 shares, resulting in
6,850,792 shares in issue at 30 June 2023 versus 10,238,206 shares
in issue in July 2022. The Board believes that the Company retains
sufficient scale to continue to operate its Investment
Programme.
The Board has closely monitored the impact of the war in
Ukraine. Those impacts and related continuing uncertainty have
short and potentially medium term implications for the Company's
investment strategy. The Board is continuing to monitor the
implications of the Company no longer having investment trust
status and its implications on the Company's investment return
profile over the longer term. In context, the Board continuously
monitors the Company's investment portfolio, liquidity and gearing,
along with levels of market activity, to appropriately minimise and
mitigate consequential risks to capital and future income such as
geopolitical risks, financial risks etc. The risks are discussed in
more detail in the Chairman's Statement and on pages 14 to 15.
Taking these factors into account, the Directors confirm that
they have a reasonable expectation that the Company will continue
to operate and meet its expenses.
The Company's portfolio consists primarily of U.S. investments.
Accordingly, the Company believes that the post "Brexit"
arrangements introduced by the U.K. government and market U.K.
government and market regulators will not materially affect the
prospects for the Company, but the Board and Portfolio Manager will
continue to keep developments under review.
This Viability & Going Concern Statement, the Strategic
Report for the year ended 30 June 2023 (on pages 2 to 16 of this
document) and the s172 statement (on pages 26 to 29) have been
approved by the Board and signed on its behalf by:
John Birch Marc Gabelli
Co-Chairman Co-Chairman 19 October 2023
Directors' Report
The Directors present the annual report and accounts of the
Company for the year ended 30 June 2023. The financial statements
have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the UK international
accounting standards and have been prepared in accordance with the
requirements of the Companies Act 2006.
The Company
The Company was incorporated in England and Wales on 28 April
2017 with registered number 10747219. The Company is registered as
an investment company as defined by Section 833 of the Companies
Act 2006 (the "Companies Act") and operates as such.
The Company was admitted to the Specialist Fund Segment of the
Main Market of the London Stock Exchange and trading on the
Official List of the International Stock Exchange on 19 July
2017.
The Company's Listing Sponsor on the International Stock
Exchange is Ocorian Administration (Guernsey) Limited. The Company
also operates an additional market quote for its ordinary shares on
the London Stock Exchange, denominated in sterling.
Investors should look to the Circular dated 19 August 2022 for
information about the Company, the Loyalty Programme, and the
Tender Offer.
The Company has elected continued adherence to the AIC's SORP.
Although no longer a trust, the Company has elected to continue to
prepare the financial statements on a basis compliant with the
recommendations of the SORP. The SORP is issued by the AIC and it
sets out recommendations, intended to represent current best
practice, on the form and contents of the financial statements of
Investment Companies. Investment Companies include investment trust
companies that have been, currently are, or are directing its
affairs so as to enable it to obtain or retain approval under
Section 1158 of the Corporation Tax Act 2010. Although the Company
no longer meets the requirements of Section 1158 of the Corporation
Tax Act 2010 to be an investment trust, it continues to conduct its
affairs as an investment company.
Going concern
The Board have closely monitored the impact of the ongoing
COVID-19 pandemic, Brexit uncertainty, and the war in Ukraine.
Those impacts and related continuing uncertainty have short- and
potentially medium-term implications for the Company's investment
strategy. Additionally, the Board is monitoring the period ahead on
the basis of the Company no longer having investment trust status
and its implications on the Company's investment return profile
over the longer term. In context, the Board continuously monitors
the Company's investment portfolio, liquidity and gearing, along
with levels of market activity, to appropriately minimise and
mitigate consequential risks to capital and future income such as
geopolitical risks, financial risks etc. Taking these factors into
account, the Directors confirm that they have a reasonable
expectation that the Company will continue to operate and meet its
expenses as they fall due. For these reasons, the Directors
consider there is reasonable evidence to continue to adopt the
going concern basis in preparing the accounts as at 30 June
2023.
This Going Concern statement should be read in conjunction with
the Company's Viability & Going Concern Statement which can be
found on page 16.
Directors
The Directors of the Company in office at the date of this
report and their biographies are set out on pages 17 and 18.
Details of Directors' interests in the shares of the Company are
set out in the Directors' Remuneration Report.
Directors' retirements are subject to the Company's Articles of
Association (the "Articles"). The Articles provide that the
directors may appoint a person who is willing to act as a director
and any director so appointed is required to retire at the next AGM
after his or her appointment and is eligible for reappointment. All
directors who held office at the time of the two preceding AGMs and
who did not retire by rotation at either of them are also required
to retire by rotation and are eligible for reappointment. In
addition, each Director considered to be non-independent will
retire and being eligible offer themselves for re-election on an
annual basis.
The Board has agreed to follow the recommendations of the U.K.
and AIC Corporate Governance Codes and ask all Directors of the
Company to offer themselves for re-election annually. Therefore,
all the Directors will retire at the forthcoming AGM and, being
eligible will offer themselves for re-election.
Having considered the Directors' performance as part of the
annual Board evaluation process the Board believes that it
continues to be effective and that each of the Directors brings an
appropriate level of knowledge, experience, business, financial and
asset management skills. The Board therefore recommends that
shareholders vote in favour of each Director's proposed election at
the AGM.
Mr. Gabelli, as a Director and President of the Gabelli Group
("GGCP, Inc."), the parent company of both Gabelli Funds, LLC (the
"Portfolio Manager") and Associated Capital Group, the Company's
largest shareholder, is deemed to be interested in the Company's
Portfolio Management Agreement, as is Mr. Birch, who serves on the
Boards of other funds in the Gabelli/GAMCO group of companies.
There were no other contracts subsisting during the year under
review, or up to the date of this report, in which a Director of
the Company is, or was, materially interested and which is, or was,
significant in relation to the Company's business.
None of the Directors have a service contract with the Company.
The terms of their appointment was provided to them in writing. No
Director is entitled to compensation for loss of office on the
takeover of the Company. The powers of the Directors are set out in
the Corporate Governance Statement.
Directors' conflicts of interest
Directors have a duty to avoid situations in which they have, or
could have, a direct or indirect interest that conflicts, or may
potentially conflict, with the Company's interests. This is in
addition to the continuing duty that Directors owe the Company to
disclose to the Board any transaction or arrangement under
consideration by the Company in which they are interested.
Directors are required to disclose any conflicts and potential
conflicts of interest upon appointment. A schedule of these is
maintained by the Company Secretary and provided at each quarterly
Board meeting. Directors are responsible for keeping these
disclosures up to date and in particular to notify any new
potential conflicts of interest, or changes to existing situations,
to the Company Secretary.
In accordance with the Companies Act 2006 and the Company's
Articles, the Directors can authorise such conflicts or potential
conflicts of interest. In deciding whether to authorise any
conflict, the Directors must consider their general duties under
the Companies Act 2006, and their overriding obligation to act in a
way they consider, in good faith, will be most likely to promote
the Company's success.
In addition, the Directors are able to impose limits or
conditions when giving authorisation to a conflict, or potential
conflict of interest, if they think this is appropriate. The
authorisation of any conflict matter, and the terms of any
authorisation, may be reviewed by the Board at any time.
The Board believes that the procedures established to deal with
conflicts of interest operated effectively during the year under
review.
Directors' Indemnities
In accordance with the provisions of the Companies Act, the
Company's Articles allow for Directors and officers of the Company
to be indemnified out of the assets of the Company against all
costs, losses, and liabilities incurred for negligence, default,
breach of duty or trust in relation to the Company's affairs and
activities. The Articles also provide that, subject to the
provisions of the Companies Act 2006, the Board may purchase and
maintain insurance for the benefit of Directors and officers of the
Company against any liability which may incur in relation to
anything done or omitted to be done, or alleged to be done or
omitted to be done, as a Director or officer. The Company has taken
out Directors' and Officers' Liability insurance, which covers the
Directors and officers of the Company.
Share Capital
Full details of the Company's issued share capital are given in
Note 11 to the Financial Statements on page 58. Details of the
voting rights in the Company's shares as at the date of this report
are also given in Note 6 to the Notice of Annual General Meeting on
page 75.
The ordinary shares carry the right to receive dividends and
have one voting right per share. Voting rights may increase to
certain Loyalty Programme qualifying shareholders in the subsequent
period commencing calendar year end 2023 (see "Loyalty Programme").
There are no restrictions on the voting rights of the ordinary
shares or any shares which carry specific rights with regard to the
control of the Company.
No shares were issued during the year under review, or up to
close of business on 30 June 2023.
At the year end and at the date of this report there were
accordingly 3,483,374 ordinary shares held in treasury (33.7% of
the issued share capital).
In September 2022, concurrent with the Fifth Anniversary Tender
Offer, the Board of Directors of the Company were authorised to
allot Ordinary Shares of the Company up to an aggregate nominal
value of $511,910.30, with such authority to expire on the fifth
anniversary of the date of the passing of the resolution. In
addition, at the November 2022 AGM, the Board of Directors was
authorised to allot relevant securities in the Company up to a
maximum aggregate nominal amount of $71,822 (being ten percent of
the total number of voting rights of the Company at the latest
practicable date prior to the publication of the Notice of AGM),
with such authority to apply until the conclusion of
this year's AGM. The resolutions for the 2023 AGM include
authorisation to the Company to allot equity securities up to an
aggregate nominal value of $45,672, that can be utilised for
acquisitions by the company. These transactions may result in the
acquisition of other operating businesses to further expand and
develop shareholder value in accordance with the investment
programme.
Share Repurchase
The Company has authority to buy back shares in the market and
may cancel or hold ordinary shares acquired by way of market
purchase in treasury.
The Directors will consider repurchasing shares in the market
under an extension of the programme if they believe it to be in
shareholders' interests. It is the Board's intention that any
shares bought back by the Company will be held in treasury and will
only be sold at prices at or above the prevailing NAV per share
ensuring a positive overall effect for shareholders when shares are
bought back at a discount and then sold at a price at or above the
NAV per share.
The current authorities to buy back and sell shares from
treasury and to issue shares will expire at the conclusion of the
2023 Annual General Meeting. The Directors are proposing that these
authorities be renewed at the forthcoming Annual General
Meeting.
The Board expects a tender offer to be implemented in 2024, in
the range of approximately 5% of the Ordinary Shares not owned by
Associated Capital Group, Inc. Any such offer is under further
review and analysis.
Close Company
As a result of the Fifth Anniversary Tender Offer, the Company
has been operating as an Investment Company with close company
status. The Board has not adjusted the Company's investment policy
(as detailed in the Charter), as a result of close status. The
Board is examining alternatives to reduce costs on an ongoing basis
and will seek to undertake a comprehensive review during the
2023-2024 period.
Loyalty Programme
The Company has implemented a loyalty programme to incentivise
long-term share ownership. The loyalty programme is open to all
shareholders, who are entered in the Loyalty Register, a separate
register to allow a shareholder to increase its voting power after
holding shares for a continuous period of at least five years. Each
shareholder so registered will be entitled to subscribe for one
special voting loyalty share in respect of each ordinary share
held. These shares can also be used as a form of consideration when
entering into one or more agreements to acquire operating
businesses in accordance with the Investment Policy, and subject to
approval by shareholders at the AGM, the articles will be updated
to reflect this dynamic.
Each ordinary shareholder and holder of special voting loyalty
shares has the right to receive notice of, to attend, to speak at,
and vote at general meetings of the Company. Each ordinary
shareholder and holder of special voting loyalty shares who is
present in person or by proxy at general meetings has one vote,
whether on a show of hands or on a poll, in respect of each
ordinary and special voting loyalty share held. At any general
meeting ordinary shares and any special voting loyalty shares in
the capital of the Company in issue would vote effectively one
class.
During the year, the Company authorised the issuance of Special
Voting Loyalty Shares in accordance with the terms specified in the
Loyalty Programme, with Associated Capital Group Inc. agreeing to
subscribe for Special Voting Loyalty Shares, which will increase
its voting interest when issued, with issuance pending.
The ordinary shares carry the right to receive dividends. The
special voting loyalty shares are not entitled to participate in
any dividend or distribution made or declared by the Company except
for a fixed annual dividend equal to 0.00001% of their nominal
value. On a winding up of the Company holders of special voting
loyalty shares would be entitled to be repaid the capital paid up
thereon pari passu with the repayment of the nominal amount of the
ordinary shares. The special voting loyalty shares are not
transferrable without the prior written consent of the Company.
These shares can also be used as a form of consideration when
entering into one or more agreements to acquire operating
businesses in accordance with the Investment Policy, and subject to
approval by shareholders at the AGM, the articles will be updated
to reflect this dynamic.
There are no restrictions on the transfer of ordinary shares or
on the exercise of voting rights attached to them, which are
governed by the Company's Articles and relevant legislation.
There are no shares which carry specific rights with regard to
the control of the Company.
Activities and Business Review
A review of the business and details of research activities can
be found within the Strategy section of this Annual Report.
Alternative Investment Fund Managers
As an investment company that is managed and marketed in the
United Kingdom, the Company is an Alternative Investment Fund
("AIF") falling within the scope of, and subject to the
requirements of, the Alternative Investment Fund Managers Directive
("AIFMD"). The Company had appointed Carne Global Fund Managers
(Ireland) Limited ("Carne") as its Alternative Investment Fund
Manager ("AIFM") pursuant to the AIFMD. As a result of the United
Kingdom's departure from the European Union, the Company assigned
Gabelli Funds LLC, a US SEC registered investment advisor as the
AIFM in accordance with such exemptions, effective 14 February
2023.
Carne was responsible for the portfolio management and risk
management functions of the Company until the point Gabelli Funds
LLC was appointed AIFM (on 13 February 2023). Carne continues to
provide the Company AIFM support services and monitor risks. The
Carne Agreement may be terminated by either party giving not less
than 90 days' written notice.
Carne was entitled to receive from the Company such annual fees,
accrued and payable at such times, as may be agreed in writing
between itself and the Company from time to time. The fees are to
be payable monthly and subject to a minimum monthly fee of @2,500.
During the year under review the AIFM fees paid to Carne were
$50,865 (2022: $48,062). Regulatory disclosures including the Key
Investor Information Document are provided on the website. Gabelli
Funds, LLC does not earn a fee for its role as AIFM; it earned
$653,934 in portfolio management fees during the year ended 30 June
2023 (2022: $841,642). Disclosures on on Remuneration as required
under AIFMD can also be found on page 77.
Portfolio management and administration
Gabelli Funds, LLC ("Gabelli") was appointed as Portfolio
Manager with effect from 15 June 2017 under a Portfolio Management
Agreement (the "Agreement") with the Company under which portfolio
management functions were delegated to Gabelli. Gabelli receives a
management fee, payable monthly within 10 business days calculated
at the rate of 0.85% of NAV accrued daily and calculated on each
business day.
Gabelli is entitled to earn a performance fee under the
Agreement in respect of each performance period, ending 30 June
each year. For the year under review Gabelli was entitled to a
performance fee of 20% of any outperformance of the net asset value
total return, capped at 3% of the average NAV. For the year ended
30 June 2023 no performance fee was paid (2022: nil).
Appointment of the Manager
The arrangements for the provision of portfolio management and
other services to the Company is considered by the Board on an
ongoing basis and a formal review is conducted annually.
During the year, the Board considered the performance of Gabelli
as Portfolio Manager by reference to the investment process,
portfolio performance and how it had fulfilled its obligations
under the terms of the Portfolio Management Agreement.
It is the opinion of the Board that the continuing appointment
of Gabelli as Portfolio Manager, on the terms disclosed is in
shareholders' interests as a whole. Among the reasons for this view
is the depth, experience and investment process of Gabelli.
Facilitating Retail Investments
The Company conducts its affairs so that its shares can be
recommended by independent financial advisers to ordinary retail
investors in accordance with the FCA's rules in relation to non-
mainstream pooled investments and intends to continue to do so for
the foreseeable future.
The shares are excluded from the FCA's restrictions which apply
to non-mainstream pooled investments because they are shares in an
investment trust.
Other third party service providers Depositary and Custodian The
Company appointed State Street Trustees Limited as its Depositary
under a Depositary Agreement dated 30 June 2017 between Carne,
Gabelli and the Company. The main role of the Depositary under the
AIFMD is to act as a central custodian with additional duties to
monitor the operations of the Company, including cash flows and to
ensure that the Company's assets are valued appropriately. The
Depositary receives a fee payable at 0.025% per annum of the gross
assets of the Company.
Under the Depositary Agreement, custody services in respect of
the Company's assets have been delegated to State Street Bank and
Trust Company. The Custodian receives a custody fee payable by the
Company at rates depending on the number of trades and the location
of securities held subject to a minimum annual fee payable of not
less than $31,250. Custody fees of $51,569 were paid during the
year under review (2022: $41,736).
The depositary agreement is subject to 90 days' written notice
of termination by any party.
Registrar
Computershare Investor Services Plc (the "Registrar") has been
appointed as the Company's registrar pursuant to the Registrar
Services Agreement. The Registrar is responsible for maintaining
the Company's register of shareholders and also provides services
in respect of the payment of dividends, provision of shareholder
documentation and compliance with the Common Reporting Standard.
Fees of $17,973 was paid to the Registrar during the year under
review (2022: $13,000). Fees in respect of corporate actions will
be agreed at the time of the corporate action.
Other Service Providers
Kin Company Secretarial Limited was appointed as Company
Secretary in October 2021 and has the responsibility for overseeing
the Governance arrangements of the Company and assisting the
Company fulfil its regulatory compliance obligations. State Street
Bank and Trust Company ("the Administrator") is responsible for the
day-to-day administration of the Company including the maintenance
of the Company's financial records and the calculation of the daily
NAV. Kin Company Secretarial has worked with the Administrator to
perform the functions of Company Secretary for the 2022/2023
financial year.
The Kin Company Secretarial agreement has no minimum term and is
terminable by Kin or the Company on not less than one month's
notice. Fees of $100,252 were paid for Company Secretarial services
during the year under review (2022: $84,466).
Related Party Transactions
Carne Global Fund Managers (Ireland) Limited is a related party
to the Company as it is considered to have had significant
influence over the Company while it served as AIFM. AIFM fees and
AIFM service fees of $50,865 were paid to Carne during the year
ended 30 June 2023 (2022: $48,062).
Gabelli Funds, LLC is a related party to the Company as it is
considered to have significant influence over the Company. Gabelli
Funds, LLC does not earn a fee for its role as AIFM; it earned
$653,934 in portfolio management fees during the year ended 30
June 2023 (2022: $841,642).
Further details of related party transactions are provided in
note -- to the financial statements.
Substantial shareholders
As at 30 June 2023, the Company had been advised by the
following shareholder of its interests of 3% or more in the
Company's ordinary issued share capital:
% of
Results
The Company generated a revenue gain for the year ended 30 June
2023 of $2,996,000 (2022: $(943,000)).
Disclosure of Information under Listing Rule 9.8.4
The disclosures required by Listing Rule 9.8.4, where relevant
to the Company, are discussed in more detail on page 67.
Dividends and dividend policy
In order to allow the Shareholders to realise a predictable, but
not assured, level of cash flow and some liquidity periodically on
their investment, the Company has adopted a "managed dividend
policy". This policy seeks to pay Shareholders a quarterly dividend
in relation to the Net Asset Value of the Company at the time,
which may be changed at any time by the Board. Between inception
and 30 June 2023, the Company returned $2.39 per share to
shareholders, consistent with its dividend policy. Dividends are
paid only when declared by the Board subject to the Board's
assessment of the Company's financial position and only if the
Company has sufficient income and distributable reserves to make
the dividend payment, and the level of dividend may vary over time.
As such, the portfolio's managed distribution of capital through
the payment of quarterly dividends is under review as we enter the
new Fiscal Year. The Company declared and paid the final interim
dividend of US$0.12 per ordinary share for the financial year
ending 30 June 2022, on 25 April 2023.
Exercise of Voting Rights in Investee Companies
The exercise of voting rights attached to the Company's
portfolio has been delegated to the Portfolio Manager.
Articles of Association
The Company's Articles can only be amended by special resolution
at a general meeting of the shareholders. Amendments will be
proposed at the AGM that are deemed immaterial. The articles are
available upon request, on the company website, and will be
provided for at the AGM.
Change of Control
There are no agreements the Company is party to that might be
affected by a change in Control of the Company. There are no
agreements between the Company and its Directors for compensation
for loss of office that occurs as a result of a takeover bid.
Gabelli approach to voting at shareholder meetings
During the year, the Manager voted on approximately 1,089
proposals at approximately 245 shareholder meetings on behalf of
the Company. At these meetings, the Manager voted in favour of the
majority of resolutions, but voted against the recommendations of
management on approximately 52
Shareholder
Holding
resolutions.
Associated Capital Group Inc 90.73%
Future developments
The Chairman's Statement and Portfolio Manager's report within
this Annual Report contain details of likely future
developments.
Financial instruments
The financial risk management and internal control processes and
policies, and exposure to the risks associated with financial
instruments can be found in Note -- to the financial
statements.
Most of the votes against were in respect of resolutions
relating to super dilutive stock option plans, which were deemed by
the Investment Manager not to be in the best interests of
shareholders.
Streamlined Energy and Carbon Reporting
The Company is categorised as a lower energy user under the HMRC
Environmental Reporting Guidelines March 2019 and is therefore not
required to make the detailed disclosures of energy and carbon
information set out within the guidelines. The Company's energy and
carbon information is therefore not disclosed in this report.
Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its
operations, nor does it have responsibility for any other emissions
producing sources under the Companies Act 2006 (Strategic Report
and Directors' Report) Regulations 2013.
Modern Slavery Act 2015 (the "MSA")
The Company is an investment company and has no employees and
does not provide goods and services in the normal course of
business. Accordingly, the Directors consider that the Company is
not required to make a slavery and human trafficking statement
under the MSA.
Employees, Social, Human Rights and Environmental Matters The
Company is an investment company and has no employees and
accordingly it has no direct social, human rights or environmental
impact from its operations. In carrying on its investment
activities and relationship with suppliers the Company aims to
conduct itself responsibly, ethically and fairly.
Board Diversity
As a close - end Investment Company, the Company falls within
scope of LR 9.8.6 R (9) and LR 14.3.33 R (1) which require
companies in-scope to disclose against the following Diversity
targets.
(i) at least 40% of the individuals on its board of directors are women
(ii) at least one of the following senior positions on its board of directors is held by a woman:
(A) the chair
(B) the chief executive
(C) the senior independent director
(D) the chief financial officer
(iii) at least one individual on its board of directors is from
a minority ethnic background
As at 30 June 2023, the Company has not met the above targets,
further details of which are set out in the Corporate Governance
Report on page 26.
Political donations
No political contributions or donations were made during the
financial period ended 30 June 2023.
Annual General Meeting
The following information to be discussed at the forthcoming
Annual General Meeting is important and requires your immediate
attention. If you are in any doubt about the action you should
take, you should seek advice from your stockbroker, bank manager,
solicitor, accountant or other financial adviser authorised under
the Financial Services and Markets Act 2000 (as amended).
If you have sold or transferred all of your ordinary shares in
the Company, you should pass this document, together with any other
accompanying documents, including the form of proxy, at once to the
purchaser or transferee, or to the stockbroker, bank or other agent
through whom the sale or transfer was effected, for onward
transmission to the purchaser or transferee.
The Directors currently anticipate that this year's Annual
General Meeting will be open to shareholders, but reserve the right
to change arrangements for the meeting at short notice. Therefore
shareholders are strongly encouraged to vote by proxy and to
appoint the Chairman as their proxy. The following resolutions will
be proposed to the AGM. Resolutions 13 and 14 are proposed to the
meeting as special business of the meeting as ordinary resolutions.
Resolutions 15-20 are proposed as special resolutions. Ordinary
resolutions require a simple majority vote (above 50%) to be
passed, whereas Special resolutions require at least a 75% majority
vote to be passed.
Resolution 14
In accordance with the Investment Policy and as opportunities
present themselves the Company may take majority and minority
positions which may require management of such investments. The
Articles will be adjusted accordingly in the resolution so that any
such positions might be taken utilising shares including Special
Voting Loyalty Shares so that an issuance and/or allotment could
occur to parties that were not prior shareholders nor members of
the Loyalty Programme.
Resolution 15 Authority to Allot shares
The Directors may only allot shares for cash if authorised to do
so by shareholders in a general meeting. Resolution 15 seeks
authority for the Directors to allot shares for cash up to an
aggregate nominal amount of US$13,701 which represents 20% of the
current issued share capital. The authority will expire at the
conclusion of the 2024 Annual General Meeting unless renewed prior
to that date.
Resolution 19 Authority to buy back shares
Resolution 19 seeks to renew the authority previously granted to
Directors to enable the Company to purchase up to 685,079 ordinary
shares being 10% of the issued share capital (excluding Treasury
Shares).
The Directors will only consider repurchasing shares in the
market if they believe it to be in shareholders' interests and as a
means of correcting any imbalance between supply and demand for the
Company's shares. Under the Listing Rules of the Financial Conduct
Authority ("FCA"), the maximum price which can be paid is the
higher of
(i) 5% above the average market value of the ordinary shares for
the five business days immediately preceding the date on which the
purchase is made and (ii) the higher of the price quoted for (a)
the last independent trade of, and (b) the highest current
independent bid for, any number of ordinary shares on the trading
venue where the purchase is carried out.
In making purchases, the Company will deal only with member
firms of the London Stock Exchange. The authority will expire at
the conclusion of the 2023 Annual General Meeting unless renewed
prior to that date.
Resolution 20 General Meetings on 14 clear days' notice
Resolution 20 seeks shareholder authority to call general meetings
other than an AGM on 14 clear days' notice. The approval will be
effective until the Company's next AGM, when it is intended that a
similar resolution will be proposed. The Board will utilise this
authority to provide flexibility when merited and would not use it
as a matter of routine.
Recommendation
Your Board recommends all resolutions to shareholders as being
in the best interests of the Company and its shareholders as a
whole. The Directors therefore unanimously recommend that
shareholders vote in favour of each resolution, as they intend to
do in respect of their own beneficial holdings.
Directors' statement as to the disclosure of information to the
auditors
In accordance with the requirement and definitions under
section
418 of the Companies Act 2006, the Directors at the date of
approval of this report confirm that:
-- so far as they are aware, there is no relevant audit
information of which the Company's auditors are unaware; and
-- each Director has taken all the steps that they ought to have
taken as a Director to make themselves aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information.
Appointment of independent auditors
PricewaterhouseCoopers LLP, the independent external auditors of
the Company, were appointed in 2017. Resolutions to reappoint
PricewaterhouseCoopers LLP as the Company's auditors, and to
authorise the Audit & Risk Committee to determine their
remuneration will be proposed at the forthcoming AGM.
The Directors' Report was approved by the Board on 19 October
2023.
John Birch Marc Gabelli
Co-Chairman Co-Chairman 19 October 2023
Corporate Governance Report
This Report sets out the role and activities of the Board and
explains how the Company is governed.
Governance
Applicable Corporate Governance Code and compliance in the year
under review
As a company admitted to trading on the Specialist Fund Segment,
the Board has considered the principles and provisions of the
Association of Investment Companies' Code of Corporate Governance
(the 'AIC Code'). The AIC Code addresses the Principles and
Provisions set out in the 2018 version of the Financial Reporting
Council's UK Corporate Governance Code (the 'UK Code'), as well as
setting out additional provisions on issues that are of specific
relevance to the Company as an investment company listed on the
London Stock Exchange and in compliance with the FCA's Listing
Rules.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council, provides more relevant information to
shareholders.
The Board of Directors also recognise the critical importance of
effective corporate governance to investors, potential investors
and the Company's stakeholders, and the directors therefore give
priority to high standards of corporate governance.
The Board confirms that it complies with the recommendations of
the AIC Code and the relevant provisions of the UK Code except as
follows:
Summary of AIC Code Provision Compliance Performance in year
Director and Board independence and independence from the
Manager
x A formal policy and procedure ensure Board independence and
the independence of the investment Manager.
The Chair should be independent on appointment
x Although the Chairman is not deemed independent for the
purposes of the AIC Code, given his qualifications and investment
experience, and the significant commitment being made by the
Gabelli Group to the Company, the Board believes that his
appointment as Chairman is in the best interests of the Company and
the shareholders as a whole.
Appoint a Senior Independent Director ('SID')
x The Board does not deem it necessary to appoint a SID given
the nature of its activities as a listed investment Company. The
key responsibilities of the SID under the UK Code are completed by
the Non-executive Directors. The performance of the Chairman is
appraised annually by the Non-executive Directors.
Monitor risk management and internal control systems
Identification of remuneration consultant in the Annual
Report
x The Company has delegated its operational management to third
party service providers, the Board therefore receives reports from
those parties to satisfy itself that an appropriate controls
environment is maintained. These reports extend to any relevant
instances of whistleblowing at each of the service providers.
x The Remuneration Committee does not deem it necessary to
appoint a remuneration consultant.
The AIC Code is available on the AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies. The UK Code is available from
the Financial Reporting Council's website at frc.org.uk.
The Board
Overview of the Board
The Board consists of six non-executive Directors. All Directors
have a wide range of other interests and are not dependent on the
Company itself. Their biographical details, which are set out in
detail on pages 17 and 18, demonstrate a breadth of investment,
commercial and professional experience with an international
perspective.
The Board has a formal schedule of matters specifically reserved
for its decision, which are categorised under various headings,
including strategy and management, internal controls and risk
management, strategy and policy considerations, transactions, and
finance.
The provision of the UK Code which relates to the combination of
the roles of the chairman and chief executive does not apply as the
Company has no executive directors.
The Board meets quarterly to review investment performance,
financial reports, discuss strategy and has the overriding
responsibility for assessing and reviewing the company's risk
appetite. Board or Committee meetings are also held on an ad hoc
basis and as required to consider any other material issues as they
arise.
Representatives of the Portfolio Manager and Company Secretary
attend each meeting. The Board, the AIFM, the Portfolio Manager,
the Company Secretary and other key services providers operate in a
cooperative and constructive relationship to ensure timely and
relevant information flows to the board.
Chairman
The Board is satisfied that other than his relationship with the
Portfolio Manager, the Chairman, Marc Gabelli, does not have any
appointments or interests which may create a conflict of interest
with the Company's activities or interests.
Table B: Ethnic Diversity Disclosures
Number
Number of senior positions on
the board and its Committees
The Nomination Committee reviewed the performance of the
Chairman during the year and is comfortable that he continues
of Board Members
Percentage of the Board
(CEO, CFO, SID
and Chair(s))
to have sufficient time to commit to his duties, and that he
performs effectively in the role. The Board therefore recommends
shareholders vote to re-elect the Chairman at the 2023 Annual
General Meeting.
Board Diversity
White British/White American or other White Minority Groups
5 83.33% 4
When recruiting a new Director, the
Board's policy is to appoint
individuals on merit. The Board believes
diversity is important in bringing
an appropriate range of skills, knowledge Mixed/
and experience to the Board and gives Multiple
that consideration when recruiting Ethnic
new Directors. Groups 0 0.00% 0
=========== ====== ============ =======
Asian/ 1 16.67% 0
As at 30 June 2023 there were 6 male Directors, of multiple
nationalities and ethnicities, and no female Directors on the
Board. Whilst all future board appointments will be made on merit,
the Directors have committed to keep the Board's gender diversity
under review with a view to complying with the FCA's approved
targets on Board Diversity and in improving the ratio over
time.
In accordance with LR 14.3.33, as at 30 June 2023 (the reference
date) the Board has not met the FCA's specified targets on Board
Diversity relating to gender or ethnicity.
In accordance with LR 14.3.33 a, whilst the Company is
supportive of the new measures which aim to improve the
representation of women and ethnic minority groups at board level,
the Board also acknowledges the size of the current Board and
believes it remains appropriate to serve the size and stature of
the company at this time. The Nominations Committee, however, is
supportive of ensuring a more diverse pool of Board Level
candidates are assessed for any future Board-Level
appointments.
The Board's Diversity Policy can be found on the company's
website: https:// www.gabelli.co.uk/investment-products/
gabelli-merger-plus/gmp-documents/
The tables below set out the numerical data on the ethnic
background and the gender identity of the Board or Directors. The
Company do not have an Executive Management team or any Executive
Directors on the Board and therefore have not reported against that
target which is non-applicable.
Number of
senior
positions
on
the board
and
Number its Committees
of Board Percentage (CEO, CFO,
SID
Members of the Board and Chair(s))
======= ============= ============= ================
Men 6 100% 4
======= ============= ============= ================
Women 0 0% 0
======= ============= ============= ================
Table A: Gender Diversity Disclosures
Asian/British Asian/ American
Role of the Board
The Board is collectively responsible for the long-term success
of the Company and is accountable to shareholders and the Company's
wider stakeholders for the performance and governance of the
Company. It is also ultimately responsible for setting and
executing the Company's strategic aims, its purpose, culture and
values. The authority of the Board in these areas is subject to the
Articles and to such approval of the shareholders in a general
meeting as may be required from time to time.
The Board also ensures that the necessary resources are in place
to enable the Company's objectives to be met in accordance with the
Company's investment objective, and that shareholder value is
maximised within a framework of proper controls.
The Directors exercise the powers conferred by the Company's
Articles of Association and UK Company Law to manage the Company's
interest for the benefit of shareholders and stakeholders.
As an investment company the Company's day to day
responsibilities are delegated to third party service providers.
The Company has no employees and the Directors are non-executive
with the Portfolio Manager represented by the Chairman.
Stakeholder Interests (s.172 statement)
The Companies (Miscellaneous Reporting) Regulations 2018 require
directors to explain more fully how they have discharged their
duties under Section 172(1) of the Companies Act 2006 in promoting
the success of their companies for the benefit of members as a
whole. This enhanced disclosure covers how the Board has engaged
with and understands the views of stakeholders and how
stakeholders' needs have been taken into account, the outcome of
this engagement and the impact that it has had on the Board's
decisions.
As the Company is an externally managed investment company and
does not have any employees or customers, the Board considers the
main stakeholders in the Company to be the shareholders and other
key service providers. The reasons for
this determination, and the Board's overarching approach to
engagement with these stakeholders, are set out in the table
below.
Stakeholder Activity or mitigation in the year
Shareholders -- The Company operates a Loyalty Programme to
reward shareholders who retain their shares for at least five
years. Further information regarding the Programme can be found on
pages 20 and 21;
-- As a listed investment Company, the Board operates policies designed to safeguard the value of shareholders' investment, in particular the Board may initiate a buyback programme whenever the Company's share price represents a discount of 7.5% or more;
-- Shareholders' rights are also protected under the Company's
Articles of Association which require any proposal that may
materially change those rights to be subject to prior approval by a
majority of shareholders in general meeting; and
-- Shareholders are given opportunities to attend meetings with
the Board and to also attend, ask questions and vote at the Annual
General Meeting of the Company.
Service Providers The Board regularly evaluates the performance
of its key panel of third-party professional
service providers. The appraisals involve an opportunity for
those third parties to provide 360deg feedback.
Social & Environment Whilst the Company's key investment
objective targets outperformance through exposure
to corporate transactions in the United States, the Investment
Manager, Gabelli Funds, LLC operates a suite of investment policies
designed to take account of Environmental, Social, and Governance
('ESG') themes across its investment strategies. These policies
ensure that exposure to ESG risks is minimised for the Company's
stakeholders.
Other Stakeholders -- The Board seeks to maintain the highest
levels of corporate governance through
compliance with the principles and provisions of both the AIC
Code and, to the maximum extent practicable, the UK Code; and
-- The Board is committed to responding promptly and
transparently to any reputational or regulatory matter that might
arise affecting the Company, its future prospects or its investment
activities.
Purpose, Values and Culture
The Board takes its responsibilities under the AIC Code
seriously and has accordingly sought to identify and promote each
of: a corporate purpose, distinct values and a culture for the
Company.
However, as a listed investment Company, which has appointed
third party service providers to operate its day to day business,
the chosen purpose, values and culture are necessarily focused on
the approach and activities of the Board of Directors.
Nevertheless, the Board prioritises the Company's primary
investment objective, together with its proprietary Private Market
Value with a Catalyst methodology, in defining its PMV with a
Catalyst purpose. The Company's values and culture primarily
reflect those of its experienced, independent and diverse
individual board members, combined with the approach and
professionalism of its appointed third party service providers.
The Board regularly monitors both the performance of the Company
against its investment objective and proprietary methodology; and
its individual directors and service providers to ensure continuing
strong performance and integration with the Board's values and
culture.
Employees, Social, Human Rights and Environmental Matters As an
investment vehicle the Company has no employees and accordingly it
has no direct social or community impact and limited environmental
impact from its operations. However, the Company believes that it
is in shareholders' interests to consider human rights issues,
together with environmental, social and governance factors when
selecting and retaining investments.
Directors' Appointment, Retirement and Succession
The rules concerning the appointment, retirement and rotation of
Directors are set out in the Directors' Report. The Board believes
that it has a reasonable balance of skills and experience. It
recognises the value of the progressive refreshing of, and
succession planning for, company boards, including for the
Chairman. The Board's tenure and succession policy seeks to ensure
that it maintains the balance of skills and experience
required.
Directors must be able to demonstrate their commitment, in terms
of time, to the Company. The Board is of the view that length of
service does not itself impair a Director's ability to act
independently or exercise good judgement, rather, a long serving
Director can continue to offer valuable perspectives and
experience.
When Directors are appointed they go through an induction
programme organised by the Portfolio Manager to familiarise them
with the specifics of the portfolio. Directors are also provided
with key information on the Company's policies, regulatory and
statutory requirements and internal controls on a regular
basis.
Committees of the Board
The Board has established an Audit & Risk Committee,
Nomination Committee, Remuneration Committee, Management Engagement
Committee and a Conflicts Committee. Each Committee has defined
terms of reference and duties.
Audit & Risk Committee
The Audit & Risk Committee is chaired by Marco Bianconi.
Further details are provided in the report of the Audit & Risk
Committee on pages 30 to 32.
Nomination Committee
The Nomination Committee is chaired by the Chairman of the Board
(who would not chair the Committee when the Chairman's successor
was being considered) and consists of Marc Gabelli, John Birch and
Yuji Sugimoto. The Nomination Committee is responsible for
reviewing Board succession, the policy on directors' tenure, the
performance of the Board and its Committees and the appointment of
new Directors. When voting on candidates for the appointment of new
directors, only independent directors will vote.
Remuneration Committee
The Remuneration Committee is chaired by James Wedderburn and
consists of John Birch and Marco Bianconi. The Remuneration
Committee is responsible for setting the Directors' remuneration in
conjunction with the Chairman and will take into consideration the
Company's peer group and the potential to appoint external
remuneration consultants when making decisions.
Management Engagement Committee
The Management Engagement Committee is chaired by John Birch and
consists of John Birch and Yuji Sugimoto. The Management Engagement
Committee is responsible for ensuring that the provisions of the
Portfolio Management Agreement remain competitive and in the best
interest of shareholders and to review the performance of the
Manager, Portfolio Manager and other third party service providers
to the Company. Details of the management arrangements are set out
on page 21.
Conflicts Committee
The Conflicts Committee is chaired by John Birch and consists of
Marco Bianconi and Yuji Sugimoto. The Conflicts Committee is
responsible for considering the potential conflicts of interest
that may arise in relation to the operation of the Company with
regard to the Directors, the AIF Manager, the Portfolio Manager and
other service providers of the Company.
Attendance at scheduled meetings
The table below sets out the number of Board and Committee
meetings held during the year under review to 30 June 2023 and the
number of meetings attended by each Director.
The Audit & Risk Committee will meet at least once per
quarter and all other Committees at least once a year and
additionally as required.
Audit
& Risk Rem M.E Nom Conficts
Director Board Co. Co. Co. Co. Co.
================= ===== === ==== === === ===
Marc Gabelli 4/4 n/a n/a n/a 1/1 n/a
Marco Bianconi 4/4 7/7 1/1 n/a n/a 1/1
John Birch 4/4 n/a 1/1 1/1 1/1 1/1
John Newlands 4/4 7/7 n/a n/a n/a n/a
James Wedderburn 4/4 7/7 1/1 n/a n/a n/a
Yuji Sugimoto 4/4 n/a n/a 1/1 1/1 1/1
================= ===== === ==== === === ===
Board Evaluation
The Board undertook an annual self-evaluation of its
performance, that of its committees and individual Directors,
including the Chairman. The reviews were led by the Chairman, in
the case of the Board, and the Chair of each committee
otherwise.
Each Chair, assisted by the Company Secretary, determined the
scope and format for the review, which generally confirmed the
directors' view that the Board and its governance continued to
function well with some issues identified for further
consideration. Further details of the annual self-assessment of the
Audit & Risk Committee are set out in the Audit & Risk
Committee report on pages 30 to 32.
There were no significant actions arising from the evaluation
process and it was agreed that the composition of the Board, at
that time, reflected a suitable mix of skills and experience, and
that the Board as a whole, the individual Directors and its
committees were performing in accordance with the provisions of the
AIC Code other than where explained in this Report. The Board
determined to keep the composition of the Board under review to
align with the FCA's specific targets on Board Diversity.
Risk Management Directors' liability insurance
During the year the Company has renewed and maintained
appropriate Directors & Officers' insurance on behalf of the
Board.
Internal controls
The Board has overall responsibility for the Company's systems
of internal controls and for reviewing their effectiveness. In
common with the majority of investment Companies, the Board has
determined that the most efficient and effective management of the
Company is achieved by the Directors determining the investment
strategy, and the Portfolio Manager being responsible for the
day-to-day investment management decisions on behalf of the
Company.
Accounting, company secretarial and custodial services have also
been delegated to third party service providers who specialise in
these areas and can provide, because of their size and
specialisation, economies of scale, segregation of duties, and all
that is required to provide proper systems of internal control
within a regulated environment.
As the Company has no employees and its operational functions
are undertaken by third parties, the Audit & Risk Committee
does not consider it necessary for the Company to establish its own
internal audit function. Instead, the Audit & Risk Committee
examines internal control reports received from its principal
service providers to satisfy itself as to the controls in
place.
The internal controls aim to ensure that assets of the Company
are safeguarded, proper accounting records are maintained, and the
financial information used within the business and for publication
is reliable. The need for an internal audit function is reviewed
annually by the Committee.
The system therefore manages rather than eliminates risk of
failure to achieve the Company's business objectives and provides
reasonable, but not absolute assurance against material
misstatement or loss.
Shareholder Engagement and General Meetings
The primary medium by which the Company communicates with its
shareholders is through the Annual and Half Yearly Reports which
aim to provide shareholders with a clear understanding of the
Company's activities and results in the relevant financial period.
This information is supplemented by the daily calculation and
publication of the NAV per share to a regulatory information
service.
The Annual and other General Meetings provide an opportunity for
shareholders to engage with the Board of Directors, and the
individual directors and the Investment Manager regularly
communicate with significant shareholders to discuss company
updates and other key events.
Key Stakeholder Outcomes
On 8 September 2022, following the Company's extraordinary
general meeting, the Company was authorised to buy back Ordinary
Shares in the Company.
Additionally, the results of the 2022 EGM authorised the Company
to allot up to 51 million ordinary shares via a special share
issuance resolution which was passed by a 75% majority vote.
Accordingly, this provides the company with the flexibility
required to scale the business and return value to shareholders in
the long term.
All shareholders are ordinarily encouraged to attend and vote at
the Company's Annual General Meeting. Shareholders are strongly
encouraged to vote by proxy and to appoint the Chairman as their
proxy if they are unable to attend in person. The Board and
representatives of the Portfolio Manager are similarly usually
available at the Annual General Meeting to discuss issues affecting
the Company. They will be happy to answer any questions provided in
writing prior to the meeting this year.
The Notice of Annual General Meeting is set out on pages 73 and
74 and details the business of the meeting. Any item not of an
entirely routine nature is explained in the Directors' Report on
pages 19 to 24. The Notice of Annual General Meeting and any
related papers are sent to shareholders at least 21 clear days
before the meeting.
Substantial Shareholdings
A summary of the significant shareholders that have been
notified to the Board as at the date of this report can be found on
page 22.
Anti-Bribery Policy
The Company has zero tolerance towards bribery and is committed
to carrying out business fairly, honestly and openly.
The Board takes its responsibility to prevent bribery seriously
and its service providers are contacted to regularly confirm their
anti- bribery policies and controls.
Criminal Finances Act 2017
The Board has a zero tolerance approach to the facilitation of
tax evasion.
By order of the Board
John Birch Marc Gabelli
Co-Chairman Co-Chairman 19 October 2023
Report of the Audit & Risk Committee
Chair of the
Audit & Risk Committee Marco Bianconi
Members Marco Bianconi John Newlands
James Wedderburn
As Chair of the Audit & Risk Committee, I am pleased to
present the Report of the Audit & Risk Committee for the year
ended 30 June 2023.
Role of the Committee
The Company has established a separately chaired Audit &
Risk Committee (the "Committee") to ensure that the interests of
shareholders are properly protected in relation to financial
reporting, internal controls and risk mitigation.
The Committee meets on a quarterly basis in preparation for the
publication of both the annual and half yearly results, and
otherwise as necessary.
-- A review of the effectiveness of the external audit process,
including the scope, execution, level of materiality, together with
the independence, objectivity and efficiency of the external
auditors and the quality of the audit engagement team;
-- A review and approval of the external audit plan together with the annual audit fee;
-- A review of the risks associated with the loss of Investment
Trust status resulting from the tender offer in October 2022 and of
the most appropriate financial statements structure for the
Company. In fact, as a result of the completed Fifth Anniversary
Tender Offer, the Company is now considered a "close company" from
a UK tax perspective, being subject to UK corporation tax. The
Company has elected continued adherence to the AIC's SORP and
continued to prepare its financial statements on a basis compliant
with the recommendations of the SORP,
-- A review of the appropriateness of the Company's accounting policies;
-- Receiving from the Company's main third-party service
providers reassurance on the adequacy and effectiveness of their
internal controls processes and risk management systems. This
initiative included a review of the key technology risks facing the
company and its main service providers,
The Committee's terms of reference are available from the
Company's website at https:// www.gabelli.co.uk/docs/pdfs/gmp_
actr.pdf.
Composition of the Committee
The Committee consisted of three Directors during the year under
review whose biographies are on pages 17 and 18 and the Committee
composition was therefore unchanged.
The Committee as a whole has competence relevant to investment
companies and is able to discharge its responsibilities
effectively, with each Director having appropriate financial
experience and as such contributing strongly to the Committee's
operation.
The Company's Auditors are invited to attend meetings of the
Committee on a regular basis. Representatives of the Portfolio
Manager and other external advisors, including the Administrator,
may also be invited to attend if deemed necessary by the Audit
& Risk Committee.
Committee Responsibilities
The key responsibilities of the Audit & Risk Committee are
to ensure the integrity, clarity and completeness of the Company's
financial statements, evaluate the robustness of the systems of
internal controls, monitor the quality, effectiveness and
objectivity of the external audit process and monitor the key risks
facing the Company.
During the year the principal activities of the Committee
included:
-- A comprehensive review of the half yearly report and annual
report and accounts, having considered the disclosures made therein
in relation to internal controls, risk management, viability, going
concern, related parties, whether the report is fair, balanced and
understandable and whether it provides the information necessary
for shareholders to assess the Company's position and performance,
business model and strategy;
including, but not limited to policies, practices and
safeguards, cybersecurity and fraud, identification, assessment,
monitoring, mitigation and the overall management of those
risks,
-- A review of the adequacy and security of the company's
arrangements with its contractors and external parties to raise
concerns, in confidence, about possible wrongdoing in financial
reporting or other matters. The Committee considered that the
arrangements remained appropriate and proportionate.
Significant Issues and Audit Risk
During the year, the Audit & Risk Committee also considered
a number of significant issues and areas of key audit risk in
respect of the Annual Report and Accounts. The Committee reviewed
the external audit plan at an early stage and concluded that
the
appropriate areas of audit risk relevant to the Company had been
put in place to obtain a reasonable assurance that the financial
statements as a whole would be free of material misstatement.
The following table sets out the key areas of risk identified
and explains how these were addressed.
Significant issue How the issue was addressed
Valuation and existence of investments
The AIFM performs the valuation of the Company's assets in
accordance with its responsibilities under the AIFMD rules.
Ownership of listed investments is verified by reconciliation to
the Custodian's records. Ownership of CFDs is verified by
reconciliation to the counterparty's records.
Recognition of income
Income received is accounted for in line with the Company's
accounting policies, as set out on page 50.
Maintaining internal controls
The Committee receives regular reports on internal controls from
the Administrator and the Investment Manager and has access to the
relevant personnel of both State Street and Gabelli Funds who have
a responsibility for risk management and internal audit.
Performance fee
The performance fee calculation is prepared by the Administrator
and reviewed by the Manager and the Committee before recommendation
to the Board, all with reference to the portfolio management
agreement.
Resource Risk
The Company has no employees and its day to day activities are
delegated to third party suppliers. The Board monitors the
performance of third-party suppliers on an ongoing basis.
External audit
The Committee conducted a review of PricewaterhouseCoopers LLP's
independence and audit process effectiveness as part of its review
of the financial reporting for the year ended 30 June 2023 and
separately completed a market benchmarking exercise in respect of
the external audit service. In considering the effectiveness, the
Committee reviewed the audit plan, the level of materiality, key
financial reporting risks, and the auditors' findings.
The Committee also considered the execution of the audit against
the plan, as well as the auditors reporting to the Committee in
respect of the financial statements for the year. Based on this,
the Committee was satisfied with the quality of the external audit
process,with appropriate focus and challenge on the key audit
risks.
The Committee advises the Board on the appointment of the
external auditors and on their remuneration. It keeps under review
the cost effectiveness and the independence and objectivity of the
external auditors, mindful of controls in place to ensure the
latter. To this end, the Committee has implemented a policy on the
engagement of the external auditors to supply non-audit
services.
The Committee was satisfied that the objectivity and
independence of the auditors was not impaired as no non- audit
services were undertaken during the year. Accordingly,
the Committee recommended to the Board that shareholder approval
be sought at the forthcoming AGM for the appointment of
PricewaterhouseCoopers LLP as the Company's auditors for the
ensuing financial year, and for the Committee to determine the
auditors' remuneration.
Audit Tendering
PricewaterhouseCoopers LLP was appointed as auditors with effect
from the Company's launch in July 2017. The Company is required to
put the external audit out to tender at least every ten years, and
at least every twenty years to change the auditors. The Company
will be required to put the audit out to tender, at the latest
following the 2027 year end.
The Audit & Risk Committee will consider annually the need
to tender as a consequence of audit quality or independence. There
are no contractual obligations that restrict the Company's choice
of auditors.
During the year ended 30 June 2023 GBP0 was paid to the auditors
for non-audit services (2022: GBP0). The auditors are required to
rotate the Company's Lead Engagement Partner every five years.
Kevin Rollo was appointed as the Audit Engagement Partner in 2021
and has successfully overseen the engagement with the support of a
strengthened audit team for the financial year under review.
Internal Audit function
As the Company has no employees and its operational functions
are undertaken by third parties, the Committee does not consider it
necessary for the Company to establish its own internal audit
function. Instead, the Committee examines internal control reports
received from its principal service providers to satisfy itself as
to the controls in place.
The internal controls aim to ensure that assets of the Company
are safeguarded, proper accounting records are maintained, and the
financial information used within the business and for publication
is reliable. The need for an internal audit function is reviewed
annually by the Committee.
Whistleblowing, anti-bribery and corruption
The Company has no employees; therefore no policies relating to
whistleblowing, anti-bribery, or corruption are considered
necessary. Notwithstanding this, the Company seeks at all times to
conduct its business with the highest standards of integrity and
honesty. Gabelli Funds, LLC is committed to complying with all
applicable legal and regulatory requirements relating to accounting
and auditing controls and procedures. Staff members of Gabelli
Funds, LLC are encouraged to report complaints and concerns
regarding accounting or auditing matters through available channels
described in the Portfolio Manager's Whistleblower Policy.
Marco Bianconi
Chair of the Audit & Risk Committee
19 October 2023
Directors' Remuneration Report
The Board presents the Directors' Remuneration Report which has
been prepared in accordance with the requirements of Sections
420-422 of the Companies Act 2006 and Schedule 8 to the Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. The law requires the Company's
auditors to audit certain of the disclosures provided. Where
disclosures have been audited this is indicated.
Statement from the Chairman
This Report describes how the Board has applied the principles
relating to Directors' remuneration. The Company's Remuneration
Policy was originally approved by shareholders at the AGM in 2018
and shareholders approved a version of the Remuneration Policy with
minor further updates at the AGMs in 2019 and in 2020, in
accordance with section 439A of the Companies Act 2006.
Accordingly, the Company's Remuneration policy will be put to
Shareholders for approval at this year's Annual General
Meeting ('AGM') to be held on 30 November 2023. Further
information on this resolution is contained with the notice of
AGM.
Director's Remuneration Policy
In 2020, the Remuneration Policy was updated to increase the
overall aggregate limit on fees payable to Directors from
$150,000 to $180,000. The Company does not propose an increase
to the aggregate limit to Non-Executive Director's fees this year
and as such will only be seeking shareholder approval for the
current limit of $180,000, which the Company deemed to be at an
appropriate level at this time.
Remuneration Committee
The Company has established a Remuneration Committee which meets
at least once a year. Further details of the membership are
provided in the Corporate Governance Report on page 28.
Policy Table
Fixed fee element Remuneration consists of a fixed fee each year
and the Directors of the Company are
entitled to such rates of annual fees as the Board at its
discretion determines.
Discretionary element In accordance with the Company's Articles
of Association, if a Director is requested
to perform extra or special services, they will be entitled to
receive such additional remuneration as the Board considers
appropriate.
Expenses In accordance with the Company's Articles of
Association the Directors are also entitled to be reimbursed for
out-of-pocket expenses and any other reasonable expenses incurred
in the proper performance of their duties.
Purpose and link to strategy Directors' fees are set to:
-- be sufficient to attract and retain individuals of a high
calibre with suitable knowledge and experience to promote the
long-term success of the Company;
-- reflect the time spent by the Directors working on the
Company's behalf and representing the Company;
-- reflect the responsibilities borne by the Directors;
-- recognise the greater time commitment and responsibility
required for the positions of Chairman of the Board and the
Chairman of the Audit & Risk Committee through appropriate fee
supplements for each role.
Operation Fees payable to the Directors will be reviewed
annually. A number of factors will be considered to ensure that the
fees are set at an appropriate level. These will include the
average rate of inflation during the period since the last fee
increase, the level of Directors' remuneration for other Investment
Companies of a similar size and complexity of the Directors'
responsibilities.
Maximum The total remuneration paid to the non-executive
Directors is subject to an annual aggregate limit of $180,000 in
accordance with the Company's Articles of Association, following
approval by shareholders at the AGM in 2020. Any further changes to
this limit will require Shareholder approval by ordinary
resolution.
The Company has no employees to consult in drawing up the
policy. There are no performance related elements to the Directors'
fees and the Company have no Executive Directors.
To ensure fees are set at an appropriate level, the Company
Secretary provides a comparison of the Directors' remuneration with
other investment trusts of a similar size and/or mandate, as well
as taking into account any data published by the
Association of Investment Companies. This comparison, together
with consideration of any alteration in non-executive Directors'
responsibilities, is used to review whether any change in
remuneration is necessary. The review of fees is performed on an
annual basis.
Remuneration Fees per annum US$
Director of the Board 30,000
Additional fee for the Chairman of the Board 1,000* Additional
fee for the Chairman of the Audit
& Risk Committee 5,000
Additional fee for the members of the Audit
& Risk Committee 1,000
* On 6 October 2023 John Birch was appointed as Co-Chairman of
the Board.
Following a review in September 2022, the Committee agreed that
the Directors' fee would not increase for the year ending 30 June
2023.
Any remuneration arrangements for new directors will be
determined by the Committee in accordance with the Remuneration
Policy, and would also be expected to mirror the above fee
structure.
The additional fees shown in the table above paid to the
Chairman of the Board (albeit Mr Gabelli waived his fee) and the
Chairman and members of the Audit & Risk Committee during the
year ended 30 June 2023 will also remain unchanged for the year
ending 30 June 2024.
Consideration of Shareholders' Views
Shareholders' approval for the remuneration report and the
Company's Remuneration Policy will be sought at the 2023 AGM.
Shareholders will have the opportunity to express their views and
raise any queries on the policy either at or in advance of this
meeting.
At the previous AGM held on 30 November 2022, the Director's
Remuneration Report received 100% votes in favour of the
resolution.
Details of voting on the Remuneration Report and the
Remuneration Policy at the 2023 AGM will be released via RNS
announcement following the meeting and will be provided in the
annual report for the year ending 30 June 2024.
Director's Remuneration Implementation Report (audited) Single
Total Figure of Remuneration
The single total remuneration figure for each Director who
served during the year to 30 June 2023 is set out below with prior
year comparison. As the Company has no employees the table below
sets out the total remuneration costs paid by the Company. Mr
Gabelli waived the entitlement to his fees as Chairman. Mr Gabelli
devotes a portion of his time employed by Gabelli to serve as
Chairman of the Company. An apportionment of his remuneration on a
time served basis from employment by an affiliate of the Portfolio
Manager would materially equate to the fees received by the other
Directors of the Company for similar qualifying services.
Directors' notice periods and payment for loss of office
Directors' appointments may be terminated without notice. In this
event, the Director will only be entitled to fees accrued at the
date of termination, together with reimbursement of any expenses
properly incurred to that date.
None of the Directors are entitled to post-employment benefits
or termination benefits.
No discretionary payments were made during the year to 30 June
2023.
The fees paid to Directors on an annual basis during the year to
30 June 2023 are as follows:
Year to 30 June 2023 Year to 30 2022 Year to 30 June 2021
Fees Total Change Fees June Change Fees Shares(1) Total
over prior Total over Change
year % prior over
year % prior
year
%
============= ============ ================== ========== ==== ====== ============ =========== ========== ============= ============
Marc Gabelli - - - - - - - - - -
Marco
Bianconi 35,000 35,000 - 35,000 35,000 (3.2)% 25,000 11,167 36,167 24.0%
John Birch* 30,000 30,000 - 30,000 30,000 (3.7)% 20,000 11,167 31,167 29.0%
John Newlands 31,000 31,000 - 31,000 31,000 (3.6)% 21,000 11,167 32,167 21.1%
Yuji Sugimoto 30,000 30,000 - 30,000 30,000 (3.7)% 20,000 11,167 31,167 28.9%
James
Wedderburn 31,000 31,000 - 31,000 31,000 (3.6)% 21,000 11,167 32,167 27.8%
============= ============ ================ ==== ========== ============ ============ =========== ============== ============= ============
Total 157,000 157,000 - 157,000 157,000 107,000 55,835 162,835
============= ============ ================ ==== ========== ============ ============ =========== ============== ============= ============
* On 6 October 2023 John Birch was appointed as Co-Chairman of
the Board.
1 Represents the fee supplement originally to be paid in shares,
on a pro rata basis for the period 1 January to 30 June 2020
following shareholder approval in 2019. Owing to complexities
surrounding the share issuance scheme approved at the 2019 Annual
General Meeting, and following legal advice, the incremental
compensation was paid in cash, in the amount of $10,000 per annum,
per Director. The amount presented for the year ended 30 June 2021
includes cash payments equivalent to and in lieu of dividends that
would have been paid between 1 January 2020 and 30 June 2021, in
the amount of $1,167 per Director.
Directors' Interests
The interests of the Directors (including their connected
persons), who are not required to purchase shares, in the Company's
share capital are as follows:
Ordinary shares
of $0.01
================= ============================================
As at 30 As at 30
Directors June 2023 June 2022
================= ====================== ====================
Marc Gabelli 20,100 20,100
Marco Bianconi 1,200 1,200
John Birch 1,000 1,000
John Newlands - -
Yuji Sugimoto - -
James Wedderburn 1,500 1,500
================= ====================== ====================
Total 23,800 23,800
================= ====================== ====================
None of the Directors has been granted, or exercised, any
options or rights to subscribe for the Ordinary Shares of the
Company.
Company Performance
A graph showing the Company's NAV performance measured by total
shareholder return compared with the Credit Suisse Merger Arb
Liquid Index, the S&P Merger Arb Index, the 13 week US Treasury
Bills, and the IQ Merger Arbitrage ETF (MNA), since launch, can be
found on page 13.
Relative Importance of Spend on Pay
The table below shows the Directors' remuneration (2022:
$157,000 and 2021: $162,835) in comparison with Portfolio
management fees paid, dividends paid to shareholders and the
Company's annual revenues.
Statement by the Chairman of the Board
The Directors confirm that the Directors' Remuneration Report
set out above provides a fair and reasonable summary for the
financial year ended 30 June 2023 of:
a) the major decisions on Directors' remuneration;
b) any substantial changes relating to Directors' remuneration made during the period; and
c) the context in which those changes occurred and the decisions which have been taken.
The Directors' Remuneration Report was approved by the Board on
20 September 2023 and is signed on its behalf by:
John Birch Marc Gabelli
Co-Chairman Co-Chairman 19 October 2023
2023
Directors' remuneration
as a % of $000 %
========================== ======= =========
Directors' remuneration 157
Dividends to Shareholders 822 19.1
Portfolio management
fees 654 24.0
Revenues 1,012 15.5
========================== ======= =========
Statement of Directors' Responsibilities in respect of the
Financial Statements
We share this Report to Shareholders, encompassing the year
ended 30 June 2023, and note certain developments post calendar
year end. This period included several important changes for the
Gabelli Merger Plus+ Trust Plc (the "Company"), which include:
-- NAV increase of 10.54% against a volatile market backdrop.
-- Fifth Anniversary Tender Offer implemented in accordance with
the Loyalty Programme. The Company purchased 3,387,414 shares,
resulting in 6,850,792 shares in issue at 30 June 2023 versus
10,238,206 shares in issue in July 2022.
-- The Company has elected continued adherence to the AIC's
SORP. Although no longer a trust, the Company has elected to
continue to prepare the financial statements on a basis compliant
with the recommendations of the SORP. The SORP is issued by the AIC
and it sets out recommendations, intended to represent current best
practice, on the form and contents of the financial statements of
Investment Companies. Investment Companies include investment trust
companies that have been, currently are, or are directing its
affairs so as to enable it to obtain or retain approval under
Section 1158 of the Corporation Tax Act 2010. Although the Company
no longer meets the requirements of Section 1158 of the Corporation
Tax Act 2010 to be an investment trust, it continues to conduct its
affairs as an investment company.
-- Confirmation of the Investment Policy in accordance with the original offering prospectus.
-- The allowance to issue Special Voting Loyalty Shares at the
AGM for qualifying shareholders under the terms of the Loyalty
Programme. During the year, the Company authorised the issuance of
Special Voting Loyalty Shares in accordance with the terms
specified in the Loyalty Programme, with Associated Capital Group
Inc. agreeing to subscribe for Special Voting Loyalty Shares, which
will increase its voting interest when issued, with issuance
pending.
Gabelli Merger Plus+ Trust Plc ("GMP") seeks to achieve long-
term total return from capital appreciation and income utilizing
the Gabelli Private Market Value with a Catalyst(TM) methodology,
primarily investing in the securities of businesses undergoing some
form of strategic change where there are substantial disconnects
between market price and business value, and, where catalysts exist
that may narrow these discounts for the benefit of shareholders.
GMP objectives, operating within this highly specialised value
based catalyst event driven merger arbitrage discipline, are to
compound and preserve shareholder wealth over time while remaining
non-correlated to the broad equity and fixed income markets.
The GMP investment process begins by focusing on a company's
balance sheet and underlying fundamentals, looking for changes in
market positions and analyzing the company's ability to generate
free cash flow relative to competition. The process continues with
the calculation of corporate replacement and intrinsic values while
accounting for sector wide industrial synergies in the context of
profitability and growth. The manager attempts to understand what
an informed industrialist would pay for a business in its entirety
through a negotiated acquisition process. This element serves as
the foundation in determining what is deemed a business's Private
Market Value ("PMV"). Lastly, the manager builds a diversified
portfolio of companies in the public market that are selling at
discounts to their PMVs,
with a catalyst in place to generate returns. The investment
programme is global, encompassing a broad spectrum of value based
special situations and event driven opportunities, with an
analytical emphasis on announced merger transactions. As market
price dislocations continue, it is expected this programme will
include minority and also majority controlling stakes in
businesses. Controlling stakes may require the management of
operating businesses on behalf of the company's shareholders in an
effort to deliver the company's objectives in accordance with
investment policy. Over the long term GMP strives to achieve
superior risk-adjusted annual returns above inflation for
shareholders.
On behalf of the Board of Directors, we thank investors for
entrusting a portion of their assets with the Gabelli Merger Plus+
Trust ("GMP"). We appreciate your confidence in the Gabelli
long-term oriented investment method.
The Portfolio Manager's Review on pages 8 to 11 provides details
of the important events that have occurred during the period and
their impact on the financial statements.
Company Considerations
Investors should note the difference between book and accounting
value. Deferred tax assets ("DTA") can be used to offset certain
taxes as applicable in the United Kingdom. And as such based on a
continuing level of activity the DTA are expected to be utilised
over the foreseeable future resulting in the company not paying UK
tax for this year.
As a result of Associated Capital Group Inc's ownership of 90.7%
of shares in issue, the Company is a consolidated subsidiary for
Associated Capital Group Inc.'s financial reporting purposes. As
such, activities of the Company and of Associated Capital Group
Inc. could be deemed related parties for purposes of this
disclosure.
Investors should note that as a close company with Associated
Capital Group Inc. controlling greater than 90% of shares and 95%
of voting shares that Associated Capital Group Inc. may be able to
ensure the passage of shareholder resolutions.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company fall
into the following broad categories: investment portfolio; global
macro events; operational; market and share price; financial;
corporate governance and regulatory compliance; taxation; emerging
and geopolitical risks. The global macro event category includes
specific market and operational risks associated with the ongoing
war in Ukraine and the aftermath of the global COVID-19 pandemic,
which continue to cause uncertainty and disruption across global
economies and markets. Information on each of these identified risk
areas, including mitigating actions taken by the Company, was
provided on pages 14 to 15 in the Strategic Report in the Company's
Annual Report and Accounts for the year ended 30 June 2023.
The Directors together with the Manager will continue to monitor
business continuity and resilience processes with the objective of
mitigating any potential for ongoing impact of COVID-19 and the
conflict in Ukraine.
Related Party Disclosure and Transactions
During the financial year, other than fees payable by the
Company in the ordinary course of business, there have been no
material transactions with related parties which have materially
affected the financial position or the performance of the
Company.
As a result of Associated Capital Group Inc's ownership in
excess of 90% of shares in issue, the Company is a consolidated
subsidiary for Associated Capital Group Inc.'s financial reporting
purposes. As such, activities of the Company and of Associated
Capital Group Inc. could be deemed related parties for purposes of
this disclosure.
Significant Events
In the year ended 30 June 2023 the Company conducted and
completed the Fifth Anniversary Tender Offer, as set out in the
circular published on 19 August 2022, and purchased 3,387,414
shares, resulting in 6,850,792 shares in issue at 30 June 2023
versus 10,238,206 shares in issue in July 2022. The Company
determined that the post tender remaining Shareholder base has
resulted in the Company being deemed a close company for the
purposes of taxation, and the company no longer avails itself of
investment trust status. The Company is committed to delivering its
investment programme for the long term and Directors, together with
management are in the process of examining alternatives to minimise
taxes, costs and expenses for its Shareholders.
Going Concern
The Board have closely monitored the impact of the ongoing
COVID-19 pandemic, Brexit uncertainty, and the war in Ukraine.
Those impacts and related continuing uncertainty have short- and
potentially medium-term implications for the Company's investment
strategy. Additionally, the Board is monitoring the period ahead on
the basis of the Company no longer having investment trust status
and its implications on the Company's investment return profile
over the longer term. In context, the Board continuously monitors
the Company's investment portfolio, liquidity and gearing, along
with levels of market activity, to appropriately minimise and
mitigate consequential risks to capital and future income such as
geopolitical risks, financial risks etc. Taking these factors into
account, the Directors confirm that they have a reasonable
expectation that the Company will continue to operate and meet its
expenses as they fall due. For these reasons, the Directors
consider there is reasonable evidence to continue to adopt the
going concern basis in preparing the accounts as at 30 June
2023.
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company Law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the financial statements in accordance with UK-
adopted international accounting standards in conformity with the
requirements of the Companies Act 2006. 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 and then apply them consistently;
-- state whether applicable UK-adopted international accounting
standards in conformity with the requirements of the Companies Act
2006 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 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.
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 and the Directors' Remuneration Report
comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company's website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors' confirmations
The Directors consider that the annual report and accounts,
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.
In the case of each Director in office at the date the
Director's Report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
The annual financial report was approved by the Board on
19 October 2023 and the above responsibility statement was
signed on its behalf by the Chairman.
By order of the Board
John Birch Marc Gabelli
Co-Chairman Co-Chairman 19 October 2023
Independent auditors' report to the members of Gabelli Merger
Plus(+) Trust Plc
Report on the audit of the financial statements
Opinion
In our opinion, Gabelli Merger Plus+ Trust plc's financial
statements:
-- give a true and fair view of the state of the company's
affairs as at 30 June 2023 and of its result and cash flows for the
year then ended;
-- have been properly prepared in accordance with UK-adopted
international accounting standards; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the
Annual Report and Accounts (the "Annual Report"), which comprise:
the Statement of Financial Position as at 30 June 2023; the
Statement of Comprehensive Income, the Statement of Changes in
Equity, and the Statement of Cash Flows for the year then ended;
and the notes to the financial statements, which include a
description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit
Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors' responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC's Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC's Ethical Standard were
not provided.
We have provided no non-audit services to the company in the
period under audit.
Our audit approach Overview
Audit scope
-- The company is a standalone Investment trust company and
engages Gabelli Funds, LLC (the "Manager") to manage its
assets.
-- We conducted our audit of the Financial Statements using
information from State Street Global Services (the "Administrator")
to whom the Manager has, with the consent of the Directors,
delegated the provision of certain administrative functions.
-- We tailored the scope of our audit taking into account the
types of investments within the company, the involvement of the
third parties referred to above, the accounting processes and
controls, and the industry in which the company operates.
-- We obtained an understanding of the control environment in
place at both the Manager and the Administrator, and adopted a
fully substantive testing approach using reports obtained from the
administrator.
Key audit matters
-- Valuation and existence of investments.
-- Income from investments.
-- Taxation.
Materiality
-- Overall materiality: $664,931 (2022: $958,410) based on 1% of net assets.
-- Performance materiality: $498,698 (2022: $718,808).
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors'
professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
This is not a complete list of all risks identified by our
audit.
Taxation is a new key audit matter this year. Assessment of the
appropriateness of the going concern basis of preparation of the
financial statements, which was a key audit matter last year, is no
longer included because of the fact that the conditions that
existing in the prior year in relation to the Tender Offers and
upcoming Continuation Vote have now passed and are not recurring
this year. Otherwise, the key audit matters below are consistent
with last year.
Key audit matter How our audit addressed the key audit
matter
Valuation and existence of investments
Refer to Accounting Policies, note 2 (g) and Notes to the
financial statements, Note 3. The company's investments have
decreased to US$55m.The investment portfolio at year end consisted
of listed equity investments and derivatives (contracts for
difference). We focused on the valuation and existence of
investments because investments represent the principal element of
the net asset value as disclosed in the Statement of Financial
Position in the financial statements. We also focused on the
accounting policy for the valuation of investments as set out in
the accounting standards as incorrect application could indicate a
misstatement in the valuation of investments.
-- We assessed the accounting policy for the valuation of
investments for compliance with accounting standards and the AIC
SORP and performed testing to check that investments are accounted
for in accordance with this stated accounting policy.
-- We tested the valuation of the listed equity investments by
agreeing the prices used in the valuation to independent third
party sources.
-- We tested the existence of the investment portfolio by
agreeing listed equity investment holdings to an independent
custodian confirmation.
-- For derivatives, we tested a sample of the valuation of these
investments using valuation techniques as indicated by our
investment specialists.
-- We tested existence of derivatives by using broker statements
obtained through the administrator.
-- No material issues were identified.
Income from investments
Income from investments refers to dividend income and net
capital gains from investments. Refer to Accounting Policies, Note
2(e) and 2(g). The company's dividend income for the year is US$1m.
Realised gains on investments for the year is US$4.7m and
unrealised gains on investments is US$0.7m. We focused on the
accuracy, occurrence and completeness of dividend income, and
existence of net capital gains as incomplete or inaccurate income
could have a material impact on the company's net asset value and
dividend cover. We also focused on the accounting policy for income
recognition and its presentation in the Statement of Comprehensive
Income as set out in the requirements of The Association of
Investment Companies Statement of Recommended Practice (the "AIC
SORP") as incorrect application could indicate a misstatement in
income recognition.
-- We assessed the accounting policies implemented were in
accordance with accounting standards and the AIC SORP, and that
income has been accounted for in accordance with the stated
accounting policy.
-- We tested the accuracy of dividend receipts by agreeing the
dividend rates from investments to independent market data. To test
for occurrence, we confirmed that a sample of dividends recorded
had occurred in the market. To test for completeness, we tested
that the appropriate dividends had been received in the year by
reference to independent data of dividends declared for all listed
investments during the year.
-- We also tested the allocation and presentation of dividend
income between the revenue and capital return columns of the Income
Statement in line with the requirements set out in the AIC SORP by
confirming reasons behind dividend distributions.
-- The gains/losses on investments held at fair value comprise
realised and unrealised gains/losses. For unrealised gains and
losses, we tested the valuation of the portfolio at the year end
(on a sample basis for derivatives), together with testing the
reconciliation of opening and closing investments. For realised
gains/losses, we tested a sample of disposals by agreeing the
proceeds to bank statements and we re-performed the calculation of
a sample of realised gains/ losses.
-- No material issues were identified.
Key audit matter How our audit addressed the key audit
matter
Taxation
The Company under its previous status as an Investment Trust
Company was able to benefit from a tax exemption under s1158 of the
Corporation Tax Act (2010). However, due to the significant uptake
by shareholders of the 5th Anniversary Tender offer and resulting
loss of ITC status, the Company is no longer afforded this
exemption. As a result, tax considerations which the Company was
previously exempt from are now due to be borne in the current
period. Refer Accounting Policies, note 2 (n) and Notes to the
financial statements, Note 8.
We have performed testing over the taxation paid by the Company
and the effect of the loss of s1158 exemption status on the
deferred tax asset. Additionally, as part of our testing, we have
assessed the appropriateness of the recognition of the deferred tax
asset. We have found no issues in relation to this testing.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
company, the accounting processes and controls, and the industry in
which it operates.
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made
subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
The impact of climate risk on our audit
In planning our audit, we made enquiries of the Directors and
Manager to understand the extent of the potential impact of climate
change risk on the Company's financial statements.
In conducting our audit, we made enquiries of the Directors and
Manager to understand the extent of the potential impact of the
climate change risk on the Company's financial statements. Both
concluded that the impact on the measurement and disclosures within
the financial statements is not material because the Company's
investment portfolio is primarily made up of Level 1 quoted
securities which are valued at fair value based on market prices.
We found this to be consistent with our understanding of the
Company's investment activities.
We also considered the consistency of the climate change
disclosures included in the Strategic Report with the financial
statements and our knowledge from our audit.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall company materiality $664,931 (2022: $958,410).
How we determined it 1% of net assets
Rationale for benchmark applied We believe that net assets is
the primary
measure used by shareholders in assessing
the performance of the company and is a generally accepted
auditing
benchmark for investment trust audits.
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (2022: 75%) of
overall materiality, amounting to $498,698 (2022:
$718,808) for the company financial statements.
In determining the performance materiality, we considered a
number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and
concluded that an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above $33,247 (2022:
$47,921) as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors' assessment of the company's
ability to continue to adopt the going concern basis of accounting
included:
-- Evaluating the Directors' assessment of potential operational
impacts of the results of the recent Tender offer and the upcoming
Continuation vote, considering their consistency with other
available information and our understanding of the business and
assessed the potential impact on the financial statements;
-- Reviewing the Directors' assessment of the Company's
financial position in the context of its ability to meet future
expected operating expenses, their assessment of liquidity as well
as their review of the operational resilience of the Company and
oversight of key third-party service providers;
-- Assessing the implications of potential significant
reductions in Net Asset Value as a result of market performance on
the ongoing ability of the Company to operate;
-- Evaluating the legally binding confirmation from the majority
shareholder regarding their intention and ability to continue to
support the Company; and
-- Assessing the impact of the loss of Investment Trust Company
status and the continued operations of the Company.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
company's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the company's
ability to continue as a going concern.
In relation to the directors' reporting on how they have applied
the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors' statement in the
financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our auditors'
report thereon. The directors are responsible for the other
information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we
identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic report and Director's Report, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic report and Director's Report
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Strategic report and
Director's Report for the year ended 30 June 2023 is consistent
with the financial statements and has been prepared in accordance
with applicable legal requirements.
In light of the knowledge and understanding of the company and
its environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and
Director's Report.
Directors' Remuneration
In our opinion, the part of the Directors' Remuneration Report
to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors' statements
in relation to going concern, longer-term viability and that part
of the corporate governance statement relating to the company's
compliance with the provisions of the UK Corporate Governance Code
specified for our review. Our additional responsibilities with
respect to the corporate governance statement as other information
are described in the Reporting on other information section of this
report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit, and we have
nothing material to add or draw attention to in relation to:
-- The directors' confirmation that they have carried out a
robust assessment of the emerging and principal risks;
-- The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or
mitigated;
-- The directors' statement in the financial statements about
whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of
any material uncertainties to the company's ability to continue to
do so over a period of at least twelve months from the date of
approval of the financial statements;
-- The directors' explanation as to their assessment of the
company's prospects, the period this assessment covers and why the
period is appropriate; and
-- The directors' statement as to whether they have a reasonable
expectation that the company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Our review of the directors' statement regarding the longer-term
viability of the company was substantially less in scope than an
audit and only consisted of making inquiries and considering the
directors' process supporting their statement; checking that the
statement is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the statement is
consistent with the financial statements and our knowledge and
understanding of the company and its environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the
financial statements and our knowledge obtained during the
audit:
-- The directors' statement that they consider the Annual
Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the
company's position, performance, business model and strategy;
-- The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
-- The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to
report when the directors' statement relating to the company's
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors'
Responsibilities, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors' report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the company and industry, we
identified that the principal risks of non-compliance with laws and
regulations related to breaches of the Corporation Tax Act 2010,
and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the
financial statements such as the Companies Act 2006. We evaluated
management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were
related to posting of inappropriate journal entries to increase
income or to overstate the value of investments and increase the
net asset value of the company. Audit procedures performed by the
engagement team included:
-- Discussions with the Directors, the Manager and the
Administrator, including consideration of known or suspected
instances of non-compliance with laws and regulation and fraud;
-- Evaluation of the controls implemented by the Manager and the
Administrator designed to prevent and detect irregularities;
-- Assessment of the company's compliance with the Corporation
Tax Act 2010, including recalculation of numerical aspects of the
tax expense; and
-- Identifying and testing journal entries, in particular a
sample of journals posted as part of the financial year end close
process.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related
to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through
collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at:
www.frc.org. uk/auditorsresponsibilities. This description forms
part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company's members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- we have not obtained all the information and explanations we require for our audit; or
-- adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- the financial statements and the part of the Directors'
Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit Committee, we were
appointed by the members on 1 July 2017 to audit the financial
statements for the year ended 30 June 2018 and subsequent financial
periods. The period of total uninterrupted engagement is 6 years,
covering the years ended 30 June 2018 to 30 June 2023.
Kevin Rollo (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP Chartered
Accountants and Statutory Auditors London
19 October 2023
Statement of Comprehensive Income
for the year ended 30 June 2023
Year ended 30 Year ended 30 June
June 2023 2022
================================= =============== ===================== ======== ========================
Revenue Capital Total Revenue Capital
$000 $000 $000 Total
Income Notes $000 $000 $000
================================= =============== ===================== ======== ========================
Investment income 5 1,012 - 1,012 1,076 - 1,076
================================= =============== ===================== ======== ========================
Total investment income 1,012 - 1,012 1,076 - 1,076
================================================== ===================== ======== ========================
Gains/(losses) on investments
Net realised and unrealised gains/(losses)
on
investments 3, 13 - 4,707 4,707 - (460) (460)
Net realised and unrealised currency
gains on
investments - 114 114 - 490 490
================================================== ===================== ======== ========================
Net gains on investments - 4,821 4,821 - 30 30
================================================== ===================== ======== ========================
Total income and gains on investments 1,012 4,821 5,833 1,076 30 1,106
================================================== ===================== ======== ========================
Expenses
Portfolio management fee 6 (654) - (654) (842) - (842)
Performance fee 6, 14 - - - - - -
Other expenses 6 (807) (501) (1,308) (1,127) (124) (1,251)
================================= =============== ===================== ======== ========================
Total expenses (1,461) (501) (1,962) (1,969) (124) (2,093)
================================================== ===================== ======== ========================
Net return on ordinary activities
before finance costs and taxation (449) 4,320 3,871 (893) (94) (987)
================================================== ===================== ======== ========================
Interest expense and similar charges (26) - (26) (1) - (1)
================================================== ===================== ======== ========================
Profit/(loss) before taxation (475) 4,320 3,845 (894) (94) (988)
================================================== ===================== ======== ========================
Taxation on ordinary activities 8 3,471 - 3,471 (49) - (49)
================================= =============== ===================== ======== ========================
Profit/(loss) for the year 2,996 4,320 7,316 (943) (94) (1,037)
================================================== ===================== ======== ========================
Earnings/(loss) per share (basic ($0.09) ($0.01)
and diluted) 9 $0.39 $0.55 $0.94 ($0.10)
================================= =============== ===================== ======== ========================
The total column of this statement represents the Statement of
Comprehensive Income prepared in accordance with UK International
Accounting Standards (UK IAS). The supplementary revenue return and
capital return columns are both prepared under guidance issued by
the Association of Investment Companies. All items in the above
statement derive from continuing operations.
No operations were acquired or discontinued during the year
ended 30 June 2023.
The Company does not have any income or expense that is not
included in net profit for the year. Accordingly, the net profit
for the period is also the total comprehensive income for the year,
as defined in UK IAS.
The notes on pages 49 to 66 form part of these financial
statements.
Statement of Changes in Equity
for the year ended 30 June 2023
Year ended 30 June 2023
================================== ======================================= =========================================
Called Special
up Distributable Capital Revenue
Share Reserve* Reserve Reserve*
Capital $000 $000 $000 Total
Year ended 30 June 2023 Note $000 $000
================================== =============== ====================== ============= ============ ============
Balance as at 1 July 2022 103 79,062 20,965 (4,356) 95,774
Ordinary shares bought back into
treasury - (32,245) - - (32,245)
Profit/(loss) for the period after
tax
on ordinary activities - - 4,320 2,996 7,316
Dividends paid 7 - (822) - - (822)
================================== =============== ====================== ============= ============ ============
Balance as at 30 June 2023 103 45,995 25,285 (1,360) 70,023
================================== =============== ====================== ============= ============ ============
Year ended 30 June 2022
======================== ======= ===================================================================================
Called Special
up Distributable Capital Revenue
Share Reserve* Reserve Reserve*
Capital $000 $000 $000 Total
Year ended 30 June 2022 Note $000 $000
======================== ======= =============== ====================== ============== ============ ============
Balance as at 1 July 2021 103 83,976 21,059 (3,413) 101,725
Loss for the period after tax on
ordinary
activities - - (94) (943) (1,037)
Dividends paid 7 - (4,914) - - (4,914)
================================= =============== ====================== ============== ============ ============
Balance as at 30 June 2022 103 79,062 20,965 (4,356) 95,774
================================= =============== ====================== ============== ============ ============
* The Revenue Reserve and Special Distributable Reserve are
distributable. The amount of the Revenue Reserve and Special
Distributable Reserve that is distributable is not necessarily the
full amount of the reserves as disclosed within these financial
statements. As at 30 June 2023, the net amount of reserves that are
distributable are $44,635,000 (2022: $74,706,000).
Statement of Financial Position
as at 30 June 2023
As at 30 2023 As at 2022
June 30 June
================================================= ============ ======== =========== ========
Note $000 $000 $000 $000
================================================= ============ ======== =========== ========
Non-current assets
Investments held at fair value through profit
or loss 3 56,514 92,381
Current assets
Cash and cash equivalents 10 9,555 5,911
Receivable for investment sold 1,800 423
Other receivables 15 73 66
Deferred tax asset 8 3,530 -
================================================= ============ ======== =========== ========
14,958 6,400
Current liabilities
Portfolio management fee payable (46) (61)
Payable for investment purchased (571) (1,875)
Other payables 15 (349) (212)
Bank overdrafts (106) (391)
================================================= ============ ======== =========== ========
Net current assets 13,886 3,861
================================================= ============ ======== =========== ========
Non-current liabilities
Investments at fair value through profit or loss
3 (325) (416)
Offering fees payable (52) (52)
================================================= =============================================
Net assets 70,023 95,774
================================================= ============ ======== =========== ========
Share capital and reserves
Called-up share capital 11 103 103
Special distributable reserve* 44,635 79,062
Capital reserve 25,285 20,965
Revenue reserve* (1,360) (4,356)
================================================= ============ ======== =========== ========
Total shareholders' funds 70,023 95,774
================================================= ============ ======== =========== ========
Net asset value per ordinary share $10.22 $9.35
================================================= ============ ======== =========== ========
* The Revenue Reserve and Special Distributable Reserve are
distributable. The amount of the Revenue Reserve and Special
Distributable Reserve that is distributable is not necessarily the
full amount of the reserves as disclosed within these financial
statements. As at 30 June 2023, the net amount of reserves that are
distributable are $44,635,000 (2022: $74,706,000).
Signed by:
Statement of Cash Flows
for the year ended 30 June 2023
Year end ed 2023 Year ended
30 June 30 June 2022
======================================================= =============== ========= ======================
$000 $000 $000 $000
======================================================= =============== ========= ============= =======
Cash flows from operating activities
Profit/(loss) before tax 3,845 (988)
Adjustments for:
Gains on investments (4,821) (30)
Cash flows from operating activities
Purchases of investments(1) (140,570) (202,678)
Sales of investments(1) 178,372 204,122
Increase in receivables(2) (7) 81
Increase/(decrease) in payables 148 (2,918)
Foreign withholding taxes on dividends (59) (49)
======================================================= =============== ========= ============= =======
Net cash flows from operating activities 36,908 (2,460)
======================================================= ==================================================
Cash flows from financing activities
Shares bought back for cash (32,245) -
Dividends paid (822) (4,914)
Interest paid (26) (1)
======================================================= =============== ========= ============= =======
Net cash flows from financing activities (33,093) (4,915)
======================================================= ==================================================
Net increase/(decrease) in cash and cash equivalents 3,815 (7,375)
Cash and cash equivalents at the start of the
period 5,520 12,405
Effect of foreign exchange rates 114 490
======================================================= =============== ========= ============= =======
Cash and cash equivalents at the end of the period 9,449(3) 5,520
======================================================= =============== ========= ============= =======
1 Receipts from the sale of, and payments to acquire, investment
securities, have been classified as components of cash flows from
operating activities because they form part of the Company's
dealing operations.
2 2022 increase/(decrease) in receivables line has been adjusted
to be consistent with the classifications applied in 2023.
3 As at 30 June 2023, $3,942,151 (2022: $5,843,979) was held as
collateral at UBS Securities LLC for Contracts for Difference, and
was restricted.
Gabelli Merger Plus+ Trust Plc is registered in England and
Wales under Company number 10747219.
The financial statements on pages 45 to 48 were approved by the
Board of Directors on 19 October 2023 and signed on its behalf
by
John Birch Marc Gabelli
Co-Chairman Co-Chairman 19 October 2023
Notes to the Financial Statements
1 General Information
Gabelli Merger Plus+ Trust Plc (the "Company") is a closed-ended
public limited company incorporated in the United Kingdom on 28
April 2017 with registered number 10747219.
2 Accounting policies
(a) Basis of preparation - The financial statements of Gabelli
Merger Plus+ Trust Plc have been prepared in accordance with the UK
adopted International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The
financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and
financial liabilities (including derivative financial instruments)
at fair value through profit or loss.
The principal accounting policies adopted by the Company are set
out below. Where presentational guidance set out in the Statement
of Recommended Practice ('SORP') for investment trusts issued by
the Association of Investment Companies ('AIC') in October 2019 is
consistent with the requirements of IFRS, the Directors have sought
to prepare the financial statements on a basis compliant with the
recommendations of the SORP.
For the accounting period ended 30 June 2022, the Company met
the requirements to be an investment trust under sections 1158 and
1159 of the Corporation Tax Act of 2010. However, as a result of
the Tranche One Tender Offer completed in the third quarter of
2022, the Company subsequently became a close company due to
becoming controlled by a single participator, Associated Capital
Group, Inc.
Although no longer a trust, the Company has elected to continue
to prepare the financial statements on a basis compliant with the
recommendations of the SORP. The SORP is issued by the AIC and it
sets out recommendations, intended to represent current best
practice, on the form and contents of the financial statements of
Investment Companies. Investment Companies include investment trust
companies that have been, currently are, or are directing its
affairs so as to enable it to obtain or retain approval under
Section 1158 of the Corporation Tax Act 2010. Although the Company
no longer meets the requirements of Section 1158 of the Corporation
Tax Act 2010 to be an investment trust, it continues to conduct its
affairs as an investment company. Further, management of the
Company also believes that consistency in presentation will be
beneficial to individuals reviewing the Company's financial
statements.
(b) Presentation of Statement of Comprehensive Income - 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 presented
alongside the Statement of Comprehensive Income.
(c) Going concern - The Directors, have taken account of the
continuing market regulatory changes affecting investee companies,
investment valuations and the war in Ukraine. Those impacts and
related continuing uncertainty have short- and potentially
medium-term implications for the Company's investment strategy.
Additionally, the Board is monitoring the period ahead on the basis
of the Company no longer having investment trust status and its
implications on the Company's investment return profile over the
longer term. In context, the Board continuously monitors the
Company's investment portfolio, liquidity, and gearing, along with
levels of market activity, to appropriately minimise and mitigate
consequential risks to capital and future income such as
geopolitical risks and financial risks. Taking these factors into
account, the Directors confirm that they have a reasonable
expectation that the Company will continue to operate and meet its
expenses as they fall due. For these reasons, the Directors
consider there is reasonable evidence to continue to adopt the
going concern basis in preparing the accounts as at 30 June
2023.
In forming this position, the Directors consulted with
shareholders utilizing the tender offer process, considered the
Company's investment objectives, risk management policies, capital
management policies and procedures, the nature of the portfolio and
expenditure projections in detail. These items are discussed in
more detail in the Directors' Report on pages 19 to 24 and the
Chairman's Statement on pages 3 and 4.
(d) Statement of estimation uncertainty - In the application of
the Company's accounting policies, the Investment Manager is
required to make judgements, estimates, and assumptions about
carrying values of assets and liabilities that are not always
readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may vary from
these estimates. There have been no significant judgements,
estimates, or assumptions for the period.
2 Accounting policies (continued)
(e) Income recognition - Revenue from investments (other than
special dividends), including taxes deducted at source, is included
in revenue by reference to the date on which the investment is
quoted ex-dividend, or where no ex-dividend date is quoted, when
the Company's right to receive payment is established. Franked
investment income is stated net of the relevant tax credit. Other
income includes any taxes deducted at source.
Special dividends are credited to capital or revenue, according
to the circumstances. Scrip dividends are treated as unfranked
investment income; any excess in value of the shares received over
the amount of the cash dividend is recognised as a capital item in
the Statement of Comprehensive Income.
Interest income is accounted for on an accrual basis by
reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount.
(f) Expenses - The management fees are allocated to revenue in
the Statement of Comprehensive Income. Interest receivable and
payable and management expenses are treated on an accruals basis.
Other expenses are charged to revenue except where they directly
relate to the acquisition or disposal of an investment, in which
case, they are added to the cost of the investment or deducted from
the sale proceeds. Starting with the year ended 30 June 2023,
transaction and finance charges related to contracts for difference
are charged to capital.
The formation and initial expenses of the Company are allocated
to capital.
(g) Investments - Investments have been designated upon initial
recognition at fair value through profit or loss. Investments are
recognised and de-recognised at trade date where a purchase or sale
is under a contract whose terms require delivery within the time
frame established by the market concerned, and are initially
measured at fair value. Subsequent to initial recognition,
investments are valued at fair value. Movements in the fair value
of investments and gains/losses on the sale of investments are
taken to the Statement of Comprehensive Income as capital
items.
The Company's investments are classified as held at fair value
through profit or loss in accordance with applicable International
Financial Standards.
Financial assets and financial liabilities are recognised in the
Statement of Financial Position when the Company becomes a party to
the contractual provisions of the instrument. The Company shall
offset financial assets and financial liabilities if it has a
legally enforceable right to set off the recognised amounts and
interests and intends to settle on a net basis. Financial assets
and liabilities are derecognised when the Company settles its
obligations relating to the instrument.
Contracts for Difference (CFDs)
CFDs are recognised in the Statement of Financial Position at
the accumulated unrealised gain or loss as an asset or liability,
respectively. This represents the difference between the nominal
book cost and market value of each position held. Movements in the
unrealised gains/losses are taken to the Statement of Comprehensive
Income as capital items.
(h) Cash and cash equivalents - The Company may invest part of
its net assets in cash and cash equivalents, money market
instruments, bonds, commercial papers or other debt obligations
with banks or other counterparties, having at least a single-A (or
equivalent) credit rating from an internationally recognised rating
agency or government and other public securities, if the Portfolio
Manager believes that it would be in the best interests of the
Company and its shareholders. This may be the case, for example,
where the Portfolio Manager believes that adverse market conditions
justify a temporary defensive position. Any cash or surplus assets
may also be temporarily invested in such instruments pending
investment in accordance with the Company's investment policy. Cash
balances are marked to market based on the prevailing exchange rate
as of the valuation date. US Treasuries are valued at their
amortised cost.
(i) Transaction costs - Transaction costs incurred on the
purchase and disposal of investments are recognised as a capital
item in the Statement of Comprehensive Income.
(j) Foreign currency - Foreign currencies are translated at the
rates of exchange ruling on the period end date. Revenue received/
receivable and expenses paid/payable in foreign currencies are
translated at the rates of exchange ruling at the transaction
date.
(k) Fair value - All financial assets and liabilities are
recognised in the financial statements at fair value.
(l) Dividends payable - Interim and final dividends are
recognised in the period in which they are declared.
(m) Capital reserve - Capital distributions received, realised
gains or losses on investments that are readily convertible to
cash, and capital expenses are transferred to the capital reserve.
Share buybacks are funded through the capital reserve, with details
of buybacks disclosed in note 11.
(n) Taxation - The tax effect of different items of income/gains
and expenditure/losses is allocated between revenue and capital on
the same basis as the particular item to which it relates, under
the marginal method, using the Company's effective rate of tax.
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the period end
date where transactions of events that result in an obligation to
pay more or a right to pay less tax in future have occurred at the
period end date measured on an undiscounted basis and based on
enacted tax rates. This is subject to deferred tax assets only
being recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of
the underlying timing differences can be deducted. Timing
differences are differences arising between the Company's taxable
profits and its results as stated in the accounts which are capable
of reversal in one or more subsequent periods.
GMP has historically been authorized as an Investment Trust
under Sections 1158 and 1159 Corporation Tax Act 2010 and the
Investment Trust (Approved Company) (Tax) Regulations 2011
(S.I.2011/2999).
Following a share buy-back offer from 19 August 2022 to 22
September 2022, GMP became a close company due to becoming
controlled by a single participator, Associated Capital Group Inc.
This constituted a "serious" breach of the Investment Trust
rules.
Accordingly, GMP notified HMRC of this development in December
2022 and requested confirmation that GMP's authorization as an
Investment Trust should be withdrawn from the commencement of the
current accounting period (being 1 July 2022).
The primary benefit associated with the Investment Trust regime
is that capital gains income realized by a qualifying Investment
Trust company is exempt from UK Corporation Tax. Therefore, loss of
Investment Trust status for a UK company can have potentially
significant consequences for its tax profile moving forwards, as it
would be subject to tax on any capital gains realized thereafter at
the main rate of UK Corporation Tax (currently 19%, but rising to
25% with effect from 1 April 2023).
At the year ended 30 June 2023, after offset against income
taxable on receipt, there was a deferred tax asset ("DTA") of
$3,530,045 (2022: Unrecognised Potential DTA $2,354,232) in
relation to surplus tax reliefs.
After the loss of its Investment Trust Status it is now possible
for GMP to utilise this DTA in order to shelter capital gains from
UK Corporation Tax. In order for the DTA to remain available, GMP
must maintain its investment business moving forwards. GMP's
activities are such that it will have an investment business for UK
tax purposes.
In particular, the Investment Trust rules require that
"substantially all of the business of the Investment Trust company
consists of investing its funds in shares, land or other assets
with the aim of spreading investment risk and giving members of the
company the benefit of the results of the management of its funds".
This may be considered analogous to having an investment
business.
Therefore, given (i) GMP previously received approval from HMRC
that this requirement was met, and (ii) the activity of the company
is not intended to change, GMP will continue having an investment
business and will meet the conditions to carry forward and use its
excess management expenses in current and future periods. As such
GMP has now included the DTA in the financial statements.
(o) Functional and presentation currency - The functional and
presentation currency of the Company is the U.S. dollar.
3 Investments at fair value through profit or loss
The financial assets measured at fair value through profit or
loss in the financial statements are grouped into the fair value
hierarchy as follows:
As at 30 June 2023
======================================= ===============================================================
Level 1 Level 2 Level 3 Total
$000 $000 $000 $000
======================================= =================== ============ ============= =============
Financial assets at fair value through
profit or loss
Equities 55,219 903 - 56,122
Contingent value rights - 257 - 257
Derivatives - 135 - 135
======================================= =================== ============ ============= =============
Gross fair value 56,514
Derivatives - (326) - (326)
--------------------------------------- ------------------- ------------ ------------- -------------
Net fair value 55,219 969 - 56,188
======================================= =================== ============ ============= =============
As at 30 June 2022
======================================= ================================================================
Level 1 Level 2 Level 3 Total
$000 $000 $000 $000
======================================= =================== ============= ============= =============
Financial assets at fair value through
profit or loss
Quoted equities 89,577 1,782 - 91,359
Contingent value rights - 132 5 137
Derivatives - 885 - 885
======================================= =================== ============= ============= =============
Gross fair value 92,381
Derivatives - (416) - (416)
--------------------------------------- ------------------- ------------- ------------- -------------
Net fair value 89,577 2,383 5 91,965
======================================= =================== ============= ============= =============
Analysis of changes in market value and book cost of portfolio
investments in year
Year ended Year ended
30 June 30 June
2023 2022
$000 $000
================================== ================ ==============
Opening book cost 99,687 93,078
Opening investment holding losses (7,722) (1,461)
================================== ================ ==============
Opening market value 91,965 91,617
================================== ================ ==============
Additions at cost 139,266 202,731
Disposals proceeds received (179,749) (201,923)
Gains/(losses) on investments 4,707 (460)
================================== ================================
Market value of investments 56,189 91,965
================================== ================ ==============
Closing book cost 63,218 99,687
Closing investment holding losses (7,029) (7,722)
================================== ================================
Closing market value 56,189 91,965
================================== ================ ==============
The company received $179,749,000 (2022: $201,923,000) from
investments sold in the year. The book cost of these investments
when they were purchased was $175,735,000 (2022: $196,122,000).
Further explanation of the disposal proceeds received in the year
can be found in the Net realised and unrealised gains/(losses) on
investments section on page 53.
Fair value hierarchy
IFRS 13 requires the Company to classify its financial
instruments held at fair value using a hierarchy that reflects the
significance of the inputs used in the valuation methodologies.
These are as follows:
-- Level 1 - quoted prices in active markets for identical investments;
-- Level 2 - other significant observable inputs (including
quoted prices for similar investments, interest rates, prepayments,
credit risk, etc.); and
-- Level 3 - significant unobservable inputs.
Valuation process and techniques for Level 3 valuations
The investments in contingent value rights are reviewed
regularly to ensure that the initial classification remains correct
given each asset's characteristics and the Company's investment
policies. The contingent value rights are initially recognised
using the transaction price as the best evidence of fair value at
acquisition, and are subsequently measured at fair value. At 30
June 2023, the quantitative inputs used to value the level 3
contingent value rights were the last sale price and the merger
price for each.
Level 2 financial assets at fair value through profit or
loss
The investments in contracts for difference are marked at the
price of the underlying equity. Contingent value rights in Level 2
are marked using broker quotes.
Level 3 financial assets at fair value through profit or
loss
Year ended Year ended
30 June 30 June
2023 2022
$000 $000
=========================================================== ================ ==============
Opening valuation 5 -
Assets acquired during the year - -
Assets disposed during the year (5) -
Total profit or loss included in net profit on investments
in the Statement
of Comprehensive Income - 5
=========================================================== ================================
Closing valuation - 5
=========================================================== ================ ==============
Net realised gains/(losses) and unrealised gains/(losses) on
investments
Year ended Year ended
30 June 30 June
2023 2022
$000 $000
========================================================== ================ ==============
Realised gains on investments 4,014 5,801
Movement in unrealised on investments 693 (6,261)
========================================================== ================================
Net realised gains/(losses) and unrealised gains/(losses)
on investments 4,707 (460)
========================================================== ================================
4 Transactions costs
During the year commissions and other expenses were incurred in
acquiring within gains in the Statement of Comprehensive Income.
The total costs were as follows:
Year ended Year ended
30 June 30 June
2023 2022
$000 $000
========== ================ ==============
Purchases 54 68
Sales 34 33
========== ================ ==============
Total 88 101
========== ================ ==============
5 Income
Year ended Year ended
30 June 30 June
2023 2022
$000 $000
==================================== ================ ==============
Income from investments
Overseas equities 423 530
Income on short-term investments(1) 387 3
Other income 202 543
==================================== ================ ==============
Total income 1,012 1,076
==================================== ================ ==============
1 Income on short-term investments represents the return on cash
and cash equivalents, primarily U.S. Treasury Bills. Further
information can be found in Note 10 on page 57.
6 Expenses
Year ended Year
ended 30 June 2023
30 June 2022
$000 $000
========================================== =========================
Revenue expenses
Portfolio Management Fee (654) (842)
Directors' Remuneration (157) (157)
Audit Fees - PwC(1) (145) (70)
Legal Fees(2) (122) (110)
Company Secretary Fees(2) (100) (94)
Administration Fees - State Street (55) (44)
Custodian/Depositary Fees - State Street (52) (42)
Former AIFM - Carne (51) (60)
Other (34) (17)
Printing (28) (4)
Registrar - Computershare (18) (33)
Regulatory Filing Fees - AIFMD (14) (13)
Directors' Expenses (11) (13)
Ongoing LSE and UKLA Fees (10) (15)
LSE RNS fees (10) (14)
Contracts for Difference - (429)
Dividend Expense on Securities Sold Short - (8)
Marketing expenses - (4)
========================================== =========================
Total revenue expenses (1,461) (1,969)
========================================== =========================
Capital expenses
Contracts for Difference(3) (317) -
Transaction costs on derivatives (92) (73)
Transaction Charges - State Street (92) (51)
========================================== =========================
Total capital expenses (501) (124)
========================================== =========================
1 Audit fees for the year ended 30 June 2023 include $34,808
related to the prior fiscal year.
2 Legal Fees and Company Secretary Fees include approximately
$39,000 and $4,000 of tender offer related fees that will not
recur.
3 Beginning with the year ended 30 June 2023 expenses related to
Contracts for Difference are treated as capital expenses. In prior
years these expenses were treated as revenue expenses.
Portfolio Management Fee
Under the terms of the Portfolio Management Agreement, the
Portfolio Manager will be entitled to a management fee ("Management
Fee"), together with reimbursement of reasonable expenses incurred
by it in the performance of its duties under the Portfolio
Management Agreement, other than the salaries of its employees and
general overhead expenses attributable to the provision of the
services under the Portfolio Management Agreement. The Management
Fee shall be accrued daily and calculated on each Business Day at a
rate equivalent to 0.85% of NAV per annum.
AIFM fees
The Company previously appointed Carne Global Fund Managers
(Ireland) Limited ("Carne") as its former Alternative Investment
Fund Manager pursuant to the AIFMD. Carne is entitled to receive
from the Company such annual fees, accrued and payable at such
times, as may be agreed in writing between itself and the Company
from time to time. The fees are payable monthly and subject to a
minimum monthly fee of @2,500. The Company appointed Gabelli Funds,
LLC to serve as AIFM effective 14 February 2023. Gabelli Funds, LLC
does not earn a fee for its role as AIFM; it earned $653,934 in
portfolio management fees during the year ended 30 June 2023 (2022:
$841,642).
7 Equity dividends
Year ended Year ended
30 June 2023 30 June
2022
$000 $000
=============== ===========================
Dividends paid 822 4,914
=============== ===========================
During the year ended 30 June 2023 dividends paid per share
totaled $0.12 (30 June 2022: $0.48 per share). More detailed
information can also be found in the Dividend History table on page
13.
8 Taxation on ordinary activities Deferred Tax Assets
At 30 June 2023 the Company has excess expenses of $7,284,611
carried forward. This sum, which is net of the amount set against
current period provides, had arisen due to the cumulative
deductible expenses having exceeded taxable income over the life of
the Company when it was authorized as an Investment Trust for tax
purposes. Now that it is no longer a trust and therefore subject to
capital gains tax, the Company believes it is more likely than not
that it will have sufficient taxable profits against which these
expenses can be offset. Therefore, a deferred tax asset of
$1,821,153 has now been recognized. Provided the Company continues
to maintain its current investment profile, it is likely that this
deferred tax asset will be utilised to offset future taxable income
subject to the normal corporate tax loss restriction rules for
carried forward losses which restrict their use for any particular
period to GBP5 million plus 50% of profits in excess of that
initial GBP5 million. The Company has also recognised a deferred
tax asset of $1,709,699 on the unrealised losses on the value of
its equity investments. At 30 June 2023 total deferred tax assets
recognised was $3,530,045, or $0.52 per Ordinary Share.
Year ended 30 June 2023
================================================ ======================= ======== === ===========================
Revenue Capital Total
Analysis of the charge in the year $000 $000 $000
================================================ ======================= ====================== ==================
-
Deferred tax asset 3,530 - 3,530
Current tax expense Irrecoverable overseas tax - (59) - - (59)
================================================ ======================= ====================== ==================
Total 3,471 - 3,471
================================================ ======================= ====================== ==================
Year ended 30 June 2022
============================================= ======= ======== === ====================
Revenue Capital Total
Analysis of the charge in the year $000 $000 $000
============================================= ======= ====================== ===========
Irrecoverable overseas tax (49) - (49)
============================================= ======= ====================== ===========
Total (49) - (49)
============================================= ======= ====================== ===========
8 Taxation on ordinary activities (continued)
Year ended 30 June 2023
================================================== =======================
Revenue Capital Total
Factors affecting the tax charge for the year $000 $000 $000
================================================== =======================
(Loss)/profit before taxation (475) 4,320 3,845
================================================== =======================
97 (886) (789)
UK Corporation tax at effective rate of 20.5%
Effects of: - - -
Non taxable overseas dividends - - -
Losses on investments held at fair value through 3,530 - 3,530
profit or loss Deferred tax benefit - - -
Current tax expense Irrecoverable overseas tax (59) - (59)
Expenses not deductible for tax purposes Losses - - -
on foreign currencies - - -
Movement in excess management expenses - - -
================================================== =======================
Total 3,471 - 3,471
================================================== =======================
Total tax charge for the year 3,568 (886) 2,682
================================================== =======================
Year ended 30 June 2022
=================================================== ======= ======== === ==============
Revenue Capital Total
Factors affecting the tax charge for the year $000 $000 $000
=================================================== ======= ====================== =====
Loss before taxation (894) (94) (988)
=================================================== ======= ====================== =====
UK Corporation tax at effective rate of 19% 170 18 188
Effects of:
Non taxable overseas dividends 98 - 98
Gains on investments held at fair value through
profit or loss - (87) (87)
Irrecoverable overseas tax (49) - (49)
Expenses not deductible for tax purposes (1) (10) (11)
Losses on foreign currencies - 93 93
Movement in excess management expenses (352) (18) (370)
Movement in deferred tax rate on excess management
expenses 85 4 89
=================================================== ======= ====================== =====
Total (219) (18) (237)
=================================================== ======= ====================== =====
Total tax charge for the year (49) - (49)
=================================================== ======= ====================== =====
At the year end after offset against income taxable on receipt,
there is a deferred tax asset of $3,530,281 (2022: Unrecognised
Potential DTA $2,354,232) in relation to surplus tax reliefs.
Note: the difference between book and accounting value. Deferred
tax assets ("DTA") can be used to offset certain taxes as
applicable in the United Kingdom. As such based on a continuing
level of activity the Company's DTA are expected to be utilised
over the foreseeable future resulting in the company not paying UK
tax for this year.
9 Earnings per share
Earnings per ordinary share is calculated with reference to the
following amounts:
Year ended Year
ended 30 June 2023
30 June 2022
======================================================= ====================
Revenue return
Revenue return attributable to ordinary shareholders
($000) 2,996 (943)
======================================================= ====================
Weighted average number of shares in issue during year 7,797,333 10,238,206
Total revenue return per ordinary share $0.39 ($0.09)
======================================================= ====================
Capital return
Capital return attributable to ordinary shareholders
($000) 4,320 (94)
======================================================= ====================
Weighted average number of shares in issue during year 7,797,333 10,238,206
Total capital return per ordinary share $0.55 ($0.01)
======================================================= ====================
Total return per ordinary share $0.94 ($0.10)
======================================================= ====================
As at 30 As at 30
Net asset value per share June 2023 June 2022
=============================================== ========== ==========
Net assets attributable to shareholders ($000) 70,023 95,774
Number of shares in issue at year end 6,850,792 10,238,206
Net asset value per share $10.22 $9.35
=============================================== ========== ==========
The Company continues to report according to SORP standards as
provided by the AIC. As such, the net asset value per share is
provided in accordance with IFRS standards inclusive of the
Deferred Tax Asset of $0.52 per share, or $3.53 million, as a
result of the Company having Close status and no longer availing
itself of Section Investment Trust status under Section 1158 of the
Corporation Tax Act 2010. Furthermore, net asset value cum-income,
which includes the Revenue Reserves, is for illustrative
purposes.
10 Cash and cash equivalents
As at 30 As at 30
June 2023 June 2022
$000 $000
================ ========== ==========
Cash 6,090 5,911
U.S. Treasuries 3,465 -
================ ========== ==========
Total 9,555 5,911
================ ========== ==========
The Board and Investment Manager oversee investments held in
cash and cash equivalents in accordance with the Investment
Policy.
11 Called up share capital
As at 30 As at 30
June 2023 June 2022
$000 $000
======================================================== ========== ==========
Allotted, called up and fully paid:
6,850,792 (2022: 10,238,206) Ordinary shares of $ 0.01
each - equity 68 102
======================================================== ========== ==========
Treasury shares:
3,483,374 (2022: 95,960) Ordinary shares of $ 0.01
each - equity 35 1
======================================================== ========== ==========
Total shares 103 103
======================================================== ========== ==========
In September 2022, concurrent with the Fifth Anniversary Tender
Offer, the Board of Directors of the Company were authorised to
allot Ordinary Shares of the Company up to an aggregate nominal
value of $511,910.30, with such authority to expire on the fifth
anniversary of the date of the passing of the resolution. In
addition, at the November 2022 AGM, the Board of Directors was
authorised to allot relevant securities in the Company up to a
maximum aggregate nominal amount of $71,822 (being ten percent of
the total number of voting rights of the Company at the latest
practicable date prior to the publication of the Notice of AGM),
with such authority to apply until the conclusion of this year's
AGM. The resolutions for the 2023 AGM include authorisation to the
Company to allot equity securities up to an aggregate nominal value
of $45,672, that can be utilised for acquisitions by the company.
These transactions may result in the acquisition of other operating
businesses to further expand and develop shareholder value in
accordance with the investment programme.
12 Financial risk management
The Company's financial instruments comprise securities and
other investments, cash balances, receivables, and payables that
arise directly from its operations; for example, in respect of
sales and purchases awaiting settlement, and receivables for
accrued income. The Company also has the ability to enter into
derivative transactions in the form of forward foreign currency
contracts, futures, and options, for the purpose of managing
currency and market risks arising from the Company's
activities.
The main risks the Company faces from its financial instruments
are (i) market price risk (comprising interest rate risk, currency
risk, and other price risk), (ii) liquidity risk, and (iii) credit
risk.
The Board regularly reviews, and agrees upon, policies for
managing each of these risks. The Portfolio Manager's policies for
managing these risks are summarised below and have been applied
throughout the year. The numerical disclosures exclude short term
receivables and payables, other than for currency disclosures.
(i) Market price risk
The fair value or future cash flows of a financial instrument
held by the Company may fluctuate because of changes in market
prices. This market risk comprises three elements - interest rate
risk, currency risk, and other price risk.
Interest rate risk
Interest rate movements may affect the level of income
receivable and payable on cash deposits.
The possible effects on fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment decisions.
Interest risk profile
The interest rate risk profile of the portfolio of financial
assets and liabilities at the year-end date was as follows:
As at 30 June 2023
=================== ======================== ======================
Interest Local currency Foreign US Dollar
rate 000 exchange equivalent
% rate $000
=================== ======== ============== ========= ===========
Assets:
US dollar 1.52 9,469 1.00 9,469
Australian dollar 0.42 (53) 1.50 (35)
Canadian dollar 0.48 99 1.32 75
Danish krone 0.00 (1) 6.82 -
Euro currency 0.60 (5) 0.92 (6)
GBP Sterling 0.51 (44) 0.79 (56)
Hong Kong dollar 0.00 1 7.84 *
New Zealand dollar 0.15 3 1.63 2
=================== ======== ============== ========= ===========
Total 9,449
=================== ================================================
* Less than $500.
As at 30 June 2022
=================== ======================== ======================
Interest Local currency Foreign US Dollar
rate 000 exchange equivalent
% rate $000
=================== ======== ============== ========= ===========
Assets:
US dollar 0.24 5,585 1.00 5,585
Australian dollar 0.12 (48) 1.45 (33)
Canadian dollar 0.15 15 1.29 12
Euro currency (0.75) (8) 0.96 (8)
GBP Sterling 0.12 (24) 0.82 (29)
Hong Kong dollar 0.00 1 7.85 *
New Zealand dollar 0.10 5 1.61 3
Norwegian krone 0.00 (5) 9.88 (1)
South African rand 0.00 (13) 16.38 (1)
Swedish krona (0.75) (80) 10.25 (8)
=================== ======== ============== ========= ===========
Total 5,520
=================== ================================================
* Less than $500.
Interest rate sensitivity
The sensitivity analysis below has been determined based on the
exposure to interest rates for both derivative and non-derivative
instruments at the year-end date and the stipulated change taking
place at the beginning of the financial year and held constant
throughout the reporting period in the case of instruments that
have floating rates.
If interest rates had been 10 (2022: 10) basis points higher or
lower and all other variables were held constant, the Company's
profit or loss for the reporting year to 30 June 2023 would
increase/decrease by $9,000 (2022: $6,000). This is mainly
attributable to the Company's exposure to interest rates on its
floating rate cash balances.
Currency risk
The Company's investment portfolio is invested predominantly in
foreign securities and the year end can be significantly affected
by movements in foreign exchange rates. It is not the Company's
policy to hedge this risk on a continuing basis but the Company
may, from time to time, match specific overseas investments with
foreign currency borrowings.
The revenue account is subject to currency fluctuation arising
from overseas income.
12 Financial risk management (continued)
Currency risk exposure by currency of denomination:
As at 30 June 2023
========================= =============== =======================
Net Investments Net monetary Total
$000 assets currency
$000 exposure
$000
========================= =============== ============ =========
Australian dollar 226 465 691
Canadian dollar 1,645 (1,664) (19)
Danish krone - (7) (7)
Euro currency - (30) (30)
GBP Sterling 371 1,208 1,579
Hong Kong dollar - (1) (1)
Japanese yen - (1) (1)
New Zealand dollar - 2 2
Norwegian krone - (10) (10)
Polish zloty - 1 1
Swedish krona - (7) (7)
Swiss franc - 6 6
========================= =============== ============ =========
Total non US Investments 2,242 (38) 2,204
========================= =============== ============ =========
US dollar 57,602 10,217 67,819
========================= =============== ============ =========
Total 59,844 10,179 70,023
========================= =============== ============ =========
As at 30 June 2022
========================= =============== =======================
Net Investments Net monetary Total
$000 assets currency
$000 exposure
$000
========================= =============== ============ =========
Australian dollar - (55) (55)
Canadian dollar 5,295 (5,222) 73
Euro currency 98 (55) 43
GBP Sterling 937 (805) 132
Hong Kong dollar - 2 2
New Zealand dollar - 3 3
South African rand - (7) (7)
Swedish krona - 108 108
Swiss franc 2,442 - 2,442
========================= =============== ============ =========
Total non US Investments 8,772 (6,031) 2,741
========================= =============== ============ =========
US dollar 82,724 10,309 93,033
========================= =============== ============ =========
Total 91,496 4,278 95,774
========================= =============== ============ =========
Currency sensitivity
The following table details the Company's sensitivity to a 10%
increase and decrease in US dollars against the relevant foreign
currencies and the resultant impact that any such increase or
decrease would have on net return before tax and equity
shareholders' funds. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts
their translation at the year end for a 10% change in foreign
currency rates.
As at As at
30 June 2023 30 June
2022
$000 $000
=================== =====================
Australian dollar 69 (6)
Canadian dollar (2) 8
Danish krone (1) -
Euro currency (3) 5
GBP Sterling 158 13
Norwegian krone (1) -
South African rand - (1)
Swedish krona (1) 11
Swiss franc 1 244
=================== =====================
The relevant US dollar exchange rates as at 30 June 2023 were:
Australian dollar (1: 1.5023); Canadian dollar (1: 1.3233); Danish
krone (1: 0.9166); Euro currency
(1: 6.8249); GBP Sterling (1: 0.7866); Norwegian krone (1:
10.7136); Swedish krona (1: 10.8013); Swiss franc (1: 0.8947).
Other price risk
Other price risks, i.e., changes in market prices other than
those arising from interest rate or currency risk, may affect the
value of the quoted investments.
The Investment Manager actively monitors market prices
throughout the year and reports to the Board, which meets regularly
in order to review investment strategy. The investments held by the
Company are listed on a recognised stock exchange.
Other price risk sensitivity
If market prices at the year-end date had been 15% higher or
lower while all other variables remained constant, the return
attributable to ordinary shareholders for the year ended 30 June
2023 would have increased/decreased by $8,428,000. The calculations
are based on the portfolio valuations as at the year-end date, and
are not representative of the year as a whole.
(ii) Liquidity risk
This is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities. All
creditors are payable within 3 months.
Liquidity risk is not considered to be significant as the
Company's assets comprise mainly readily realisable securities,
which can be sold to meet funding commitments if necessary.
(iii) Credit risk
This is the risk of failure of the counterparty to a transaction
to discharge its obligations under that transaction that could
result in the Company suffering a loss.
The table below shows the counterparty risk
as at the Balance Sheet date:
Derivative
exposure:
CFDs Collateral Net exposure
posted
$000 $000 $000
============================================ ========== ============ ==============
Counterparty
UBS Securities, LLC 191 (4,053) (3,862)
============================================ ========== ============ ==============
Total 191 (4,053) (3,862)
============================================ ========== ============ ==============
Net exposure represents the mark-to-market value of derivative
contracts less any cash collateral held. Negative exposure
represents the Fund's exposure to that counterparty. Positive
amounts are not an exposure to the Fund.
12 Financial risk management (continued)
The risk is managed as follows:
-- Investment transactions are carried out mainly with brokers
whose credit ratings are reviewed periodically by the Portfolio
Manager.
-- Most transactions are made delivery versus payment on recognised exchanges.
-- Cash is held at State Street Bank and Trust which has a
credit rating by Standard and Poor's on short-term deposits of A-1+
and long-term deposits AA-.
The maximum credit risk exposure as at 30 June 2023 was
$14,958,000 (2022: $6,400,000). This was due to cash and
receivables as per note (10) 'Cash & cash equivalents', note
(15) 'Total other receivables' and Statement of Financial Position
Receivable for investment sold.
Capital management policies and procedures
The Company's capital management objectives are:
-- to ensure that the Company will be able to continue as a going concern; and
-- to maximise the revenue and capital return to its equity
shareholders through an appropriate balance of equity capital and
debt.
The Board monitors and reviews the broad structure of the
Company's capital on an ongoing basis. The Board considers the
Company's capital requirements in the context of both the Special
Distributable and Revenue reserves being treated as distributable,
as permitted by current accounting standards for listed investment
companies. The distributable reserves can be used to fund dividends
and share repurchase programmes. This review includes the nature
and planned level of gearing, which takes account of the Portfolio
Manager's views on the market and the extent to which revenue in
excess of that which is required to be distributed under the
investment trust rules should be retained.
The analysis of shareholders' funds is as follows:
As at 30 As at 30
June 2023 June 2022
$000 $000
================================= ========== ==========
Called-up share capital 103 103
Special distributable reserve(1) (45,995) 79,062
Capital reserve 25,602 20,965
Revenue reserve* (1,677) (4,356)
================================= ======================
Total shareholders' funds 70,023 95,774
================================= ========== ==========
1 The Revenue Reserve and Special Distributable Reserve are
distributable. The amount of the Revenue Reserve and Special
Distributable Reserve that is distributable is not necessarily the
full amount of the reserves as disclosed within these financial
statements. As at 30 June 2023, the net amount of reserves that are
distributable are $45,995,000 (2022: $74,706,000).
Alternative Investment Fund Managers' ('AIFM') Directive
In accordance with the Alternative Investment Fund Managers'
Directive ("AIFMD"), the Company has appointed Gabelli Funds, LLC
as its Alternative Investment Fund Manager (the "AIFM"), effective
14 February 2023, to provide portfolio management and risk
management services to the Company in accordance with the
investment management agreement.
Leverage
Leverage is calculated using two methods: i) Gross method and
ii) Commitment method. For further details please see the Glossary
on page 69.
The Company's maximum leverage levels at 30 June 2023 are shown
below:
Gross method Commitment
Leverage Exposure method
======================== ============ ==========
Maximum permitted limit 500% 250%
Actual 115% 131%
======================== ============ ==========
The leverage limits are set by the AIFM and approved by the
Board and are in line with the maximum leverage levels permitted in
the Company's Articles of Association. The AIFM is also required to
comply with the gearing parameters set by the Board in relation to
borrowings.
13 Derivatives risk
The Company's investment policy may involve the use of
derivatives (including, without limitation, forward foreign
exchange contracts, equity contracts for difference swap agreements
("CFDs"), securities sold short and/or structured financial
instruments). The Company may use both exchange-traded and
over-the-counter derivatives as part of its investment activity.
The cost of investing utilising derivatives may be higher than
investing in securities (whether directly or through nominees) as
the Company will have to bear the additional costs of purchasing
and holding such derivatives, which could have a material adverse
effect on the Company's returns. The low initial margin deposits
normally required to establish a position in such instruments
permit a high degree of leverage. As a result, depending on the
type of instrument, a relatively small movement in the price of a
contract may result in a profit or a loss which is high in
proportion to the amount of funds actually placed as initial margin
and may result in unquantifiable further losses exceeding any
margin deposited. In addition, daily limits on price fluctuations
and speculative position limits on exchanges may prevent prompt
liquidation of positions resulting in potentially greater
losses.
The use of derivatives may expose the Company to a higher degree
of risk. These risks may include credit risk with regard to
counterparties with whom the Company trades, the risk of settlement
default, lack of liquidity of the derivative, imperfect tracking
between the change in value of the derivative and the change in
value of the underlying asset that the Company is seeking to track
and greater transaction costs than investing in the underlying
assets directly. Additional risks associated with investing in
derivatives may include a counterparty breaching its obligations to
provide collateral, or, due to operational issues (such as time
gaps between the calculation of risk exposure to a counterparty's
provision of additional collateral or substitutions of collateral
or the sale of collateral in the event of a default by a
counterparty), there may be instances where credit exposure to its
counterparty under a derivative contract is not fully
collateralised. The use of derivatives may also expose the Company
to legal risk, which is the risk of loss due to the unexpected
application of a law or regulation, or because a court declares a
contract not legally enforceable.
The use of CFDs is a highly specialised activity that involves
investment techniques and risks different from those associated
with ordinary portfolio security transactions. In a CFD, a set of
future cash flows is exchanged between two counterparties. One of
these cash flow streams will typically be based on a reference
interest rate combined with the performance of a notional value of
shares of a stock. The other will be based on the performance of
the shares of a stock. Depending on the general state of short-term
interest rates and the returns on the Company's portfolio
securities at the time a CFD transaction reaches its scheduled
termination date, there is a risk that the Company will not be able
to obtain a replacement transaction or that terms of the
replacement will not be as favourable as on the expiring
transaction. At 30 June 2023 the Company held CFDs, as shown in the
following table.
As at
30 June 2023
Unrealised
Security name Trade currency Shares Nominal gain/(loss)
(000) ($000)
$000
=================================== =============== ====== ======= ============
ADVA Optical Networking SE USD 1 30 1
Allfunds Group plc EUR 4 30 (4)
Alliance Aviation Service AUD 60 111 7
Arlington Asset Investment Corp USD 34 151 7
Black Knight Inc USD 3 188 10
Broadcom Inc USD (1) (1,054) (20)
Brookfield Infrastructure Partners USD (2) (117) 4
Chevron Corp USD (3) (436) 1
Chr. Hansen A/S DKK 6 406 (28)
Curtis Banks Group plc GBP 16 64 **
Dechra Pharmaceuticals plc GBP 34 1,546 15
Disruptive Capital GP GBP 1 8 (8)
Egetis Therapeutics AB SEK 68 34 (7)
Ellington Financial Inc USD (13) (172) (3)
Emis Group plc GBP 20 336 1
Entain plc GBP 25 387 18
Essential Metals Ltd AUD 248 74 (4)
Extra Space Storage Inc USD (2) (286) (6)
Fox Corp USD (3) (115) (2)
13 Derivatives risk (continued) As at
30 June 2023
Unrealised
Security name Trade currency Shares Nominal gain/(loss)
(000) ($000)
$000
====================================== =============== ====== ======= ============
Genkyotex SA EUR 7 ** **
Globus Medical Inc USD (15) (850) (48)
Grifols SA USD (12) (149) (11)
Heico Corp USD (2) (369) (27)
Intercontinental Exchange Inc USD * (41) (2)
Iveco Group NV EUR 3 27 2
John Wood Group plc GBP 23 38 1
Lennar Corp USD (9) (1,000) (80)
Link Admin AUD 20 27 (3)
Livent Corp USD (7) (204) **
Lookers plc GBP 274 409 3
Magellan Midstream Partners USD 6 338 17
Majorel Group Luxembourg SA EUR 26 808 (4)
Maxlinear Inc USD (1) (34) (1)
Meltwater Holding NV NOK 113 201 (10)
Network International Holdings plc GBP 254 1,227 1
Newcrest Mining Ltd USD 37 666 (9)
Newmont Corp USD (13) (551) **
Novozymes A/S DKK (8) (413) 25
Numis Corporation plc GBP 35 147 **
ONEOK Inc USD (4) (229) (5)
Orange Belgium SA EUR 5 81 (3)
Ordina NV EUR 34 210 1
Origin Energy Ltd AUD 248 1,416 (2)
PDC Energy Inc USD 5 324 (3)
PEXA Group Ltd AUD 3 24 1
Praemium Ltd AUD 121 49 6
Ramsay Health Care Ltd AUD 1 24 (1)
Randall & Quilter Investment Holdings
Ltd GBP 32 18 3
Regency Centers Corp USD (5) (301) (6)
Rovio Entertainment Oyj EUR 108 1,065 (4)
Siltronic AG EUR 2 183 (19)
SimCorp A/S DKK 9 949 (3)
Softwareone Holding AG CHF 1 25 **
SOHO China Ltd HKD 437 66 (1)
Spear Investment Group EUR 39 9 **
Spire Healthcare plc GBP 29 78 1
STS Holding SA PLN 25 145 1
Telecom Italia EUR 285 76 4
Telenet Group Holding NV EUR 21 467 3
As at 30
June 2023
Unrealised
gain/(loss)
$000
Security name Trade currency Shares Nominal
(000) ($000)
=============== ================ ======= ======== ============
Toshiba Corp JPY 28 914 (1)
Vivendi SE EUR 4 34 1
=============== ================ ======= ======== ============
Total unrealised loss on derivatives (191)
==================================================== ============
* Fewer than 500 shares.
** Less than $500.
14 Performance fee
Subject to the satisfaction of the Performance Conditions, the
Portfolio Manager shall be entitled under the Portfolio Management
Agreement, in respect of each Performance Period, to receive 20% of
the Total Return relating to such Performance Period, provided that
such amount shall not exceed 3% of the Average NAV.
Performance Conditions
The Portfolio Manager's entitlement to a Performance fee in
respect of any Performance Period shall be conditional on the
Closing NAV per Share in respect of the Performance Period
(adjusted for any changes to the NAV per Share through dividend
payments, Share repurchases (howsoever effected) and Share
issuances since Admission) being in excess of the Performance
Hurdle and High Water Mark. The Performance Hurdle is equal to the
Starting NAV per Share increased by two times the rate of return on
13 week Treasury Bills published by the US Department of the
Treasury over the Performance Period, less the Starting NAV per
Share; multiplied by the weighted average of the number of Shares
in issue (excluding any Shares held in treasury) at the end of each
day during the Performance Period. For the year ended 30 June 2023,
no Performance fee was paid. As at 30 June 2023, no amount was
outstanding to the Portfolio Manager in respect of the performance
fee, reflecting the performance period matching the Company's
financial year (2022: $nil).
15 Other Assets and Liabilities
The categories of other receivables and other payables
include:
As at 30 As at 30
June June
2023 2022
$000 $000
======================== ======== ========
Other receivables
FX currency purchased 3 -
FX currency sold - 12
All other receivables* 70 54
======================== ======== ========
Total other receivables 73 66
======================== ======== ========
Other payables
FX currency sold 6 -
Custodian fees 15 7
Accounting fees 26 17
Audit fees 86 70
All other payables 216 118
======================== ======== ========
Total other payables 349 212
======================== ======== ========
* As at 30 June 2023, all other receivables included prepaid
expenses and dividend and swap income.
16 Related party disclosure: Directors
Each of the Directors is entitled to receive a fee from the
Company at such rate as may be determined in accordance with the
Articles of Incorporation. The Directors' remuneration is $30,000
per annum for each Director, other than:
-- the Chairman, who will receive an additional $1,000 per annum
*;
-- the Chairman of the Audit & Risk Committee, who will
receive an additional $5,000 per annum; and
-- the Members of the Audit & Risk Committee, who will
receive an additional $1,000 per annum.
Each of the Directors is also entitled to be paid all reasonable
expenses properly incurred by them in connection with the
performance of their duties. These expenses will include those
associated with attending general meetings, Board or committee
meetings and legal fees. The Board may determine that additional
remuneration may be paid, from time to time, to any one or more
Directors in the event such Director or Directors are requested by
the Board to perform extra or special services on behalf of the
Company.
Carne Global Fund Managers (Ireland) Limited, was considered a
related party to the Company as it was considered to have
significant influence over the Company while in its role as AIFM.
During the financial year ended 30 June 2023, Carne earned fees of
US$39,926, of which US$12,708 was payable at year end. Carne Global
Financial Services Limited, the parent Company of the AIFM, earned
fees amounting to US$12,173 during the financial year ended 30 June
2023 in respect of other fund governance services to the Company,
of which US$5,458 was payable at year end. The related party
transactions with the Directors are set out on pages 36 and 37 and
on page 22.
Related parties disclosure: other
The Portfolio management fee for the period ended 30 June 2023
paid by the Company to the Portfolio Manager is presented in the
Statement of Comprehensive Income. Details of the Portfolio
Management fee paid during the period is disclosed in Note 6.
Details of Performance fee paid during the year are disclosed in
Note 14.
As at 30 June 2023, Associated Capital Group Inc., an affiliate
of the AIFM and Portfolio Manager, held 6,210,619 Ordinary Shares
in the Company. Associated Capital Group Inc. also agreed to
subscribe for Special Voting Loyalty Shares, which will increase
its voting interest when issued, with issuance pending.
Investors should note that as a close company with Associated
Capital Group Inc. controlling greater than 90% of shares and
greater than 90% of voting shares Associated Capital Group Inc. may
be able to ensure the passage of shareholder resolutions.
Further details of related parties and transactions, including
with the Company's AIFM Gabelli Funds, LLC, are disclosed in the
Directors' Report on page 22.
Connected party transactions
All connected party transactions are carried out at arm's
length. There were no such transactions during the year ended 30
June 2023.
17 Contingent Liabilities and Commitments
As at 30 June 2023, the Company had no contingent liabilities or
commitments (30 June 2022: nil).
18 Historical Share and NAV information
30 June 30 June 2022 30 June
2023 2021
================= ========= ------------ ==========
Total Shares(1) 6,850,792 10,238,206 10,238,206
Total NAV ($000) 70,023 95,774 101,725
NAV per share $10.22 $9.35 $9.94
================= ========= ============ ==========
1 Data excludes 3,484,374 shares held in treasury as of 30 June
2023.
* Mr Gabelli has waived his fees since appointment as
Chairman.
19 Significant events
Events arising in Ukraine, as a result of military action being
undertaken by Russia, may impact on securities directly or
indirectly related to companies domiciled in Russia and/or listed
on exchanges located in Russia ("Russian Securities"). As at 30
June 2023, the Company did not have direct exposure to Russian
securities. The Directors are monitoring developments related to
this military action, including economic sanctions and actions of
foreign governments.
The Company appointed Gabelli Funds, LLC to serve as AIFM
effective 14 February 2023.
20 Post balance sheet events
The Company paid the first interim dividend for the fiscal year
ended 30 June 2023 on 8 September 2023. On 5 October 2023 the
Company named John Birch as non-executive Co-Chairman.
Regulatory Disclosures
Information to be disclosed in accordance with Listing Rule
9.8.4
The disclosures below are made in compliance with the
requirements of Listing Rule 9.8.4.
9.8.4 (1) The Company has not capitalised any interest in the
year under review.
9.8.4 (2) The Company has not published any unaudited financial
information in a class 1 circular or prospectus or any profit
forecast or profit estimate.
9.8.4 (4) The Company does not have any long term incentive
schemes in operation.
9.8.4 (5) and (6) The Chairman Mr Gabelli has waived or agreed
to waive any current or future emoluments from the Company.
9.8.4 (7) During the year to 30 June 2023, the Company has not
issued shares.
9.8.4 (8) and 9.8.4 (9) are not applicable.
9.8.4 (10) As President of the Portfolio Manager's parent
company, GGCP, and an employee of the Portfolio Manager, Mr Gabelli
is/ was deemed to be interested in the Company's portfolio
management agreement. There were no other contracts of significance
subsisting during the year under review to which the Company is a
party and in which a Director of the Company is or was materially
interested; or between the Company and a controlling
shareholder.
9.8.4 (11) This provision is not applicable to the Company.
9.8.4 (12) and (13) There were no arrangements under which a
shareholder has waived or agreed to waive any dividends or future
dividends.
9.8.4 (14) This provision is not applicable to the Company.
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END
FR FFSFIUEDSEFS
(END) Dow Jones Newswires
October 19, 2023 11:14 ET (15:14 GMT)
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