Gabelli Merger Plus+ Gabelli Merger -GMPP - Annual Financial Report & Notice of AGM
30/10/2024 07:00
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RNS Number : 1304K Gabelli Merger Plus+ Trust PLC 30 October 2024
GABELLI MERGER PLUS(+) TRUST PLC
Annual Report and Accounts For the year ended 30 June 2024
"We invest like owners. We invest primarily in the equity securities of cash
generating, franchise companies, selling in the public market 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. We measure PMV by scrutinizing on-and off-balance sheet assets
and liabilities and free cash flow. As a reference check, we examine
valuations and merger transactions in the public domain. Our investment
objective is to achieve a long-term annualised return in excess of inflation
for our clients."
OUR INVESTMENT APPROACH
CONTINUING A VALUE INVESTING LEGACY
· Our Firm's approach is founded on the principles of Graham
& Dodd
· Furthered academically by our founder Mario Gabelli
· Establish values to determine margin of safety
· Invest within circle of competence
· Invest like owners of businesses
· Intensive proprietary research culture
· Focused and rigorous independent fundamental analysis in
valuing the underlying business using publicly available information including
data from customers, competitors, products and new technologies
· Announcement of a merger with definitive terms starts the
process
· Merger investing benefits from the Gabelli core fundamental
approach by establishing real world value before initiating positions
Gabelli supplements the principles of Graham & Dodd through the
implementation of our proprietary Private Market Value (PMV) with a
Catalyst™ approach
Portfolio
Identify Catalysts
Private Market Value (PMV)
Gabelli Research Universe
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.
STRATEGIC REPORT
PORTFOLIO SUMMARY
LARGEST PORTFOLIO SECURITY HOLDINGS
Security(1) Offsetting position(2) As at 30 June 2024
% of total Market value(4) ( Offsetting market % of total
portfolio(6) ) $000
value(5)
portfolio(3)
(gross)
$000
(net)
Hess Corp 7.2 4,164 - 7.3
U.S. Treasury Bill 1 Aug 2024 5.2 2,987 - 5.2
U.S. Treasury Bill 20 Aug 2024 5.2 2,978 - 5.2
Hashicorp Inc 4.7 2,714 - 4.7
U.S. Treasury Bill 12 Sep 2024 4.3 2,474 - 4.3
--------------- --------------- --------------- ---------------
Endeavor Group Holdings 3.5 2,038 - 3.5
Amedisys Inc 3.5 1,987 - 3.5
Albertsons Cos Inc 3.1 1,799 - 3.1
United States Steel Corp 2.9 1,678 - 2.9
Everbridge Inc 2.9 1,647 - 2.9
--------------- --------------- --------------- ---------------
Catalent Inc 2.8 1,625 - 2.8
Juniper Networks Inc 2.8 1,610 - 2.8
Pnm Resources Inc 2.8 1,584 - 2.8
Axonics Inc 2.6 1,489 - 2.6
Capri Holdings Ltd 2.4 1,406 - 2.4
--------------- --------------- --------------- ---------------
Squarespace Inc 2.2 1,237 - 2.2
Hibbett Inc 2.1 1,195 - 2.1
Stericycle Inc 2.0 1,131 - 2.0
National Western Life Group 1.9 1,068 - 1.9
Haynes International Inc 1.9 1,065 - 1.9
--------------- --------------- --------------- ---------------
Sub-total Top 20 Holdings 66.0 37,876 - 66.1
========= ========= ========= =========
Other holdings(7) 34.0 19,612 (350) 33.9
--------------- --------------- --------------- ---------------
Total holdings 100.0 57,488 (350) 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.
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( ) Includes derivatives, individual positions are each less than
$750 thousand in market value.
Portfolio Allocation %
Equities 84.0
Fixed income 16.1
Derivatives (contracts for difference) (0.1)
---------------
Total 100.0
=========
FINANCIAL HIGHLIGHTS
Performance As at As at
30 June 2024
30 June 2023
Net asset value per share (cum income)(1,2,7) $10.04 $10.22
Net asset value per share (ex income)(3,7) $10.12 $10.52
Dividends per share paid during the year(4) $0.48 $0.12
Share price(5) $9.00 $9.00
Discount to Net Asset Value(6,7) 10.36% 11.94%
========= =========
Total returns Year ended Year ended
30 June 2024
30 June 2023
Net asset value per share(7,8) 3.14% 10.54%
U.S. 3-month Treasury Bill Index 5.36% 3.80%
Share price(7,9) 5.39% 1.33%
========= =========
Income
Per Share Returns Year ended Year ended
30 June 2024
30 June 2023
Revenue return per share $0.12 $0.39
Capital return per share $0.17 $0.55
--------------- ---------------
Total return per share $0.29 $0.94
========= =========
Ongoing charges(7,10) Year ended Year ended
30 June 2024
30 June 2023
Annualised ongoing charges 2.01% 2.17%
========= =========
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 to the financial statements.
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 dividends paid during the fiscal year ended 30 June 2024 were
the first, second and third interim dividends for the year ended 30 June 2023.
The dividend paid during the fiscal year ended 30 June 2023 was the fourth
interim dividend for the year ended 30 June 2022. The Board has continued to
review and assess the Company's distribution policy.
5 See Chairman's Statement for discussion regarding the Specialist
Fund Segment of the London Stock Exchange, on which the Company's Ordinary
Shares trade.
6 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.
7 These key performance indicators are alternative performance
measures. Further information regarding the use of alternative performance
measures can be found on pages 11 and 12 in the Annual Report and Financial
Statements as at 30 June 2024.
8 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.
9 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.
10 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.
STATEMENT FROM THE CHAIR
INTRODUCTION
Gabelli Merger Plus+ Trust Plc (the "Company") was incorporated in England and
Wales on 28 April 2017. Its shares trade under the symbol "GMP" and have been
listed on the Specialist Fund Segment of the Main Market of the London Stock
Exchange and the Official List of the International Stock Exchange since 19
July 2017.
The Company's objective is to generate total returns, consisting of capital
appreciation and current income. The Company's secondary objective is the
protection of capital, uncorrelated to equity and fixed income markets. The
Company has broad and flexible investment authority and, accordingly, it may
at any time have investments in other related or unrelated areas.
This is the Company's second annual report to shareholders as a close company,
while no longer availing itself of investment trust status, as per Section
1158 of the Corporation Tax Act 2010 ("S1158"). The Company is classified as
an investment company and accordingly is a member of the Association of
Investment Companies ("AIC").
After consultation with minority shareholders, the Company determined that
continued adherence to the AIC's SORP is in the best interests of the
investment company despite no longer remaining S1158 eligible. The largest
shareholder, Associated Capital Group, Inc., is intent on continuing with the
listed vehicle and growing value in the markets in accordance with the
investment policy.
The Deferred Tax Asset ("DTA") increases the book value of the standard
portfolio NAV from $9.63 per share to $10.04 per share as of 30 June 2024. The
DTA is expected to preserve tax advantages into the medium term. The Board
believes there is currently no material NAV impact to the Company and its
shareholders from the loss of S1158 status.
The Company's Ordinary Shares trade on the Specialist Fund Segment of the
London Stock Exchange. Secondary liquidity for the Company's Ordinary Shares
is available via the trading system known as SETSqx, which is an auction based
trading process. It is quote based throughout the day, until the auctions at
U.K. times: 8am, 9am, 11am, 2pm and 4:35pm, when buyers and sellers can cross
orders with each other. As there is no market maker, absent a "match" in
prices, a trade would not occur. The closing market price is based on the last
actual trade on the day or from any previous trading session when the last
trade occurred. Thus there would have to be a match at the prescribed auction
times to "meet" on price and quantity for an execution to occur.
The 7 1/2% discount management mentioned in the offering prospectus is not a
policy and the Board instead reviews overall conditions on a regular and
frequent basis.
The Board is always receptive to feedback and welcomes any questions and
comments from shareholders.
PERFORMANCE
The Company's Net Asset Value ("NAV") at 30 June 2024 was $10.04 per share,
generating a total return of 3.14% for the year ended 30 June 2024.
The Company has provided a total return of 35.91% since issuance. This
includes the costs of the issue resulting in a starting NAV of $9.92 per share
compared with the issue price of $10.00 per share, and initial closing market
price of $10.15 per share.
REPURCHASE OF ORDINARY SHARES
On 31 January 2024 the Board announced the commencement of an On-Market
Repurchase ("OMT") via a SETSqx tender. On 16 February 2024 the Company
announced the successful completion of the OMT, in which the Company
repurchased 19,500 Ordinary Shares.
No further buybacks or tenders are expected at this time.
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.
During the year ended 30 June 2024, Associated Capital Group, Inc. subscribed
for 6,179,100 Special Voting Loyalty Shares, the maximum amount it was
permitted under the Loyalty Programme.
DIVIDEND
Through 30 June 2024 the Company paid dividends of $2.87 per Ordinary Share,
totaling $27.4 million:
Fiscal Year Per share Total
($)
($ million)
2018 0.35 3.6 million
2019 0.48 5.0 million
2020 0.48 5.0 million
2021 0.48 4.9 million
2022 0.48 4.9 million
2023 0.12 0.8 million
2024 0.48 3.2 million
--------------- ---------------
Total 2.87 27.4 million
========= =========
The Company expects to make future dividend payments based upon the available
revenue reserve, comprised of interest and dividend income earned less
operating expenses but excluding the impact of any non-cash tax charges such
as deferred taxes. This policy will be subject to continuous review by the
Board.
EXPANSION OF OPERATING INVESTMENT ACTIVITIES
Subsequent to 30 June 2024, the Company acquired its affiliated UK investment
manager, Gabelli Securities International UK Limited ("GSIL UK"), a limited
company organised and existing under the laws of England and Wales. The
transaction was financed through the issuance of new ordinary shares at a
premium to the Company's Net Asset Value. The Company's shareholders will
benefit from the increase to the Company's cash and investments of
approximately $1 million as it absorbs GSIL UK's balance sheet. The
acquisition positions the Company to increase sources of income, allowing for
both self-management and the broadening of services to affiliated and third
parties.
OUTLOOK
We are enthusiastic for the year ahead.
The U.S. economy continues to expand. Some of this is due to productivity
growth (thanks to AI), some is due to more workers in the labor force (thanks
to workers who left the work force during COVID coming back). Also helping the
economy is a huge amount of fiscal stimulus, which unfortunately means the
U.S. government is running a deficit to GDP ratio of about 7%, unheard of in
an economy near full employment. For now, the stock market does not seem to be
concerned about the huge debt levels building up in the economy, but at some
point politicians will need to address government debt levels.
Looking ahead, the trajectory of inflation and the resilience of the labor
market will be crucial in shaping the Federal Reserve's actions. Should
inflation continue to trend downward and labor market conditions soften, the
likelihood of rate cuts will increase. However, the Fed's commitment to a
data-driven strategy involves careful monitoring of various other economic
indicators to avoid premature adjustments that could undermine the progress
made so far.
Yields in the Treasury space will remain influenced by Fed policy and Treasury
bill supply. With front-end yields elevated and the Fed still wary of
inflation, we expect the investment environment for government money market
funds to remain attractive. As with non-government debt, Government and
Treasury fund yields have probably peaked and will continue to gradually
decline as managers roll maturities into securities with lower yields that are
pricing in future rate reductions. Additionally, any large supply changes in
Treasury issuance may create yield volatility on the front end.
We expect M&A activity to remain strong with pent up demand likely to
drive transaction announcements. Companies will gain further clarity into the
Federal Reserve's interest rate policy and the upcoming U.S. presidential
election's potential impact to regulatory changes, but perhaps the main issue
which buyers and sellers continue to monitor is the more stringent antitrust
environment. Within the U.S., the Federal Trade Commission (FTC) continued its
watchful eye on deals, requesting additional information from merging parties
including the energy and healthcare sectors. Deals continue to close as
merging parties are drafting strong merger agreements with additional time to
consummate deals, in the event of regulatory delays. The drivers for M&A
activity to remain robust over the coming years include the need to compete on
a global basis, acquire new technological advancements and enter new and
growing business units.
In the current high-yielding environment, it is strategically advantageous to
allocate a portion of the Company's assets to U.S. Treasury bills due to the
numerous benefits they offer. Treasuries stand out for their ability to
provide competitive returns when compared to other fixed-income securities and
given their short-term nature allows for frequent reinvestment at prevailing
interest rates, potentially maximizing the overall yield of the portfolio over
time. Moreover, Treasuries are highly liquid and can be easily bought and sold
without significantly affecting their value. This liquidity not only enhances
the flexibility of the Company's investment strategy but also allows for swift
adjustments in response to changing market conditions.
I extend a welcome to all our shareholders for the next phase of exciting
growth.
JOHN
BIRCH
MARC GABELLI
Co-Chairman
Co-Chairman
29 October 2024
THE SEARCH FOR VALUE - GABELLI MERGER PLUS+ INVESTMENT METHODOLOGY
THE GABELLI INVESTMENT PROCESS
Private Market Value with a Catalyst™
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™ 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 expenditures necessary 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:
· 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.
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.
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
Gabelli catalyst event merger arbitrage offers investors broad and flexible
investment authority
· PMV with a Catalyst selection across all sectors and
capitalizations
· Full use of Gabelli organisation resources: proprietary
research, portfolio management, risk control and trading
· Fundamental research-driven investment process
· Opportunities to maximize returns regardless of market
direction
· Minimize overall market correlation
Enhanced Risk and Return
Liquidations
Deep Value
Special Situations
Announced Deals
Stable, Cash flow generators
Margin of Stable
Low
Hight
Catalyst Timeline
Short Term
Long Term
METHODOLOGY AND MARKET OPPORTUNITY
In this context, let us outline our investment methodology and the investment
environment through 30 June 2024.
Merger arbitrage is a highly specialized investment approach designed
principally to profit from corporate events, including the successful
completion of proposed mergers, acquisitions, takeovers, tender offers,
leveraged buyouts, restructurings, demergers, and other types of corporate
reorganisations and actions. As arbitrageurs, we seek to earn the
differential, or "spread," between the market price of our investments and the
value ultimately realized through deal consummation.
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 normalized interest rate environment, providing attractive
merger spread opportunities
· The Fund's experienced investment team, which pursues
opportunities globally through the disciplined application of Gabelli's
investment methodology
GLOBAL DEAL ACTIVITY(1
) Global deal merger and acquisition activity ("M&A") totalled $1.5
trillion during the first half of 2024, a year over year increase of 18%. This
increase was largely driven by the return of the "mega deal"-those greater
than $10 billion- which totalled $363 billion, an increase of 70% compared to
2023. Deals with value under $500 million, on the other hand, accounted for
$354 billion during the first half, down 13% year over year.
The United States continued to be the most popular venue for transactions.
Deals involving United States-based targets increased 39% year over year and
accounted for 53% of global deal activity. European M&A tallied $343
billion of transactions over the same period, an increase of 39%. Asia Pacific
target M&A lagged-totalling $226 billion-a 24% decrease year over year.
Cross border M&A activity totalled $505 billion during the first half of
the year, an increase of 15% year over year. Private equity deals saw an
uptick as well, an increase of 36% compared to the same period last year.
Private equity accounted for 24% of total deal activity.
The Technology sector was the biggest contributor to merger activity during
the first half, totalling $265 billion, accounting for 17% of total announced
deal volume. The Energy & Power sector also accounted for 17% of deal
activity.
PORTFOLIO IN REVIEW
Equity markets continued their move higher to start the year, as the Fed's
ability to orchestrate a "soft landing"- taming inflation while avoiding a
recession-seems increasingly likely with every data release. Through the first
six months of 2024, the S&P 500 returned 15%; however, similarly to 2023,
this performance was driven by a handful of stocks. The top ten stocks
accounted for 70% of the returns with the remaining 490 stocks returning only
4%.
Our merger arbitrage portfolios earn returns from taking asymmetrical deal
risk and not market risk. The return profile of the fund is a function of
investing in M&A transactions, earning a "spread" upon deal closure, and
reinvesting that capital into newly announced deals. The opportunity set of
transactions we are seeing in the market is robust, as some of the M&A
headwinds from the last few years appear to have abated. A plateauing of
interest rates, increasing understanding of the regulatory hurdles necessary
to complete M&A, and equilibrium in buyer/seller expectations have all
helped to spur M&A activity so far in 2024, which totalled $1.5 trillion
globally, up 18% year over year. "Mega deals"-deals over $10 billion in
value-have also seen a resurgence, up 70% so far this year. Additionally,
private equity backed M&A accounted for $370 billion, an increase of 36%
compared to the first half of 2023.
Merger arbitrage spreads continue to remain attractive. As we have discussed
in the past, the risk-free rate is one of the components of a deal spread and
should drive spread levels for transactions on the safer side of the risk
spectrum. Even with Federal Reserve rate cuts looming, we expect a more
normalized interest rate environment than we have seen over the past decade;
thus creating a more compelling spread environment going forward. Spread
levels for deals that skew on the riskier side have naturally remained wider
and will continue to be driven by regulatory and other specific risks
involved. While regulators have been more aggressive in recent years in
challenging transactions such as Capri and Albertson's, the vast majority of
transactions are able to close. We feel this regulatory environment has
created unique investment opportunities with an attractive risk/reward.
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 prospect to generate absolute returns.
1 Thomson Reuters M&A Review - First Half 2024
NOTABLE CONTRIBUTORS TO PERFORMANCE INCLUDE:
Commercial and Industrial Services
Applus Services (APPS-SM), a Spanish testing and inspection company, was the
subject of a competitive bidding process between private equity firms, which
began last summer. Apollo initially bid 9.50 for the company, while I Squared
and TDR offered to pay 9.75. After multiple rounds of bidding, the Spanish
markets regulator, CNMV, confirmed in April that the I Squared and TDR
consortium submitted the winning bid of 12.78 cash per share, or approximately
1.7 billion.
Music and Entertainment
Hipgnosis Songs Fund (SONG-LN), a UK based portfolio of music rights, also
benefitted from a bidding war. Hipgnosis will be acquired by Blackstone for
$1.31 cash per share or $1.6 billion. Hipgnosis originally agreed to be
acquired by Concord Music for $1.14 cash per share or $1.4b. Blackstone made a
competing offer of $1.24 cash per share, which Concord Music countered by
raising their bid to $1.25. Blackstone ultimately delivered the knockout bid
of $1.30, which it eventually upped to $1.31 cash per share.
Biotech Pharma
Immunogen (IMGN-NASDAQ), a biotechnology company developing targeted therapies
to treat cancer, was acquired by AbbVie in February for $31.26 cash per share,
or about $9 billion. Shares of Immunogen traded at a 6% discount to deal terms
in the days before the deal closed, reflecting the uncertainty over whether
the US FTC would launch a phase 2 antitrust investigation, but the FTC
approved the deal and it subsequently closed on February 13.
Karuna Therapeutics (KRTX-NASDAQ), a biopharmaceutical company whose next
generation drug KarXT has been submitted to the FDA for approval to
treat schizophrenia and will likely be used to treat other neurological
disorders, received US antitrust approval to be acquired by Bristol-Myers
Squibb. Under terms of the agreement Karuna shareholders received $330 cash
per share, or about $12 billion. Shares of Karuna traded at a large discount
to deal terms (as much as 5% gross) in the weeks leading up to approval as
investors debated the likelihood of the FTC clearing the deal, or pushing it
into a phase 2 review, which would have extended the timeline of the
transaction.
Energy and Exploration
Pioneer Natural Resources (PXD-NYSE), an independent oil and gas exploration
and production company in Texas, was acquired by Exxon Mobil following an
extended antitrust review that yielded minor concessions by the merging
companies as a condition to FTC approval. Under terms of the agreement Pioneer
shareholders received 2.3234 shares of Exxon Mobil common stock, which valued
the transaction at $68 billion.
Cloud Computing and Data
Splunk (SPLK-NASDAQ), which develops software that monitors, detects and
protects enterprise computer systems, was acquired by Cisco Systems for $157
cash per share, or about $28 billion. The deal closed faster than initially
expected after receiving US antitrust approval without an extended review, and
the deal closed shortly after receiving clearance from the European
Commission.
MERGER INVESTING
Merger arbitrage is a highly specialised component of a portfolio. The
investment approach is designed principally to profit from corporate events,
including the successful completion of proposed mergers, acquisitions,
takeovers, tender offers, leveraged buyouts, restructurings, demergers, and
other types of corporate reorganisations and other actions. As arbitrageurs,
we seek to earn the differential, or "spread," between the market price of our
investments and the value ultimately realised through deal consummation.
INVEST LIKE OWNERS Corporate Mergers Provide Valuable Insights
Fundamental and Active Complement to Long-Term Value Investing
CAPITAL ALLOCATION
Ideas sourced from proprietary database of Gabelli PMV with Catalyst original
research coupled with rigorous analysis of valuations provided as corporations
allocate capital through announced corporate events and M&A transactions
worldwide
RIGOROUS ANALYSIS
Focus on strategic, cash transactions with financing secured
Understand all downside risks including its fundamental basis
Focus on legal and governance, MAC clauses, financing conditions,
shareholders' votes
Analyse all deal issues such as antitrust / regulatory items
DYNAMIC MANAGEMENT
Real time monitoring of spreads/positions
Extensive proprietary database
Actively traded as the event progresses and according to closing
Positions are increased gradually as transaction hurdles are passed
Gabelli "PMV with a Catalyst" (TM) One Process Globally
· Targeted strategy to achieve superior total returns, non
correlated to the broad market
· Preservation and growth of investor capital
· Provides diversification to traditional equity and fixed
income portfolios
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 in the Portfolio
Summary.
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 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.
BUSINESS MODEL
Please see the Process in Action on page 6.
BOARD DIVERSITY
Please see the "Board Diversity" section in the Corporate Governance Report.
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 2024, the Company's KPIs, as monitored closely by
the Board at each meeting, are listed below:
Net Asset Value Total Return
Year ended 30 June 2024(1)
3.14%
(30 June 2023: 10.54%)
Share Price Total Return
Year ended 30 June 2024(2)
5.39%
(30 June 2023: 1.33%)
Discount to Net Asset Value
Year ended 30 June 2024(3)
10.36%
(30 June 2023: 11.94%)
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 various indices The Company does not use a benchmark. However, 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 2024, the Company returned $2.87 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.
Share price discount to net asset value (NAV) per share The NAV per share is published on a daily basis on the London Stock Exchange
and The International 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 10.36%
as of 30 June 2024 and at a discount of 11.94% as of 30 June 2023.
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.
Performance is assessed on a total return basis for the NAV and share price.
CUMULATIVE PERFORMANCE CHART (USD) FROM 19 JULY 2017
Cumulative performance from 1 October 2022 includes the deferred tax asset.
1 The Company presents returns compared to the Credit Suisse Merger
Arbitrage Liquid Index ("Credit Suisse Index") and NYLI Merger Arbitrage ETF
("MNA", and formerly IQ Merger Arbitrage ETF ). The Credit Suisse Index
attempts to employ the merger arbitrage strategy by using a quantitative
methodology to track a dynamic basket of securities held as long or short
positions and cash weighted in accordance with the index rules to reflect
publicly announced merger and acquisition transactions that meet certain
qualifying conditions, including that deals have arbitrage potential. MNA's
investment approach is designed to track the performance of the NYLI Merger
Arbitrage Index, which seeks to employ a systematic investment process
designed to identify opportunities in companies whose equity securities trade
in developed markets, including the U.S., and which are involved in announced
mergers, acquisitions and other buyout-related transactions. Given the
investment strategy of the Company, these are deemed to be appropriate
comparators.
.
DIVIDEND HISTORY
$ per share Ex dividend date Record date Payment date
Third interim 2023 0.12 29 February 2024 1 March 2024 15 March 2024
Second interim 2023 0.24 15 February 2024 16 February 2024 1 March 2024
First interim 2023 0.12 24 August 2023 25 August 2023 8 September 2023
---------------
Total 0.48
========= ========= ========= =========
The Board continues to review and assess the Company's distribution policy.
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 pre-trade compliance
Excessive Portfolio Concentration 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 the risk factors and
their effects on the portfolio, and a thorough analysis of the investment
strategy is undertaken.
Deal Failure Risk The increased scrutiny by U.S. and UK anti-trust authorities on M&A cross
border transactions represents an additional source of deal failure risk which
the Investment Manager can mitigate via appropriate portfolio diversification
and careful stock picking.
Counterparty Risk 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 All third party service providers report to the Board on a regular basis and
The operational functions of the Company are outsourced to third parties. their reports and representations are reviewed by the Board, the AIF Manager
Systems disruptions, control failures, fraud or inadequate disaster recovery and the Portfolio Manager.
provisions at key service providers could adversely impact the Company.
A state-backed cyberattack could also result in widespread disruption across Whilst the Board takes all reasonable endeavours to safeguard the Company from
the financial industry. a cyberattack 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 could increase for key service The Board relies on assurances from the Company's key third-party providers
providers. Such events are external to the management and beyond the control that they have appropriate and adequate cybersecurity policies in place to
of the Company. mitigate the risk of a cyberattack. The 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.
Unforeseen global events such as geopolitical crisis, war, act of terrorism or Global economic, geopolitical, and financial conditions are constantly
outbreak of pandemics could lead to dramatically increased market instability monitored. Diversification of Company assets is incorporated into the
and Company share price volatility a decline in cross-border M&A activity. investment strategy and, if disruptive events occur, the Manager is prepared
to adopt a temporary defensive position and invest some 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 may cause a widening of bid-ask spreads and a To address a discount, the Board may consider using share buybacks, through
wider price discount to NAV. which shares would be repurchased when trading at a discount 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 (comprising interest rate risk, currency risk Further details of these risks are disclosed in Note 12 to the financial
and other price related risks); (ii) liquidity risk; (iii) credit risk and statements together with a summary of the policies for managing these risks.
(iv) Derivative risk.
Tax Risks
The Company is no longer eligible to avail itself of Investment Trust Status The Company has engaged reputable, external tax consultants with whom the
as per Section 1158 of the Corporation Tax Act 2010 and is consequentially management team consults with on a regular basis and from whom the Board now
exposed to UK corporation tax payments. receives periodic updates to ensure the Company remains compliant with any
tax-related payments and disclosures.
Corporate Governance and Regulatory Compliance Risks
Damage to the Company's reputation through inadequate corporate governance The Board complies with good governance practices in accordance with the
arrangements. Association of Investments 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 regulatory requirements. The Company receives and responds to guidance 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 Russia's invasion of Ukraine and the The Board is keeping these evolving risks and market pressures under constant
conflict in the Middle East. The impact of sanctions and the rise in commodity review and will continue to monitor the volatility around investee company
prices are likely to be primary influences on markets. Rising commodity prices valuations and implications for the Company's likely future dividend income
and further disruption to supply chains shall exacerbate inflationary pressure stream.
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 and the Company's
accounting policy.
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.
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 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 13 to 14.
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 2024 and the s172 statement have been approved by the Board
and signed on its behalf by:
JOHN
BIRCH
MARC GABELLI
Co-Chairman
Co-Chairman
29 October 2024
GOVERNANCE
BOARD OF DIRECTORS
The Directors of the Company who were in office during the year and up to the
date of the signing of the financial statements were as follows:
MARCO BIANCONI
Independent non-executive Director
Chair of the Audit & Risk Committee, member of the Conflicts and
Remuneration Committees
Marco is Corporate Development, M&A and Investor Relations Director at
Cementir Holding N.V. an international Building Materials manufacturer quoted
on the Italian Stock exchange. He previously served for five years as CFO of
its parent company Caltagirone SpA. Prior to this he worked for over eight
years at Fidelity Investments in London as Portfolio Manager and Pan-European
Equity Analyst. Marco holds a number of non-executive roles within the
Cementir group and is non-executive director at Henderson European Focus Trust
Plc. Marco holds an MBA at NYU Stern School of Business, class 1996 and he is
a Chartered Accountant since 1990.
Appointed on 5 June 2017.
JOHN BIRCH
Non-executive Director and Co-Chairman
Chair of the Management Engagement and Conflicts Committees, member of the
Remuneration and Nomination Committees
John is the Managing Partner of The Cardinal Partners Global S.a.r.l.
Previously he was Chief Operating Officer of Sentinel Asset Management, Inc.
and Sentinel Administrative Services, Inc., both members of National Life
Group. He has also held senior roles in State Street, American Skandia
Investment Services, Inc., Gabelli Funds, Inc. and Gabelli International. He
has an MA in Tax and over 30 years experience in asset management.
Appointed on 5 June 2017.
MARC GABELLI
Non-executive Director and Co-Chairman
Chair of the Nomination Committee
Marc is a director and President of the Portfolio Manager's parent company,
GGCP, a director of Associated Capital Group "ACG" and is a Senior Portfolio
Manager at Gabelli. As a fund manager, his focus is global value equity
investments. He has managed several Morningstar five star mutual funds, and a
Lipper #1 ranked global equity mutual fund. Marc is active in a variety of
charitable educational efforts in the United States and United Kingdom. He has
lived and worked in the U.K. at various times, beginning in 1990. He is a
graduate of the Massachusetts Institute of Technology (M.I.T.) Sloan School of
Management.
Appointed on 28 April 2017.
JOHN NEWLANDS
Independent non-executive Director
Member of the Audit & Risk Committee
John has served more than twenty years in the City of London, most recently
with Brewin Dolphin Limited as Head of Investment Companies Research from 2007
to 2017. He was a member of the Association of Investment Companies
Statistics' Committee from 2000 to 2017. He has an MBA from Edinburgh
University Business School and is a Chartered Electrical Engineer. He has
written four books about financial history, the most recent charting the
history of Dunedin Income Growth Investment Trust. He is a non executive
director of CQS New City High Yield Fund and Chair of Develop North PLC and
Deputy Chair of the Investment Committee of Durham Cathedral.
Appointed on 8 February 2018.
YUJI SUGIMOTO
Independent non-executive Director
Member of the Nomination, Conflicts and Management Engagement Committees
Yuji has over 37 years experience in financial markets. He is a former
Executive Director of Sumitomo Mitsui Banking Corporation in the US. Prior to
this Yuji co-managed Japanese/Pan-Asian institutional research sales as a
Managing Director at Lehman Brothers / Barclays. From 2003 to 2007 he managed
a New York based Japanese equity hedge fund Sugimoto Capital Management LLC,
which he founded. He started his career at Salomon Brothers working for 24
years in New York, London, Hong Kong and Tokyo in a number of institutional
sales management positions as a Managing Director. He has a MBA from the
University of Southern California and a B.A. in Economics from Columbia
University.
Appointed on 5 June 2017.
JAMES WEDDERBURN
Independent non-executive Director
Chair of the Remuneration Committee and member of the Audit & Risk
Committee
James has over 40 years experience in the investment industry. From 1999 to
2017 he was Director of the family office of Sir Peter Lampl, founder of the
Sutton Trust social mobility charity, where he was responsible for all
financial and investment matters and closely involved with the charity's
finances. He worked previously at financial group Hamilton Lunn monitoring the
global investments of ultra high net worth clients and, prior to that, was a
fund manager at Invesco MIM and Samuel Montagu responsible for UK pension fund
and charity clients. James spent his early career as a UK equity research
analyst at Cazenove and Laing & Cruickshank after graduating from Oxford
University.
Appointed on 15 November 2017.
DIRECTORS' REPORT
The Directors present the annual report and accounts of the Company for the
year ended 30 June 2024. The financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the UK and 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.
In the opinion of the Directors, the Company has conducted its affairs during
the year under review, and subsequently, so as to qualify as an investment
trust for the purposes of section 1158 of the Corporation Tax Act 2010 (as
amended). The Company has applied to, and obtained approval from, HMRC as an
investment trust company subject to continuing to meet the eligibility
requirements.
GOING CONCERN
The Directors, having taken account of the continuing uncertainty around
investee company valuations and implications on the Company's future income
streams from various geopolitical conflicts and, have determined that the
Company's strategy, longer-term asset allocation, short-term liquidity and
robust governance structure provide a sufficient basis for the Board to adopt
the going concern basis for the Company as at 30 June 2024.
In forming this position, the Directors considered the Company's investment
objectives, risk management policies, capital management policies and
procedures, the nature of the portfolio and expenditure projections in detail.
The Company is able to meet all of its liabilities from its assets and the
ongoing charges are approximately 2% of assets. This Going Concern statement
should be read in conjunction with the Company's Viability Statement which can
be found on page 15.
DIRECTORS
The Directors of the Company in office at the date of this report and their
biographies are set out on pages 16 and 17. 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 latest 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 the Directors each bring 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 Gabelli Group Capital Partners, the
parent company of Gabelli Funds, LLC (the "Portfolio Manager"), 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 has a service contract with the Company. The terms of
their appointment are provided to them in a letter when they join the Board.
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 Report.
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. Details of the voting rights in the Company's shares as
at the date of this report are also given in Note 6 in the Notes to the Notice
of Annual General Meeting on page 79.
The ordinary shares carry the right to receive dividends and have one voting
right per share. 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 2024.
At the year end and at the date of this report there were accordingly
3,502,874 ordinary shares held in treasury.
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 2024 Annual General Meeting. The
Directors are proposing that these authorities be renewed at the forthcoming
Annual General Meeting.
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 maintained by the registrar 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.
A shareholder may only exercise this right during the prescribed subscription
period each calendar year, being between 1 and 14 December, by completing the
appropriate subscription documentation and paying up the nominal value of the
special voting loyalty shares. Subject to the receipt of valid subscriptions
during the period and the satisfaction of certain requirements by the Company
under the Companies Act and the Articles special voting loyalty shares would
be issued on 31 December, or the preceding business day, should 31 December
not be a business day.
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.
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.
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.
During the year ended 30 June 2024, Associated Capital Group, Inc. subscribed
for 6,179,100 special voting loyalty shares.
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 has appointed Gabelli Funds LLC as
its Alternative Investment Fund Manager ("AIFM") pursuant to the AIFMD.
Carne Global Fund Managers (Ireland) Limited ("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.
Regulatory disclosures including the Key Investor Information Document are
provided on the website. Disclosures on Remuneration as required under AIFMD
can also be found on page 81.
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 2024 no performance fee was paid (2023: 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 $45,124 were paid
during the year under review (2023: $51,569).
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 $13,000 were paid to the Registrar during
the year under review (2023: $17,973). Fees in respect of corporate actions
will be agreed at the time of the corporate action.
OTHER SERVICE PROVIDERS
Bridgehouse Company Secretaries Limited ("Bridgehouse") was formally appointed
in May 2024 to take over as the Company Secretary from Kin Company Secretarial
Limited ("Kin"). 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.
The Bridgehouse agreement has no minimum term and is terminable by Bridgehouse
or the Company on not less than one month's notice. Fees of $61,000 were paid
for Company Secretarial services during the year under review (2023:
$100,252).
RELATED PARTY TRANSACTIONS
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 $568,334 in portfolio management fees
during the year ended 30 June 2024 (2023: $653,934).
Further details of related party transactions are provided in the note 16 to
the financial statements.
SUBSTANTIAL SHAREHOLDERS
As at 30 June 2024, the Company had been advised by the following shareholders
of their interests of 3% or more in the Company's ordinary issued share
capital:
Shareholder % of
Share Capital
Associated Capital Group Inc(1) 92.59%
=========
1( ) Further information regarding Associated Capital Group, Inc
and its related party status can be found on note 16 to the financial
statements.
As at the date of this report the Company had not been notified of any changes
and all other shareholders have less than a 3% interest in the Company's
ordinary issued share capital.
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 12 to the financial statements.
RESULTS
The Company generated a revenue profit for the year ended 30 June 2024 of
$823,000 (2023: $2,996,000).
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 71.
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 2024, the Company returned $2.87 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 Company declared and paid three quarterly
interim dividends totalling $0.48 during the financial year ended 30 June
2024.
ARTICLES OF ASSOCIATION
The Company's Articles can only be amended by special resolution at a general
meeting of the shareholders. No amendments are proposed at the 2024 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.
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.
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 only newly appointed executives
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, COMMUNITY, 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-ended investment company, the Company falls within the scope of LR
9.8.6 R (9) and LR 14.3.33 R (1) which requires 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 2024 the Company has not met the above targets, further details
of which are set out in the Corporate Governance Report on pages 23-27.
POLITICAL DONATIONS
No political contributions or donations were made during the financial period
ended 30 June 2024.
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 Co-Chairmen 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 15-18 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
$26,021 which represents 20% of the current issued share capital. The
authority will expire at the conclusion of the 2025 Annual General Meeting
unless renewed prior to that date.
RESOLUTION 17 AUTHORITY TO BUY BACK SHARES
Resolution 17 seeks to renew the authority previously granted to Directors to
enable the Company to purchase up to 683,129 ordinary shares being 10% of the
of the total number of voting rights of the Company at the latest practical
date.
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 2025 Annual General Meeting unless renewed prior to that date.
RESOLUTION 18 GENERAL MEETINGS ON 14 CLEAR DAYS' NOTICE
Resolution 18 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 Committee to determine their remuneration will be
proposed at the forthcoming AGM.
The Directors' Report was approved by the Board on 29 October 2024.
JOHN
BIRCH
MARC GABELLI
Co-Chairman
Co-Chairman
29 October 2024
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 year
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.
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 following analysis
explains how the company has complied with the principles and provisions of
the AIC Code during the financial year.
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 Co-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 Co-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 trust. The key responsibilities of the SID
under the UK Code are completed by the Non-executive Directors. The
performance of the Co‑Chairmen is appraised annually by the Non-executive
Directors.
Monitor risk management and internal control systems 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.
Identification of remuneration consultant in the Annual Report 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 16 and 17,
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.
CO-CHAIRMEN
The Board is satisfied that other than their relationship with the Portfolio
Manager, the Co-Chairmen, do not have any appointments or interests which may
create a conflict of interest with the Company's activities or interests.
The Nomination Committee reviewed the performance of the Co-Chairmen during
the year and is comfortable that they continue to have sufficient time to
commit to their duties, and that they perform effectively in the role. The
Board therefore recommends shareholders vote to re-elect the Co-Chairmen at
the 2024 Annual General Meeting.
BOARD DIVERSITY
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 and experience to the Board and gives that
consideration when recruiting new Directors.
As at 30 June 2024 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 improving the ratio over
time.
In accordance with LR 14.3.33 as at 30 June 2024 (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 14.3.33a 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
Board Level appointments.
The Board 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 any
Executive Directors on the Board and therefore have not reported against that
target which is non-applicable.
TABLE A: GENDER DIVERSITY DISCLOSURES
Number of senior
positions on the
board and its
Committeess
Number of
Percentage
(CEO, CFO, SID
Board Members
of the Board
and Chair(s))
Men 6 100% 4
Women 0 0% 0
========= ========= =========
TABLE B : ETHNIC DIVERSITY DISCLOSURES
Number of senior
positions on
the board and
its Committees
Number of
Percentage
(CEO, CFO, SID
Board Members
of the Board
and Chair(s))
White British/White American or Other White Minority Groups 5 83.33% 4
Mixed/Multiple Ethnic Groups 0 0.00% 0
Asian/Asian/BritishAsian/American 1 16.67% 0
========= ========= =========
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.
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 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 in the Directors' Report;
· As a listed investment trust, 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 360° feedback. During the period under review,
the Board traveled to New York to visit the GAMCO head office and meet with
members of staff at all levels by way of employee engagement. As part of the
off-site visit, the Board also met with the company's major shareholders.
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 trust, 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
The Company has newly appointed executives but 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
Co-Chairmen. 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 28 to
29.
NOMINATION COMMITTEE
The Nomination Committee is chaired by Marc Gabelli 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
James Wedderburn, John Birch and Marco Bianconi. The Remuneration Committee is
responsible for setting the Directors' remuneration in conjunction with the
Co-Chairmen 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 in the Directors' Report.
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 2024 and the number of meetings
attended by each Director.
The Audit & Risk Committee will meet at least twice a year and all other
Committees at least once a year and additionally as required.
Director Audit Rem M.E
& Risk
Co.
Co.
Nom
Conficts
Board
Co.
Co.
Co.
Marc Gabelli 4/4 n/a n/a n/a 1/1 n/a
Marco Bianconi 4/4 4/4 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 4/4 n/a n/a n/a n/a
James Wedderburn 4/4 4/4 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 Co‑Chairmen. The reviews
were led by the Co-Chairmen, in the case of the Board, and the Chairman of
each committee otherwise.
Each Chairman 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 few issues.
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 trusts, 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 only newly appointed executives 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 RELATIONS AND ANNUAL GENERAL MEETING
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.
All shareholders are ordinarily encouraged to attend and vote at the Company's
Annual General Meeting. However, it is explained in the Notice of Annual
General Meeting that whilst the Directors anticipate the meeting in 2024 being
open to shareholders, the Directors reserve the right to change arrangements
at short notice. Shareholders are strongly encouraged to vote by proxy and to
appoint the Co-Chairmen as their proxy. 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 77 and 78 and details
the business of the meeting. Any item not of an entirely routine nature is
explained in the Directors' Report. 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 in the Directors' Report.
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
29 October 2024
REPORT OF THE AUDIT & RISK COMMITTEE
Chair
MARCO BIANCONI
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 2024.
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. During
the period under review the Committee met four times and three times since the
financial year end and the publication of this report.
COMPOSITION OF THE COMMITTEE
The Committee consisted of three Directors during the year under review whose
biographies are on pages 16 and 17 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 provide
oversight of the financial reporting process to ensure that the information
provided to the shareholders is fair, balanced and understandable and allows
accurate assessment of the Company's position. The Committee also reviews the
robustness of the systems of internal controls, monitors the quality,
effectiveness and objectivity of the external audit process and monitors the
key risks facing the Company.
The Committee's terms of reference are available on the Company's website at
https://www.gabelli.co.uk/docs/pdfs/gmp_actr.pdf.
During the year the principal activities of the Committee included:
· A comprehensive review of the full year, half year reports
and annual report and accounts, considered the disclosures made in relation to
internal controls, risk management, viability, going concern, related parties,
and whether the reports are 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;
· 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 and assessment of the main risks faced by the
Company, also considering that it is deemed 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,
· Monitored developments in the Group's risk management
processes;
· 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, including, but not limited to policies, practices and safeguards,
cybersecurity and fraud, identification, assessment, monitoring, mitigation
and the overall management of those risk,
· 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 Committee reviewed those items in the Group's financial statements that
have the potential to significantly impact reporting and identified the
management override of controls and the risk of fraud in income definition.
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 in the notes to the financial statements.
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 2024. 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 2024 £0 was paid to the auditors for non-audit
services (2023: £0). 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 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
29 October 2024
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 CO-CHAIRMEN
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 5
December 2024. Further information on this resolution is contained within 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.
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 Co-Chairmen 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 $180,000 in accordance with the Company's Articles
of Association, following approval by shareholders at the AGM in 2020. Any
further changes to this limit will require Shareholder approval by ordinary
resolution.
There are no performance related elements to the Directors' fees and the
Company has no Executive Directors.
To ensure fees are set at an appropriate level, a comparison of the Directors'
remuneration with investment trusts of a similar size and/or mandate, is
undertaken as well as taking into account any data published by the
Association of Investment Companies. This comparison, together with
consideration of any alteration in non-executive Directors' responsibilities,
is used to review whether any change in remuneration is necessary. The review
of fees is performed on an annual basis.
Remuneration Fees per annum US$
Director of the Board 30,000
Additional fee for the Co-Chairmen of the Board 1,000(1)
Additional fee for the Chairman of the Audit & Risk Committee 5,000
Additional fee for the members of the Audit & Risk Committee 1,000
=========
1 On 6 October 2023 John Birch was appointed as Co-Chairman of the
Board.
Following a review in September 2023, the Committee agreed that the Directors'
fee would not increase for the year ending 30 June 2024.
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 Co-Chairmen 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 2024 will also remain
unchanged for the year ending 30 June 2025.
CONSIDERATION OF SHAREHOLDERS' VIEWS
Shareholders' approval for the remuneration report will be sought at the 2024
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 2023, the Director's Remuneration
Report received 100% votes in favour of the resolution.
Details of voting on the Remuneration Report at the 2024 AGM will be released
via RNS announcement following the meeting and will be provided in the annual
report for the year ending 30 June 2025.
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 2024 is set out below with prior year comparison. The table
below sets out the total remuneration costs paid by the Company. Mr Gabelli
waived the entitlement to his fees as Co-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 2024.
The fees paid to Directors on an annual basis during the year to 30 June 2024
are as follows:
Year to 30 June 2024 Year to 30 June 2023 Year to 30 June 2022 Year to 30 June 2021
Change Change Change Change
over
over
over
over
prior
prior
prior
prior
Fees
Total
year %
Fees
Total
year %
Fees
Total
year %
Fees
Shares(2)
Total
year %
Marc Gabelli - - - - - - - - - - - - -
Marco Bianconi 35,000 35,000 - 35,000 35,000 - 35,000 35,000 -3.2% 25,000 11,167 36,167 24.0%
John Birch(1) 31,000 31,000 3.3% 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 - 31,000 31,000 -3.6% 21,000 11,167 32,167 21.1%
Yuji Sugimoto 30,000 30,000 - 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 - 31,000 31,000 -3.6% 21,000 11,167 32,167 27.8%
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total 158,000 158,000 - 157,000 157,000 - 157,000 157,000 107,000 55,835 162,835
========= ========= ========= ========= ========= ========= ========= ========= ========= ========= ========= ========= =========
1 On 6 October 2023 John Birch was appointed as Co-Chairman of the
Board.
2 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
Directors As at As at
30 June 2024
30 June 2023
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 and the IQ
Merger Arbitrage ETF (MNA), since launch, can be found on page 12.
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the Directors' remuneration (2023: $157,000 and 2022:
$157,000) in comparison with Portfolio management fees paid, dividends paid to
shareholders and the Company's annual revenues.
2024
Directors' remuneration as a % of $000 %
Directors' remuneration 158
Dividends to Shareholders 3,227 4.9
Portfolio management fees 568 27.8
Revenues 2,374 6.6
========= =========
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
2024 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 29 October
2024 and is signed on its behalf by:
JOHN
BIRCH
MARC GABELLI
Co-Chairman
Co-Chairman
29 October 2024
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL
STATEMENTS
We share this Report to Shareholders, encompassing the year ended 30 June
2024, 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:
· The Company paid three interim dividends totalling $0.48 per
share relating to the fiscal year ended 30 June 2023.
· On 5 October 2023 the Company named John Birch as
non-executive Co-Chairman and named Patrick Huvane and Manjit Kalha as
executives. On 30 November 2023 the Company named Gustavo Pifano as an
executive.
· In February 2024, the Company announced the commencement of
an On-Market Repurchase ("OMT") via an ongoing SETSqx tender for up to 5% of
the shares held by minority shareholders or approximately 25,000 shares. A
total of 19,500 shares were repurchased as part of this program.
· 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.
· The Company previously authorised the issuance of Special
Voting Loyalty Shares in accordance with the terms specified in the Loyalty
Programme. During the year ended 30 June 2024, Associated Capital Group, Inc.
subscribed for Special Voting Loyalty Shares, which increased its voting
interest.
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 9 to 10 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 92.6% 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 that Associated Capital Group Inc.
may be able to ensure the approval 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 geopolitical conflicts, 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 in the Strategic Report in the Company's Annual Report and Accounts
for the year ended 30 June 2024.
The Directors together with the Manager will continue to monitor business
continuity and resilience processes with the objective of mitigating any
potential for ongoing of the various ongoing geopolitical conflicts.
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.
GOING CONCERN
The Board have closely monitored the impact of the various geopolitical events
as the 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 2024.
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 29 October 2024 and
the above responsibility statement was signed on its behalf by the
Co-Chairmen.
By order of the Board
JOHN
BIRCH
MARC GABELLI
Co-Chairman
Co-Chairman
29 October 2024
FINANCIAL STATEMENTS
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 2024 and of its profit 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 2024; 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 & Risk
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 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.
Materiality
· Overall materiality: $686,130 (2023: $664,931) based on 1% of
net assets.
· Performance materiality: $514,598 (2023: $498,698).
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, which was a key audit matter last year, is no longer included
because of the fact that the prior year was the first time the Company could
not avail itself of the s1158 Investment Trust tax exemption leading to
additional audit focus on the tax treatment of previously unrecognised
deferred tax assets. As no issues were identified in the prior year taxation
is no longer treated as a key audit matter in the current 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 investment portfolio at year-end consisted of listed equity · We assessed the accounting policy for the valuation of
investments and derivatives (contracts for difference). We focused on the investments for compliance with accounting standards and the AIC SORP and
valuation and existence of investments because investments represent the performed testing to check that investments are accounted for in accordance
principal element of the net asset value as disclosed in the Statement of with this stated accounting policy.
Financial Position in the financial statements. We also focused on the
accounting policy for the valuation of investments as set out in the · We tested the valuation of the listed equity investments by
accounting standards as incorrect application could indicate a misstatement in agreeing the prices used in the valuation to independent third party sources.
the valuation of investments.
· 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 advised by our valuation
specialists.
· We tested the existence of derivatives by using third party
information obtained directly from the broker.
· 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). We focused on · We assessed the accounting policies implemented were in
the accuracy, occurrence and completeness of dividend income, and occurence of accordance with accounting standards and the AIC SORP, and that income has
net capital gains as inaccurate recognition of income could have a material been accounted for in accordance with the stated accounting policy.
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 · We tested the accuracy of dividend receipts by agreeing the
Statement of Comprehensive Income as set out in the requirements of The dividend rates from investments to independent market data. To test for
Association of Investment Companies Statement of Recommended Practice (the occurrence, we confirmed that a sample of dividends recorded had occurred in
"AIC SORP") as incorrect application could result in a misstatement in income the market. To test for completeness, we tested that the appropriate dividends
recognition. 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 and losses on investments held at fair value
comprise realised and unrealised gains and 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 and 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 and losses.
· No material issues were identified.
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. 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 $686,130 (2023: $664,931).
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% (2023: 75%) of
overall materiality, amounting to $514,598 (2023: $498,698) 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 & Risk Committee that we would report to them
misstatements identified during our audit above $34,307 (2023: $33,247) 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 arising from geopolitical inutability in certain regions, 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;
· 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 Directors' 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 on
the following page.
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 Directors' Report for the year
ended 30 June 2024 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 Directors' 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 & Risk 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 in
respect of the Financial Statements, 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 & Risk 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 7 years, covering the years ended 30 June
2018 to 30 June 2024.
KEVIN ROLLO (SENIOR STATUTORY AUDITOR)
FOR AND ON BEHALF OF PRICEWATERHOUSECOOPERS LLP
Chartered Accountants and Statutory Auditors
London
29 October 2024
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2024
Year ended 30 June 2024 Year ended 30 June 2023
Income Notes Revenue Capital Total Revenue Capital Total
$000
$000
$000
$000
$000
$000
Investment income 5 2,374 - 2,374 1,012 - 1,012
--------------- --------------- --------------- --------------- --------------- ---------------
Total investment income 2,374 - 2,374 1,012 - 1,012
========= ========= ========= ========= ========= =========
Gains on investments
Net realised and unrealised gains on investments 3, 13 - 2,255 2,255 - 4,707 4,707
Net realised and unrealised currency gains on investments - 24 24 - 114 114
--------------- --------------- --------------- --------------- --------------- ---------------
Net gains on investments - 2,279 2,279 - 4,821 4,821
========= ========= ========= ========= ========= =========
Total income and gains on investments 2,374 2,279 4,653 1,012 4,821 5,833
========= ========= ========= ========= ========= =========
Expenses
Portfolio management fee 6 (568) - (568) (654) - (654)
Performance fee 6, 14 - - - - - -
Other expenses 6 (647) (600) (1,247) (807) (501) (1,308)
--------------- --------------- --------------- --------------- --------------- ---------------
Total expenses (1,215) (600) (1,815) (1,461) (501) (1,962)
========= ========= ========= ========= ========= =========
Net return on ordinary activities before finance costs and taxation 1,159 1,679 2,838 (449) 4,320 3,871
Interest expense and similar charges (20) - (20) (26) - (26)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss) before taxation 1,139 1,679 2,818 (475) 4,320 3,845
Taxation on ordinary activities 8 (316) (510) (826) 3,471 - 3,471
--------------- --------------- --------------- --------------- --------------- ---------------
Profit for the year 823 1,169 1,992 2,996 4,320 7,316
========= ========= ========= ========= ========= =========
Profit per share (basic and diluted) 9 $0.12 $0.17 $0.29 $0.39 $0.55 $0.94
========= ========= ========= ========= ========= =========
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
2024.
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 46 to 70 form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2024
Year ended 30 June 2024
Year ended 30 June 2024 Note Called up Special
Share
Distributable
Capital
Revenue
Capital
Reserve(1) (
Reserve
Reserve*
Total
$000 ) $000
$000
$000
$000
Balance as at 1 July 2023 103 45,995 25,285 (1,360) 70,023
Ordinary shares bought back into treasury - (175) - - (175)
Profit for the period after tax on ordinary activities - - 1,169 823 1,992
Dividends paid 7 - (3,227) - - (3,227)
--------------- --------------- --------------- --------------- ---------------
Balance as at 30 June 2024 103 42,593 26,454 (537) 68,613
========= ========= ========= ========= =========
Year ended 30 June 2023
Year ended 30 June 2023 Note Called up Special
Share
Distributable
Capital
Revenue
Capital
Reserve*
Reserve
Reserve*
Total
$000
$000
$000
$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 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
========= ========= ========= ========= =========
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 2024,
the net amount of reserves that are distributable is $42,056,000 (2023:
$44,635,000).
The notes on pages 46 to 70 form part of these financial statements.
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2024
As at 30 June 2024 As at 30 June 2023
Note $000 $000 $000 $000
Non-current assets
Investments held at fair value through profit or loss 3 57,488 56,514
--------------- ---------------
Current assets
Cash and cash equivalents 10 8,430 9,555
Receivable for investment sold 1,391 1,800
Other receivables 15 131 73
Deferred tax asset 8 2,774 3,530
--------------- ---------------
12,726 14,958
========= =========
Current liabilities
Portfolio management fee payable (46) (46)
Payable for investment purchased (661) (571)
Other payables 15 (403) (349)
Bank overdrafts (89) (106)
--------------- ---------------
Net current assets 11,527 13,886
========= =========
Non-current liabilities
Investments at fair value through profit or loss 3 (350) (325)
Offering fees payable (52) (52)
--------------- ---------------
Net assets 68,613 70,023
========= =========
Share capital and reserves
Called-up share capital 11 103 103
Special distributable reserve(1) 42,593 44,635
Capital reserve 26,454 25,285
Revenue reserve(1) (537) (1,360)
--------------- --------------- --------------- ---------------
Total shareholders' funds 68,613 70,023
========= =========
Net asset value per ordinary share $10.04 $10.22
========= =========
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 2024,
the net amount of reserves that are distributable are $42,056,000 (2023:
$44,635,000).
The financial statements on pages 42 to 45 were approved by the Board of
Directors on 29 October 2024 and signed on its behalf by
JOHN BIRCH MARC GABELLI
Co-Chairman Co-Chairman
29 October 2024
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2024
Year ended Year ended
30 June 2024
30 June 2023
$000 $000 $000 $000
Cash flows from operating activities
Profit before tax 2,818 3,845
--------------- ---------------
Adjustments for:
Gains on investments (2,279) (4,821)
--------------- ---------------
Cash flows from operating activities
Purchases of investments(1) (212,093) (140,570)
Sales of investments(1) 213,898 178,372
Increase in receivables (58) (7)
Increase in payables 74 148
Foreign withholding taxes on dividends (70) (59)
--------------- --------------- --------------- ---------------
Net cash flows from operating activities 2,290 36,908
========= =========
Cash flows from financing activities
Shares bought back for cash (175) (32,245)
Dividends paid (3,227) (822)
Interest paid (20) (26)
--------------- --------------- --------------- ---------------
Net cash flows from financing activities (3,422) (33,093)
========= =========
Net (decrease)/increase in cash and cash equivalents (1,132) 3,815
Cash and cash equivalents at the start of the period 9,449 5,520
Effect of foreign exchange rates 24 114
--------------- ---------------
Cash and cash equivalents at the end of the period 8,341(2,3) 9,449(2,3)
========= =========
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 As at 30 June 2024, $6,223,143 (2023: $3,942,151) was held as
collateral at UBS securities LLC for Contracts for Difference, and was
restricted.
3 As at 30 June 2024, Cash and cash equivalents at the end of the
period includes Cash and cash equivalents of $8,430 and Bank overdrafts of $89
(2023: $9,555 and $106, respectively).
Gabelli Merger Plus+ Trust Plc is registered in England and Wales under
Company number 10747219.
The financial statements on pages 42 to 45 were approved by the Board of
Directors on 29 October 2024 and signed on its behalf by
JOHN BIRCH MARC GABELLI
Co-Chairman Co-Chairman
29 October 2024
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). 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 an Investment 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 various geopolitical conflicts. 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 a period no less than 12 months from the signing
of the balance sheet.. 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 2024.
In forming this position, the Directors considered the Company's investment
objectives, risk management policies, capital management policies and
procedures, the nature of the portfolio and expenditure projections in detail.
(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.
(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. U.S. Treasuries held for
investment diversification purposes are not included as cash equivalents and
are valued at their amortised cost. 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. U.S. 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.
(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 was historically 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 accounting period starting 1 July
2022.
The primary benefit associated with the Investment Trust regime is that
capital gains 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.
At 30 June 2024, after offset against income taxable on receipt, there was a
deferred tax asset ("DTA") of $2.77 million (2023: $3.53 million) 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 forward. 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 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 2024
Level 1 Level 2 Level 3 Total
$000
$000
$000
$000
Financial assets at fair value through profit or loss
Quoted equities 47,822 - - 47,822
Contingent value rights 165 - - 165
Derivatives - 317 - 317
U.S. Treasuries - 9,184 - 9,184
--------------- --------------- --------------- ---------------
Gross fair value 57,488
=========
Derivatives - (350) - (350)
--------------- --------------- --------------- ---------------
Net fair value 47,987 9,151 - 57,138
========= ========= ========= =========
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
Quoted equities 55,219 903 - 56,122
Contingent value rights - 257 - 257
Derivatives - 135 - 135
--------------- --------------- --------------- ---------------
Gross fair value 56,514
=========
Derivatives - (325) - (325)
--------------- --------------- --------------- ---------------
Net fair value 55,219 970 - 56,189
========= ========= ========= =========
There were no transfers between levels for all periods presented.
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
Analysis of changes in market value and book cost of portfolio investments in
year
Year ended Year ended
30 June 2024(1) (
30 June 2023
) $000
$000
Opening book cost 63,218 99,687
Opening investment holding losses (7,029) (7,722)
--------------- ---------------
Opening market value 56,189 91,965
========= =========
Additions at cost 212,183 139,266
Disposals proceeds received (213,489) (179,749)
Gains on investments 2,255 4,707
--------------- ---------------
Market value of investments 57,138 56,189
========= =========
Closing book cost 63,759 63,218
Closing investment holding losses (6,621) (7,029)
--------------- ---------------
Closing market value 57,138 56,189
========= =========
1 Figures for the year ended 30 June 2024 include U.S. Treasuries
purchased for investment diversification purposes.
The company received $213,489,000 (2023: $179,749,000) from investments sold
in the year. The book cost of these investments when they were purchased was
$211,642,000 (2023: $175,735,000). Further explanation of the disposal
proceeds received in the year can be found in the Net realised and unrealised
gains on investments section.
Net realised and unrealised gains on investments
Year ended Year ended
30 June 2024
30 June 2023
$000
$000
Realised gains on investments 1,847 4,014
Movement in unrealised gains on investments 408 693
--------------- ---------------
Net realised and unrealised gains on investments 2,255 4,707
========= =========
4 TRANSACTIONS COSTS
During the year commissions and other expenses were incurred in acquiring or
disposing of investments classified at fair value through profit or loss.
These have been charged through capital and are within gains in the Statement
of Comprehensive Income. The total costs were as follows:
Year ended Year ended
30 June 2024
30 June 2023
$000
$000
Purchases 56 54
Sales 23 34
--------------- ---------------
Total 79 88
========= =========
5 INCOME
Year ended Year ended
30 June 2024
30 June 2023
$000
$000
Income from investments
Dividend income 499 423
Income on short-term investments(1) 1,337 387
Other income(2) 538 202
--------------- ---------------
Total income 2,374 1,012
========= =========
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.
2 Includes swap income of $458,000 and $172,000, respectively.
6 EXPENSES
Year ended Year ended
30 June 2024
30 June 2023
$000
$000
Revenue expenses
Portfolio Management Fee (568) (654)
Directors' Remuneration (157) (157)
Audit Fees - PwC (100) (145)
Company Secretary Fees (61) (100)
Other (54) (34)
Legal Fees (50) (122)
Former AIFM - Carne Nil (51)
AIFM Support Services (48) Nil
Administration Fees - State Street (46) (55)
Custodian/Depositary Fees - State Street (45) (52)
Directors' Expenses (21) (11)
Printing (17) (28)
Regulatory Filing Fees - AIFMD (13) (14)
Registrar - Computershare (13) (18)
LSE RNS fees (12) (10)
Ongoing LSE and UKLA Fees (10) (10)
--------------- ---------------
Total revenue expenses (1,215) (1,461)
========= =========
Capital expenses
Contracts for Difference (483) (317)
Transaction costs on derivatives (63) (92)
Transaction Charges - State Street (54) (92)
--------------- ---------------
Total capital expenses (600) (501)
========= =========
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 Gabelli Funds, LLC to serve as Alternative
Investment Fund Manager pursuant to the AIFMD. Gabelli Funds, LLC does not
earn a fee for its role as AIFM; it earned $568,334 in portfolio management
fees during the year ended 30 June 2024 (2023: $653,934). For the year ended
30 June 2024 Carne provided certain support services to the AIFM such as due
diligence and reporting for which it earned fees of $48,133.
7 EQUITY DIVIDENDS
Year ended Year ended
30 June 2024
30 June 2023
$000
$000
Dividends paid 3,227 822
========= =========
During the year ended 30 June 2024 dividends paid per share totalled $0.48
(2023: $0.12 per share).
8 TAXATION ON ORDINARY ACTIVITIES
Deferred Tax Assets
At 30 June 2023 total recognised deferred tax assets were $3,530,045. During
the year ended 30 June 2024 the Company incurred deferred tax expense of
$755,548 reflecting partial utilisation of the deferred tax asset, resulting
in a deferred tax asset of $2,774,497 or $0.41 per Ordinary Share.
The deferred tax asset was comprised of $6,588,127 ($1,647,032 deferred tax
asset at 25% tax rate) related to unrealised losses on the value of the
investment portfolio and excess expenses of $4,509,861 ($1,127,465 deferred
tax asset at 25% tax rate) carried forward. This sum, which is net of the
amount set against current period taxable income, arose due to the cumulative
deductible expenses having exceeded taxable income over the life of the
Company. Now that the Company is no longer an investment trust for tax
purposes and is therefore subject to UK 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. 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 £5 million plus 50% of
profits in excess of that initial £5 million.
Year ended 30 June 2024
Analysis of the charge in the year Revenue Capital Total
$000
$000
$000
Deferred tax expense (246) (510) (756)
Irrecoverable overseas tax (70) - (70)
--------------- --------------- ---------------
Total (316) (510) (826)
========= ========= =========
Deferred tax expense in the year ended 30 June 2024 is due to the partial
utilization of the deferred tax in the offset of current income.
Year ended 30 June 2024
Factors affecting the tax charge for the year Revenue Capital Total
$000
$000
$000
Profit before taxation 1,139 1,679 2,818
UK Corporation tax at effective rate of 25% (285) (420) (705)
--------------- --------------- ---------------
Effects of:
Unrealised gains not yet taxable - 63 (52)
Capital expenses not deductible - (150) (150)
Other adjustments 39 (3) 36
Irrecoverable overseas tax (70) - (70)
--------------- --------------- ---------------
Total (541) 420 (121)
========= ========= =========
Total tax charge for the year (826) - (826)
========= ========= =========
Year ended 30 June 2023
Analysis of the charge in the year Revenue Capital Total
$000
$000
$000
Deferred tax benefit 3,530 - 3,530
Irrecoverable overseas tax (59) - (59)
--------------- --------------- ---------------
Total 3,471 - 3,471
========= ========= =========
Year ended 30 June 2023
Factors affecting the tax charge for the year Revenue Capital Total
$000
$000
$000
(Loss)/profit before taxation (475) 4,320 3,845
UK Corporation tax at effective rate of 20.5% 97 (886) (789)
--------------- --------------- ---------------
Effects of:
Deferred tax benefit 3,530 - 3,530
Irrecoverable overseas tax (59) - (59)
--------------- --------------- ---------------
Total 3,471 - 3,471
========= ========= =========
Total tax charge for the year 3,568 (886) 2,682
========= ========= =========
9 EARNINGS PER SHARE
Earnings per ordinary share is calculated with reference to the following
amounts:
Year ended Year ended
30 June 2024
30 June 2023
Revenue return
Revenue return attributable to ordinary shareholders ($000) 823 2,996
--------------- ---------------
Weighted average number of shares in issue during year 6,843,331 7,797,333
Total revenue return per ordinary share $0.12 $0.39
--------------- ---------------
Capital return
Capital return attributable to ordinary shareholders ($000) 1,169 4,320
--------------- ---------------
Weighted average number of shares in issue during year 6,843,331 7,797,333
Total capital return per ordinary share $0.17 $0.55
--------------- ---------------
Total return per ordinary share $0.29 $0.94
========= =========
Net asset value per share As at As at
30 June 2024
30 June 2023
Net assets attributable to shareholders ($000) 68,613 70,023
Number of shares in issue at year end 6,831,292 6,850,792
Net asset value per share $10.04 $10.22
========= =========
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 $0.41 per share, or
$2.77 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.
10 CASH AND CASH EQUIVALENTS
As at As at
30 June 2024
30 June 2023
$000
$000
Cash 8,430 6,090
U.S. Treasuries -(1) 3,465
--------------- ---------------
Total 8,430 9,555
========= =========
1 U.S. Treasuries held for investment diversification purposes are not
included as cash equivalents.
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 As at
30 June 2024
30 June 2023
$000
$000
Allotted, called up and fully paid:
6,831,292 (2023: 6,850,792) Ordinary shares of $ 0.01 each - equity 68 68
--------------- ---------------
Treasury shares:
3,502,874 (2023: 3,483,374) Ordinary shares of $ 0.01 each - equity 35 35
--------------- ---------------
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 2023 Annual General Meeting ("AGM"),
the Board of Directors was authorised to allot relevant securities in the
Company up to a maximum aggregate nominal amount of $45,672 (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 2024
AGM include authorisation for the Company to allot equity securities up to an
aggregate nominal value of $45,542, 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 2024
Interest Local Foreign US Dollar
rate
currency
exchange
equivalent
%
000
rate
$000
Assets:
US dollar 1.60 8,415 1.00 8,415
Euro currency 0.65 (16) 0.93 (17)
GBP Sterling 0.54 (56) 0.79 (70)
Swedish krona 0.00 134 10.59 12
Swiss franc 0.13 1 0.90 1
--------------- --------------- --------------- ---------------
Total 8,341
=========
As at 30 June 2023
Interest Local Foreign US Dollar
rate
currency
exchange
equivalent
%
000
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.
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 (2023: 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 2024 would increase/decrease by $8,000 (2023:
$9,000). 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.
Currency risk exposure by currency of denomination:
As at 30 June 2024
Net Net monetary Total currency
Investments
assets
exposure
$000
$000
$000
Australian dollar - (3) (3)
Canadian dollar 794 (801) (7)
Euro currency - (2) (2)
GBP Sterling 631 (1,778) (1,147)
Hong Kong dollar 228 (231) (3)
Norwegian krone - 2 2
Swedish krona - (15) (15)
Swiss franc - 8 8
--------------- --------------- ---------------
Total non US Investments 1,653 (2,820) (1,167)
========= ========= =========
US dollar 55,518 14,262 69,780
--------------- --------------- ---------------
Total 57,171 11,442 68,613
========= ========= =========
As at 30 June 2023
Net Net monetary Total currency
Investments
assets
exposure
$000
$000
$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
========= ========= =========
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 2024
30 June 2023
$000
$000
Australian dollar - 69
Canadian dollar (1) (2)
Danish krone - (1)
Euro currency - (3)
GBP Sterling (115) 158
Norwegian krone - (1)
Swedish krona (2) (1)
Swiss franc 1 1
========= =========
The relevant US dollar exchange rates as at 30 June 2024 were: Canadian dollar
(1: 1.3684); GBP Sterling (1: 0.7910); Swedish krona (1: 10.5902); Swiss franc
(1: 0.8986).
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 2024 would have increased/decreased by
$8,571,000. 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 posted
Net exposure
$000
$000
$000
Counterparty
UBS Securities, LLC 33 (6,223) (6,190)
--------------- --------------- ---------------
Total 33 (6,223) (6,190)
========= ========= =========
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.
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 2024 was $9,952,000 (2023:
$14,958,000). 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 As at
30 June 2024
30 June 2023
$000
$000
Called-up share capital 103 103
Special distributable reserve(1) 42,593 45,995
Capital reserve 26,454 25,285
Revenue reserve(1) (537) (1,360)
--------------- ---------------
Total shareholders' funds 68,613 70,023
========= =========
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 2024,
the net amount of reserves that are distributable are $42,056,000 (2023:
$44,635,000).
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"), 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.
The Company's maximum leverage levels at 30 June 2024 are shown below:
Leverage Exposure Gross Commitment
method
method
Maximum permitted limit 500% 250%
Actual 119% 128%
========= =========
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 2024 the Company held CFDs, as shown in the following table.
Security name Trade Shares As at
currency
(000)
30 June 2024
Unrealised
gain/(loss)
$000
Alpha Financial Markets Consulting GBP 15 **
Altium Ltd AUD 30 6
Aluflexpack AG CHF 7 2
Anglo American plc GBP 1 2
APM Human Services International Ltd AUD 165 1
Ascential plc GBP 31 4
Banco Bilbao Vizcaya Argentaria EUR (21) (5)
Banco de Sabadell SA EUR 104 3
Barratt Developments plc GBP (26) 9
Calliditas Therapeutics SEK 9 1
Capital One Financial Corp USD (1) (4)
Chesapeake Energy Corp USD (1) 4
Chevron Corp USD (29) (111)
Civitanavi Systems SpA EUR 13 **
Conocophillips USD (4) (18)
Covestro AG EUR 2 6
Crescent Energy Inc USD (12) **
Darktrace plc USD 119 (11)
Ds Smith plc USD 212 157
Egetis Therapeutics AB SEK 79 (26)
Eqt Corp USD (20) 48
First Advantage Corp USD (8) 3
Genkyotex SA EUR 7 **
Global Interconnection Corp GBP 17 (53)
Gram Car Carriers ASA NOK 5 **
Grifols SA USD (1) 2
International Paper Co USD (11) 16
Iqgeo Group plc GBP 27 **
John Bean Technologies Corp EUR (2) 6
Karnov Group AB SEK 9 (8)
Keywords Studios plc GBP 8 13
Kindred Group plc SEK 78 10
Lok'Nstore Group plc GBP 35 2
Marel HF EUR 93 4
Mattioli Woods plc GBP 13 (1)
Neoen SA EUR 4 1
Network International Holdings plc GBP 293 2
Newmont Corp USD 1 1
Noble Corp plc USD (5) (8)
Nordic Paper Holding AB SEK 26 (4)
Ox2 AB SEK 29 **
PGS ASA NOK 168 10
Pinewood Technologies GBP 63 (26)
Psc Insurance Group Ltd AUD 31 **
Redrow plc GBP 18 (7)
Schlumberger Ltd USD (11) (48)
Shinko Electric Industries JPY 15 **
Smurfit Kappa Group plc USD (3) 4
Softwareone Holding AG CHF 3 (2)
Spear Investment Group EUR 39 **
Spirent Communications plc GBP 261 (5)
Synopsys Inc USD (1) (3)
TGS ASA NOK (12) (8)
Trident Royalties plc GBP 162 (1)
Virgin Money Uk plc GBP 416 (1)
Willscot Mobile Mini Holding USD (1) **
---------------
Total unrealised loss on derivatives (33)
=========
* 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 2024, no Performance
fee was paid. As at 30 June 2024, no amount was outstanding to the Portfolio
Manager in respect of the performance fee, reflecting the performance period
matching the Company's financial year (2023: $nil).
15 OTHER ASSETS AND LIABILITIES
The categories of other receivables and other payables include:
As at 30 June As at 30 June
2024
2023
$000
$000
Other receivables
FX currency purchased - 3
All other receivables(1) 131 70
--------------- ---------------
Total other receivables 131 73
========= =========
Other payables
FX currency sold 1 6
Custodian fees 22 15
Accounting fees 33 26
Audit fees 94 86
All other payables 253 216
--------------- ---------------
Total other payables 403 349
========= =========
1 As at 30 June 2024, 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 Co-Chairmen, who will receive an additional $1,000 per
annum(1);
· 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.
1 Mr Gabelli has waived his fees since appointment as Chairman and in
his current role as Co-Chairman.
Related parties disclosure: other
The Portfolio management fee for the period ended 30 June 2024 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 2024, Associated Capital Group Inc., an affiliate of the AIFM
and Portfolio Manager, held 6,324,756 Ordinary Shares in the Company.
Associated Capital Group Inc. also subscribed for 6,179,100 Special Voting
Loyalty Shares, as defined in the glossary on page 75, which increased its
voting interest. For the years ended 30 June 2024 and 2023, the Company paid
dividends of $3,022,863 and $745,951, respectively, to Associated Capital
Group, Inc. commensurate with its ownership interest.
Investors should note that as a close company with Associated Capital Group
Inc. controlling greater than 90% of shares, Associated Capital Group Inc. may
be able to ensure the approval 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.
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 2024.
17 CONTINGENT LIABILITIES AND COMMITMENTS
As at 30 June 2024, the Company had no contingent liabilities or commitments
(30 June 2023: nil).
18 HISTORICAL SHARE AND NAV INFORMATION
30 June 2024 30 June 2023 30 June 2022
Total Shares(1) 6,831,292 6,850,792 10,238,206
Total NAV ($000) 68,613 70,023 95,774
NAV per share $10.04 $10.22 $9.35
========= ========= =========
1 Data excludes 3,502,874 shares held in treasury as of 30 June 2024.
19 POST BALANCE SHEET EVENTS
On 29 October 2024, the Company acquired its affiliated UK investment manager,
Gabelli Securities International UK Limited ("GSIL UK"), a limited company
organised and existing under the laws of England and Wales. The transaction
will be financed through the issuance of 96,493 new ordinary shares to
Associated Capital Group, Inc. at a premium to the Company's Net Asset Value.
The Company's shareholders will benefit from the increase to the Company's
cash and investments of approximately $1 million as it absorbs GSIL UK's
balance sheet. The acquisition positions the Company to increase sources of
income, allowing for both self-management and the broadening of services to
affiliated and third parties. The consideration shares rank pari passu with
the Company's existing ordinary shares. Following the issue of the
consideration shares the Company will have 6,927,785 ordinary shares in issue
with each ordinary share carrying the right to one vote and 3,502,874 ordinary
shares held in treasury.
The acquisition is in line with the Company's Investment Policy to pursue a
variety of strategies and instruments, including, but not limited to
controlling operating businesses to grow value.
20 PORTFOLIO/SCHEDULE OF INVESTMENTS
A statement of changes in the composition of the Portfolio during the
financial period is available to shareholders free of charge from the
Administrator on request.
Quantity Security Name % Total
Cost
Market Value
Investments
COMMON STOCK
Communication Services
Media & Entertainment
38,605 Aimia Inc 144,787 76,175 0.1%
15,555 Atlanta Braves Holdings Inc 467,995 613,489 1.1%
75,400 Endeavor Group Holding 1,979,902 2,038,062 3.6%
27,003 GCI Liberty Inc - - 0.0%
206,823 Imax China Holding Inc 209,780 227,819 0.4%
10,078 Liberty Media Corp 239,386 223,228 0.4%
19,888 Liberty Media Corp 600,319 440,718 0.8%
7,491 Liberty Media Corp 249,482 286,681 0.5%
329,631 NII Holdings Inc 626,707 115,371 0.2%
13,800 Wideopenwest Inc 65,632 74,658 0.1%
--------------- --------------- ---------------
4,583,991 4,096,200 7.2%
========= ========= =========
Telecommunication Services
57,050 Consolidated Communications 246,233 251,020 0.4%
13,747 Telesat Corp 393,391 125,098 0.2%
--------------- --------------- ---------------
639,624 376,118 0.6%
========= ========= =========
Total Communication Services 5,223,615 4,472,318 7.8%
========= ========= =========
Consumer Discretionary
Consumer Durables & Apparel
42,500 Capri Holdings Ltd 2,241,067 1,405,900 2.5%
1,237 CH Auto Inc 5,047 2,227 0.0%
68,900 Vizio Holding Corp A 747,620 744,120 1.3%
--------------- --------------- ---------------
2,993,734 2,152,247 3.8%
========= ========= =========
Consumer Services
15,550 Park Lawn Corp 294,986 295,579 0.5%
35,850 Playags Inc 410,870 412,275 0.7%
3,600 Target Hospitality Corp 42,240 31,356 0.1%
--------------- --------------- ---------------
748,097 739,210 1.3%
========= ========= =========
Retailing
13,700 Hibbett Inc 1,187,165 1,194,777 2.1%
17,203 Sportsman's Warehouse Holdings 172,705 41,459 0.1%
24,050 The Aaron's Company Inc 239,801 240,019 0.4%
--------------- --------------- ---------------
1,599,670 1,476,255 2.6%
========= ========= =========
Total Consumer Discretionary 5,341,501 4,367,712 7.7%
========= ========= =========
Consumer Staples
Food & Staples Retailing
91,080 Albertsons Cos Inc 1,868,895 1,798,830 3.2%
--------------- --------------- ---------------
1,868,895 1,798,830 3.2%
========= ========= =========
Total Consumer Staples 7,763,887 7,772,317 13.6%
========= ========= =========
Energy
Energy
15,622 Championx Corp 605,615 518,807 0.9%
21,706 Diamond Offshore Drilling Inc 333,485 336,226 0.6%
75,346 Equitrans Midstream Corp 985,549 977,991 1.7%
28,230 Hess Corp 4,059,472 4,164,490 7.3%
16,423 Marathon Oil Corp 469,601 470,847 0.8%
35,400 Overseas Shipholding 298,072 300,192 0.5%
11,346 Silverbow Resources Inc 423,478 429,219 0.8%
16,500 Southwestern Energy Corp 125,141 111,045 0.2%
30,000 US Silica Holdings Inc 463,472 463,500 0.7%
========= ========= =========
Total Energy 7,763,887 7,772,317 13.6%
========= ========= =========
Financials
Asset Management
14,700 Canaccord Genuity Group Inc 113,083 90,885 0.2%
--------------- --------------- ---------------
113,083 90,885 0.2%
========= ========= =========
Banks
450 Macatawa Bank Corp 6,384 6,570 0.0%
--------------- --------------- ---------------
6,384 6,570 0.0%
========= ========= =========
Diversified Financial Services
6,150 Assetmark Financial Holdings 208,981 212,483 0.4%
771 Discover Financial Services 93,413 100,855 0.2%
--------------- --------------- ---------------
302,393 313,337 0.6%
========= ========= =========
Financials
7,650 Nuvei Corp Subordinate Vtg 242,232 247,707 0.4%
--------------- --------------- ---------------
242,232 247,707 0.4%
========= ========= =========
Insurance
4,550 Icc Holdings Inc 100,602 102,967 0.2%
2,150 National Western Life Group 1,054,307 1,068,421 1.9%
--------------- --------------- ---------------
1,154,910 1,171,388 2.1%
========= ========= =========
Investment Companies
487,644 Hipgnosis Songs Fund Ltd 608,282 631,225 1.1%
--------------- --------------- ---------------
608,282 631,225 1.1%
========= ========= =========
Total Financials 2,427,285 2,461,111 4.3%
========= ========= =========
Health Care
Health Care Equipment & Supplies
21,650 Amedisys Inc 1,999,618 1,987,470 3.5%
300 Atrion Corporation 135,489 135,729 0.2%
22,150 Axonics Inc 1,524,333 1,489,145 2.6%
13,800 R1 Rcm Inc 189,574 173,328 0.3%
16,600 Silk Road Medical Inc 445,553 448,864 0.8%
7,850 Surmodics Inc 330,668 330,014 0.6%
--------------- --------------- ---------------
4,625,234 4,564,550 8.0%
========= ========= =========
Pharmaceuticals, Biotechnology & Life Sciences
7,650 Abiomed Inc 7,803 13,388 0.0%
132,674 Adamas Pharmace - 6,634 0.0%
90,210 Akouos Inc 71,266 67,658 0.1%
6,750 Alimera Sciences Inc 37,383 37,530 0.1%
28,904 Catalent Inc 1,661,278 1,625,272 2.8%
16,855 Cerevel Therapeutics Holding 703,247 689,201 1.2%
16,275 Clementia Pharmaceuticals Inc 420,388 - 0.0%
155,990 Cyteir Therapeutic - - 0.0%
100,314 Flexion Therape - 30,094 0.1%
2,116 Grifols S.A. 42,470 13,341 0.0%
21,400 Olink Holding AB Adr 528,494 545,272 1.0%
5,300 Opiant Pharmace 3,445 2,650 0.0%
--------------- --------------- ---------------
3,475,773 3,031,039 5.3%
========= ========= =========
Total Health Care 8,101,007 7,595,589 13.3%
========= ========= =========
Industrials
Capital Goods
3,716 Mcgrath Rentcorp 439,933 395,940 0.7%
650 Encore Wire Corp 184,048 188,390 0.3%
--------------- --------------- ---------------
623,982 584,329 1.0%
========= ========= =========
Commercial & Professional Services
30,665 Sterling Check Corp 474,148 453,842 0.8%
19,456 Stericycle Inc 1,145,554 1,130,977 2.0%
--------------- --------------- ---------------
1,619,702 1,584,819 2.8%
========= ========= =========
Transportation
6,000 Hawaiian Holdings Inc 79,399 74,580 0.1%
--------------- --------------- ---------------
79,399 74,580 0.1%
========= ========= =========
Total Industrials 2,323,082 2,243,729 3.9%
========= ========= =========
Information Technology
Software & Services
290,483 Altaba Inc 4,099,538 733,470 1.3%
1,950 Ansys Inc 656,145 626,925 1.1%
47,079 Everbridge Inc 1,550,627 1,647,294 2.9%
35,350 Copperleaf Technologies 305,294 306,133 0.5%
80,550 Hashicorp Inc 2,676,382 2,713,730 4.8%
48,250 Matterport Inc 210,431 215,678 0.4%
10,000 Perficient Inc 735,697 747,900 1.3%
27,800 Powerschool Holdings Inc 620,465 622,442 1.1%
28,350 Squarespace Inc 1,230,446 1,236,911 2.2%
18,250 Walkme Ltd 251,740 254,953 0.5%
--------------- --------------- ---------------
12,336,765 9,105,434 16.0%
========= ========= =========
Technology Hardware & Equipment
16,350 HollySys Automation Technologies 414,621 353,814 0.6%
23,650 Infinera Corp 146,666 126,291 0.2%
44,150 Juniper Networks Inc 1,632,627 1,609,709 2.8%
--------------- --------------- ---------------
2,193,914 2,089,814 3.7%
========= ========= =========
Total Information Technology 14,530,680 11,195,248 19.6%
========= ========= =========
Materials
Containers & Packaging
22,531 Resolute Forest 31,994 45,062 0.1%
3,627 WestRock Corp 86,521 182,293 0.3%
--------------- --------------- ---------------
118,515 227,355 0.4%
========= ========= =========
Materials
6,383 Arcadium Lithium Plc 67,224 21,447 0.0%
18,150 Haynes International Inc 1,082,373 1,065,405 1.9%
--------------- --------------- ---------------
1,149,597 1,086,852 1.9%
========= ========= =========
Metals & Mining
3,500 Artemis Gold Inc. 149,617 25,118 0.0%
44,400 United States Steel Corp 1,964,286 1,678,320 2.9%
--------------- --------------- ---------------
2,113,903 1,703,438 3.0%
========= ========= =========
Total Materials 3,382,015 3,017,645 5.3%
========= ========= =========
Utilities
Utilities
42,870 PNM Resources Inc 2,073,862 1,584,475 2.8%
14,850 Allete Inc 932,633 925,897 1.5%
12,750 Atlantica Sustainable Infrastructure 279,624 279,862 0.5%
4,750 Avangrid Inc 170,601 168,768 0.3%
========= ========= =========
Total Utilities 3,456,720 2,959,003 5.1%
========= ========= =========
RIGHTS
Financials
Asset Management
22,199 Breeze Holdings Acquisition Corp 5,528 3,885 0.0%
7,441 Clover Leaf Capital Corp 2,945 1,338 0.0%
15,950 Northview Acquisition Corp 3,942 1,632 0.0%
12,711 Viveon Health Acquisition Corp 2,312 766 0.0%
--------------- --------------- ---------------
Total Financials 14,727 7,621 0.0%
========= ========= =========
Materials
Materials
190,215 Pan American Silver Corp CVR 28,643 87,993 0.2%
--------------- --------------- ---------------
Total Materials 28,643 87,993 0.2%
========= ========= =========
WARRANTS
Financials
Asset Management
566 Blueriver Acquisition Corp 25 9 0.0%
4,394 Kalera PLC 1,984 0 0.0%
7,975 Northview Acquisition Corp 2,362 419 0.0%
3,186 OCA Acquisition Corp 108 366 0.0%
16,460 Tastemaker Acquisition Corp 11,264 309 0.0%
9,230 Viveon Health Acquisition Corp 2,933 55 0.0%
========= ========= =========
Total Financials 18,676 1,158 0.0%
========= ========= =========
Health Care
Health Care Equipment & Supplies
25,000 Anew Medical Inc 775 2,525 0.0%
========= ========= =========
Total Health Care 18,676 1,158 0.0%
========= ========= =========
Information Technology
Software & Services
48,961 Presto Automation Inc 23,304 1,249 0.0%
6,169 Prosomnus Inc 1,688 53 0.0%
13,933 Cxapp Inc 8,968 2,600 0.0%
1,429 Spectral AI Inc 50 246 0.0%
2,139 Banzai International Inc 150 49 0.0%
284 Prospector Leddartech 1 8 0.0%
========= ========= =========
Total Information Technology 34,161 4,204 0.0%
========= ========= =========
FIXED INCOME
U.S. Government Obligations
U.S. Treasury Bills
750,000 U.S. Treasury Bill, 08/08/2024 745,846 745,862 1.3%
3,000,000 U.S. Treasury Bill, 08/21/2024 2,986,452 2,986,502 5.2%
2,500,000 U.S. Treasury Bill, 09/12/2024 2,473,616 2,473,520 4.3%
3,000,000 U.S. Treasury Bill, 08/20/2024 2,978,167 2,978,160 5.2%
--------------- --------------- ---------------
Total U.S. Government Obligations 9,184,081 9,184,044 16.1%
========= ========= =========
Quantity Security Name Unrealized Market Value % Total
App/(Dep)
Investments
Equity Contract for Difference Swap Agreements
Long Positions
15,000 Alpha Financial Markets Consulting (284) 93,859
29,612 Altium Ltd 5,537 1,345,387
6,700 Aluflexpack Ag New 1,864 114,450
1,100 Anglo American Plc 1,571 34,791
164,720 Apm Human Services International 1,100 152,361
30,677 Ascential Plc 3,878 132,623
103,817 Banco De Sabadell S.A 2,407 200,334
9,000 Calliditas Therapeutics-B 680 174,728
13,447 Civitanavi Systems Spa 288 88,200
1,545 Covestro Ag 6,141 90,741
119,497 Darktrace Plc (10,745) 870,989
17,378 Disruptive Cap Swap 156,918 43,935
212,165 Ds Smith Plc (26,109) 1,129,112
78,551 Egetis Therapeutics AB 0 34,639
6,738 Genkyotex Genkyotex (52,722) 0
5,334 Gram Car Carriers Asa 250 130,000
27,250 Iqgeo Group Plc 0 160,866
8,712 Karnov Group (7,760) 58,243
7,561 Keywords Studios Plc 12,855 220,978
77,867 Kindred Group Plc 9,559 926,445
34,856 Lok'Nstore Group Plc 2,203 484,676
92,543 Marel Hf 3,824 327,304
13,450 Mattioli Woods Plc (510) 133,977
4,473 Neoen S.A. 1,039 180,540
292,791 Network International Holding 2,221 1,447,157
1,036 Newmont Corp 1,088 43,377
26,314 Nordic Paper Holding Ab (4,040) 115,379
29,100 Ox2 275 163,358
167,713 Pgs Asa 10,081 140,817
62,763 Pinewood Technologies (25,785) 282,446
31,100 Psc Insurance Group Ltd 208 125,659
17,806 Redrow Plc (6,753) 150,132
14,952 Shinko Electric Industries 186 524,240
3,376 Softwareone Holding AG (1,954) 63,493
38,582 Spear Invst Wt Swap 0 9,097
261,025 Spirent Communications Plc (4,714) 603,830
161,600 Trident Royalties Plc (613) 97,441
415,743 Virgin Money Uk Plc (1,361) 1,122,555
--------------- --------------- ---------------
80,823 12,018,160
--------------- --------------- ---------------
Equity Contract for Difference Swap Agreements
Short Positions
(20,826) Banco Bilbao Vizcaya Argenta (5,145) (208,739)
(25,641) Barratt Developments Plc 9,076 (153,053)
(786) Capital One Financial Corp (3,734) (108,822)
(1,430) Chesapeake Energy Corp 4,219 (117,532)
(28,961) Chevron Corp (111,500) (4,530,080)
(3,615) Conocophillips (18,039) (413,484)
(11,965) Crescent Energy Inc-A 461 (141,785)
(20,495) Eqt Corp 48,368 (757,905)
(7,669) First Advantage Corp 2,605 (123,241)
(1,282) Grifols S.A. 1,971 (10,800)
(10,947) International Paper Co 15,916 (394,693)
(2,437) John Bean Technologies Corp 6,119 (231,442)
(5,027) Noble Corp Plc (8,194) (224,456)
(11,489) Schlumberger Ltd (48,024) (542,051)
(3,486) Smurfit Kappa Group Plc 3,487 (155,423)
(691) Synopsys Inc (3,351) (411,186)
(11,506) Tgs Asa (8,429) (138,537)
(1,064) Willscot Mobile Mini Holding 223 (40,049)
--------------- ---------------
(113,972) (8,703,276)
========= ========= =========
Total Equity CFD Swap Agreements (33,149) 3,314,884 5.8%
========= ========= =========
Total Investments Including U.S. Treasuries 63,698,973 57,168,520 100.0%
========= ========= =========
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.
GLOSSARY
ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE ("AIFMD")
Agreed by the European Parliament and the Council of the European Union and
adopted into UK legislation, the AIFMD classifies certain investment vehicles,
including investment companies, as Alternative Investment Funds ("AIFS") and
requires them to appoint an Alternative Investment Fund Manager ("AIFM") and
Depositary to manage and oversee the operations of the investment vehicle.
The Board of the Company retains responsibility for strategy, operations and
compliance and the Directors retain a fiduciary duty to shareholders.
ALTERNATIVE PERFORMANCE MEASURES
Net Asset Value total return, which is calculated based on the net asset value
per share at 30 June 2024, compared to the Net Asset Value per share as at 30
June 2023, adjusted for dividends paid, and assumes that dividends are
reinvested.
Share price total return, which is calculated based on the share price as at
30 June 2024, compared to the share price as at 30 June 2023, adjusted for
dividends paid, and assumes that all dividends are reinvested.
Discount to net asset value, which is calculated by dividing the difference
between the share price and net asset value per share, by the net asset value
per share.
ASSOCIATION OF INVESTMENT COMPANIES ("AIC")
The Company is a member of the AIC which is the trade body for investment
companies and represents the industry in relation to various matters which
impact the regulation of such entities.
CAPITAL RETURN PER SHARE
The capital return per share is the capital profit for the year (see Statement
of Comprehensive Income) divided by the weighted average number of ordinary
shares in issue during the year.
CLOSE COMPANY
Subject to certain exceptions, a close company is broadly a company which is
under the control of five or fewer participators or any number of
participators if those participators are directors, or more than half the
assets of which would be distributed to five or fewer participators, or to
participators who are directors, in the event of the winding up of the
company.
CONNECTED PARTY
A connected party to the Company includes the Administrator, the Depositary,
the AIFM, the Portfolio Managers of the relevant sub-funds of the Company, the
Board and the respective holding companies (if any), subsidiaries and
affiliates of each (each a "Connected Party").
CONTRACT FOR DIFFERENCE ("CFD")
A financial instrument in which 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. CFDs are open-ended with no fixed termination date, in
contrast to swaps, which utilise fixed termination dates.
CUM-INCOME NAV
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. When the cum-income NAV is
lower than the ex-income NAV, this reflects the revenue deficit.
CUSTODIAN
The Custodian is responsible for ensuring the safe custody of the Company's
assets and that all transactions in the underlying holdings are transacted in
an accurate and timely manner.
DEPOSITARY
From July 2014 all AIFs were required to appoint a Depositary who has
responsibility for overseeing the operations of the Company including
safekeeping, cash monitoring and verification of ownership and valuation of
the underlying holdings and is responsible for the appointment of a custodian.
The Depositary is strictly liable for the loss of any investments or other
assets in its custody unless it has notified that it has discharged its
liability in certain markets.
The Depositary has confirmed that it has not discharged liability in relation
to any of the Company's assets.
DIVIDEND DATES
When declared or recommended, each dividend will have three key dates applied
to it. The payment date is the date on which shareholders will receive their
dividend, either by BACS transfer or by receipt of a dividend cheque. The
record date applied to the dividend is used as a cut-off for the Company's
registrars to know which shareholders should be paid a dividend. Only
shareholders on the register of members at the close of business on the record
date will receive the dividend. The ex-dividend date is the business day
before the record date and is the date upon which the Company's net asset
value will be disclosed ex-dividend.
DIVIDEND YIELD
The annual dividend expressed as a percentage of the share price.
EX-INCOME NAV
Ex-income net asset value is the cum-income NAV excluding income (net income
being all current year 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).
FIFTH ANNIVERSARY TENDER OFFER
The tender offer to purchase certain of the Company's Ordinary Shares from
Shareholders whose names were entered into the Loyalty Register on Admission
and who continuously remained on the Loyalty Register from Admission to the
launch of the Fifth Anniversary Tender Offer.
ADDITIONAL FIFTH ANNIVERSARY TENDER OFFER
The tender offer to purchase certain of the Company's Ordinary Shares from
Shareholders whose names were entered into the Loyalty Register at the time of
the November 2017 Tap Admission and who continuously remained on the Loyalty
Register from the November 2017 Tap Admission to the launch of the Additional
Fifth Anniversary Tender Offer.
GEARING (INCLUDING ACTUAL AND NOMINAL GEARING)
The net gearing percentage reflects the amount of borrowings (i.e. bank loans
or overdrafts) the Company has used to invest in the market less cash and
investments in cash funds, divided by net assets. Nominal gearing is the total
notional amount of assets plus total notional amount of liabilities, divided
by equity. Actual gearing is calculated under two methodologies: the gross
method, which includes the market value of positions and the gross exposure of
derivatives, and excludes cash and cash equivalents; and the commitment
method, which includes the value of cash and cash equivalents. Nominal CFD
gearing is the gross nominal value of CFD positions, as a percentage of
shareholders' equity.
HIGH WATER MARK
The closing Net Asset Value (NAV) per share in respect of the last performance
period in respect of which a performance fee was payable to the Portfolio
Manager (adjusted for any changes to the NAV per share through dividend
payments, share repurchases, and share issuances from admission to the end of
such performance period).
LEVERAGE
Leverage is the ratio between a fund's Total Exposure and its Net Asset Value,
expressed as a percentage. For the purposes of the AIFM Directive, leverage
can be calculated using two methods: (i) the gross method; and (ii) the
commitment method. Under the gross method, Total Exposure is the algebraic sum
of all investment positions (long and short), excluding cash and cash
equivalents and converting derivative instruments into the equivalent position
in the underlying asset. Under the commitment method, Total Exposure is the
algebraic sum of all investment positions (long and short), plus cash and cash
equivalents, minus hedging arrangements and offsetting instruments between
eligible assets.
LIQUIDITY
In the context of the liquidity of shares in the stock market, this refers to
the availability of buyers in the market for the share in question. Where the
market in a particular share is described as liquid, that share will be in
demand and holders wishing to sell their shares should find ready buyers.
Conversely, where the market in a share is illiquid the difficulty of finding
a buyer will tend to depress the price that might be negotiated for a sale.
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 maintained by the registrar 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.
LOYALTY REGISTER
The register of Qualifying Registered Shareholders maintained by the
Registrars in accordance with the Company's loyalty programme.
NET ASSET VALUE ("NAV") PER ORDINARY SHARE
The value of the Company's assets (i.e. investments, cash held and debtors)
less any liabilities (i.e. bank borrowings, debt securities and creditors) for
which the Company is responsible, divided by the number of shares in issue.
The aggregate NAV is also referred to as total shareholders' funds on the
Statement of Financial Position. The NAV is published daily.
30 June 2024
(in thousands, except per share data) $ Shares Per share
Ex-income NAV $69,150 6,831 $10.12
Revenue reserve (537) 6,831 (0.08)
--------------- --------------- ---------------
Net asset value per ordinary share $68,613 6,831 $10.04
========= ========= =========
Net Asset Value per ordinary share, total return represents the theoretical
return on the cum-income NAV per ordinary share, assuming that dividends paid
to shareholders were reinvested at the cum-income NAV per ordinary share at
the close of business on the day shares were quoted ex-dividend.
2024 2023
NAV at start of year 10.22 9.35
NAV at end of year 10.04 10.22
Effect of dividends(1) 0.50 0.12
NAV at end of year including effect of dividends 10.54 10.35
NAV total return 3.14% 10.54%
========= =========
1 Assumed reinvested at the time of shares going ex-dividend.
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 year
and this is calculated in accordance with guidance issued by the Association
of Investment Companies.
2024 2023
$000
$000
Regular recurring expenses ("Ongoing Charges") a 1,341 1,645
Average Shareholders' funds b 66,827 75,684
Ongoing Charge Calculation a/b 2.01% 2.17%
========= ========= =========
PERFORMANCE FEE
A detailed explanation of the calculation methodology for the Performance Fee
payable to the Investment Manager can be found in Note 14.
PERFORMANCE HURDLE
In relation to each performance period, the hurdle is represented by "A"
multiplied by "B", where: "A" 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; and "B" is 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. The Remuneration Committee has determined that this is the
most appropriate means of benchmarking the Manager's performance.
PREMIUM/(DISCOUNT)
The amount by which the market price per share of an investment trust is
either higher premium or lower (discount) than the NAV per share, expressed as
a percentage of the NAV per share.
PROSPECTUS
The prospectus published by the Company on 15 June 2017 in connection with the
placing of up to 20,000,000 Ordinary Shares at $10 per Ordinary Share.
RELATED PARTY
Related party disclosures are required under International Financial Reporting
Standards (IAS 24). A common definition of a related party is if one party has
the ability to control the other party or exercise significant influence over
the other party in making financial or operational decisions and defined as:
(i) Two or more parties are related parties when at any time during
the financial period:
(ii) one party has direct or indirect control of the other party; or
the parties are subject to common control from the same source; or
(iii) one party has influence over the financial and operating policies
of the other party to an extent that that other party might be inhibited from
pursuing at all times its own separate interests; or
(iv) the parties, in entering a transaction, are subject to influence
from the same source to such an extent that one of the parties to the
transaction has subordinated its own separate interests.
REVENUE RETURN PER ORDINARY SHARE
The revenue return per ordinary share is the revenue return profit for the
year divided by the weighted average number of ordinary shares in issue during
the year.
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.
2024 2023
Share price at start of year 9.00 9.00
Share price at end of year 9.00 9.00
Effect of dividends* 0.49 0.12
Share price at end of year including effect of dividends 9.49 9.12
Share price total return 5.39% 1.33%
========= =========
* Assumed reinvested at the time of the shares going ex-dividend.
SHAREHOLDER
Owner of the Company's Ordinary Shares.
SPECIAL VOTING LOYALTY SHARES
Redeemable non-participating voting shares of a nominal value of $0.01 each in
the capital of the Company (if any) having the rights and privileges and being
subject to the restrictions contained in the Articles. Each Registered Holder
of an ordinary share who remains registered in the Loyalty Register in respect
such Ordinary Share for a continuous uninterrupted period of at least five
years (the "Qualifying Period") and is not an ineligible shareholder and/or is
not disqualified shall be entitled to subscribe for one Special Voting Loyalty
Share in respect of such ordinary share.
(1) As to voting: The holders of Special Voting Loyalty Shares shall
have the right to receive notice of, to attend, and to vote at all general
meetings of the Company.
(2) As to dividends and distributions: 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
per cent. of their nominal value.
(3) On a winding up or other return of capital: On a winding up of the
Company, the holder of a Special Voting Loyalty Share shall be entitled to be
repaid the capital paid up thereon pari passu with the repayment of the
nominal amount of the ordinary shares.
TOTAL RETURN PERFORMANCE
This is the return on the share price or NAV taking into account both the rise
and fall of share prices and the dividends paid to shareholders. Any dividends
received by a shareholder are assumed to have been reinvested in either
additional shares (for share price total return) or the Company's assets (for
NAV total return).
COMPANY INFORMATION
REGISTERED NAME
Gabelli Merger Plus+ Trust Plc
REGISTERED OFFICE
3 St. James's Place,
London SW1A 1NP
BOARD OF DIRECTORS
Marc Gabelli
Marco Bianconi
John Birch
John Newlands
Yuji Sugimoto
James Wedderburn
PORTFOLIO MANAGER AND ALTERNATIVE INVESTMENT FUND MANAGER
Gabelli Funds, LLC
One Corporate Center
Rye, NY 10580-1422
United States
COMPANY SECRETARY
Bridgehouse Company Secretaries Limited
Suite 2:06,
Bridge House,
181 Queen Victoria Street,
London, EC4V 4EG
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
ADMINISTRATOR AND CUSTODIAN
State Street Bank and Trust Company
20 Churchill Place
Canary Wharf
London E14 5HJ
DEPOSITARY
State Street Trustees Ltd
20 Churchill Place
Canary Wharf
London E14 5HJ
REGISTRAR AND RECEIVING AGENT
Computershare Investment Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
LEGAL & FINANCIAL ADVISERS TO THE COMPANY
Dickson Minto W.S.
16 Charlotte Square
Edinburgh
EH2 4DF
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
22 Bishopsgate
London
EC2N 4BQ
The Company is a member of The Association of Investment Companies ("AIC"),
which publishes a number of useful fact sheets and email updates for investors
interested in investment companies.
The AIC
9th Floor
24 Chiswell Street
London
EC1Y 4YY
0207 282 5555
www.theaic.co.uk
INFORMATION TO SHAREHOLDERS
Contact Information and Website
Please visit us on the Internet. Our homepage at www.gabelli.co.uk
(http://www.gabelli.co.uk) includes useful information about the Company, such
as daily prices, factsheets, announcements, and current and historic half year
and annual reports.
We welcome your comments and questions at +44 (0) 20 3206 2100 or via e-mail
at info@gabelli.co.uk (mailto:info@gabelli.co.uk) .
GENERAL INFORMATION
SEDOL/ISIN: BD8P074/GB00BD8P0741
London Stock Exchange (TIDM) Code: GMP
Legal Entity Identifier (LEI): 5493006X09N8HK0V1U37
The Company's registrar is Computershare Investor Services PLC.
Computershare's website address is investorcentre.co.uk and certain details
relating to your holding can be checked through this website. Alternatively,
Computershare can be contacted on 0370 707 1390.
Change of name or address must be notified through the website or sent to The
Pavilions, Bridgwater Road, Bristol BS99 6ZZ.
The Company is a member of The Association of Investment Companies ("AIC"),
which publishes a number of useful fact sheets and email updates for investors
interested in investment companies www.theaic.co.uk.
ANNUAL GENERAL MEETING
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the seventh Annual General Meeting (the "AGM") of
the Company will be held at GAMCO (UK), 3 St. James's Place London SW1A 1NP
United Kingdom on Thursday 5 December 2024 at 13:00 (GMT) to consider and, if
thought fit, pass the following resolutions, of which resolutions numbered 1
to 14 (inclusive) will be proposed as Ordinary Resolutions, and resolutions
numbered 15 to 18 (inclusive) will be proposed as Special Resolutions.
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 Co-Chairmen as their proxy.
ORDINARY BUSINESS
1. To receive the Company's audited financial statements, the
Strategic Report and the reports of the Directors of the Company (the
"Directors") for the year ended 30 June 2024 (the "Annual Report") together
with the report of the auditors.
2. To approve the Directors' Remuneration Report for the year ended
30 June 2024.
3. To approve the directors' remuneration policy, as set out in the
Directors' Remuneration Report, which takes effect immediately after the end
of the annual general meeting.
4. To approve the Company's dividend policy to pay dividends out of
the current period revenue reserve, ex the impact of any deferred tax charges.
The dividends declared in respect of the financial year ended 30 June 2023
totaled $0.48 per share.
5. To re-elect Marc Gabelli as a Director.
6. To re-elect Marco Bianconi as a Director.
7. To re-elect John Birch as a Director.
8. To re-elect John Newlands as a Director.
9. To re-elect Yuji Sugimoto as a Director.
10. To re-elect James Wedderburn as a Director.
11. To re-appoint PricewaterhouseCoopers LLP as auditors of the Company
to hold office until the conclusion of the next AGM of the Company.
12. To authorise the Audit & Risk Committee to determine the
remuneration of the auditors.
SPECIAL BUSINESS
Ordinary Resolution
13. THAT in addition to all existing authorities:
a. the Directors of the Company be and are hereby generally and
unconditionally authorised in accordance with section 551 of the Companies Act
2006 (the "Act") to exercise all the powers of the Company to allot ordinary
shares in the capital of the Company (the "Ordinary Shares") up to an
aggregate nominal value of $45,542, such authority to expire at the conclusion
of next year's AGM (unless the authority is previously revoked, varied or
extended by the Company in general meeting) but so that this authority shall
allow the Company to make, before the expiry of this authority, offers or
agreements which would or might require equity securities to be allotted after
such expiry and the Directors of the Company may allot equity securities
pursuant to any such offer or agreement as if the authority had not expired;
and
b. the Directors of the Company be and are hereby generally and
unconditionally authorised in accordance with section 551 of the Act to
exercise all the powers of the Company to allot Ordinary Shares up to an
aggregate nominal value of $511,910.30, such authority to expire on the fifth
anniversary of the date of the passing of this resolution (unless the
authority is previously revoked, varied or extended by the Company in general
meeting) but so that this authority shall allow the Company to make, before
the expiry of this authority, offers or agreements which would or might
require equity securities to be allotted after such expiry and the Directors
of the Company may allot equity securities pursuant to any such offer or
agreement as if the authority had not expired.
c. the Directors of the Company be and are hereby generally and
unconditionally authorised in accordance with section 551 of the Act to
exercise all the powers of the Company to allot Special Voting Loyalty Shares
up to an aggregate nominal value of $511,910.30, such authority to expire on
the fifth anniversary of the date of the passing of this resolution (unless
the authority is previously revoked, varied or extended by the Company in
general meeting).
14. THAT the Directors of the Company be and are hereby authorised to
exercise all powers of the Company, as granted by all existing authorities
(including by resolution 13 above), to allot new Ordinary Shares and Special
Voting Loyalty shares for purposes of making acquisitions.
SPECIAL RESOLUTIONS
15. THAT, in addition to all existing authorities, the Directors of the
Company be and are hereby empowered in accordance with section 570 of the Act,
to allot equity securities (as defined in section 560 of the Act) for cash
under the authority given by resolution 13(a) and, in accordance with section
573 of the Act, to sell any Ordinary Shares held by the Company as treasury
shares ("treasury shares") for cash, in each case, as if section 561 of the
Act did not apply to any such allotment or sale, such power in respect of the
authority given by resolution 13(a) to be limited:
a. to the allotment of equity securities and sale of treasury shares
in connection with an offer of, or invitation to apply for, equity securities:
i. to holders of Ordinary Shares in the capital of the Company in
proportion (as nearly as may be practicable) to their existing holdings; and
ii. to holders of other equity securities in the capital of the
Company, as required by the rights of those securities or, subject to such
rights, as the Directors otherwise considers necessary, and so that the
Directors may impose any limits or restrictions and make any arrangements
which it considers necessary or appropriate to deal with treasury shares,
fractional entitlements, record dates, legal, regulatory or practical problems
in or under the laws of any territory or the requirements of any regulatory
body or stock exchange; and
b. otherwise than pursuant to resolution 15(a) above, to the
allotment of equity securities and sale of treasury shares up to an aggregate
nominal amount of $26,021 (being 20% of the total number of voting rights of
the Company at the latest practicable date prior to the publication of this
Notice);
c. such that no allotment of securities shall be made which would
result in Ordinary Shares being issued or sold from treasury at a price which
is less than the higher of the Company's cum or ex income net asset value per
Ordinary Share at the latest practicable date before such allotment of equity
securities as determined by the Directors in their reasonable discretion; and
d. such power, unless renewed, to apply until the expiry of the
powers in resolution 13(a) but, in each case, during this period the Company
may make offers, and enter into agreements, which would, or might, require
equity securities to be allotted (and treasury shares to be sold) after the
power ends and the Directors may allot equity securities (and sell treasury
shares) under any such offer or agreement as if the power had not ended.
16. THAT, in addition to all existing authorities, the Directors of the
Company be and are hereby empowered, pursuant to sections 570 and 573 of the
Act, to allot or make offers or agreements to allot equity securities (as
defined in section 560 of the Act) for cash pursuant to the authority referred
to in resolution 13(b) above as if section 561 of the Act did not apply to any
allotment which is the subject of, and provided that this power shall expire
upon the expiry of, the authority conferred by resolution 13(b) above (unless
the authority is previously revoked, varied or extended by the Company in
general meeting), but so that this authority shall allow the Company to make,
before the expiry of this authority, offers or agreements which would or might
require equity securities to be allotted after such expiry and the Directors
of the Company may allot equity securities pursuant to any such offer or
agreement as if the authority had not expired.
17. THAT, in addition to all existing authorities, the Company be
authorised for the purposes of section 701 of the Act to make one or more
market purchases (as defined in section 693(4) of the Act) of its Ordinary
Shares, provided that:
a. the maximum number of Ordinary Shares hereby authorised to be
purchased is 1,301,039 (being 10% of the total number of voting rights of the
Company at the latest practicable date prior to the publication of this
Notice);
b. the minimum price (exclusive of expenses) which may be paid for
an Ordinary Share is the nominal amount of that share; and
c. the maximum price (exclusive of expenses) which may be paid for
an Ordinary Share is the higher of:
i. an amount equal to 5% above the average of the middle market
quotations for an Ordinary Share as derived from the Daily Official List of
the London Stock Exchange plc for the five business days immediately preceding
the day on which that Ordinary Share is contracted to be purchased; and
ii. an amount equal to the higher of the price of the last
independent trade and the highest current independent bid on the trading
venues where the purchase is carried out at the relevant time, such authority,
unless renewed or extended, to apply until the conclusion of next year's AGM
but during this period the Company may enter into a contract to purchase
Ordinary Shares, which would, or might, be completed or executed wholly or
partly after the authority ends and the Company may purchase Ordinary Shares
pursuant to any such contract as if the authority had not ended.
18. THAT a general meeting of the Company other than an Annual General
Meeting may be called on not less than 14 clear days' notice.
BY ORDER OF THE BOARD
JOHN BIRCH MARC GABELLI
Co-Chairman Co-Chairman
29 October 2024
Registered Office:
3 St. James's Place
London
England
SW1A 1NP
NOTES TO THE NOTICE OF THE AGM
The Annual General Meeting is currently anticipated to be open to members this
year. All members are entitled to vote at the meeting by providing a form of
proxy. Members are strongly advised to appoint the Chairman of the meeting as
their proxy.
PROXY APPOINTMENT
1 A member is entitled to appoint another person as his proxy to
exercise all or any of his rights to attend and to speak and vote at the AGM,
or any adjournment thereof. A proxy need not be a shareholder of the Company.
A shareholder may appoint more than one proxy in relation to the AGM provided
that each proxy is appointed to exercise the rights attached to a different
share or shares held by that shareholder.
2 A form of proxy is enclosed. The appointment of a proxy will not
prevent a member from subsequently attending and voting at the meeting in
person.
3 To appoint a proxy, the form of proxy and any power of attorney
or other authority (if any) under which it is executed (or a duly certified
copy of any such power or authority), must be either (a) sent to the Company's
Registrar, Computershare Investor Services PLC, at The Pavilions, Bridgwater
Road, Bristol, BS99 6ZY, or (b) the proxy appointment must be lodged using the
CREST Proxy Voting Service in accordance with Note 8 below, in either case so
as to be received no later than 1.00pm (GMT) on 3 December 2024 (or, if the
meeting is adjourned, no later than 48 hours (excluding any part of a day that
is not a working day) before the time of any adjourned meeting).
JOINT SHAREHOLDERS
4 In the case of joint holders of a share the vote of the senior
who tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names appear in the
register of members in respect of the share.
NOMINATED PERSONS
5 The right to appoint a proxy does not apply to persons whose
shares are held on their behalf by another person and who have been nominated
to receive communications from the Company in accordance with section 146 of
the Act ("Nominated Persons"). Nominated Persons may have a right under an
agreement with the member who holds the shares on their behalf to be appointed
(or to have someone else appointed) as a proxy. Alternatively, if Nominated
Persons do not have such a right or do not wish to exercise it, they may have
a right under such an agreement to give instructions to the person holding the
shares as to the exercise of voting rights.
INFORMATION ABOUT SHARES AND VOTING
6 Holders of Ordinary Shares are entitled to attend and vote at
general meetings of the Company. The total number of issued Ordinary Shares in
the Company on 1 October 2024, which is the latest practicable date before the
publication of this Notice is 6,831,292 Shares (excluding shares held in
treasury).
RIGHT TO ATTEND AND VOTE
7 Entitlement to attend and vote at the meeting, and the number of
votes which may be cast at the meeting, will be determined by reference to the
Company's register of members as at the close of business on 2 December 2024,
or, if the meeting is adjourned, no later than 48 hours (excluding any part of
a day that is not a working day) before the time fixed for the adjourned
meeting (as the case may be). In each case, changes to the register of members
after such time will be disregarded.
CREST MEMBERS
8 CREST members who wish to appoint a proxy or proxies through the
CREST electronic proxy appointment service may do so for the meeting (and any
adjournment of the meeting) by following the procedures described in the CREST
Manual available on the website of Euroclear UK and Ireland Limited
("Euroclear") at www.euroclear.com. CREST Personal Members or other CREST
sponsored members (and those CREST members who have appointed a voting service
provider) should refer to their CREST sponsor or voting service provider, who
will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be
valid, the appropriate CREST message (a "CREST Proxy Instruction") must be
properly authenticated in accordance with Euroclear's specifications and must
contain the information required for such instructions, as described in the
CREST Manual. The message (regardless of whether it constitutes the
appointment of a proxy or an amendment to the instruction given to a
previously appointed proxy) must, in order to be valid, be transmitted so as
to be received by Computershare Investor Services PLC Participant ID 3RA50 by
the latest time(s) for receipt of proxy appointments specified in Note 3
above. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST Applications
Host) from which the issuer's agent is able to retrieve the message by enquiry
to CREST in the manner prescribed by CREST. After this time any change of
instructions to a proxy appointed through CREST should be communicated to him
by other means.
CREST members (and, where applicable, their CREST sponsors or voting service
providers) should note that Euroclear does not make available special
procedures in CREST for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member concerned to take
(or, if the CREST member is a CREST personal member or sponsored member or has
appointed a voting service provider, to procure that his CREST sponsor or
voting service provider takes) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular
time. In this connection, CREST members (and, where applicable, their CREST
sponsors or voting service providers) are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the CREST
system and timings. The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5) (a) of the Uncertificated
Securities Regulations 2001.
CORPORATE REPRESENTATIVES
9 Any corporation which is a member can appoint one or more
corporate representatives who may exercise on its behalf all of its powers as
a member provided that they do not do so in relation to the same shares.
AUDIT CONCERNS
10 Shareholders should note that, under section 527 of the Act,
members meeting the threshold requirements set out in that section have the
right to require the Company to publish on a website a statement setting out
any matter relating to: (i) the audit of the Company's accounts (including the
auditors report and the conduct of the audit) that are to be laid before the
AGM for the financial year ended 30 June 2024; or (ii) any circumstance
connected with auditors of the Company appointed for the financial year ended
30 June 2024 ceasing to hold office since the previous meeting at which annual
accounts and reports were laid. The Company may not require the shareholders
requesting any such website publication to pay its expenses in complying with
sections 527 or 528 (requirements as to website availability) of the Act.
Where the Company is required to place a statement on a website under section
527 of the Act, it must forward the statement to the Company's auditors not
later than the time when it makes the statement available on the website. The
business which may be dealt with at the AGM for the relevant financial year
includes any statement that the Company has been required under section 527 of
the Act to publish on a website.
QUESTIONS
11 Any member attending the AGM has the right to ask questions. The
Company must cause to be answered any such question relating to the business
being dealt with at the meeting but no such answer need be given if (a) to do
so would interfere unduly with the preparation for the meeting or involve the
disclosure of confidential information, (b) the answer has already been given
on a website in the form of an answer to a question, or (c) it is undesirable
in the interests of the Company or the good order of the meeting that the
question be answered.
MEMBERS' RIGHT TO REQUEST A RESOLUTION TO BE PROPOSED AT THE MEETING
12 Under sections 338 and 338A of the Companies Act 2006, members
meeting the threshold requirements in those sections have the right to require
the Company:
i. to give, to members of the Company entitled to receive notice
of the meeting, notice of a resolution which may properly be moved and is
intended to be moved at the meeting; and/or
ii. to include in the business to be dealt with at the meeting any
matter (other than a proposed resolution) which may be properly included in
the business.
A resolution may properly be moved or a matter may properly be included in the
business unless:
a. (in the case of a resolution only) it would, if passed, be
ineffective (whether by reason of inconsistency with any enactment or the
Company's constitution or otherwise);
b. it is defamatory of any person; or
c. it is frivolous or vexatious.
Such a request may be in hard copy form or in electronic form, and must
identify the resolution of which notice is to be given or the matter to be
included in the business, must be authorised by the person or persons making
it, must be received by the Company not later than four weeks before the AGM,
and (in the case of a matter to be included in the business only) must be
accompanied by a statement setting out the grounds for the request.
WEBSITE INFORMATION
13 A copy of this notice and other information required by section
311A of the Act can be found at
www.gabelli.co.uk/investment-products/gabelli-merger-plus/.
USE OF ELECTRONIC ADDRESS
14 Members may not use any electronic address provided in either this
notice of meeting or any related documents (including the enclosed form of
proxy) to communicate with the Company for any purposes other than those
expressly stated.
DOCUMENTS AVAILABLE FOR INSPECTION
15 Copies of the letters of appointment of the non-executive Directors
may be inspected during normal business hours on any weekday (Saturdays,
Sundays and public holidays excepted) at the registered office of the Company
at 3 St. James's Place, London SW1A 1NP, United Kingdom, up to and including
the date of the AGM, and, if possible, on the date itself at the AGM venue 15
minutes before the meeting until it ends.
COMMUNICATION
16 Except as provided above, shareholders who have general queries
about the AGM should use the following means of communication (no other
methods of communication will be accepted):
· by calling the Registrar's helpline on: +44 (0)370 707 1390,
or
· by writing to the Registrar, Computershare Investor Services
PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, or
· by email to the Registrar web.queries@computershare.co.uk
GABELLI MERGER PLUS+ LOYALTY PROGRAMME
The Company has a Loyalty Programme in place for its long‑term shareholders.
Please see page 19 for benefits and eligibility requirements.
CONTACT THE COMPANY
www.gabelli.com/mergerplus (http://www.gabelli.com/mergerplus)
gmpassist@gabelli.com (mailto:gmpassist@gabelli.com)
+44 20 3206 2100
+1 914 921 5135
+39 02 3057 8299
APPENDIX
AIFMD REMUNERATION DISCLOSURES
GABELLI FUNDS, LLC
In accordance with the AIFMD and FCA Rules, Gabelli Funds, LLC's remuneration
policy and remuneration disclosures in respect of the year ended 30 June 2024
are available from Gabelli Funds, LLC on request.
This announcement is neither an offer to sell nor a solicitation of an offer
to buy these securities.
The offer is made by the prospectus only.
$100,111,000
Gabelli Merger Plus(+) Trust Plc
10,011,100
Ordinary Shares
Price $10 per Share
19 July 2017
Printed by Park Communications on FSC(®) certified paper.
Park works to the EMAS standard and its Environmental Management System is
certified to ISO 14001.
This publication has been manufactured using 100% offshore wind electricity
sourced from UK wind.
100% of the inks used are HP Indigo ElectroInk which complies with RoHS
legislation and meets the chemical requirements of the Nordic Ecolabel (Nordic
Swan) for printing companies, 95% of press chemicals are recycled for further
use and, on average 99% of any waste associated with this production will be
recycled and the remaining 1% used to generate energy.
This document is printed on Galerie Satin paper made of material from
well-managed, FSC(®)-certified forests and other controlled sources.
Gabelli Merger Plus+ Trust Plc
www.gabelli.com/mergerplus
gmpassist@gabelli.com
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