Gabelli Merger Plus+ Gabelli Merger -GMPP - Half-year Report
30/03/2023 07:00
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RNS Number : 6869U Gabelli Merger Plus+ Trust PLC 29 March 2023
GABELLI MERGER PLUS+ TRUST PLC
("The Company")
The company today announces its Half-Yearly Financial Report (Unaudited) for
the six months ended 31 December 2022
The full report will shortly be made available to access electronically on the
company's website at GAMCO Investors, Inc. (gabelli.co.uk)
(https://www.gabelli.co.uk/investment-products/gmp-portfolio-commentary-and-reports/)
and at the National Storage Mechanism
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2022
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.
Contents
Overview
Financial highlights 01
Interim Management Report and Responsibility Statement 02
The Search for Value - Gabelli Merger Plus+ Investment Methodology 05
Portfolio Manager's review 09
Portfolio
Portfolio summary 17
Financial Statements
Statement of comprehensive income 18
Statement of changes in equity 20
Statement of financial position 22
Notes to the financial statements 24
Company Information 45
OVERVIEW
FINANCIAL HIGHLIGHTS
PERFORMANCE
(Unaudited) (Unaudited) (Audited)
As at
As at
As at
31 December 2022
31 December 2021
30 June 2022
Net asset value (cum income)(1) $9.99 $9.83 $9.35
Net asset value per share (ex income)(1) $10.46 $10.20 $9.78
Dividends per share paid during the period $0.00 $0.24 $0.48
Share price $9.00 $9.00 $9.00
Discount to Net Asset Value(2) 9.91% 8.44% 3.74%
========= ========= =========
Total returns (Unaudited) (Unaudited) (Audited)
Half year ended
Half year ended
Half year ended
31 December 2022
31 December 2021
30 June 2022
Net asset value per share(3) 6.73% 6.72% (1.34)%
U.S. 3-month Treasury Bill Index 2.93% 0.09% 1.69%
Share price(4) 0.00% 29.80% 29.06%
========= ========= =========
Income (Unaudited) (Unaudited) (Audited)
Half year ended
Half year ended
Half year ended
31 December 2022
31 December 2021
30 June 2022
Revenue return per share $0.11 ($0.03) ($0.09)
========= ========= =========
ONGOING CHARGES(5)
(Unaudited) (Unaudited) (Audited)
Half year ended
Half year ended
Half year ended
31 December 2022
31 December 2021
30 June 2022
Annualised ongoing charges 1.85% 1.67% 1.67%
========= ========= =========
Source: Investment Manager (Gabelli Funds, LLC), verified by the Administrator
(State Street Bank and Trust Company). Figures stated as at 31 December
reflect the respective six month reporting period, figures as at 30 June
reflect the full 12 month financial year of the 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 7 and Note 8, pages 35 to 37.
2 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.
3 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.
4 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.
5 Ongoing Charges are operating expenses incurred in the running of
the Company, and are expressed as a percentage of the average net asset value
during the period. Please refer to note 6 on page 33 for more details on
Ongoing Charges calculation.
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
We share this 1st Half Report to Shareholders, encompassing the period from
July 2022 through December 2022, and note certain developments post calendar
year end. This period included several important changes for the Gabelli
Merger Plus+ Trust Plc (the "Company"), which include:
· NAV increase of 6.73% against a volatile market
backdrop.
· Tender Offer implemented across two tranches in
accordance with the Loyalty Programme. The Tranche One Tender repurchased
3,055,957 shares, resulting in 7,182,249 shares in issue at calendar year end
2022 versus 10,238,206 shares in issue in July 2022. Subsequently, the Tranche
Two Tender was competed in February 2023, and repurchased 331,457 shares,
resulting in 6,850,792 shares in issue in March 2023.
· A Close company status was determined as a result
of the completed Tranche One Tender Offer, and as such the Company is taxable.
The Company became a close company due to becoming controlled by a single
participator, Associated Capital Group, Inc. holding roughly 90% of the 2023
shares in issue.
· 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. Although the Company no longer meets the requirements of
section 1158 to be an investment trust, it continues to conduct its affairs as
an investment company, and had done so up until the Tranche Two Tender offer.
· Confirmation of the Investment Policy in
accordance with the original offering prospectus.
· The allowance to issue Special Voting Loyalty
Shares at the AGM for qualifying shareholders under the terms of the Loyalty
Programme.
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 specialized
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. 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 16 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 Company is a close company and no longer avails
itself of investment trust status. The net asset value presented here is
before applicable taxes, should be used to illustrate portfolio change, and is
provided for informational purposes only.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Company fall into the
following broad categories: investment portfolio; global macro events;
operational; market and share price; financial; corporate governance and
regulatory compliance; taxation; emerging and geopolitical risks. The global
macro event category includes specific market and operational risks associated
with the ongoing war in Ukraine and the aftermath of the global COVID-19
pandemic, which continue to cause uncertainty and disruption across global
economies and markets. Information on each of these identified risk areas,
including mitigating actions taken by the Company, was provided on pages 16 to
18 in the Strategic Report in the Company's Annual Report and Accounts for the
year ended 30 June 2022.
The Directors together with the Manager will continue to monitor business
continuity and resilience processes with the objective of mitigating any
potential for ongoing impact of COVID-19 and the conflict in Ukraine.
RELATED PARTY DISCLOSURE AND TRANSACTIONS
During the first six months of the current 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.
SIGNIFICANT EVENTS
In the six-month period from 1 July - 31 December 2022, the Company conducted
and completed the Tranche One Tender Offer, as set out in the circular
published on 19 August 2022. The tender results were announced via RNS on 4
October 2022. The Company has since determined that the post tender remaining
Shareholder base has resulted in the Company being deemed a Close Company for
the purposes of taxation, and the company no longer avails itself of
investment trust status. The Company is committed to delivering its investment
programme for the long term and Directors, together with management are in the
process of examining alternatives to minimise taxes, costs and expenses for
its Shareholders.
GOING CONCERN
The Board have closely monitored the impact of the ongoing COVID-19 pandemic,
Brexit uncertainty, and the war in Ukraine. Those impacts and related
continuing uncertainty have short- and potentially medium-term implications
for the Company's investment strategy. Additionally, the Board is monitoring
the period ahead on the basis of the Company no longer having investment trust
status and its implications on the Company's investment return profile over
the longer term. In context, the Board continuously monitors the Company's
investment portfolio, liquidity and gearing, along with levels of market
activity, to appropriately minimise and mitigate consequential risks to
capital and future income such as geopolitical risks, financial risks etc.
Taking these factors into account, the Directors confirm that they have a
reasonable expectation that the Company will continue to operate and meet its
expenses as they fall due. For these reasons, the Directors consider there is
reasonable evidence to continue to adopt the going concern basis in preparing
the accounts as at 31 December 2022.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within the half
yearly financial report has been prepared in accordance with applicable
International Accounting Standard 34 - 'Interim Financial Reporting' (IFS)
as contained in UK-adopted international accounting standard; and
· the Interim Management Report, together with the Portfolio Manager's
Review, include a fair review of the information required by 4.2.7R and 4.2.8R
of the Disclosure Guidance and Transparency Rules.
This half yearly financial report has not been audited or reviewed by the
Company's auditors.
The half yearly financial report was approved by the Board on 28 March 2023
and the above responsibility statement was signed on its behalf by the
Chairman.
MARC GABELLI
Chairman
FOR AND ON BEHALF OF THE BOARD
28 March 2023
THE SEARCH FOR VALUE - GABELLI MERGER PLUS+ INVESTMENT METHODOLOGY
"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. 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."
Invest Like Owners Corporate Mergers Provide Valuable Insights
Fundamental and Active Complement to Long Term Value Investing
Capital Allocation Rigorous Analysis Dynamic Management
Ideas sourced from proprietary database of Gabelli PMV with Catalyst original Focus on strategic, cash transactions with financing secured Real time monitoring of spreads/positions
research coupled with rigorous analysis of valuations provided as corporations
allocate capital through announced corporate events and M&A transactions Understand all downside risks including its fundamental basis Extensive proprietary database
worldwide
Focus on legal and governance, MAC clauses, financing conditions, Actively traded as the event progresses and according to closing
shareholders' votes
Positions are increased gradually as transaction hurdles are passed
Analyse all deal issues such as antitrust / regulatory items
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
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 analyze 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 the manager 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.
The Gabelli Investment Process
Private Market Value with a Catalyst(TM)
Idea generation Research Process Portfolio Construction
Fundamental Analysis Research Universe Investable Universe Estimate PMV Identify Catalysts Implementation Portfolio Monitoring
Description · Gabelli research universe · Company Visits · Value to strategic buyer of entire business · Catalyst implies a time frame for realising value · Free cash flow generation · Daily investment meetings
· Covering industries globally · Proprietary analysis · Rigorous asset and core business valuation · Financial Engineering · Competitive position · Continuous risk management and thesis validation
· Companies not typically covered by Wall Street · Focus on core competencies · Intrinsic value plus control premium/synergy benefits · Spin-offs · High barriers to entry · Weekly PM meetings
· Change in management · Pricing power · Weekly risk management meetings
· New product · Franchise value
· M&A · Proven leadership
# of companies ~2,000 ~500 40-60 Core Positions
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 utilizes 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 realize 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 analyze 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 utilization of public resources.
PORTFOLIO MANAGER'S REVIEW
METHODOLOGY AND MARKET OPPORTUNITY
In this context, let us outline the investment landscape during the 2H of the
year to 31 December 2022 and the environment ahead. We are especially
enthusiastic about the opportunities to grow client wealth in the decades to
come, and we highlight below several factors that should help drive results.
These include:
· Increased market volatility, which enhances our ability to
establish positions for the prospect of improved returns;
· A robust market for corporate deal making as conditions
continue to provide an accommodative market for mergers and acquisitions;
· A rising interest rate environment, providing attractive
merger spread opportunities;
· The Fund's experienced investment team, which pursues
opportunities globally through the disciplined application of the Gabelli
investment methodology.
GLOBAL DEAL ACTIVITY(1
) Global deal merger and acquisition activity ("M&A") totaled $3.6
trillion during 2022, a year-over-year decrease of 37% (30% decrease if SPACs
are excluded). Deal activity began to slow down in the second half of the
year, as the third quarter was the first in two years that did not surpass $1
trillion in announced deal activity. The total number of deals worldwide
decreased only 17% compared to 2021. Mega deals-those greater than $10
billion-totalled $787 billion, while deals with values between $1 billion and
$5 billion accounted for $1.0 trillion during the year, down 31% and 44% year
over year, respectively.
Cross border M&A activity totaled $1.1 trillion for the calendar year, a
decrease of 46% from last year's all-time high. Private equity deals decreased
36% year over year; however, these buyouts accounted for a record 20% of total
deal activity.
1 Thomson Reuters M&A Review - Full Year 2022
While deals involving United States-based targets declined 38% in 2022, they
still accounted for 43% of global deal activity. European M&A tallied $850
billion of transactions over the same period, a decrease of 39%. Asia Pacific
targets totalled $830 billion in 2022, a 32% decrease year over year. The
Technology sector was the biggest contributor to merger activity during the
first half, totaling $720 billion, accounting for a record 20% of total
announced deal volume. The Energy & Power and Industrials sectors were
also large contributors, accounting for 13% and 12% of M&A activity,
respectively.
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.
PORTFOLIO IN REVIEW
2022 was a difficult year for risk assets, marked by for risk assets, marked
by stubborn inflation, conflict in Europe, and the Federal Reserve's war on
inflation. Higher interest rates and the prospect of a recession spared
neither stocks nor bonds, as the S&P 500 and investment grade bonds were
down 18% and 13%, respectively. As we have noted in the past, our merger
arbitrage portfolios generate returns from taking idiosyncratic deal risk and
not market risk, and thus were able to earn a positive return for our clients,
despite the volatile markets.
Uncertainty in the boardroom, elevated borrowing costs, and a bid-ask
divide-that often persists until market participants can digest a sharp
decline in asset values-all contributed to a 30% decline in M&A volumes
(ex-SPACs) in 2022. However, despite the sharp decline from record 2021
levels, volumes only declined mid-single digits from more normalized 2018 and
2019 levels. The fourth quarter did enjoy an uptick in announced M&A with
a healthy $800 billion in deal activity. We expect M&A to remain fairly
robust on a historical basis.
In terms of merger arbitrage spreads, they remain wide and attractive compared
to recent history. There are three main reasons for this: (1) market
volatility; (2) perceived regulatory risk; and (3) interest rates. Deals close
in all market environments, and volatility provides us with an opportunity, as
it is often indiscriminate. Mispriced risk allows us to add to our highest
conviction positions at lower prices-the benefits of which will be apparent as
these transactions progress towards closing.
Regarding regulatory risk, the aggressive policy reform rhetoric we have
written about in the past has translated in some cases into aggressive action.
Some deals were able to close in spite of regulatory action (Change
Healthcare) and some were able to find alternative, less problematic suitors
(Aerojet Rocketdyne). We feel as though this regulatory regime has created
unique investment opportunities and an attractive risk/reward.
Lastly, the merger arbitrage strategy is a beneficiary of rising rates, as the
risk free rate is one of the components of a deal spread. As rates rise,
nominal spreads should widen, all things being equal. With the 3 month U.S.
Treasury bill yielding wellover 4%, this should continue to create a more
compelling spread environment going forward.
We continue to find attractive investment opportunities in newly announced and
pipeline deals. We remain focused on investing in highly strategic,
well-financed deals with an added focus on near-term catalysts, and are upbeat
about our prospects to generate absolute returns in 2023.
NOTABLE DRIVERS OF PERFORMANCE INCLUDE:
· Aerojet Rocketdyne Holdings, Inc. (AJRD-NYSE), which designs
and manufactures specialized power and propulsion systems for space and
defense applications, agreed to be acquired by L3Harris Technologies for $58
cash per share, or about $5 billion. In December 2020, Aerojet agreed to be
acquired by Lockheed Martin for $51 cash per share, but that deal was
terminated in February 2022 after the U.S. Fair Trade Commission sued to block
the transaction, claiming that Lockheed would be able to raise the prices the
U.S. government pays for rocket engines, and potentially deliver a lower
quality product to Lockheed's rival defense contractors that utilize Aerojet's
propulsion systems. We believe the acquisition by L3Harris provides fewer
antitrust risks than the Lockheed transaction did. L3Harris primarily produces
electronics and communications systems, so there is no horizontal overlap with
Aerojet's business and no benefit from bundling the two companies' products.
An important distinction from the Lockheed deal is that there is also no
vertical integration, as Aerojet does not supply L3Harris with any products
used in L3's programs, and Aerojet will become a new business unit for L3 as a
merchant supplier of engines to prime contractors. We believe shares of
Aerojet Rocketdyne were inexpensive after the deal with Lockheed Martin was
called off and certain shareholders were forced to sell their position. At the
time, shares traded at less than 10x EBITDA, a significant discount to its
historical valuation, and Tony Bancroft, Gabelli's defense analyst, thought
other buyers for Aerojet would emerge and that shares were worth more than $60
in a takeover. We expect the L3Harris deal to close in mid-2023.
· Avast plc (AVST LN-London), which designs and markets
computer security software, received approval from the U.K. Competition and
Markets Authority (CMA) to be acquired by NortonLifeLock in August, and
subsequently called in September. U.K. CMA approval was he final remaining
regulatory approval required, and uncertainty that approval would be granted
caused shares of Avast to trade at a very large discount to deal terms - more
than 30% gross. It surprised the market when the U.K. CMA referred the
acquisition to a Phase 2 review in March after the companies had received
unconditional clearances from every other global regulator that reviewed the
transaction, but at the end of the review the CMA reached the same conclusion
as other regulators. Under the terms of the agreement, Avast shareholders were
entitled to elect cash and shares of NortonLifeLock worth about £7.15 per
share, or roughly $9 billion.
· Change Healthcare, Inc. (CHNG-NASDAQ), which provides
software to the insurance and healthcare industries that enables payments and
analytics for health insurers and clinicians, won a decisive victory in court
against the U.S. Department of Justice. In January 2021, Change Healthcare
agreed to be acquired by UnitedHealth Group's Optum division for $25.75 cash
per share or about $13 billion. In February 2022, the DOJ sued to block the
transaction, claiming the merger would give UnitedHealth access to
competitors' data and reduce competition in markets for commercial insurance
and the processing of claims. The DOJ complaint ignored an agreement Change
and UnitedHealth had reached with TPG Capital to sell for $2.2 billion
Change's Claims Editing Business, the only business line in which Change and
UNH competed directly. Change's business fundamentals and balance sheet had
improved while the merger was pending and, as an incentive to convince Change
to extend the merger contract to allow time for the trial, UnitedHealth agreed
to pay an extra $2 cash per share if the companies were successful in court,
bringing total consideration to $27.75 cash per share, an increase in deal
terms of about 8%. UnitedHealth also agreed to pay $650 million to Change if
they were not successful in court, which was also worth about $2 per share to
Change, and increased the standalone value of Change if the companies were to
lose their court case and the deal was blocked. U.S. District Court Judge for
the District of Columbia Carl Nichols issued his decision on September 19th,
denying the DOJ's request to enjoin the merger. Judge Nichols rejected
arguments made by the DOJ that United Healthcare would violate well
established firewalls between Optum and UnitedHealth's traditional healthcare
insurance business and share competitively sensitive information, and
determined the value of sharing that information was lower than the government
alleged. The Department of Justice has thus far elected not to appeal the
decision, and Change Healthcare and UnitedHealth completed the merger on 3
October 2022.
· Mandiant (MNDT-NASDAQ), a global cybersecurity company
focused on protecting customers from various forms of cyber attacks, received
several key approvals for its acquisition by Google in July including in
Austria and Japan. However, none was more important receiving antitrust
approval from the U.S. Department of Justice. Given the overhang of the DOJ's
ongoing investigation of Google's display advertising business, antitrust
approval in the U.S. was viewed as the key hurdle to be cleared before
Mandiant could be acquired for $23.00 cash per share, or about $5 billion. In
June, shares of Mandiant traded at a discount of more than 8% outright on
concerns the antitrust review could drag out if it became ensnared in the
DOJ's separate investigation into Google. The deal ultimately closed on 12
September 2022.
· Swedish Match (SWMA SS-Stockholm), which manufactures and
markets smokeless tobacco products, was acquired by Philip Morris after its
minimum tender condition was satisfied in November. Swedish Match initially
agreed to be acquired by Philip Morris in May 2022 for SEK106 cash per share.
Philip Morris increased the deal price to SEK116 (+9.4%) in October 2022 in
response to Swedish Match shareholder opposition to deal terms, arguing the
price did not adequately reflect the value and growth prospects of SWMA's
business, and in particular its ZYN products.
· Twitter, Inc. (TWTR-NYSE), which operates the microblogging
social network Twitter, was acquired by an entity controlled by Elon Musk.
Twitter agreed to be acquired by Musk on April 25, 2022 for $54.20 cash per
share, which valued Twitter at $44 billion. Mr. Musk already owned 9% of
Twitter before he made his acquisition proposal to the company. Following
announcement of the deal, Musk accused Twitter of misrepresenting the number
of bot accounts on its platform and sought to terminate the transaction,
likely in an attempt to obtain a price cut on the deal. Twitter sued Musk in
Delaware court to honor the merger contract, and following extensive fact
gathering leading up to the trial Musk relented, honouring his original
commitment to buy the company for $54.20 cash per share. The transaction
closed on 28 October 2022.
SELECT PORTFOLIO HOLDINGS AS OF 31 DECEMBER 2022
Activision Blizzard, Inc. (ATVI-NASDAQ) agreed to be acquired by Microsoft
Corp. (MSFT-NASDAQ). Activision Blizzard develops and publishes interactive
entertainment content and services. Under terms of the agreement, Activision
shareholders will receive $95.00 cash per share, valuing the transaction at
approximately $74 billion. The transaction is subject to shareholder as well
as regulatory approvals.
Aerojet Rocketdyne Holdings, Inc. (AJRD-NYSE) agreed to be acquired by
L3Harris Technologies, Inc. (LHX-NYSE). Aerojet designs, develops,
manufactures, and sells aerospace and defense products and systems in the U.S.
Under terms of the agreement, Aerojet shareholders will receive $58.00 cash
per share, valuing the transaction at approximately $5 billion. The
transaction is subject to shareholder as well as regulatory approvals.
First Horizon Corp. (FHN-NYSE) agreed to be acquired by The Toronto-Dominion
Bank (TD CN-Toronto). First Horizon operates as the bank holding company for
First Horizon Bank that provides various financial services. Under terms of
the agreement, First Horizon shareholders will receive $25.00 cash per share,
valuing the transaction at approximately $13 billion. The transaction is
subject to shareholder as well as regulatory approvals.
Horizon Therapeutics plc (HZNP-NASDAQ) agreed to be acquired by Amgen, Inc.
(AMGN-NASDAQ). Horizon is a biotechnology company that focuses on the
discovery, development, and commercialization of medicines for rare,
autoimmune, and severe inflammatory diseases. Under terms of the agreement,
Horizon shareholders will receive $116.50 cash per share, valuing the
transaction at approximately $28 billion. The transaction is subject to
shareholder as well as regulatory approvals.
PNM Resources, Inc. (PNM-NYSE) agreed to be acquired by Avangrid, Inc.
(AGR-NYSE). PNM Resources engages in the energy and energy-related businesses
in the U.S. Under terms of the agreement PNM shareholders will receive $50.30
cash per share, valuing the transaction at approximately $8 billion. The
transaction is subject to shareholder as well as regulatory approvals.
Shaw Communications, Inc. (SJR/B CN-Toronto) agreed to be acquired by Rogers
Communications, Inc. (RCI/B CN-Toronto). Shaw Communications operates as a
connectivity company in North America in the Wireline and Wireless segments of
the market. Under terms of the agreement, Shaw shareholders will receive
C$40.50 cash per share, valuing the transaction at approximately C$26 billion.
The transaction is subject shareholder as well as regulatory approvals.
South Jersey Industries, Inc. (SJI-NYSE) agreed to be acquired by
Infrastructure Investment Fund. South Jersey Industries provides
energy-related products and services. Under terms of the agreement South
Jersey shareholders will receive $36.00 cash per share, valuing the
transaction at approximately $8 billion. The transaction is subject to
shareholder as well as regulatory approvals.
STORE Capital Corp. (STOR-NYSE) agreed to be acquired by GIC and Oak Street.
STORE Capital is an internally managed net-lease real estate investment trust.
Under terms of the agreement STORE shareholders will receive $32.25 cash per
share, valuing the transaction at approximately $14 billion. The transaction
is subject to shareholder as well as regulatory approvals.
TEGNA, Inc. (TGNA-NYSE) agreed to be acquired by Standard General LP. TEGNA
operates television stations that deliver television programming and digital
content in the U.S. Under terms of the agreement, TEGNA shareholders will
receive $24.00 cash per share, valuing the transaction at approximately $5
billion. The transaction also includes an additional cash consideration in the
form of a "ticking fee" to be paid 9 months after signing. The transaction is
subject to shareholder as well as regulatory approvals.
Tower Semiconductor Ltd. (TSEM-NASDAQ) agreed to be acquired by Intel Corp.
(INTC-NASDAQ). Tower Semiconductor operates foundries, proving manufacturing
of integrated circuits (ICs) worldwide. Under terms of the agreement Tower
shareholders will receive $53.00 cash per share, valuing the transaction at
approximately $5 billion. The transaction is subject to shareholder as well as
regulatory approvals.
SELECT CLOSED DEALS AS OF 31 DECEMBER 2022
Alleghany Corp. was acquired by Berkshire Hathaway, Inc. in October 2022.
Alleghany provides property and casualty reinsurance and insurance products in
the U.S. and internationally. On 21 March 2022, Berkshire Hathaway announced
it would acquire Alleghany Corp for $848.02 cash per share, valuing the
transaction at approximately $12 billion.
Avast plc was acquired by NortonLifeLock, Inc. in September 2022. Avast
provides digital security and privacy products. On 12 August 2021
NortonLifelock announced it would acquire Avast for $7.61 cash and 0.0302
shares of NortonLifeLock common stock per share, valuing the transaction at
approximately £6 billion.
Change Healthcare, Inc was acquired by UnitedHealth Group, Inc. in October
2022. Change Healthcare provides data and analytics-driven solutions to
enhance clinical, financial, administrative, and patient engagement outcomes
in the U.S. healthcare system. On 5 January 2021 UnitedHealth Group announced
it would acquire Change Healthcare for $25.75 cash per share, valuing the
transaction at approximately $8 billion.
Citrix Systems, Inc was acquired by Vista Equity Partners and Elliot
Investment Management in September 2022. Citrix Systems provides workspace,
app delivery and security, and professional services worldwide. On 31 January
2022, Vista Equity Partners and Elliot Investment Management announced they
would acquire Citrix Systems for $104.00 cash per share, valuing the
transaction at approximately $17 billion.
Coherent, Inc. was acquired by II-VI, Inc. in July 2022. Coherent provides
lasers, laser-based technologies, and laser-based system solutions. On 25
March 2021 II-VI announced it would acquire Coherent for $220.00 cash and 0.91
shares of II-VI common stock per share, valuing the transaction at
approximately $7 billion.
Mandiant, Inc. was acquired by Alphabet, Inc. in September 2022. Mandiant
provides cyber defense solutions. On 8 March 2022, Alphabet announced it would
acquire Mandiant for $23.00 cash per share, valuing the transaction at
approximately $5 billion.
Meggitt plc was acquired by Parker-Hannifin Corp. in September 2022. Meggitt
designs and manufactures components and sub-systems in the U.K., the U.S., and
internationally. On 2 August 2021, Parker-Hannifin announced it would acquire
Meggitt for £8.00 cash per share, valuing the transaction at approximately
£7 billion.
Nielsen Holdings plc was acquired by Evergreen Coast Capital and Brookfield
Business Partners in October 2022. Nielsen Holdings operates as a measurement
and data analytics company worldwide. On 29 March 2022, Evergreen Coast
Capital and Brookfield Business Partners announced they would acquire Nielsen
for $28.00 cash per share, valuing the transaction at approximately $16
billion.
Swedish Match AB was acquired by Philip Morris International, Inc. in November
2022. Swedish Match develops, manufactures, markets, and sells snus and other
smokeless tobacco products, nicotine pouches, and other tobacco products in
Scandinavia, the U.S., and internationally. On 11 May 2022, Phillip Morris
announced it would acquire Swedish Match for SEK 106.00 cash per share,
valuing the transaction at approximately $16 billion. Phillip Morris
eventually bumped the terms to SEK 116.00 cash per share to secure the
requisite number of shares in the tender.
Twitter, Inc. agreed to be acquired by Elon Musk. Twitter operates as a
platform that allows users to consume, create, distribute, and discover
content. On 25 April 2022, Elon Musk announced he would be acquiring Twitter
for $54.20 cash per share, valuing the transaction at approximately $44
billion.
GABELLI FUNDS, LLC
28 March 2023
PORTFOLIO
PORTFOLIO SUMMARY
LARGEST PORTFOLIO SECURITY HOLDINGS (EXCLUDING CASH AND CASH EQUIVALENTS)
(Unaudited)
As at 31 December 2022
Security(1) Offsetting position(2) % of total Market Offsetting % of total
portfolio(6)
value(4)
market
portfolio(3 )
(gross)
$000
value(5)
(net)
$000
Activision Blizzard Inc 4.5 2,791 4.5
Shaw Communications Inc 4.2 2,592 4.2
First Horizon Corp 4.1 2,566 4.1
South Jersey Industries plc 3.1 1,959 3.1
TEGNA Inc 3.1 1,924 3.1
--------------- --------------- --------------- ---------------
STORE Capital Corp 3.1 1,904 3.1
Horizon Therapeutics plc 2.8 1,770 2.8
PNM Resources Inc 2.6 1,647 2.6
Tower Semiconductor Ltd 2.5 1,544 2.5
Aerojet Rocketdyne Holdings Inc 2.3 1,438 2.3
--------------- --------------- --------------- ---------------
MoneyGram International Inc 2.2 1,365 2.2
LHC Group Inc 2.1 1,285 2.1
Altaba Inc 2.1 1,280 2.1
Coupa Software Inc 2.0 1,235 2.0
Liberty Media Corp-Liberty SiriusXM 1.9 1,173 1.9
--------------- --------------- --------------- ---------------
VMware Inc Broadcom Inc 1.8 1,093 (499) 1.0
Signify Health Inc 1.6 1,020 1.6
Rogers Corp 1.6 1,018 1.6
Sierra Wireless Inc 1.6 993 1.6
Yamana Gold Inc Pan American 1.6 987 (748) 0.4
Silver/Agnico Eagle
Mines
--------------- --------------- --------------- ---------------
Subtotal 50.8 31,584 (1,247) 48.8
Other holdings(7) 49.2 33,699 (1,725) 51.2
--------------- --------------- --------------- ---------------
Total holdings 100.0 65,283 (2,972) 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 of the long position as a percentage of
the total portfolio value.
7 Including derivatives and equity short positions, and excluding U.S.
Treasuries.
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Half year ended 31 December 2022
Half year ended 31 December 2021
Year ended 30 June 2022
Income Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
$000
$000
$000
$000
$000
$000
$000
$000
$000
Investment income 5 487 - 487 626 - 626 1,076 - 1,076
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total investment income 487 - 487 626 - 626 1,076 - 1,076
--------------- --------------- --------------- ========= ========= ========= ========= ========= =========
Gains on investments
Net realised and unrealised gains/(losses) on investments 3 - 4,826 4,826 - 1,894 1,894 - (460) (460)
Net realised and unrealised currency gains on investments - 208 208 - 183 183 - 490 490
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net gains on investments - 5,034 5,034 - 2,077 2,077 - 30 30
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total income and gains on investments 487 5,034 5,521 626 2,077 2,703 1,076 3,779 4,855
========= ========= ========= ========= ========= ========= ========= ========= =========
Expenses
Portfolio management fee 6 (369) - (369) (433) - (433) (842) - (842)
Performance fee 6 - (963) (963) - (287) (287) - - -
Other expenses 6 (697) (111) (808) (493) (90) (583) (1,127) (124) (1,251)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total expenses (1,066) (1,074) (2,140) (926) (377) (1,303) (1,969) (124) (2,093)
========= ========= ========= --------------- --------------- --------------- --------------- --------------- ---------------
Net return on ordinary activities before finance costs and taxation (579) 3,960 3,381 (300) 1,700 1,400 (893) (94) (987)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Interest expense and similar charges - - - - - - (1) - (1)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss) before taxation (579) 3,960 3,381 (300) 1,700 1,400 (894) (94) (988)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Taxation on ordinary activities 7 1,580 - 1,580 (16) - (16) (49) - (49)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss) for the period 1,000 3,960 4,960 (316) 1,700 1,384 (943) (94) (1,037)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Earnings/(loss) per share (basic and diluted) 8 $0.11 $0.45 $0.57 ($0.03) $0.17 $0.14 ($0.09) ($0.01) ($0.10)
========= ========= ========= ========= ========= ========= ========= ========= =========
The total column of this statement represents the Statement of Comprehensive
Income prepared in accordance with International Financial Reporting Standards
("IFRS"). 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 period ended 31
December 2022.
The Company does not have any income or expense that is not included in net
profit for the period. Accordingly, the net profit for the period is also the
total comprehensive income for the period, as defined in IAS1 (revised).
The notes on pages 24 to 44 form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 DECEMBER 2022
HALF YEAR ENDED 31 DECEMBER 2022 (UNAUDITED)
Called up Special Capital Revenue Total
Share Capital
Distributable
Reserve
Reserve*
$000
$000
Reserve*
$000
$000
$000
Balance as at 1 July 2022 103 79,062 20,965 (4,356) 95,774
Ordinary shares bought back into treasury - - (29,001) - (29,001)
Profit/(loss) for the period after tax on ordinary activities - - 3,960 1,000 4,960
--------------- --------------- --------------- --------------- ---------------
Balance as at 31 December 2022 103 79,062 (4,076) (3,356) 71,734
========= ========= ========= ========= =========
HALF YEAR ENDED 31 DECEMBER 2021 (UNAUDITED)
Called up Special Capital Revenue Total
Share Capital
Distributable
Reserve
Reserve*
$000
$000
Reserve*
$000
$000
$000
Balance as at 1 July 2021 103 83,976 21,059 (3,413) 101,725
Profit/(loss) for the period after tax on ordinary activities - - 1,700 (316) 1,384
Dividends paid - (2,457) - - (2,457)
--------------- --------------- --------------- --------------- ---------------
Balance as at 31 December 2021 103 81,519 22,759 (3,729) 100,652
========= ========= ========= ========= =========
YEAR ENDED 30 JUNE 2022 (AUDITED)
Called up Special Capital Revenue Total
Share Capital
Distributable
Reserve
Reserve*
$000
$000
Reserve*
$000
$000
$000
Balance as at 1 July 2021 103 83,976 21,059 (3,413) 101,725
Loss for the period after tax on ordinary activities - - (94) (943) (1,037)
Dividends paid - (4,914) - - (4,914)
--------------- --------------- --------------- --------------- ---------------
Balance as at 30 June 2022 103 79,062 20,965 (4,356) 95,774
========= ========= ========= ========= =========
* The Revenue Reserve and Special Distributable Reserve are
distributable. The amount of the Revenue Reserve and Special Distributable
Reserve that is distributable is not necessarily the full amount of the
reserves as disclosed within these financial statements. As at 31 December
2022, the net amount of reserves that are distributable are $74,093,000 (31
December 2021: $77,790,000, 30 June 2022: $74,706,000).
The notes on pages 24 to 44 form part of these financial statements.
STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
As at 31 December 2022
As at 31 December 2021
As at 30 June 2022
Note $000 $000 $000 $000 $000 $000
Non-current assets
Investments held at fair value through profit or loss 3 56,938 88,059 92,381
Current assets
Cash and cash equivalents 9 14,727 14,717 5,911
Deferred tax asset 7 2,354 - -
Receivable for investment sold 447 76 423
Other receivables 12 157 88 66
--------------- --------------- --------------- --------------- --------------- ---------------
17,685 14,881 6,400
Current liabilities
Portfolio management fee payable (52) (71) (61)
Performance fee payable (963) (287) -
Payable for investment purchased (268) (531) (1,875)
Taxes payable (741) (531) (1,875)
Other payables 12 (455) (300) (212)
Bank overdrafts (162) - (391)
--------------- --------------- --------------- --------------- --------------- ---------------
Net current assets 15,045 13,692 3,861
========= ========= =========
Non-current liabilities
Investments at fair value through profit or loss 3 (197) (1,048) (416)
Offering fees payable (52) (51) (52)
--------------- --------------- ---------------
Net assets 71,734 100,652 95,774
========= ========= =========
Share capital and reserves
Called-up share capital 10 103 103 103
Special distributable reserve* 79,062 81,519 79,062
Capital reserve (4,076) 22,759 20,965
Revenue reserve* (3,355) (3,729) (4,356)
--------------- --------------- --------------- --------------- --------------- ---------------
Total shareholders' funds 71,734 100,652 95,774
Net asset value per ordinary share $9.99 $9.83 $9.35
========= ========= =========
* The Revenue Reserve and Special Distributable Reserve are
distributable. The amount of the Revenue Reserve and Special Distributable
Reserve that is distributable is not necessarily the full amount of the
reserves as disclosed within these financial statements. As at 31 December
2022, the net amount of reserves that are distributable are $74,093,000 (31
December 2021: $77,790,000, 30 June 2022: $74,706,000).
Gabelli Merger Plus+ Trust Plc is registered in England and Wales under
Company number 10747219.
The notes on pages 24 to 44 form part of these financial statements.
The financial statements on pages 18 to 23 were approved by the Board of
Directors on 28 March 2023 and signed on its behalf by:
MARC GABELLI CHAIRMAN
Notes to the financial statements
1 Condensed financial statements
The half yearly report has not been audited by the Company's auditors.
2 Accounting policies
(a) Basis of preparation - The financial statements of Gabelli Merger Plus+
Trust Plc have been prepared in accordance with the UK adopted International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). The financial statements have been prepared under the
historical cost convention, as modified by the revaluation of financial assets
and financial liabilities (including derivative financial instruments) at fair
value through profit or loss.
The principal accounting policies adopted by the Company are set out below.
Where presentational guidance set out in the Statement of Recommended Practice
('SORP') for investment trusts issued by the Association of Investment
Companies ('AIC') in October 2019 is consistent with the requirements of IFRS,
the Directors have sought to prepare the financial statements on a basis
compliant with the recommendations of the SORP.
For the accounting period ended 30 June 2022, the Company met the requirements
to be an investment trust under sections 1158 and 1159 of the Corporation
Taxes Act of 2010. However, as a result of the Tranche One Tender Offer
completed in the third quarter of 2022, the Company subsequently became a
close company due to becoming controlled by a single participator, Associated
Capital Group, Inc.
Although no longer a trust, the Company has elected to continue to prepare the
financial statements on a basis compliant with the recommendations of the
SORP. The SORP is issued by the AIC and it sets out recommendations, intended
to represent current best practice, on the form and contents of the financial
statements of Investment Companies. Investment Companies include investment
trust companies that have been, currently are, or are directing its affairs so
as to enable it to obtain or retain approval under Section 1158. Although the
Company no longer meets the requirements of section 1158 to be an investment
trust, it had done so up until 30 June 2022 and 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 the 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, having taken account of the continuing
market regulatory changes affecting investee companies, investment valuations,
implications of the COVID-19 pandemic, and the war in Ukraine, 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 31
December 2022.
In forming this position, the Directors consulted with shareholders utilising
the tender offer process, considered the Company's investment objectives, risk
management policies, capital management policies and procedures, the nature of
the portfolio and expenditure projections in detail.
(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. All 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.
The formation and initial expenses of the Company are allocated to capital.
(g) Investments - Investments have been designated upon initial recognition at
fair value through profit or loss. Investments are recognised and
de-recognised at trade date where a purchase or sale is under a contract whose
terms require delivery within the time frame established by the market
concerned, and are initially measured at fair value. Subsequent to initial
recognition, investments are valued at fair value. Movements in the fair value
of investments and gains/losses on the sale of investments are taken to the
Statement of Comprehensive Income as capital items.
The Company's investments are classified as held at fair value through profit
or loss in accordance with applicable International Financial Standards.
Financial assets and financial liabilities are recognised in the Statement of
Financial Position when the Company becomes a party to the contractual
provisions of the instrument. The Company shall offset financial assets and
financial liabilities if it has a legally enforceable right to set off the
recognised amounts and interests and intends to settle on a net basis.
Financial assets and liabilities are derecognised when the Company settles its
obligations relating to the instrument.
Contracts for Difference (CFDs)
CFDs are recognised in the Statement of Financial Position at the accumulated
unrealised gain or loss as an asset or liability, respectively. This
represents the difference between the nominal book cost and market value of
each position held. Movements in the unrealised gains/losses are taken to the
Statement of Comprehensive Income as capital items.
(h) Cash and cash equivalents - The Company may invest part of its net assets
in cash and cash equivalents, money market instruments, bonds, commercial
papers or other debt obligations with banks or other counterparties, having at
least a single-A (or equivalent) credit rating from an internationally
recognised rating agency or government and other public securities, if the
Portfolio Manager believes that it would be in the best interests of the
Company and its shareholders. This may be the case, for example, where the
Portfolio Manager believes that adverse market conditions justify a temporary
defensive position. Any cash or surplus assets may also be temporarily
invested in such instruments pending investment in accordance with the
Company's investment policy. Cash balances are marked to market based on the
prevailing exchange rate as of the valuation date. US Treasuries are valued at
their amortised cost.
(i) Transaction costs - Transaction costs incurred on the purchase and
disposal of investments are recognised as a capital item in the Statement of
Comprehensive Income.
(j) Foreign currency - Foreign currencies are translated at the rates of
exchange ruling on the period end date. Revenue received/receivable and
expenses paid/payable in foreign currencies are translated at the rates of
exchange ruling at the transaction date.
(k) Fair value - All financial assets and liabilities are recognised in the
financial statements at fair value.
(l) Dividends payable - Interim and final dividends are recognised in the
period in which they are declared.
(m) Capital reserve - Capital distributions received, realised gains or losses
on investments that are readily convertible to cash, and capital expenses are
transferred to the capital reserve. Share buybacks are funded through the
capital reserve, with details of buybacks disclosed in Note 10.
(n) Taxation - The tax effect of different items of income/gains and
expenditure/losses is allocated between revenue and capital on the same basis
as the particular item to which it relates, under the marginal method, using
the Company's effective rate of tax. Deferred taxation is recognised in
respect of all timing differences that have originated but not reversed at the
period end date where transactions of events that result in an obligation to
pay more or a right to pay less tax in future have occurred at the period end
date measured on an undiscounted basis and based on enacted tax rates. This is
subject to deferred tax assets only being recognised if it is considered more
likely than not that there will be suitable profits from which the future
reversal of the underlying timing differences can be deducted. Timing
differences are differences arising between the Company's taxable profits and
its results as stated in the accounts which are capable of reversal in one or
more subsequent periods.
GMP has historically been authorized as an Investment Trust under sections
1158 and 1159 Corporation Taxes Act 2010 and the Investment Trust (Approved
Company) (Tax) Regulations 2011 (S.I.2011/2999).
Following a share buy-back offer from 19 August 2022 to 22 September 2022, GMP
became a close company due to becoming controlled by a single participator,
Associated Capital Group Inc. This constituted a "serious" breach of the
Investment Trust rules.
Accordingly, GMP notified HMRC of this development in December 2022 and
requested confirmation that GMP's authorization as an Investment Trust should
be withdrawn from the commencement of the current accounting period (being 1
July 2022).
The primary benefit associated with the Investment Trust regime is that
capital gains income realized by a qualifying Investment Trust company is
exempt from UK Corporation Tax. Therefore, loss of Investment Trust status for
a UK company can have potentially significant consequences for its tax profile
moving forwards, as it would be subject to tax on any capital gains realized
thereafter at the main rate of UK Corporation Tax (currently 19%, but rising
to 25% with effect from 1 April 2023).
At the year ended 30 June 2022, after offset against income taxable on
receipt, there was a potential deferred tax asset of $2,354,232 (2021:
$1,498,961) in relation to surplus tax reliefs. As the Company had not
generated sufficient taxable profits to utilise these amounts, due to its
Investment Trust status, no deferred tax asset was recognized.
After the loss of its Investment Trust Status it is now possible for GMP to
utilize this DTA in order to shelter capital gains from UK Corporation Tax. In
order for the DTA to remain available, GMP must maintain its investment
business moving forwards. GMP's activities are such that it will have an
investment business for UK tax purposes.
In particular, the Investment Trust rules require that "substantially all of
the business of the [Investment Trust] company consists of investing its funds
in shares, land or other assets with the aim of spreading investment risk and
giving members of the company the benefit of the results of the management of
its funds". This may be considered analogous to having an investment business.
Therefore, given (i) GMP previously received approval from HMRC that this
requirement was met, and (ii) the activity of the company is not intended to
change, GMP will continue having an investment business and will meet the
conditions to carry forward and use its excess management expenses in current
and future periods. As such GMP has now included the DTA in the financial
statements.
(o) Functional and presentation currency - The functional and presentation
currency of the Company is the U.S. dollar.
3 Analysis of changes in market value and book cost of portfolio investments
in year
(Unaudited) (Unaudited) (Audited)
As at As at As at
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Opening book cost 99,687 93,078 93,078
Opening investment holding losses (7,722) (1,461) (1,461)
--------------- --------------- ---------------
Opening market value 91,965 91,617 91,617
========= ========= =========
Additions at cost 71,500 103,190 202,731
Disposals proceeds received (111,550) (109,690) (201,923)
Gains/(losses) on investments 4,826 1,894 (460)
--------------- --------------- ---------------
Market value of investments 56,741 87,011 91,965
========= ========= =========
Closing book cost 63,829 87,838 99,687
Closing investment holding losses (7,088) (827) (7,722)
--------------- --------------- ---------------
Closing market value 56,741 87,011 91,965
========= ========= =========
The company received $111,550,000 (31 December 2021: $109,690,000, 30 June
2022: $201,923,000) from investments sold in the period. The book cost of
these investments when they were purchased was $107,358,000 (31 December 2021:
$108,430,000, 30 June 2022: $196,122,000).
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.
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 31 December 2022 (Unaudited)*
Level 1 Level 2 Level 3 Total
$000 $000 $000 $000
Financial assets at fair value through profit or loss
Quoted equities 55,291 1,287 4 56,582
Contingent value rights - 210 - 210
Derivatives - 146 - 146
-------------- -------------- -------------- --------------
Gross fair value 56,938
Derivatives - (197) - (197)
-------------- -------------- -------------- --------------
Net fair value 55,291 1,446 4 56,741
======== ======== ======== ========
* There were no transfers between levels for the period ended 31
December 2022.
As at 31 December 2021 (Unaudited)
Level 1 Level 2 Level 3 Total
$000 $000 $000 $000
Financial assets at fair value through profit or loss
Quoted equities 84,574 2,007 - 86,581
Contingent value rights - 412 - 412
Derivatives - 1,066 - 1,066
-------------- -------------- -------------- --------------
Gross fair value 88,059
Derivatives - (1,048) - (1,048)
-------------- -------------- -------------- --------------
Net fair value 84,574 2,437 - 87,011
======== ======== ======== ========
As at 30 June 2022 (Audited)
Level 1 Level 2 Level 3 Total
$000 $000 $000 $000
Financial assets at fair value through profit or loss
Quoted equities 89,577 1,782 - 91,359
Contingent value rights - 132 5 137
Derivatives - 885 - 885
-------------- -------------- -------------- --------------
Gross fair value 92,381
Derivatives - (416) - (416)
-------------- -------------- -------------- --------------
Net fair value 89,577 2,383 5 91,965
======== ======== ======== ========
Net realised and unrealised gains/(losses) on investments
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Realised gains on investments 4,192 1,260 5,801
Movement in unrealised gains/(losses) on Investments 634 634 (6,261)
-------------- -------------- --------------
Net realised and unrealised gains on investments 4,826 1,894 (460)
======== ======== ========
4 Transaction costs
During the period 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/(losses) in the
Statement of Comprehensive Income. The total costs were as follows:
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Purchases 24 33 68
Sales 25 13 33
-------------- -------------- --------------
Total 49 46 101
======== ======== ========
5 Income from investments
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Income from investments
Overseas equities 227 190 530
Income on short term investments(1) 108 19 3
Other income 152 417 543
-------------- -------------- --------------
Total income 487 626 1,076
======== ======== ========
1 Income on short term investments represents the return on cash and
cash equivalents, primarily U.S. Treasury Bills. Further information can be
found in Note 9 on page 38.
6 Expenses
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Revenue expenses
Portfolio Management Fee (369) (433) (842)
Contracts for Difference (177) (230) (429)
Audit Fees - PwC (100) (35) (70)
Directors' Remuneration (79) (79) (157)
Company Secretary Fees (76) (40) (94)
Legal Fees (76) (37) (110)
Custodian/Depositary Fees - State Street (28) (17) (42)
AIFM - Carne (27) (24) (60)
Administration Fees - State Street (23) (23) (44)
Printing (19) (8) (17)
Directors' Expenses (10) (8) (15)
LSE RNS fees (8) (11) (8)
Registrar - Computershare (8) (7) (13)
Regulatory Filing Fees - AIFMD (7) (7) (13)
Ongoing LSE and UKLA Fees (3) (5) (14)
Other (56) 38 (41)
-------------- -------------- --------------
Total revenue expenses (1,066) (926) (1,969)
======== ======== ========
Includes expenses related to prior period and/or Tender Offer. These Ongoing
Charges include investment management fees as well as fixed and variable
overhead costs and exclude tender offer-related costs, CFD-related costs, and
financing costs. Including tender offer-related costs (0.25%), CFD-related
costs (0.26%) and financing costs (0.00%) would increase the Ongoing Charges
percentage to 2.37%. Ongoing Charges are calculated in accordance with
guidance issued by the Association of Investment Companies (AIC) which
provides a consistent basis for the comparison of cost from one year to the
next and relative to other investment companies.
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Capital expenses
Performance Fee (963) (287) -
Transaction costs on derivatives (56) (53) (73)
Transaction Charges - State Street (55) (37) (51)
-------------- -------------- --------------
Total capital expenses (1,074) (377) (124)
======== ======== ========
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.
Performance Fee
The Portfolio Manager shall be entitled to earn a Performance fee (as defined
below) under the Portfolio Management Agreement. The Performance fee shall be
payable on the following basis.
Subject to the satisfaction of the Performance Conditions, the Portfolio
Manager shall be entitled, 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. For the period to 31 December 2022, a provisional Performance
fee of $962,715 was charged to the Fund.
AIFM Fees
The Company has appointed Carne Global Fund Managers (Ireland) Limited
("Carne") as its Alternative Investment Fund Manager pursuant to the AIFMD.
Carne is entitled to receive from the Company such annual fees, accrued and
payable at such times, as may be agreed in writing between itself and the
Company from time to time. The fees are payable monthly and subject to a
minimum monthly fee of €2,500.
7 Taxation on ordinary activities and deferred tax assets
Taxation on ordinary activities
(Unaudited)
Half year ended 31 December 2022
Analysis of the charge in the period Revenue Capital Total
$000 $000 $000
Deferred tax benefit 2,354 - 2,354
Current tax expense (740) - (740)
Irrecoverable overseas tax (34) - (34)
-------------- -------------- --------------
Total 1,580 - 1,580
======== ======== ========
(Unaudited)
Half year ended 31 December 2021
Analysis of the charge in the period Revenue Capital Total
$000 $000 $000
Deferred tax benefit - - -
Current tax expense - - -
Irrecoverable overseas tax (16) - (16)
-------------- -------------- --------------
Total (16) - (16)
======== ======== ========
(Audited)
Year ended 30 June 2022
Analysis of the charge in the year Revenue Capital Total
$000 $000 $000
Deferred tax benefit - - -
Current tax expense - - -
Irrecoverable overseas tax (49) - (49)
-------------- -------------- --------------
Total (49) - (49)
======== ======== ========
Deferred Tax Assets
At December 31, 2022, the Company has excess expenses of $9,416,927 carried
forward. This sum has arisen due to the cumulative deductible expenses having
exceeded taxable income over the life of the Company when it was authorized as
an Investment Trust for tax purposes. Now that it is no longer a trust and
therefore subject to capital gains tax, the Company believes it is more likely
than not that it will have sufficient taxable profits against which these
expenses can be offset. Therefore, a deferred tax asset of $2,354,232, or
$0.23 per Ordinary Share, has now been recognized. Provided the Company
continues to maintain its current investment profile, it is likely that this
deferred tax asset will be utilized 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.
Deferred tax assets (Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Deferred tax assets 2,354 - 2,354
-------------- -------------- --------------
Total 2,354 - 2,354
======== ======== ========
8 Earnings per share
Earnings per ordinary share is calculated with reference to the following
amounts:
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Revenue return
Revenue return attributable to ordinary shareholders ($000) 1,000 (316) (943)
--------------- --------------- ---------------
Weighted average number of shares in issue during period 8,743,425 10,238,206 10,238,206
Total revenue return per ordinary share $0.11 ($0.03) ($0.09)
======== ======== ========
Capital return
Capital return attributable to ordinary shareholders ($000) 3,960 1,700 (94)
--------------- --------------- ---------------
Weighted average number of shares in issue during period 8,743,425 10,238,206 10,238,206
Total capital return per ordinary share $0.45 $0.17 ($0.01)
--------------- --------------- ---------------
Total return per ordinary share $0.57 $0.14 ($0.10)
======== ======== ========
Net asset value per share (Unaudited) (Unaudited) (Audited)
As at As at As at
31 December 2022 31 December 2021 30 June 2022
Net assets attributable to shareholders ($000) 71,743 100,652 95,774
Number of shares in issue at period end 7,182,249 10,238,206 10,238,206
Net asset value per share $9.99 $9.83 $9.35
======== ======== ========
The Company continues to report according to SORP standards as provided by the
AIC. As such, the net asset value per share is provided in accordance with
IFRS standards inclusive of the Deferred Tax Asset of $0.23 per share, or
$2.34 million, as a result of the Company having Close status and no longer
availing itself of HMRC 1158 Investment Trust status. Furthermore, net asset
value ex-income, which includes the Revenue Reserves, is for illustrative
purposes.
9 Cash and cash equivalents
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Cash 5,279 14,717 5,911
U.S. Treasuries 9,448 - -
-------------- -------------- --------------
Total 14,727 14,717 5,911
======== ======== ========
The Board and Investment Manager oversee investments held in cash and cash
equivalents in accordance with the Investment Policy.
10 Called up share capital
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Allotted, called up and fully paid:
7,182,249 ordinary shares of $0.01 each - equity 72 102 102
-------------- -------------- --------------
Treasury shares:
3,151,917 ordinary shares of $0.01 each - equity 31 1 1
-------------- -------------- --------------
Total shares 103 103 103
======== ======== ========
11 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 utilizing 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
31 December 2022 the Company held CFDs, as shown in the following table.
Security names Trade Shares (Unaudited)
currency (000) As at
31 December 2022
Unrealised
gain/(loss)
$000
Aareal Bank AG EUR 34 (14)
ADVA Optical Networking SE EUR 5 3
Agnico Eagle Mines Ltd USD (6) 4
Alliance Aviation Service AUD 60 5
AVEVA Group plc GBP 16 2
Biffa plc GBP 105 (1)
Black Knight Inc USD 3 3
Broadcom Inc USD (1) 10
Cazoo Group Ltd USD 27 (2)
Chr. Hansen A/S DKK 1 (1)
Devro plc GBP 135 **
Disruptive Capital GP GBP 82 (12)
Distell Group Ltd ZAR 41 (2)
Emis Group plc GBP 10 (1)
Entain plc GBP 25 (28)
Euronav NV USD 19 (44)
Frontline Ltd USD (28) 51
Genkyotex SA EUR 7 **
Grief Inc USD (4) 5
Grifols SA EUR (12) (3)
HomeServ plc GBP 67 5
Intercontinental Exchange Inc USD (0) 2
IVECO Group NV EUR 6 (5)
K3 Capital Group plc GBP 20 **
Lennar Corp USD (9) 1
Link Admin AUD 20 (20)
MaxLinear Inc USD (2) 8
MFE - MediaForEurope N.V. EUR 143 (2)
Micro Focus International plc GBP 60 5
MKS Instruments Inc USD 0 (1)
Newcrest Mining AUD (3) **
Novozymes A/S DKK (1) **
Orange Belgium SA EUR 5 2
OZ Minerals Ltd AUD 18 6
Pan American Silver Corp USD (27) 5
PEXA Group Ltd AUD 3 22
Praemium Ltd AUD 121 (3)
Pushpay Holdings Ltd NZD 222 (1)
Ramsay Health Care Ltd AUD 1 **
Randall & Quilter Investment Holdings Ltd GBP 32 **
RPS Group plc GBP 137 **
SciPlay Corp USD 7 1
Silicon Motion Technology Corp ADR USD 4 (7)
Siltronic AG EUR 4 (43)
SOHO China Ltd HKD 437 (3)
Spear Investment Group EUR 39 (4)
Spire Healthcare plc GBP 49 4
Telecom Italia EUR 285 2
-------------- --------------
Total unrealised loss on derivatives (51)
========
* Less than 500 shares.
** Less than $500.
12 Current assets and Liabilities
The categories of other receivables and other payables include:
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
$000 $000 $000
Other receivables
FX currency sold - - 12
All other receivables* 157 88 54
-------------- -------------- --------------
Total other receivables 157 88 66
======== ======== ========
Other payables
FX currency purchased 8 70 -
Custodian fees 10 3 7
Accounting fees 13 15 17
Audit fees 71 35 70
All other payables 353 177 118
-------------- -------------- --------------
Total other payables 455 300 212
======== ======== ========
* At 31 December 2022, all other receivables included prepaid expenses
and dividend and swap income.
13 Related party transactions
Each of the Directors is entitled to receive a fee from the Company at such
rate as may be determined in accordance with the Articles of Incorporation.
The Directors' remuneration is $30,000 per annum for each Director, other
than:
- the Chairman, who will receive an additional $1,000 per annum*;
- the Chairman of the Audit Committee, who will receive an
additional $5,000 per annum; and
- the Members of the Audit Committee, who will receive an
additional $1,000 per annum.
Each of the Directors is also entitled to be paid all reasonable expenses
properly incurred by them in connection with the performance of their duties.
These expenses will include those associated with attending general meetings,
Board or committee meetings and legal fees. The Board may determine that
additional remuneration may be paid, from time to time, to any one or more
Directors in the event such Director or Directors are requested by the Board
to perform extra or special services on behalf of the Company.
Carne Global Fund Managers (Ireland) Limited, as AIFM is considered a related
party to the Company as it is considered to have significant influence over
the Company in its role as AIFM. During the period ended 31 December 2022, the
AIFM earned fees of $26,930 of which $5,285 was payable at period end. Carne
Global Financial Services Limited, the parent company of the AIFM, earned fees
amounting to $6,577 during the period ended 31 December 2022 in respect of
other fund governance services provided to the Company, of which $6,577 was
payable at period end.
The Central Bank of Ireland AIF Rulebook Chapter 2.viii - 'Dealings by
management company, general partner, depositary, AIFM, investment manager or
by delegates or group companies of these states in paragraph one that any
transaction carried out with a qualifying investor AIF by a management
company, general partner, depositary, AIFM, investment manager or by delegates
or group companies of these must be carried out as if negotiated at arm's
length. Transactions must be in the best interests of the shareholders. The
AIFM is satisfied that there are arrangements (evidenced by written
procedures) in place, to ensure that the obligations set out in paragraph 1 of
Section 1.xii are applied to all transactions with connected parties; and the
AIF is satisfied that transactions with connected parties entered into during
the period ended 31 December 2022 complied with the obligations set out in
this paragraph.
The related party transactions with the Directors are set out in the
Directors' Remuneration Report on pages 35 to 37 of the 2022 Annual Report and
Financial Statements as at 30 June 2022.
Related parties disclosure: other
The Portfolio management fee for the period ended 31 December 2022 paid by the
Company to the Portfolio Manager is presented in the Statement of
Comprehensive Income. Details of Portfolio management fee paid during the
period is disclosed in Note 6.
As at 31 December 2022, Associated Capital Group Inc., an affiliate of the
Portfolio Manager, held 6,257,775 Ordinary Shares in the Company.
Further details of related parties and transactions, including with the
Company's AIFM Carne Global Fund Managers (Ireland) Limited, are disclosed on
page 65 of the Annual Report and Financial Statements as at 30 June 2022.
Connected party transactions
All connected party transactions are carried out at arm's length. There were
no such transactions during the period ended 31 December 2022.
14 Contingent Liabilities and Commitments
As at 31 December 2022, the Company had no contingent liabilities or
commitments (31 December 2021: nil).
15 Significant events
The outbreak of Coronavirus (COVID-19), declared by the World Health
Organisation ("WHO") as a global pandemic in March 2020 and has impacted many
aspects of daily life and the global economy since this date. There has been
no official change to its status as a pandemic, but this is expected in 2023
as the crisis is now considered broadly stable. There continue to be new
variants impacting different regions. The number of infections continue to
increase but there is continued focus on rollout of vaccine programmes and a
significant drop in recorded mortality rates. Most travel movements and
operational restrictions implemented by many countries have returned to
normal. While many economies globally have reopened the pace of recovery has
varied from country to country and most countries also now impacted by the
rising inflation as a global phenomenon. As we progress through 2023, there
continues to be potential unforeseen economic consequences from this virus and
market reaction to such consequences could be rapid and unpredictable and vary
from country to country.
The Directors together with the Manager will continue to monitor business
continuity and resilience processes with the objective of mitigating any
potential for ongoing impact of COVID-19.
Conflict in Ukraine
Events arising in Ukraine, as a result of military action being undertaken by
Russia, may impact on securities directly or indirectly related to companies
domiciled in Russia and/or listed on exchanges located in Russia ("Russian
Securities"). As at 31 December 2022, the Company did not have direct exposure
to Russian securities. The Directors are monitoring developments related to
this military action, including economic sanctions and actions of foreign
governments.
16 Post balance sheet events
The Gabelli Merger Plus+ Trust conducted and completed the Tranche Two Tender
Offer, as set out in the circular published by the Company on 19 August 2022.
The results of the tender were as follows: A total of 331,457 Qualifying
Shares were validly tendered under the Tranche Two Tender Offer at the Tender
Price of $973.89 U.S. cents per share, which, upon being purchased by the
Company, are to be held in treasury. Proceeds of the tender were payable by 15
February 2023.
The change of AIFM from Carne Global Fund Managers (Ireland) Limited to
Gabelli Funds LLC occurred on 14 February 2023.
17 Significant Portfolio Changes
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.
18 Approval of Financial Statements
The Directors approved the financial statements on 28 March 2023.
Company Information
Registered Name
Gabelli Merger Plus+ Trust Plc
Registered Office
3 St. James's Place,
London, England, SW1A 1NP
Board of Directors
Marc Gabelli (Chairman)
Marco Bianconi
John Birch
John Newlands
Yuji Sugimoto
James Wedderburn
Portfolio Manager
Gabelli Funds, LLC
One Corporate Center
Rye
New York
10580-1422
Company Secretary
Kin Company Secretarial Limited
Hyde Park House
5 Manfred Road
London
SW15 2RS
Alternative Investment Fund Manager
Gabelli Funds, LLC (from 14 February 2023)
One Corporate Center
Rye, NY 10580 USA
Carne Global Fund Managers (Ireland)
Limited (through 13 February 2023)
2nd floor, Block E
Iveagh Court, Harcourt Road
Dublin
Ireland
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 Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Legal & Financial Advisers
Dickson Minto W.S.
16 Charlotte Square
Edinburgh
EH2 4DF
CONTACT INFORMATION AND WEBSITE
Please visit us on the Internet. Our homepage at 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.
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.
Gabelli Merger Plus+ Trust Plc
www.gabelli.co.uk
info@gabelli.co.uk
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