TIDMGMP TIDMGMPP
RNS Number : 0966E
Gabelli Merger Plus+ Trust PLC
26 October 2022
26 October 2022
GABELLI MERGER PLUS+ TRUST PLC - FINAL RESULTS
GABELLI MERGER PLUS (+) TRUST PLC
Financial Results for the year ended 30 June 2022
FINANCIAL HIGHLIGHTS
As at As at
Performance 30 June 22 30 June 21
Net asset value per share (cum income) $9.35 $9.94
Net asset value per share (ex income) $9.78 $10.27
Dividends per share paid during the year(1) $0.48 $0.48
Share price $9.00 $7.40
Discount to Net Asset Value(2,3) (3.74)% (25.63%)
Year Year ended
Total returns ended 30 30 June 2021
June 2022
Net asset value per share(4) (1.34)% 12.12%
U.S. 3-month Treasury Bill 1.69% 0.09%
Share price(5) 29.06% 5.46%
Year ended Year ended
Income 30 June 2022 30 June 2021
Revenue return per share ($0.09) ($0.14)
Year ended Year ended 30June
Ongoing charges(6) 30 June 2021 2022
Annualised ongoing charges 1.67% 1.66%
Source: Portfolio Manager (Gabelli Funds, LLC), verified by the
Administrator (State Street Bank and Trust Company).
1 The dividends paid during the year ended 30 June 2022 include
the fourth quarter dividend for the year ended 30 June 2021.
2 Figures are inclusive of income and dividends paid, in line
with the Association of Investment Companies (the "AIC")
guidance.
3 These key performance indicators are alternative performance
measures.
4 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.
5 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.
6 Ongoing Charges are operating expenses incurred in the running
of the Company, whether charged to revenue or capital, but
excluding financing costs. These are expressed as a percentage of
the average net asset value during the period and this is
calculated in accordance with guidance issued by the Association of
Investment Companies.
CHAIRMAN'S STATEMENT
We share this Annual Report to Shareholders, encompassing the
period from July 2021 through June 2022, and note certain
developments post financial year end. This period marks the fifth
year of operations for the Gabelli Merger Plus+ Trust Plc (the
"Company") activating the Loyalty Programme tender offer and
additional voting shares for qualifying shareholders. Gabelli
Merger Plus+ Trust Plc operates globally in the highly specialised
investment discipline of event driven merger arbitrage. The
objectives are to compound and preserve wealth over time, while
remaining non-correlated to the broad equity and fixed income
markets. The investment programme is global, encompassing a broad
spectrum of special situations and event driven opportunities, with
an emphasis on announced merger transactions. The portfolio is a
highly liquid, non-market correlated alternative to traditional
equity and fixed income securities.
The Company's primary objective is to seek to generate total
return, consisting of capital appreciation and current income. The
Company will seek a secondary objective of the protection of
capital, uncorrelated to equity and fixed income markets. The Fund
utilizes the Gabelli Private Market Value (PMV) with a Catalyst(TM)
investment methodology, and has built a diversified portfolio using
catalyst event merger arbitrage strategies to create an optimal
risk/reward profile. The investment programme is global,
encompassing a broad spectrum of special situations and event
driven opportunities, with an emphasis on announced merger
transactions. The portfolio is a highly liquid, non-market
correlated alternative to traditional equity and fixed income
securities. Merger returns are derived through the narrowing of
deal spreads from time of announcement until their expected
closure. The spread is a function of three primary elements: the
risk free rate, the risk premium associated with the transaction
fundamentals, and the time value of money. The dynamic interplay
across these components is evaluated within every investment by the
Manager. Position sizing will vary according to a probabilistic
assessment of the risk. The inherent risk in all merger investing
is a broken deal rather than the standard deviation or price
variance of the market price movements over the deal timeline.
Gabelli Funds LLC, the Portfolio Manager, employs an active
approach to analysing the fundamentals of a merger investment and
has a long history of implementing such a programme. At its core,
this differentiated investment approach utilises the Gabelli
analytical methodology to manage risk amongst other inputs and
factors. The full details of this investment programme were set out
in the offering Prospectus and are found on the Company's web site,
www.Gabelli. com/MergerPlus.
The Board is always receptive to feedback and is available
should you have any questions or comments via the Portfolio
Manager's Investor Relations group directly. We thank you, our
shareholders, for your confidence in entrusting a portion of your
assets to our team.
The Investment Environment
Uncertainty surrounding the current state of the global
macroeconomic environment, taxed supply chains and an ongoing war
in Eastern Europe plagued the pace of deal making in the first half
of 2022, which showed a 21% decrease in deals versus last year's
levels in the second quarter alone. Deal making in the technology
sector slowed 19% year- over-year, but remained the most active,
followed by industrials and financials.
Despite COVID-19 cases trending significantly below peak,
certain hot spots remain, particularly in China. This adds an
element of uncertainty to capital allocation decisions evidenced in
a further 17% decline in cross border activity when compared to
last year.
Nevertheless, the number of deals greater than $10 billion
increased 11% year-over-year, and several well-known targets
entered into merger agreements. Microsoft began the year announcing
its $69 billion acquisition of game developer Activision
Blizzard.
In May, software company VMware Inc agreed to be acquired by
Broadcom Inc in a cash and stock transaction valued at $61 billion.
There was also Elon Musk's well- publicised bid to take Twitter
private for $44 billion, the outcome of which remains
uncertain.
The broad market still sits over 20% above the level where it
ended in 2019, an 8% CAGR over a very fraught time. We as a society
may have moved past COVID, but its aftereffects are still felt.
Political, corporate and individual actors still need to sort
through a variety of issues. Economic and market conditions may
worsen before they improve, and there may be volatility in currency
markets as Central Banks adjust interest rate policies, but the
risks are more balanced today than they have been in some time.
Principal Developments on Investments During the Year
Throughout periods of the first half, we saw significant
widening of deal spreads, some of which were tied to specific deal
risks, including worries that buyers would walk away from
transactions, leaving target companies vulnerable to market
conditions. This led to relatively broad based selling across
announced deals, with more pain felt in technology, given the
sector's steep selloff this year following lofty valuations.
Spreads have since rebounded following the successful completion
of several deals, as well as updates provided by buyers to reassure
the market that they remain committed to closing their
transactions. While the pace of acquisition announcements by
strategic acquirers slowed, private equity backed deals remained
plentiful. A total of $553 billion worth of deals were announced in
the half, accounting for a quarter of all M&A activity. While
some private equity sponsors have hit roadblocks attempting to
secure financing, strategic buyers balance sheets remain strong
with regards to cash levels and financial buyers' are coming off
very robust years of capital raising.
We expect transaction activity to strengthen as companies gain
more certainty in the face of current global concerns. As market
valuations continue to reset, the strong US Dollar is enticing for
corporate deal making, positioning American companies well in the
competition for assets on a global basis. The Gabelli method is
well organised to invest during such a period. Gabelli managers are
fundamental and bottom up. Their analysts follow sectors globally,
and seek to understand everything available relating to a business,
and are agnostic of indices and market capitalisations. Their work
emphasizes balance sheet and cash flows. Ultimately, they seek to
identify businesses that are trading in the market at discounts to
their estimates of the value an informed industrial acquirer would
pay for the company in its entirety, thus establishing the Private
Market Value ("PMV"). The Gabelli team also need event catalysts to
invest, thus providing the potential for returns independent of the
broad markets. Volatility has historically presented
excellent opportunities to acquire a business through the
fractional interest represented in its traded shares and we believe
the PMV with a Catalyst method will fare well in the period
ahead.
Performance
The Company's net asset value (NAV) plus dividends paid
delivered a total return to shareholders during the year under
review of -1.11% in U.S. dollars. This performance compared to the
equivalent 13-week U.S. Treasury Bill which yielded 1.69% as of 30
June 2022, and also relative to the IQ Merger Arbitrage ETF,
S&P Merger Arbitrage Index, and Credit Suisse Merger Arbitrage
Liquid Index, which returned -7.44%, -1.59%, and -0.88%,
respectively. The share price total return with dividends
reinvested was 29.06%, with the discount narrowing during the year.
The performance for shareholders at IPO through the tender period
of 22 September 2022, was 19.08% with dividends reinvested, versus
a return of 18.97% for the Credit Suisse Merger Arbitrage Liquid
Index.
Dividend
The Company's portfolio is largely focused on the Catalyst
events of announced takeovers, where the terms are known and
transparent to the market. Such investments generally have
estimated return profiles in periods of less than nine months. The
company will pursue other Catalyst Event opportunities as they
surface, and will also invest occasionally in other forms of
relative value arbitrage, such as such as share class arbitrage and
holdco arbitrage. Holding periods average approximately 120 days.
In arbitrage, the culmination of a position is effectively a return
of cash as the position is closed. In order to allow the
Shareholders to realise a predictable, but not assured, level of
cash flow and some liquidity periodically on their investment, the
Company has adopted a "managed dividend policy". This policy seeks
to pay Shareholders a quarterly dividend in relation to the Net
Asset Value of the Company at the time, which may be changed at any
time by the Board. Between inception and 30 June 2022, the Company
returned $2.27 per share to shareholders, consistent with its
dividend policy. Dividends are paid only when declared by the Board
subject to the Board's assessment of the Company's financial
position and only if the Company has sufficient income and
distributable reserves to make the dividend payment, and the level
of dividend may vary over presented excellent opportunities to
acquire a business through the fractional interest represented in
its traded shares and we believe the PMV with a Catalyst method
will fare well in the period ahead of time. As such, the
portfolio's managed distribution of capital through the payment of
quarterly dividends is under review as we enter the new Fiscal
Year.
Tender Offer and Close Company Status
This report also addresses the period through October 2022 as a
subsequent event to the fiscal year ending 30 June 2022. The
Company commenced the Fifth Anniversary Tender Offer for Qualifying
Registered Shares via two tranches beginning in September 2022 and
ending February 2023. Shareholders whose shares are registered in
the Loyalty Programme for five years are eligible to participate in
the Company's tender offer. As of 7 October 2022 the Company
successfully completed the tender for 3,005,957 shares at NAV less
expenses. The Tranche Two tender offer will commence in January
2023, with an estimated maximum of approximately 343,000 Qualifying
Shares Tender results present two significant developments for
shareholder consideration: first, the overall portfolio assets
under management are now USD 68 million versus USD 97 million;
second, the post tender shareholder composition requires the
Company to operate as a Close Company. The Board of Directors
acknowledges the broad shareholder participation in the tender, and
notes that the largest shareholder, Associated Capital Group,
elected not to tender and has expressed its view that the Company
should continue. Associated Capital Group, legal and beneficial
owner of 6,216,256 shares at the time of this writing, has
confirmed via a letter of Deed, which contains enforceable
irrevocable undertakings, that it will both vote in favour of
continuation of the company and not participate in the tender
offer. As a result, the Company will operate as a Close investment
company, and therefore will be subject to UK corporate taxes, and
thus no longer avail itself to investment trust status. The Board
of Directors will assess shareholder considerations and undertake
the analysis of options for the continuing Company, including
operational and structural alternatives oriented towards expense
and tax savings, as it progresses. Finally, in accordance with the
charter, remaining registered loyalty Programme Five-year
shareholders are eligible to receive an additional vote per
individual share held. The Loyalty Programme has been implemented
in accordance with the offering prospectus.
Final Thoughts
With heartfelt sadness we write this letter after the passing of
Her Majesty Queen Elizabeth II, whose steadfast leadership will be
missed. Today's post World War II order is facing intense
challenges, yet this Company has performed consistently and
non-correlated to the broader indices since inception. It has
endured COVID-19, the onset of inflation and higher interest rates,
and a fragile regulatory environment lead by the geo-political
wrangling between the US and China. The list continues, as will the
Gabelli Merger Plus+ Trust Plc in the United Kingdom.
Marc Gabelli
Chairman
INVESTMENT OBJECTIVE AND POLICY
Investment objective
The Company's primary investment objective is to seek to
generate total return, consisting of capital appreciation and
current income. The Company will seek a secondary objective of the
protection of capital, uncorrelated to equity and fixed income
markets.
Investment policy
The Company will seek to meet its investment objective by
utilising the Gabelli Private Market Value (PMV) with a CatalystTM,
investment methodology, maintaining a diversified portfolio of
event merger arbitrage strategies to seek to create an optimal
risk/ reward profile for the portfolio.
"Event Driven Merger Arbitrage" is a highly specialised active
investment approach designed principally to profit from the
differences between the public market price and the price achieved
through corporate catalyst events. Catalysts are utilised to earn
returns independent of the broad markets' direction. This includes
corporate events such as announced mergers, acquisitions,
takeovers, tender offers, leveraged buyouts, restructurings,
demergers and other types of reorganisations and corporate actions
("deals").
The Company will invest globally although it is expected to have
an emphasis on securities traded in the United States,
predominantly equity securities issued by companies of any market
capitalisation. The Company is permitted to use a variety of
investment strategies and instruments, including but not limited
to: convertible and non-convertible debt securities; asset-backed
and mortgage-backed securities; fixed interest securities,
preferred stock, non-convertible preferred stock, depositary
receipts; shares or units of UCIs or UCITS; rights qualifying as
transferable securities; when issued, delayed delivery transferable
securities; forward contracts; swaps; recently issued transferable
securities; repurchase agreements, money market instruments and
warrants.
The Company may invest part of its net assets in cash and cash
equivalents, money market instruments, bonds, commercial paper or
other debt obligations with banks or other counterparties having at
least a single A (or equivalent) credit rating from an
internationally recognised rating agency or government and other
public securities, if the Portfolio Manager believes that it would
be in the best interests of the Company and its Shareholders. This
may be the case, for example, if the Portfolio Manager believes
that adverse market conditions justify a temporary defensive
position. Any cash or surplus assets may also be temporarily
invested in such instruments pending investment in accordance with
the Company's investment policy.
The Company may take both long and short positions in equity and
debt securities. For shorting purposes, the Company may use
indices, individual stocks, or fixed income securities.
The Company may utilise financial derivative instruments to
create both long and synthetic covered short positions with the aim
of maximising positive returns. The Company may use strategies and
techniques consisting of options, futures contracts, and currency
transactions and may enter into total rate of return, credit
default, or other types of swaps and related derivatives for
various purposes, including to gain economic exposure to an asset
or group of assets that may be difficult or impractical to
acquire.
The Company may also use derivatives for efficient portfolio
management purposes including, without limitation, hedging and risk
management and leverage.
The Company has broad and flexible investment authority and,
accordingly, it may at any time have investments in other related
or unrelated areas. Strategies and financial instruments utilised
by the Company may include: (i) purchasing or writing options
(listed or unlisted) of any and all types including options on
equity securities, stock market and commodity indices, debt
securities, futures contracts, future contracts on commodities and
currencies; (ii) trading in commodity futures contracts, commodity
option contracts and other commodity interests including physical
commodities; (iii) borrowing money from brokerage firms and banks
on a demand basis to buy and sell short investments in excess of
capital; and (iv) entering into swap agreements (of any and all
types including commodity swaps, interest rate swaps and currency
swaps), forward contracts, currencies, foreign exchange contracts,
warrants, credit default swaps, synthetic derivatives (for example,
CDX), collateralised debt obligations tranches, and other
structured or synthetic debt obligations, partnership interests or
interests in other
investment companies and any other financial instruments of any
and all types which exist now or are hereafter created.
There has been no change to the investment policy since the
launch of the Company on 19 July 2017. No material change will be
made without shareholder approval.
PORTFOLIO MANAGER'S REVIEW
Methodology and Market Opportunity Gabelli Funds would like to
thank our investors for allocating a portion of their assets to the
Gabelli Merger Plus+ Trust ("GMP"). We appreciate the confidence
and trust you have placed in our organization through your
investment in GMP. Our investment objective is to compound and
preserve wealth over time while remaining non-correlated to the
broad markets. As a firm, we have invested in mergers since 1977
and created the Gabelli group's first dedicated, announced merger
fund more than thirty years ago. We remain vigilant in the
application of our investment philosophy and in our search for
opportunities. In this context, let us outline our investment
methodology and the investment environment through 30 June
2022.
We remain vigilant in the application of our investment
philosophy and in our search for opportunities. In this context,
let us outline our investment methodology and the investment
environment through 30 June 2022. Merger arbitrage is a highly
specialised investment approach designed principally to profit from
corporate events, including the successful completion of proposed
mergers, acquisitions, takeovers, tender offers, leveraged buyouts,
restructurings, demergers, and other types of corporate
reorganizations and actions. As arbitrageurs, we seek to earn the
differential, or "spread," between the market price of our
investments and the value ultimately realized through deal
consummation.
We are especially enthusiastic about the opportunities to grow
client wealth in the decades to come, and we highlight below
several factors that should help drive results. These include:
-- Increased market volatility, which enhances our ability to
establish positions for the prospect of improved returns;
-- A robust market for corporate deal making as conditions
continue to provide an accommodative market for mergers and
acquisitions.
-- A rising interest rate environment, providing attractive merger spread opportunities;
-- The Fund's experienced investment team, which pursues
opportunities globally through the disciplined application of
Gabelli's investment methodology;
Global Deal Activity(1)
Global deal merger and acquisition activity ("M&A") totalled
$2.2 trillion during the first half of 2022, a year- over-year
decrease of 21%; however, the deal flow remained notably
consistent, capped off with $1 trillion in deals in the second
quarter. This marked the eighth consecutive quarter to pass $1
trillion. There were twenty-six deals completed with values greater
than $10 billion, accounting for $609 billion in aggregate, up 11%
year over year. Deals with values between $1-$5 billion accounted
for $562 billion during the year, a decrease of 35% compared to the
first half of 2021.
Cross border M&A activity totalled $687 billion for the
calendar year, marking a decrease of 17% year-over-year. The value
of private equity-backed buyouts remained robust at $553 billion in
the first half, an all-time high. This accounted for nearly 26% of
total M&A activity.
The slowdown of deal activity, compared to the record-breaking
levels of 2021, was driven mainly by U.S. based targets, which saw
$958 billion in deal activity, a decrease of 28% year-over-year.
European M&A tallied $527 billion of transactions over the same
period, a decrease of only 4%.
The Technology sector was the biggest contributor to merger
activity during the first half, totalling $531 billion. This
accounted for 25% of total announced deal volume, a record.
Financials and Industrials sectors were also large contributors,
each accounting for 12% of M&A activity.
1 Thomson Reuters M&A Review - First Half of 2022
PORTFOLIO IN REVIEW
The first half of 2022 was the worst for markets since 1970 with
the S&P 500 shedding nearly 21%. Similar to 1970, the main
cause of the market turmoil was inflation. Economists often define
inflation as too many dollars chasing too few goods. Both those
conditions have been eminently true of late. Years of easy monetary
policy formed the underbrush while $5 trillion in rescue stimulus,
$5 trillion in Quantitative Easing, supply chain snafus, and
pent-up demand triggered by COVID provided the spark for an
explosion in prices. The war in Ukraine, which has perhaps
permanently altered global food and energy flows, accelerated the
fire. Unfortunately, most central banks, including the Fed, entered
this year behind the curve. In order to restore credibility and
avoid the fate of 1970s Chair Arthur Burns, Jerome Powell has had
to act aggressively with increases of 150 basis points over the
last six months. The Fed can neither pump more oil nor harvest more
wheat, but it can act on the demand side of the equation.
Against this backdrop of rising rates, macroeconomic concerns,
and regulatory uncertainty, deal making slowed to $2.2 trillion in
the first half of the year. While this was down 21% compared to the
same period last year, 2021 was a record year and a likely outlier
for M&A activity. The first two quarters of 2022 each saw deal
volume above $1 trillion, the 7th and 8th consecutive quarters to
reach that level. We expect we will continue to see a robust deal
environment, as a reset in valuations should provide opportunities
for both strategic and private equity buyers.
As we have noted in the past, 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. Fixed income markets are currently
anticipating an additional 200 basis points of rate hikes this
year, which would bring the Fed Funds rate to 3.5%.
Currently, the spreads in the portfolio are as wide as we have
seen since the beginning of the COVID pandemic. Aggressive
antitrust policy rhetoric has increased volatility in deal spreads,
which provides us an opportunity. Mispriced risk allows us to add
to our highest conviction positions at lower prices, generating
more attractive returns as deals progress towards closing.
We continue to find attractive investment opportunities in newly
announced and pipeline deals. We remain focused on investing in
highly strategic, well-financed deals with an added focus on near-
term catalysts, and are upbeat about our prospect to continue to
generate absolute returns.
Notable contributors to performance include:
-- Arena Pharmaceuticals, Inc. (ARNA- NASDAQ), a biotechnology
company that develops therapeutics for autoimmune diseases, was
acquired by Pfizer in March after the companies received U.S.
antitrust approval. In February, Pfizer withdrew and refiled its
application for antitrust approval in the hopes of avoiding a
second request that would have extended the timeline for approval.
The companies had already received antitrust approvals in Germany
and Austria, and Arena shareholders voted to approve the
transaction in February. Under the terms of the agreement, Arena
shareholders received $100.00 cash per share, or about $6
billion.
-- Meggitt plc (MGGT LN-London), an engineering firm that
designs and manufactures components for the aerospace, defence and
energy industries, agreed to be acquired by Parker-Hannifin for
GBP8.00 cash per share, or about GBP7 billion. Meggitt has made
considerable progress securing various approvals needed to
consummate the transaction and awaits only UK government approval.
The deal was completed on 13 September 2022.
-- Sanderson Farms, Inc. (SAFM- NASDAQ), a producer and
processor of fresh and frozen chicken products, agreed to be
acquired by a consortium led by Cargill for $203 cash per share, or
about $5 billion. As the deal awaits its final regulatory approval
from the U.S. Department of Justice, the stock has traded
favourably on Sanderson's fundamentals. The company's results have
greatly benefited from poultry pricing and the consensus is that
the stock would trade significantly higher in the event the deal
cannot be completed.
-- Swedish Match (SWMA SS- Stockholm), a manufacturer of
smokeless tobacco products, including the market-leading product
ZYN, agreed to be acquired by Philip Morris International for
SEK106.00 cash per share, or about $16 billion. In June, the
companies received antitrust approval in the U.S. The spread then
tightened further upon reports that Elliott was building a stake in
Swedish Match to oppose the sale at current terms.
-- Xilinx, Inc. (XLNX-NASDAQ), a designer of advanced
programmable semiconductors used in automotive, aerospace, and
consumer applications, was acquired by Advanced Micro Devices. The
companies received approval from Chinese antitrust regulator SAMR
in January, but were required to re-file their application in the
U.S., given it had been more than one year since receiving U.S.
antitrust approval, which was granted on 9 February, 2022. The deal
subsequently closed on 14 February, 2022. Under the terms of the
agreement, Xilinx shareholders received 1.7234 shares of AMD common
stock per share of Xilinx, which valued the company at $48
billion.
Notable detractors from performance include:
-- Avast plc (AVST LN-London), a provider of cyber security
software, agreed to be acquired by NortonLifeLock for $7.61 cash
and 0.0302 shares of NLOK, valuing the transaction at $8 billion.
While the deal secured all global regulatory approvals outside of
the UK, in March the UK antitrust regulator referred the deal to a
stage two review, and the stock sold off due to the uncertainty. In
the end, the transaction secured approval from the Competition and
Markets Authority, with a completion date of 12 September 2022.
-- Twitter Inc. (TWTR US), a provider of online social
networking services, Twitter agreed to be acquired by Elon Musk for
$54.20 cash, or $44 billion. In July, Elon Musk unilaterally
terminated the merger agreement with Twitter, citing material
breach of the access to information and financing cooperation
covenants in the context of spam accounts. Twitter sued Musk in
Delaware Chancery court for Specific Performance, essentially
asking the court to compel Musk to close the deal on terms. Musk's
attempt to terminate the transaction caused some disruption at the
company. This, coupled with a deteriorating environment for
digital- advertising spending, negatively impacted Twitter's stock
price. On 4 October 2022, Musk again reversed course and stated
that he would move ahead with the acquisition at the original price
of $54.20. At the time of writing, the outcome of this deal is
still uncertain.
SELECT PORTFOLIO HOLDINGS AS OF 30 JUNE 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 the 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, and is expected to
close in late 2022 or 2023.
-- Avast plc (AVST LN-London ) agreed to be acquired by
NortonLifeLock, Inc. (NLOK-NASDAQ). Avast provides digital security
and privacy products. Under the terms of the agreement, Avast
shareholders will receive $7.61 cash and 0.0302 shares of
NortonLifeLock common stock per share, valuing the transaction at
approximately GBP6 billion. The transaction was subject to
shareholder as well as regulatory approvals, and closed in
mid-September 2022.
-- Coherent, Inc. (COHR-NASDAQ) agreed to be acquired by II-VI,
Inc. (IIVI-NASDAQ). Coherent provides lasers, laser-based
technologies, and laser-based system solutions. Under the terms of
the agreement, Coherent shareholders received $220.00 cash and 0.91
shares of II-VI common stock per share, valuing the transaction at
approximately $7 billion. The transaction was subject to approval
by shareholders of both companies, as well as regulatory approvals,
and closed in July 2022.
-- 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, which provides
various financial services. Under the 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, and is
expected to close in late 2022 or early 2023.
-- Mandiant, Inc. (MNDT-NASDAQ) agreed to be acquired by
Alphabet, Inc. (GOOGL-NASDAQ). Mandiant provides cyber defence
solutions. Under the terms of the agreement, Mandiant shareholders
will receive $23.00 cash per share, valuing the transaction at
approximately $5 billion. The transaction is subject to shareholder
as well as regulatory approvals, and is expected to close in the
second half of 2022.
-- Meggitt plc (MGGT LN-London ) agreed to be acquired by
Parker-Hannifin Corp. (PH-NYSE). Meggitt designs and manufactures
components and sub-systems in the UK, rest of Europe, the U.S., and
internationally. Under the terms of the agreement, Meggitt
shareholders will receive GBP8.00 cash per share, valuing the
transaction at approximately GBP7 billion. The transaction is
subject to shareholder as well as regulatory approvals, and is
expected to close in the third quarter of 2022.
-- Rogers Corp. (ROG-NYSE) agreed to be acquired by DuPont de
Nemours, Inc. (DD-NYSE). Rogers designs, develops, manufactures,
and sells engineered materials and components worldwide. Under the
terms of the agreement, Rogers shareholders will receive $277.00
cash per share, valuing the transaction at approximately $5
billion. The transaction is subject to shareholder as well as
regulatory approvals, and is expected to close in the second half
of 2022.
-- 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 the
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, and is expected to close in the second half of 2022.
-- Swedish Match AB (SWMA SS- Stockholm) agreed to be acquired
by Philip Morris International, Inc. (PM-NYSE). 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. Under the terms of the
agreement, Swedish Match shareholders will receive SEK 106.00 cash
per share, valuing the transaction at approximately $16 billion.
The transaction is subject to the tender of at least 90% of shares
outstanding, as well as regulatory approvals, and is expected to
close in the fourth quarter of 2022.
-- 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 the 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, and is expected to close by the
first quarter of 2023.
-- Vifor Pharma AG (VIFN SW- Switzerland) agreed to be acquired
by CSL Ltd. (CSL AU- Sydney). Vifor Pharma develops and
manufactures pharmaceutical products in Switzerland, rest of
Europe, the U.S., and internationally. Under the terms of the
agreement, Vifor shareholders will receive $179.25 cash per share,
valuing the transaction at approximately $12 billion. The
transaction is subject to the tender of at least a majority of
shares outstanding, as well as regulatory approvals, and closed in
August.
SELECT CLOSED DEALS AS OF 30 JUNE 2022
-- Arena Pharmaceuticals, Inc . was acquired by Pfizer Inc. in
March 2022. Arena Pharmaceuticals focuses on developing novel
medicines in the areas of gastroenterology, dermatology, and
cardiology. On 13 December, 2021, Pfizer announced it would acquire
Arena for $100.00 cash per share, valuing the transaction at
approximately $6 billion.
-- Cerner Corp. was acquired by Oracle Corp. in June 2022.
Cerner provides health care information technology solutions and
tech-enabled services in the U.S. and internationally. On 20
December, 2021, Oracle announced it would acquire Cerner for $95.00
cash per share, valuing the transaction at approximately $30
billion.
-- Crown Resorts Ltd. was acquired by Blackstone, Inc. in June
2022. Crown Resorts operates in the entertainment industry
primarily in Australia. On 13 February, 2022, Blackstone announced
it would acquire Crown for A$13.10 cash per share, valuing the
transaction at approximately A$9 billion.
-- CyrusOne, Inc. was acquired by KKR & Co., Inc. and Global
Infrastructure Partners in March 2022. CyrusOne is a premier global
REIT specializing in design, construction, and operation of more
than 50 high- performance data centres worldwide. On 15 November,
2021, KKR announced it would acquire CyrusOne for $90.50 cash per
share, valuing the transaction at approximately $15 billion.
-- Ferro Corp. was acquired by Prince International, a portfolio
company of American Securities LLC, in April 2022. Ferro produces
and markets specialty materials in the U.S., Europe, the Middle
East, Africa, the Asia Pacific, and Latin America. On 11 May, 2021,
Prince announced it would acquire Ferro for $22.00 cash per share,
valuing the transaction at approximately $2 billion.
-- IHS Markit Ltd . was acquired by S&P Global, Inc. in
February 2022. IHS Markit provides critical information, analytics,
and solutions for various industries and markets worldwide. On 30
November, 2020, S&P announced it would acquire IHS for 0.2838
shares of S&P common stock per share, valuing the transaction
at approximately $44 billion.
-- Intersect ENT, Inc. was acquired by Medtronic plc in May
2022. Intersect ENT operates as an ear, nose, and throat medical
technology company in the U.S. On 6 August, 2021, Medtronic
announced it would acquire Intersect for $28.25 cash per share,
valuing the transaction at approximately $1 billion.
-- Mimecast Ltd . was acquired by Permira in May 2022. Mimecast
provides cloud security and risk management services for corporate
information and email. On 7 December, 2021, Permira announced it
would acquire Mimecast for $80.00 cash per share, valuing the
transaction at approximately $6 billion.
-- Nuance Communications, Inc. was acquired by Microsoft Corp.
in March 2022. Nuance Communications provides conversational and
cognitive artificial intelligence innovations. On 12 April, 2021,
Microsoft announced it would acquire Nuance for $56.00 cash per
share, valuing the transaction at approximately $17 billion.
-- Veoneer, Inc. was acquired by QUALCOMM, Inc. in April 2022.
Veoneer designs, develops, and manufactures automotive safety
electronics primarily in North America, Europe, and Asia. On 4
October, 2021, QUALCOMM announced it would acquire Veoneer for
$37.00 cash per share, valuing the transaction at approximately $4
billion.
-- Xilinx, Inc. was acquired by Advanced Micro Devices, Inc. in
February 2022. Xilinx designs and develops programmable devices and
associated technologies worldwide. On 27 October, 2020, Advanced
Micro Devices announced it would acquire Xilinx for 1.7234 shares
of Advanced Micro common stock per share, valuing the transaction
at approximately $34 billion.
-- Z Energy Ltd. was acquired by Ampol Ltd. in May 2022. Z
Energy sells transport fuel in New Zealand. On 12 October, 2021,
Ampol announced it would acquire Z Energy for NZ$3.78 cash per
share, valuing the transaction at approximately NZ$3 billion.
PORTFOLIO SUMMARY
Largest Portfolio Security holdings (excluding cash and cash
equivalents)
As at 30 June 2022
% of total Offsetting % of total
portfolio(3) market portfolio(6)
(gross)
Market value(4) value(5) (net)
Security(1) Offsetting short $000 $000
position(2)
Shaw Communications Inc 2.7 3,143 2.7
Activision Blizzard Inc 2.5 2,870 2.5
Coherent Inc II-VI Inc 2.3 2,693 (399) 2.0
Mandiant Inc 2.1 2,486 2.1
Vifor Pharma AG 2.1 2,442 2.1
Change Healthcare Inc 2.1 2,389 2.1
Rogers Corp 2.0 2,327 2.0
First Horizon Corp 1.9 2,245 1.9
PNM Resources Inc 1.9 2,179 1.9
Tower Semiconductor Ltd 1.8 2,112 1.8
BioHaven Pharmaceutical
Holding Company Ltd 1.8 2,076 1.8
Aerojet Rocketdyne Holdings
Inc 1.7 1,960 1.7
Citrix Systems Inc 1.7 1,924 1.7
Nielsen Holdings plc 1.5 1,750 1.5
Intertape Polymer Group Inc 1.4 1,672 1.4
Altaba Inc 1.4 1,666 1.4
SailPoint Technologies Inc 1.4 1,630 1.4
Tegna Inc 1.4 1,592 1.4
Zendesk Inc 1.4 1,567 1.4
MoneyGram International Inc 1.2 1,412 1.2
Sub-total 36.3 42,135 (399) 36.0
Other holdings(7) 63.7 78,868 (4,901) 64.0
Total holdings 100.0 121,003 (5,300) 100.0
(1) Long position.
(2) The offsetting short position of II-VI taken in advance of
its acquisition of Coherent Inc., which was converted into the
right to receive $220 in cash plus 0.91 share of II-VI common
stock.
(3) Represents the market value as a percentage of the total portfolio value.
(4) Market value of the long position.
(5) Market value of the offsetting short position.
(6) Represents the total position value (market value plus the
offsetting market value) as a percentage of the total portfolio
value.
(7) Including derivatives and equity short positions, and
excluding U.S. Treasuries. A Statement of Portfolio Changes is
available from the Administrator upon request.
STRATEGY
OUR KEY PERFORMANCE INDICATORS ("KPIS")
The Company's strategy is to generate returns for its
shareholders by pursuing its investment objective while mitigating
shareholder risk, by investing in a diversified spread of equity
investments. Through a process of bottom-up stock selection and the
implementation of disciplined portfolio construction, we aim to
create value for the Company's shareholders.
The largest holdings in the Company's portfolio are listed
below.
GEARING POLICY
At the sole discretion of the Portfolio Manager, the Company may
use leverage as part of its investment programme. It is anticipated
that the Company will structurally gear and use tactical leverage
or portfolio borrowings in an amount (calculated at the time of
investment) of around 2 times of the Net Asset Value, subject to
maximum gearing of 2.5 times the Net Asset Value.
LEVERAGE
Leverage is calculated using two methods:
i) Gross method and ii) Commitment method.
BUSINESS MODEL
Please see the Methodology in Action on page 7 of the full
report.
Board Diversity
Please see the "Board Diversity" item on page 29 of the full
report
KEY PERFORMANCE INDICATORS ("KPIS")
The Board recognises that it is share price performance that is
most important to the Company's shareholders. Fundamental to share
price performance is the performance of the Company's net asset
value. The central priority is to generate returns for the
Company's shareholders through net asset value and share price
total return, and discount management.
For the year ended 30 June 2022, the Company's KPIs, as
monitored closely by the Board at each meeting, are listed
below:
Net Asset Value Total Return
Year ended 30 June 2022
(1.34)%
(30 June 2021: 12.12%)
Share Price Total Return
Year ended 30 June 2022
29.06%
(30 June 2021: 5.46%)
Discount to Net Asset Value
Year ended 30 June 2022
3.74%
(30 June 2021: 25.63%)
The above table sets out the key KPIs for the Company. These
KPIs fall within the definition of 'Alternative Performance
Measures' (APMs) under guidance issued by the European Securities
and Markets Authority (ESMA). Information explaining how these are
calculated is set out in the Glossary. These KPIs including APMs
have been carefully selected by the Board on discussion with the
Portfolio Manager, to give the most appropriate overview of
performance in the financial year to shareholders and other
stakeholders.
Performance measured The Company does not use a benchmark. However,
against various indices at each meeting the Board reviews and compares
portfolio performance in the context of the performance
of the ETF MNA and Credit Suisse Merger Arb Liquid
Indices. Information on the Company's performance
is given in the Chairman's Statement and the Portfolio
Manager's Review.
Share Price Total Return The Company's primary investment objective is to
seek to generate total return consisting of capital
appreciation and current income.
In order to allow the Shareholders to realise a
predictable, but not assured, level of cash flow
and some liquidity periodically on their investment,
the Company has adopted a "managed dividend policy".
This policy seeks to pay Shareholders a quarterly
dividend in relation to the Net Asset Value of
the Company at the time, which may be changed at
any time by the Board. Between inception and 30
June 2022, the Company returned
$2.27 per share to shareholders, consistent with
its dividend policy. Dividends are paid only when
declared by the Board subject to the Board's assessment
of the Company's financial position and only if
the Company has sufficient income and distributable
reserves to make the dividend payment, and the
level of dividend may vary over time. As such,
the portfolio's managed distribution of capital
through the payment of quarterly dividends is under
review as we enter the new Fiscal Year.
Share price discount The NAV per share is published on a daily basis
to net asset value (NAV) on the London Stock Exchange and The International
per share Stock Exchange. The NAV is calculated in accordance
with the Association of Investment Companies (AIC)
formula.
At each Board meeting, the Board monitors the level
of the Company's discount to NAV, the changes thereto
and the reason for such changes. The Directors
recognise the importance to investors that the
shares should not trade at a significant discount
to NAV. Accordingly, the Board would consider implementing
a share buy back programme to ensure that the share
price does not trade at a significant discount
to the NAV.
In the year under review, the Company's shares
have traded from a discount of 25.63% as of 30
June 2021 to a discount of 3.85% as of 30 June
2022.
Performance is assessed on a total return basis for the NAV and
share price.
Cumulative Performance Chart (USD) from 19 July 2017
Dividend History
Rate ($) Ex-dividend date Record date Payment date
Fourth interim 2022 Not yet declared*
Third interim 2022 0.12 18 April 2022 19 April 2022 28 April 2022
Second interim 2022 0.12 20 January 2022 21 January 2022 03 February 2022
First interim 2022 0.12 18 November 2021 19 November 2021 03 December 2021
Total 0.36
Fourth interim 2021 0.12 14 October 2021 15 October 2021 29 October 2021
Third interim 2021 0.12 15 April 2021 16 April 2021 30 April 2021
Second interim 2021 0.12 14 January 2021 15 January 2021 28 January 2021
First interim 2021 0.12 15 October 2020 16 October 2020 30 October 2020
Total 0.48
* The Board expects to announce the final interim dividend in
respect of the Company's financial year ended 30 June 2022 after
the Tranche Two Tender Offer has concluded. Qualifying Registered
Shareholders who participate in either Tender Offer will not be
entitled to any such dividend in respect of any Ordinary Shares
validly tendered.
PRINCIPAL RISKS
The Company continues to have exposure to a variety of risks and
uncertainties, and the Audit & Risk Committee has focused
attention on identifying and mitigating key risks likely to
crystallise in the current economic environment. The Board
continues to prioritise a robust system of controls to minimise
exposure to global macro events in particular, which remains
highlighted as a generic risk as in recent Annual Reports.
The Directors confirm that they have carried out a further
robust assessment of the principal risks facing the Company during
the year, including those that would threaten its investment
objective, business
model, future performance, solvency or liquidity. The Company
maintains a risk matrix which sets out the risks facing the
Company, the likelihood and potential impact of each risk and the
controls established for mitigation. The risk matrix is reviewed by
the Audit & Risk Committee on a regular basis throughout the
financial year, and was specifically refreshed in 2022 to introduce
more stringent risk ratings for each risk and to reflect the impact
of related mitigating controls.
The core principal risks set out in the 2021 Annual Report
remain largely unchanged, however there are some risks that have
emerged which are set out in the
following table with an explanation of how they are mitigated.
On review during the year, the Board re-rated several principal
risks and considered the adequacy of mitigating controls in place
across the Company's operations and those of its key third party
providers. The Audit & Risk Committee has also specifically
considered the risks associated to the Portfolio Manager's use of
Contracts for Difference within the investment strategy, which on
review were felt to continue to be appropriate. The risk narrative
in the table below includes a summary of the actions taken to
position the Company to withstand the related effects for markets
and investments:
Risk Mitigation
Investment Portfolio Risks
Decline in the U.S. equity markets. By investing in a diversified portfolio and
by adhering to a carefully monitored series
of investment restrictions, enabled by automated
pre-trade compliance features and daily review
of trade tickets. These strictures mandate
that no single security purchase can, at the
time of investment, account for more than
15% of the gross assets of the Company. The
Board meets the portfolio management team
quarterly at the Board meetings to review
the risk factors and their effects on the
portfolio, and a thorough analysis of the
investment strategy is undertaken.
Merger and event driven risks Portfolio management team's careful selection
address the possibility that deals and active monitoring of mergers and acquisitions
do not go through, are delayed deals, and maintaining a thorough knowledge
beyond the original closing dates, of the selected securities in the portfolio.
or that the terms of the proposed
transactions change adversely.
Global Macro Events Risks
Unforeseen global emergencies Global economic, geopolitical, and financial
such as the pandemic could lead conditions are constantly monitored. Diversification
to dramatically increased market of Company assets is incorporated into the
instability and Company share investment strategy and, if disruptive events
price volatility. occur, the Manager is prepared to adopt a
temporary defensive position and invest some
or all of the Company's portfolio in cash
or cash equivalents, money market instruments,
bonds, commercial paper, or other debt obligations
with banks or other counterparties, with appropriate
ratings as determined by an internationally
recognised rating agency and approved by the
Board. Another option is the investment in
"government and public securities" as defined
for the purposes of the Financial Conduct
Authority Handbook.
The effects of the COVID-19 pandemic appear
to be easing, but the aftermath of the pandemic
continues to create uncertainty for economic
forecasts and markets as Governments globally
seek to transition communities, businesses
and individuals back to normality. The Manager
has therefore carefully managed the Company's
investments to protect shareholders' interests
and to position the Company to benefit from
future performance of markets in line with
its key investment principles. The pandemic
also impacted the day-to-day operational management
of both the Board and the Company's third
party service providers. The Board and all
its third party service providers continue
to successfully work and meet remotely, and
regular third party briefings have kept the
Board informed of how related risks are minimised
through the pandemic and ongoing global recovery.
The military aggression undertaken The Board continues to monitor the events
by Russia against Ukraine has unfolding in Ukraine. The portfolio management
upset the world economic order. team of the Trust monitors the holdings for
The geopolitical repercussions their exposure to the war.
are extensive, creating global The Audit & Risk Committee have noted that
problems including higher energy it is possible that a future event may temporarily
and food prices and possibly altering compromise the availability of an individual
global food and energy flows permanently. board member or a key representative or integral
team member of a third party service provider,
in turn impacting the Company's performance
and have plans in place to prepare for such
eventualities such as remote working etc to
ensure continuity.
Fraud and cybersecurity vulnerability The Board relies on assurances from the Company's
could increase for key service key third-party providers that they have appropriate
providers resulting from the war and adequate cybersecurity policies in place
in Ukraine. Such events are external to mitigate the risk of a cyberattack. The
to the management and beyond the Board keep these policies under review by
controls of the Company. receiving regular presentations from the Heads
of cybersecurity of its service providers,
who describe in detail the efforts they take
to secure the company's data and to mitigate
the risks of loss or potential damages that
could result from such attacks.
Operational Risks
Outsourcing
The operational functions of the All third party service providers report to
Company are outsourced to third the Board on a regular basis and their reports
parties. Systems disruptions, and representations are reviewed by the Board,
control failures and/or operational the AIF Manager and the Portfolio Manager.
lockdowns caused by the COVID-19
pandemic at these companies could
impact the Company.
A state-backed cyberattack could Whilst the Board takes all reasonable endeavours
also result in widespread disruption to safeguard the Company from a cyberattack
across the financial industry. on this scale, complete mitigation of this
external risk cannot be guaranteed, however
the Board, together with its' service providers
remain vigilant to the likelihood of such
an event in the current climate and have improved
the company's readiness to reduce disruptions
to the company's activities, in the event
of such threat.
Market and Share Price Risks
Market risk arising from volatility To address a discount, the Board may consider
in the prices of the Company's using share buybacks, through which shares
investments. The share price of would be repurchased when trading at a discount
the Company may fall below the from NAV, up to a maximum percentage of 14.99%
NAV. of the issued share capital. The Company has
continued its shareholder engagement programmes
to increase its visibility and interaction
with existing and potential investors.
Financial Risks
Comprise: (i) share price risk Further details of these risks are disclosed
(comprising interest rate risk, in Note 12 to the financial statements together
currency risk and other price with a summary of the policies for managing
related risks); (ii) liquidity these risks.
risk; and (iii) credit risk.
Corporate Governance and Regulatory Compliance Risks
Damage to its reputation through The Board complies with good governance practices
poor corporate governance. in accordance with the Association of Investments
Trusts' ("AIC") Code of Corporate Governance
guidelines which endorse the UK Corporate
Governance Code. The Board and its Committees
actively perform self-assessments of compliance
through the annual effectiveness evaluation
and receive are advised regularly advice
Shareholder discontent due to from by the Company Secretary in relation
a lack of appropriate communications to any regulatory changes within the corporate
and/or inadequate financial reporting governance landscape that may impact the
company.
The Board is in contact with its major shareholders
on a regular basis, and it monitors shareholder
sentiment.
Failure to comply with legal The Company receives and responds to guidance
and regulatory requirements from both its external and internal advisors
on compliance with the Listing Rules, the
Financial Conduct Authority's Disclosure and
Transparency Rules, UK Companies Act 2006,
as well as other applicable regulations.
In order to qualify as an The Board receives confirmations periodically
investment trust, the Company that the Company remains compliant with s1158
must comply with Section 1158-59 CTA 2010 in maintaining its Investment Trust
of the Corporation Tax Act Status. The criteria are monitored by the
2010 ("CTA 2010"). A breach Administrator, AIF Manager, and the Portfolio
of these sections could result Manager who reports to the Board on compliance
in the Company losing investment at each quarterly meeting. In addition, the
trust status and, as a consequence, Audit & Risk Committee are also kept informed
capital gains realised within of any potential breaches by the Company's
the Company's portfolio would External Auditors who review compliance as
be subject to Corporation part of the audit process and provide guidance
Tax. accordingly.
Emerging Risks Mitigation
Environmental, Social and
Climate Change Risks
Environmental, Social and The Board and Investment Manager are committed
Climate issues pose some of to supporting business activities that are
the most significant challenges environmentally and socially responsible in
to the long-term prosperity line with its sustainability commitments and
of the global economy, the its support of the goals of the Paris Accord.
well-being of people and communities,
and the natural environmental
ability to support life.
Geopolitical Risks
Geopolitical risks have risen The Board is keeping these evolving risks
with Russia's invasion of and market pressures under constant review
Ukraine. The impact of sanctions and will continue to monitor the volatility
and the rise in commodity around investee company valuations and implications
prices are likely to be the for the Company's likely future dividend income
main transmission mechanism stream.
to markets. Rising commodity
prices and further disruption
to supply chains shall exacerbate
inflationary pressure and
may also create a negative
impact on global growth, with
Europe at particular risk.
VIABILITY & GOING CONCERN STATEMENT
In accordance with the provisions of the UK Corporate Governance
Code, the Directors have assessed the prospects of the Company over
a longer period than the 12 months referred to in the 'Going
Concern' guidelines.
The Board conducted this review focusing on a period of five
years. This period was selected as it is aligned with the Company's
investment objective of generating total return, consisting of
capital appreciation and current income. In making this assessment
the Board also considered the Company's principal risks.
Investment Companies in the UK operate in a well established and
robust regulatory environment and the Directors have assumed
that:
-- Investors will continue to want to invest in closed-end
investment companies because the fixed capitalisation structure is
suited to pursuing the Portfolio Manager's proprietary long-term
PMV with a Catalyst(TM) investment strategy;
-- The Company's remit of investing globally with an emphasis on
securities traded in the U.S., and predominantly equity securities
issued by companies of any market capitalisation will continue to
be attractive to investors.
-- The UK's well established investment and robust regulatory
environment will continue as such and will remain an attractive
global domicile for the Company's remit.
-- The recent period of UK political instability as reflected in
the Sterling exchange rate relative to the US Dollar, the interplay
of parliamentary politics with the Bank of England, and the
regulatory unravelling of Brexit relative to the European Union,
will pass in the medium term and return to a period of marketplace
stability and instil domicile confidence for global investors.
As with all investment vehicles, there is a risk that the
performance of individual investments will vary and that capital
may be lost, but this is not regarded as a threat to the viability
of the Company.
Operationally, the Company retains title to all assets, and cash
and securities are held with a custodian bank approved by the
Portfolio Manager and the Board.
The nature of the Company's investments means that solvency and
liquidity risks are low because:
-- The Company's portfolio is invested in readily realisable, listed securities;
-- The closed-end nature of the Company means that, unlike an
open-ended fund, it does not need to liquidate positions when
shareholders wish to sell their shares; and
-- The expenses of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
currently foreseen which would alter that position.
-- The taxation of the Company should it operate as a close
investment company are predictable and modest in comparison with
the return profile of the investment programme, and as a result of
regular consultation with shareholders, an effort to undertake the
mitigation of such close status taxation, such as a
re-domiciliation, is not expected in the period after 12 months
from the tranche two tender offer.
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. The risks are discussed in
more detail in the Chairman's statement.
Taking these factors into account, the Directors confirm that
they have a reasonable expectation that the Company will continue
to operate and meet its expenses. The Directors have also
considered the fact that there will be a continuation vote at the
Company's 2022 Annual General Meeting, and having consulted and
maintained close contact with the Company's major shareholders,
have received a letter in Deed, which contains enforceable
irrevocable undertakings, from the largest shareholder, Associated
Capital Group, legal and beneficial owner of 6,216,256 shares at
the time of this writing, that they will both vote in favour of
continuation of the company and not participate in the 2nd tender
offer. Thereby the Directors confirm with certainty that the
company's largest shareholder will vote in favour of the company to
continue to operate.
The Company's portfolio consists primarily of U.S. investments.
Accordingly, the Company believes that the post "Brexit"
arrangements introduced by the U.K. government and market U.K.
government and market regulators will not materially affect the
prospects for the Company, but the Board and Portfolio Manager will
continue to keep developments under review.
This Viability & Going Concern Statement, the Strategic
Report for the year ended 30 June 2022 and the s172 statement have
been approved by the Board and signed on its behalf by:
Marc Gabelli
Chairman
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company Law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the financial statements in accordance with UK-
adopted international accounting standards in conformity with the
requirements of the Companies Act 2006. Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for
that period.
In preparing the financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable UK-adopted international accounting
standards in conformity with the requirements of the Companies Act
2006 have been followed, subject to any material departures
disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements and the Directors' Remuneration Report
comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company's website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors' confirmations
The Directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
In the case of each Director in office at the date the
Director's Report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
By order of the Board
Marc Gabelli
Chairman of the Board
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2022
Year ended 30 June Year ended 30 June
2022 2021
Revenue Capital Total Revenue Capital
$000 $000 $000 Total
Income Notes $000 $000 $000
Investment income 5 1,076 - 1,076 327 - 327
Total investment income 1,076 - 1,076 327 - 327
Gains/(Losses) on investments
Net realised and unrealised (losses)/gains
on
investments 3, 14 - (460) (460) - 15,435 15,435
Net realised and unrealised currency
gains/(losses) on
investments - 490 490 - (142) (142)
Net gains/(losses) on investments - 30 30 - 15,293 15,293
Total income and gains on investments 1,076 30 1,106 327 15,293 15,620
Expenses
Portfolio management fee 6 (842) - (842) (852) - (852)
Performance fee 6, 13 - - - - (2,796) (2,796)
Other expenses 6 (1,127) (124) (1,251) (901) (174) (1,075)
(1,753) (2,970)
Total expenses (1,969) (124) (2,093) (4,723)
Net return on ordinary activities
before finance costs and taxation (893) (94) (987) (1,426) 12,323 10,897
Interest expense and similar charges (1) - (1) - - -
Profit/(loss) before taxation (894) (94) (988) (1,426) 12,323 10,897
Taxation on ordinary activities 8 (49) - (49) (33) - (33)
Profit/(loss) for the year (943) (94) (1,037) (1,459) 12,323 10,864
Earnings/(Loss) per share (basic 9 ($0.09) ($0.01) ($0.10) ($0.14) $1.20 $1.06
and diluted)
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 year
ended 30 June 2022.
The Company does not have any income or expense that is not
included in net profit for the year. Accordingly, the net profit
for the period is also the total comprehensive income for the year,
as defined in IAS1 (revised).
The notes form part of these financial statements.
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2022
Year ended 30 June Year ended 30 June
2022 2021
Revenue Capital Total Revenue Capital
$000 $000 $000 Total
Income Notes $000 $000 $000
Investment income 5 1,076 - 1,076 327 - 327
Total investment income 1,076 - 1,076 327 - 327
Gains/(Losses) on investments
Net realised and unrealised (losses)/gains
on
investments 3, 14 - (460) (460) - 15,435 15,435
Net realised and unrealised currency
gains/(losses) on
investments - 490 490 - (142) (142)
Net gains/(losses) on investments - 30 30 - 15,293 15,293
Total income and gains on investments 1,076 30 1,106 327 15,293 15,620
Expenses
Portfolio management fee 6 (842) - (842) (852) - (852)
Performance fee 6, 13 - - - - (2,796) (2,796)
Other expenses 6 (1,127) (124) (1,251) (901) (174) (1,075)
(1,753) (2,970)
Total expenses (1,969) (124) (2,093) (4,723)
Net return on ordinary activities
before finance costs and taxation (893) (94) (987) (1,426) 12,323 10,897
Interest expense and similar charges (1) - (1) - - -
Profit/(loss) before taxation (894) (94) (988) (1,426) 12,323 10,897
Taxation on ordinary activities 8 (49) - (49) (33) - (33)
Profit/(loss) for the year (943) (94) (1,037) (1,459) 12,323 10,864
Earnings/(Loss) per share (basic 9 ($0.09) ($0.01) ($0.10) ($0.14) $1.20 $1.06
and diluted)
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 year
ended 30 June 2022.
The Company does not have any income or expense that is not
included in net profit for the year. Accordingly, the net profit
for the period is also the total comprehensive income for the year,
as defined in IAS1 (revised).
The notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2022
Year ended 30 June 2022
Called Special
up Distributable Capital Revenue
Year ended 30 June Share Capital Reserve* Reserve Reserve* Total
2022 Note $000 $000 $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 7 - (4,914) - - (4,914)
Balance as at 30 June 2022 103 79,062 20,965 (4,356) 95,774
Year ended 30 June 2021
Called Special
up Distributable Capital Revenue
Share Capital Reserve* Reserve Reserve* Total
Year ended 30 June 2021 Note $000 $000 $000 $000 $000
Balance as at 1 July 2020 103 88,912 9,279 (1,954) 96,340
Ordinary shares bought back
into treasury - - (543) - (543)
Profit/(loss) for the period
after
tax on ordinary activities - - 12,323 (1,459) 10,864
Dividends paid 7 - (4,936) - - (4,936)
Balance as at 30 June 2021 103 83,976 21,059 (3,413) 101,725
* The Revenue Reserve and Special Distributable Reserve are
treated as distributable reserves. As at 30 June 2022, the net
amount of reserves that are distributable are $74,706,000 (2021:
$80,563,000).
STATEMENT OF FINANCIAL POSITION
as at 30 June 2022
As at 30 2022 As at 30 June
June 2021
Note $000 $000 $000 $000
Non-current assets
Investments held at fair value through profit
or loss 3 92,381 98,369
Current assets
Cash and cash equivalents 10 5,911 12,405
Receivable for investment sold 423 2,622
Other receivables 15 66 147
6,400 15,174
Current liabilities
Portfolio management fee payable (61) (82)
Performance fee payable - (2,796)
Payable for investment purchased (1,875) (1,822)
Other payables 15 (212) (314)
Bank overdrafts (391) -
Net current assets 3,861 10,160
Non-current liabilities
Investments at fair value through profit
or loss 3 (416) (6,752)
Offering fees payable (52) (52)
Net assets 95,774 101,725
Share capital and reserves
Called-up share capital 11 103 103
Special distributable reserve* 79,062 83,976
Capital reserve 20,965 21,059
Revenue reserve* (4,356) (3,413)
Total shareholders' funds 95,774 101,725
Net asset value per ordinary share $9.35 $9.94
* The Revenue Reserve and Special Distributable Reserve are
treated as distributable reserves. As at 30 June 2022, the net
amount of reserves that are distributable are $74,706,000 (2021:
$80,563,000).
STATEMENT OF CASH FLOWS
for the year ended 30 June 2022
Year ended Year ended
30 June 2022 30 June 2021
$000 $000 $000 $000
Cash flows from operating activities
(Loss)/profit before tax (988) 10,897
Adjustments for:
Gains on investments (30) (15,293)
Cash flows from operating activities
Purchases of investments(1,2) (202,678) (277,371)
Sales of investments(1,2) 204,122 252,191
Increase in receivables(2) (995) (409)
(Decrease)/increase in payables(2) (2,918) 2,640
Interest paid (1) -
Dividend income 1,076 330
Foreign withholding taxes on dividends (49) (33)
Net cash flows from operating activities(3) (2,461) (27,048)
Cash flows from financing activities
Shares bought back for cash - (543)
Dividends paid (4,914) (4,936)
Net cash flows from financing activities (4,914) (5,479)
Net decrease in cash and cash equivalents(3) (7,375) (32,527)
Cash and cash equivalents at the start of the
period 12,405 45,074
Effect of foreign exchange rates(3) 490 (142)
Cash and cash equivalents at the end of the period(4) 5,520 12,405
1 Receipts from the sale of, and payments to acquire, investment
securities, have been classified as components of cash flows from
operating activities because they form part of the Company's
dealing operations.
2 Comparative figures have been updated to reflect a
reclassification of moving the non-cash elements of the
purchases/sales from the "increase/decrease in
receivables/payables" to the "purchases/sales of investments"
section.
3 Comparative figures have been updated to reflect a
reclassification of effect of foreign exchange rates from "cash
flows from operating activities" to "net decrease in cash and cash
equivalents" section.
4 As at 30 June 2022, $5,843,979 (2021: $11,697,439) was held as
collateral at UBS securities LLC and was restricted.
Gabelli Merger Plus(+) Trust Plc is registered in England and
Wales under Company number 10747219.
The financial statements were approved by the Board of Directors
on 25 October 2022 and signed on its behalf by
Marc Gabelli
Chairman
Notes to the Financial Statements
1. General Information
Gabelli Merger Plus+ Trust Plc (the "Company") is a closed-ended
public limited company incorporated in the United Kingdom on 28
April 2017 with registered number 10747219. The Company commenced
operation on 19 July 2017 and intends to conduct its affairs so as
to qualify, at all times, as an investment trust for the purposes
of section 1158 of the Corporation Tax Act 2010 (as amended).
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.
b. Presentation of Statement of Comprehensive Income - To better
reflect the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary
information which analyses the Statement of Comprehensive Income
between items of a revenue and capital nature has been presented
alongside the Statement of Comprehensive Income.
c. Going concern - The Directors, 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 30
June 2022.
In forming this position, the Directors consulted with
shareholders utilizing the tender offer process, considered the
Company's investment objectives, risk management policies, capital
management policies and procedures, the nature of the portfolio and
expenditure projections in detail. These items are discussed in
more detail in the Directors' Report and the Chairman's
Statement.
The Directors have also considered the fact that there will be a
continuation vote at the Company's 2022 Annual General Meeting, and
having consulted and maintained close contact with the Company's
major shareholders, have received a letter in Deed, which contains
enforceable irrevocable undertakings, from the largest shareholder,
Associated Capital Group, legal and beneficial owner of 6,216,256
shares at the time of this writing, that they will both vote in
favour of continuation of the company and not participate in the
2nd tender offer. Thereby the Directors confirm with certainty that
the company's largest shareholder will vote in favour of the
company to continue to operate. The Viability & Going Concern
Statement contains additional information.
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 note 11.
n. Taxation - The tax effect of different items of income/gains
and expenditure/losses is allocated between revenue and capital on
the same basis as the particular item to which it relates, under
the marginal method, using the Company's effective rate of tax.
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the period end
date where transactions of events that result in an obligation to
pay more or a right to pay less tax in future have occurred at the
period end date measured on an undiscounted basis and based on
enacted tax rates. This is subject to deferred tax assets only
being recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of
the underlying timing differences can be deducted. Timing
differences are differences arising between the Company's taxable
profits and its results as stated in the accounts which are capable
of reversal in one or more subsequent periods.
o. Functional and presentation currency - The functional and
presentation currency of the Company is the U.S. dollar.
3. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
The financial assets measured at fair value through profit or
loss in the financial statements are grouped into the fair value
hierarchy as follows:
As at 30 June 2022
Level 1 Level 2 Level Total
3
$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
As at 30 June 2021
Level 1 Level 2 Level Total
3
$000 $000 $000 $000
Financial assets at fair value through
profit or loss
Quoted equities 92,205 5,498 - 97,703
Contingent value rights - 278 - 278
Derivatives - 388 - 388
Gross fair value 98,369
Derivatives - (1,892) - (1,892)
Quoted equities - shorts (4,860) - - (4,860)
Net fair value 87,345 4,272 - 91,617
* Dova Pharmaceuticals Inc has been transferred from Level 1 to
Level 2 and Zagg Inc has been transfered from Level 2 to Level 3
during the year.
Analysis of changes in market value and book cost of portfolio
investments in year
Year ended Year ended
30 June 30 June
2022 2021
$000 $000
Opening book cost 93,078 59,509
Opening investment holding losses (1,461) (9,377)
Opening market value 91,617 50,132
Additions at cost 202,731 276,928
Disposals proceeds received (201,923) (250,878)
Gains/(losses) on investments (460) 15,435
Market value of investments 91,965 91,617
Closing book cost 99,687 93,078
Closing investment holding losses (7,722) (1,461)
Closing market value 91,965 91,617
The company received $201,923,000 (2021: $250,878,000) from
investments sold in the year. The book cost of these investments
when they were purchased was $196,122,000 (2021: $243,359,000).
Further explanation of the disposal proceeds received in the year
can be found in the Net realised and unrealised gains/(losses) on
investments section.
Fair value hierarchy
IFRS 13 requires the Company to classify its financial
instruments held at fair value using a hierarchy that reflects the
significance of the inputs used in the valuation methodologies.
These are as follows:
-- Level 1 - quoted prices in active markets for identical investments;
-- Level 2 - other significant observable inputs (including
quoted prices for similar investments, interest rates, prepayments,
credit risk, etc.); and
-- Level 3 - Significant unobservable inputs.
Valuation process and techniques for Level 3 valuations
The investments in contingent value rights are reviewed
regularly to ensure that the initial classification remains correct
given each asset's characteristics and the Company's investment
policies. The contingent value rights are initially recognised
using the transaction price as the best evidence of fair value at
acquisition, and are subsequently measured at fair value. At 30
June 2022, the quantitative inputs used to value the level 3
contingent value rights included the last sale price, broker
quotes, or the merger price.
Level 2 financial assets at fair value through profit or
loss
The investments in contracts for difference are marked at the
price of the underlying equity. Contingent value rights in Level 2
are marked using broker quotes.
Level 3 financial assets at fair value through profit or
loss.
Year ended Year ended
30 June 30 June
2022 2021
$000 $000
Opening valuation - 42
Assets acquired during the year - 2
Assets disposed during the year - -
Total profit or loss included in net profits/(losses)
on investments in
the Statement of Comprehensive Income 5 (44)
Closing valuation 5 -
Net realised and unrealised gains/(losses) on investments
Year ended Year ended
30 June 30 June
2022 2021
$000 $000
Realised gains on investments 5,801 7,519
Movement in unrealised gains/(losses) on investments (6,261) 7,916
Net realised and unrealised gains/(losses) on investments (460) 15,435
---------------- -------------
4. TRANSACTIONS COSTS
During the year commissions and other expenses were incurred in
acquiring within gains/(losses) in the Statement of Comprehensive
Income. The total costs were as follows:
Year ended Year ended
30 June 30 June
2022 2021
$000 $000
Purchases 68 79
Sales 33 75
Total transaction costs 101 154
---------------- -------------
5. Income/(loss) from investments Expenses
Year ended Year ended
30 June 30 June
2022 2021
$000 $000
Income/(loss) from investments
Overseas equities 530 286
Income on short-term investments(1) 3 (7)
Other income 543 48
Total income/(losses) 1,076 327
---------------- --------------
1 Income on short-term investments represents the return on cash
and cash equivalents, primarily U.S. Treasury Bills. Further
information can be found in Note 10
6. EXPENSES
Year ended Year
ended 30 June 2022
30 June 2021
$000 $000
Revenue expenses
Portfolio Management Fee (842) (852)
Contracts for Difference (429) (277)
Directors' Remuneration ( 1 5 7 ) (163)
Legal Fees (110) (45)
Company Secretary Fees (94) (62)
Audit Fees - PwC (70) (68)
AIFM - Carne (60) (53)
Administration Fees - State Street (44) (42)
Custodian/Depositary Fees - State Street (42) (38)
Printing (17) (13)
Other (33) (36)
Directors' Expenses (15) -
Ongoing LSE and UKLA Fees (14) (10)
Registrar - Computershare(1) (13) (16)
Regulatory Filing Fees - AIFMD (13) (58)
LSE RNS fees (8) (14)
Marketing expenses (4) (3)
Dividend Expense on Securities Sold Short (4) (7)
Broker Retainer Fee(2) - 4
Total revenue expenses (1,969) (1,753)
Capital expenses
Transaction costs on derivatives (73) (103)
Transaction Charges - State Street (51) (71)
Performance Fee(3) - (2,796)
Total capital expenses (124) (2,970)
1 The regulatory filing fees for the year ended 30 June 2021
include filing fees from prior fiscal years.
2 The broker retainer fees for the year ended 30 June 2022
reflects a Cantor Fitzgerald Europe Retainer reimbursement.
3 Further information regarding the Performance Fee can be found
in Note 13.
Portfolio Management Fee
Under the terms of the Portfolio Management Agreement, the
Portfolio Manager will be entitled to a management fee ("Management
Fee"), together with reimbursement of reasonable expenses incurred
by it in the performance of its duties under the Portfolio
Management Agreement, other than the salaries of its employees and
general overhead expenses attributable to the provision of the
services under the Portfolio Management Agreement. The Management
Fee shall be accrued daily and calculated on each Business Day at a
rate equivalent to 0.85% of NAV per annum.
AIFM fees
The Company 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 GBP2,500.
7. EQUITY DIVIDS
Year ended Year
ended 30 June 2022
30 June 2021
$000 $000
Dividends paid 4,914 4,936
During the year ended 30 June 2022 dividends paid per share
totalled $0.48 (30 June 2021: $0.48 per share). More detailed
information can also be found in the Dividend History table
8. TAXATION ON ORDINARY ACTIVITIES
Year ended 30 June 2022
Revenue Capital Total
Analysis of the tax charge in the year $000 $000 $000
Irrecoverable overseas tax (49) - (49)
Total (49) - (49)
Year ended 30 June 2021
Revenue Capital Total
Analysis of the tax charge in the year $000 $000 $000
Irrecoverable overseas tax (33) - (33)
Total (33) - (33)
Year ended 30 June 2022
Revenue Capital Total
Factors affecting the tax charge for the year $000 $000 $000
Loss before taxation (894) (94) (988)
UK Corporation tax at effective rate of 19% 170 18 188
Effects of:
Non taxable overseas dividends 98 - 98
Gains on investments held at fair value through
profit or loss - (87) (87)
Irrecoverable overseas tax (49) - (49)
Expenses not deductible for tax purposes (1) (10) (11)
Losses on foreign currencies - 93 93
Movement in excess management expenses (352) (18) (370)
Movement in deferred tax rate on excess management
expenses 85 4 89
Total (219) (18) (237)
Total tax charge for the year (49) - (49)
Factors affecting the tax charge for the year
(Loss)/profit before taxation (1,426) 12,323 10,897
UK Corporation tax at effective rate of 19% 271 (2,341) (2,070)
Effects of:
Non taxable overseas dividends 54 - 54
Losses on investments held at fair value through
profit or loss - 2,933 2,933
Irrecoverable overseas tax (33) - (33)
Expenses not deductible for tax purposes (1) (12) (13)
Gains on foreign currencies - (27) (27)
Movement in excess management expenses (324) (553) (877)
Total (304) 2,341 2,037
Total tax charge for the year (33) - (33)
At the year end after offset against income taxable on receipt,
there is a potential deferred tax asset of $2,354,232 (2021:
$1,498,961) in relation to surplus tax reliefs. As the Company
has not generated sufficient taxable profits to utilise these
amounts, no deferred tax asset has not been recognised.
Due to the Company's status as an investment trust and the
intention to continue to meet the conditions required to obtain
approval in the foreseeable future, the Company has not provided
deferred tax on capital gains and losses arising on the revaluation
or disposal of investments.
9. EARNINGS PER SHARE
Earnings per ordinary share is calculated with reference to the
following amounts:
Year ended Year ended
30 June 30 June
2022 2021
Revenue return
Revenue loss attributable to ordinary shareholders
($000) (943) (1,459)
Weighted average number of shares in issue during year 10,238,206 10,247,238
Total revenue return (loss) per ordinary share ($0.09) ($0.14)
Capital return
Capital return attributable to ordinary shareholders
($000) (94) 12,323
Weighted average number of shares in issue during year 10,238,206 10,247,238
Total capital return per ordinary share ($0.01) $1.20
Total return per ordinary share ($0.10) $1.06
As at 30 As at 30
Net asset value per share June 2022 June 2021
Net assets attributable to shareholders ($000) 95,774 101,725
Number of shares in issue at year end 10,238,206 10,238,206
Net asset value per share $9.35 $9.94
10. CASH AND CASH EQUIVALENTS
As at As at
30 June 2022 30
June 2021
$000 $000
Cash 5,911 12,405
Total 5,911 12,405
The Board and Investment Manager oversee investments held in
cash and cash equivalents in accordance with the Investment
Policy.
11. CALLED UP SHARE CAPITAL
As at 30 As at
June 2022 30 June
2021
$000 $000
Allotted, called up and fully paid:
10,238,206 (2021: 10,238,206) Ordinary shares of $0.01
each - equity 102 102
Treasury shares:
95,960 (2021: 95,960) Ordinary shares of $0.01 each
- equity 1 1
Total shares 103 103
12. FINANCIAL RISK MANAGEMENT
The Company's financial instruments comprise securities and
other investments, cash balances, receivables, and payables that
arise directly from its operations; for example, in respect of
sales and purchases awaiting settlement, and receivables for
accrued income. The Company also has the ability to enter into
derivative transactions in the form of forward foreign currency
contracts, futures, and options, for the purpose of managing
currency and market risks arising from the Company's
activities.
The main risks the Company faces from its financial instruments
are (i) share price risk (comprising interest rate risk, currency
risk, and other price risk), (ii) liquidity risk, and (iii) credit
risk.
The Board regularly reviews, and agrees upon, policies for
managing each of these risks. The Portfolio Manager's policies for
managing these risks are summarised below and have been applied
throughout the year. The numerical disclosures exclude short term
receivables and payables, other than for currency disclosures.
a. Share price risk
The fair value or future cash flows of a financial instrument
held by the Company may fluctuate because of changes in market
prices. This market risk comprises three elements - interest rate
risk, currency risk, and other price risk.
b. Interest rate risk
Interest rate movements may affect the level of income
receivable and payable on cash deposits.
The possible effects on fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment decisions.
12 Financial risk management (continued)
Interest risk profile
The interest rate risk profile of the portfolio of financial
assets/(liabilities) at the year end date was as follows:
As at 30 June 2022
Interest Local currency Foreign US Dollar
rate 000 exchange equivalent
% rate $000
Assets:
US dollar 0.24 5,585 1.00 5,585
Australian dollar 0.12 (48) 1.45 (33)
Canadian dollar 0.15 15 1.29 12
Euro currency (0.75) (8) 0.96 (8)
GBP Sterling 0.12 (24) 0.82 (29)
Hong Kong dollar 0.00 1 7.85 *
New Zealand dollar 0.10 5 1.61 3
Norwegian krone 0.00 (5) 9.88 (1)
South African rand 0.00 (13) 16.38 (1)
Swedish krona (0.75) (80) 10.25 (8)
Total 5,520
* Less than $500.
As at 30 June 2021
Interest Local currency Foreign US Dollar
rate 000 exchange equivalent
% rate $000
Assets:
US dollar 0.00 12,462 1.00 12,462
Australian dollar 0.00 1 1.33 1
Canadian dollar 0.00 6 1.24 5
Euro currency (0.75) (12) 0.84 (14)
GBP sterling 0.00 (39) 0.72 (54)
Hong Kong dollar 0.00 1 7.77 *
Japanese yen (0.35) 265 110.99 2
Polish zloty 0.00 1 3.81 *
Singapore dollar 0.00 4 1.34 3
Swedish krona (1.25) 1 8.55 *
Total 12,405
* Less than $500.
Interest rate sensitivity
The sensitivity analysis below has been determined based on the
exposure to interest rates for both derivative and non-derivative
instruments at the year end date and the stipulated change taking
place at the beginning of the financial year and held constant
throughout the reporting period in the case of instruments that
have floating rates.
If interest rates had been 10 (2021: 10) basis points higher or
lower and all other variables were held constant, the Company's
profit or loss for the reporting year to 30 June 2022 would
increase/decrease by $6,000 (2021: $12,000). This is mainly
attributable to the Company's exposure to interest rates on its
floating rate cash balances.
Currency risk
The Company's investment portfolio is invested predominantly in
foreign securities and the year end can be significantly affected
by movements in foreign exchange rates. It is not the Company's
policy to hedge this risk on a continuing basis but the Company
may, from time to time, match specific overseas investments with
foreign currency borrowings.
The revenue account is subject to currency fluctuation arising
from verses income. Currency risk exposure by currency of
denomination:
As at June 2022
30
Net Investments Net monetary Total currency
$000 assets exposure
$000 $000
Australian dollar - (55) (55)
Canadian dollar 5,295 (5,222) 73
Euro currency 98 (55) 43
GBP Sterling 937 (805) 132
Hong Kong dollar - 2 2
New Zealand dollar - 3 3
South African rand - (7) (7)
Swedish krona - 108 108
Swiss franc - - -
Total non US Investments 8,772 (6,031) 2,741
US dollar 82,724 10,309 93,033
Total 91,496 4,278 95,774
As at June 2021
30
Net Investments Net monetary Total
$000 assets currency
$000 exposure
$000
Australian dollar - (7) (7)
Canadian dollar 4,845 (4,851) (6)
Euro currency 1,327 (604) 723
GBP sterling - (44) (44)
Hong Kong dollar - (12) (12)
Japanese yen - 5 5
Norwegian krone - 4 4
Singapore dollar - 2 2
South African rand - (2) (2)
Total non US Investments 6,172 (5,509) 663
US dollar 91,806 9,256 101,062
Total 97,978 3,747 101,725
12. Financial risk management (continued) Currency
sensitivity
The following table details the Company's sensitivity to a 10%
increase and decrease in US dollars against the relevant foreign
currencies and the resultant impact that any such increase or
decrease would have on net return before tax and equity
shareholders' funds. The sensitivity analysis includes only
outstanding foreign currency denominated items and adjusts their
translation at the year end for a 10% change in foreign currency
rates.
As at As at
30 June 2022 30
June 2021
$000 $000
Australian dollar (6) (1)
Canadian dollar 8 (1)
Euro currency 5 72
GBP Sterling 13 (4)
Japanese yen - 1
South African rand (1) -
Swedish krona 11 -
Swiss franc - -
The relevant US dollar exchange rates as at 30 June 2022 were:
Australian Dollar (1: 1.4542); Canadian Dollar (1: 1.2900); Euro
currency (1: 0.9565); GBP Sterling
(1: 0.8234), South African rand (1: 16.3825), Swedish krona (1:
10.2474) and Swiss franc (1: 0.9574).
Other price risk
Other price risks, i.e., changes in market prices other than
those arising from interest rate or currency risk, may affect the
value of the quoted investments.
The Investment Manager actively monitors market prices
throughout the year and reports to the Board, which meets regularly
in order to review investment strategy. The investments held by the
Company are listed on a recognised stock exchange.
Other price risk sensitivity
If market prices at the year end date had been 15% higher or
lower while all other variables remained constant, the return
attributable to ordinary shareholders for the year ended 30 June
2022 would have increased/decreased by $13,795,000. The
calculations are based on the portfolio valuations as at the year
end date, and are not representative of the year as a whole.
a. Liquidity risk
This is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities. All
creditors are payable within 3 months.
Liquidity risk is not considered to be significant as the
Company's assets comprise mainly readily realisable securities,
which can be sold to meet funding commitments if necessary.
b. Credit risk
This is the risk of failure of the counterparty to a transaction
to discharge its obligations under that transaction that could
result in the Company suffering a loss.
The table below shows the counterparty risk as at the Balance
Sheet date:
Derivative exposure: CFDs
Collateral posted
Net exposure
$000 $000 $000
Counterparty
UBS Securities, LLC (469) (5,844) (6,313)
Total (469) (5,844) (6,313)
Net exposure represents the mark-to-market value of derivative
contracts less any cash collateral held. Negative exposure
represents the Fund's exposure to that counterparty. Positive
amounts are not an exposure to the Fund.
The risk is managed as follows:
-- Investment transactions are carried out mainly with brokers
whose credit ratings are reviewed periodically by the Portfolio
Manager.
-- Most transactions are made delivery versus payment on recognised exchanges
Cash is held at State Street Bank and Trust which has a credit
rating by Standard and Poor's on short term deposits of A-1+ and
long term deposits AA-.
The maximum credit risk exposure as at 30 June 2022 was
$6,400,000 (2021: $15,174,000). This was due to cash and
receivables as per note (10) 'Cash & cash equivalents', note
(15) 'Total other receivables' and Statement of Financial Position
Receivable for investment sold.
Capital management policies and procedures
The Company's capital management objectives are
-- to ensure that the Company will be able to continue as a going concern; and
-- to maximise the revenue and capital return to its equity
shareholders through an appropriate balance of equity capital and
debt.
The Board monitors and reviews the broad structure of the
Company's capital on an ongoing basis. The Board considers the
Company's capital requirements in the context of both the Special
Distributable and Revenue reserves being treated as distributable,
as permitted by current accounting standards for listed investment
trusts. The distributable reserves can be used to fund dividends
and share repurchase programmes. This review includes the nature
and planned level of gearing, which takes account of the Portfolio
Manager's views on the market and the extent to which revenue in
excess of that which is required to be distributed under the
investment trust rules should be retained.
The analysis of shareholders' funds is as follows:
As at As at
June June
2022 2021
30 $000 30 $000
Called-up share capital 103 103
Special distributable reserve* 79,062 83,976
Capital reserve 20,965 21,059
Revenue reserve* (4,356) (3,413)
Total shareholders' funds 95,774 101,725
*The Revenue Reserve and Special Distributable Reserve are
treated as distributable reserves. As at 30 June 2022, the net
amount of reserves that are distributable are $74,706,000 (2021:
$80,563,000).
Alternative Investment Fund Managers' ('AIFM') Directive
In accordance with the Alternative Investment Fund Managers'
Directive ("AIFMD"), the Company has appointed Carne Global Fund
Managers (Ireland) Limited as its Alternative Investment Fund
Manager (the "AIFM") to provide portfolio management and risk
management services to the Company in accordance with the
investment management agreement.
Leverage
Leverage is calculated using two methods: i) Gross method and
ii) Commitment method.
The Company's maximum leverage levels at 30 June 2022 are shown
below:
Gross method Commitment
Leverage Exposure method
Maximum permitted limit 500% 250%
1 3 7
Actual 131% %
The leverage limits are set by the AIFM and approved by the
Board and are in line with the maximum leverage levels permitted in
the Company's Articles of Association. The AIFM is also required to
comply with the gearing parameters set by the Board in relation to
borrowings.
13. PERFORMANCE FEE
Subject to the satisfaction of the Performance Conditions, the
Portfolio Manager shall be entitled under the Portfolio Management
Agreement, in respect of each Performance Period, to receive 20% of
the Total Return relating to such Performance Period, provided that
such amount shall not exceed 3% of the Average NAV.
14. 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 year ended 30 June 2022, no
Performance fee was paid. As at 30 June 2022, no amount was
outstanding to the Portfolio Manager in respect of the performance
fee, reflecting the performance period matching the Company's
financial year (2021: $2,795,658).
15. 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 30 June 2022 the Company held CFDs, as shown in the
following table.
As at
30 June
2022
Unrealised
Security name Trade currency Shares gain/(loss)
(000)
$000
Aareal Bank AG EUR 7 (3)
ADTRAN Inc USD (15) 7
ADVA Optical Networking SE USD 27 (7)
Ardent Leisure Group Ltd AUD 190 6
Atlantia SpA EUR 73 (2)
Atotech Ltd USD 27 (5)
Avast plc USD 383 160
Befimmo EUR 7 **
Black Knight Inc USD 3 3
Brewin Dolphin Holdings plc GBP 109 4
Broadcom Inc USD (1) 14
Caretech Holdings plc GBP 9 **
Cazoo Group Ltd USD 27 (8)
CMC Materials Inc USD 11 10
ContourGlobal plc GBP 60 (1)
Deutsche Euroshop AG EUR 56 11
Disruptive Capital GP GBP 86 **
Distell Group Ltd ZAR 44 (6)
Drilling Co USD 15 (130)
EcoOnline Holding AS NOK 103 **
EDF SA EUR 14 (7)
Emis Group plc GBP 2 **
Entain plc GBP 22 (26)
Entegris Inc USD (5) 29
Euronav NV USD 1 **
Flagstar Bancorp Inc USD 11 8
Frontline Ltd USD (1) **
Fulton Financial USD (9) **
Genkyotex SA EUR 7 **
Grief Inc USD (4) (7)
Grifols SA USD (12) (4)
Healthcare Realty Trust Inc USD (37) (64)
Healthcare Trust of America USD 37 15
HomeServe plc GBP 67 8
Hunter Douglas EUR * **
Ideagen Inc GBP 88 2
II-VI Inc USD (8) 45
Intercontinental Exchange Inc USD * 1
As at 30
June 2022
Unrealised
gain/(loss)
$000
Security name
Trade currency Shares
(000)
Intertrust NV EUR 29 1
IVECO Group NV EUR 6 **
Lennar Corp USD (5) (3)
Leovegas AB SEK 46 **
Link Admin AUD 94 (28)
MaxLinear Inc USD (2) 3
Mediaset Espana
Comunicacion, S.A. EUR 32 (2)
Meggitt plc GBP 395 97
MKS Instruments Inc USD (1) 5
New York Community
Bancorp USD (44) (4)
Newcrest Mining AUD (3) 5
Noble Corp USD (25) 156
NortonLifeLock USD (10) 3
Orange Belgium SA EUR 5 (4)
Praemium Ltd AUD 121 (5)
Prudential USD 11 4
Randall & Quilter
Investment Holdings
Ltd GBP 32 5
Rentokil Initial plc USD (77) (2)
Sanne Group plc GBP 11 1
SciPlay Corp USD 20 10
Siemens Gamesa Renewable
Energy S.A. EUR 12 1
Silicon Motion
Technology Corp ADR USD 4 (21)
Siltronic AG EUR 5 (41)
SOHO China Ltd HKD 437 2
Spear Investment Group EUR 39 (2)
Spire Healthcare plc GBP 62 6
Swedish Match AB SEK 391 115
Telecom Italia EUR 285 1
Ultra Electronics
Holdings plc GBP 30 73
Vivo Energy plc USD 412 11
VMware Inc USD 5 (34)
Vonage Holdings Corp USD 45 63
Total unrealised gain on derivatives 469
* Less than 500 shares.
** Less than $500.
16. OTHER ASSETS AND LIABILITIES
The categories of other receivables and other payables
include:
As at 30 As at
June 30 June
2022 2021
$000 $000
Other receivables
FX currency sold 12 57
All other receivables 54 90
Total other receivables 66 147
Other payables
FX currency purchased - 20
Custodian fees 7 8
Accounting fees 17 13
Audit fees 70 70
All other payables 118 203
Total other payables 212 314
14 Related party disclosure: Directors
Each of the Directors is entitled to receive a fee from the
Company at such rate as may be determined in accordance with the
Articles of Incorporation. The Directors' remuneration is $30,000
per annum for each Director, other than:
-- the Chairman, who will receive an additional $1,000 per annum *;
-- the Chairman of the Audit & Risk Committee, who will
receive an additional $5,000 per annum; and
-- the Members of the Audit & Risk Committee, who will receive an additional $1,000 per annum.
Each of the Directors is also entitled to be paid all reasonable
expenses properly incurred by them in connection with the
performance of their duties. These expenses will include those
associated with attending general meetings, Board or committee
meetings and legal fees. The Board may determine that additional
remuneration may be paid, from time to time, to any one or more
Directors in the event such Director or Directors are requested by
the Board to perform extra or special services on behalf of the
Company.
Carne Global Fund Managers (Ireland) Limited, 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 financial year ended 30 June 2022, the AIFM received
fees of US$46,403, of which US$3,135 was payable at year end. Carne
Global Financial Services Limited, the parent Company of the AIFM,
received fees amounting to US$14,645 during the financial year
ended 30 June 2022 in respect of other fund governance services to
the Company, of which US$3,223 was payable at year end. The related
party transactions with the Directors are set out in the Directors'
Remuneration Report.
Related parties disclosure: other
The Portfolio Management fee and Performance fee for the year
ended 30 June 2022 paid by the Company to the Portfolio Manager are
presented in the Statement of Comprehensive Income. Details of
Portfolio management fee paid during the year are disclosed in Note
6. Details of Performance fee paid during the year are disclosed in
Note 13.
As at 30 June 2022, Associated Capital Group Inc., an affiliate
of the Portfolio Manager, held 6,195,825 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 in the Directors' Report.
Connected party transactions
All connected party transactions are carried out at arm's
length. There were no such transactions during the year ended 30
June 2022.
* Mr Gabelli has waived his fees since appointment as
Chairman.
17. CONTINGENT LIABILITIES AND COMMITMENTS
As at 30 June 2022, the Company had no contingent liabilities or
commitments (30 June 2021: nil).
18. HISTORICAL SHARE AND NAV INFORMATION
30 June 30 June 30 June
2022 2021 2020
Total Shares 10,238,206 10,238,206 10,328,206
Total NAV ($000) 95,774 101,725 96,430
NAV per share $9.35 $9.94 $9.33
19. SIGNIFICANT EVENTS
The outbreak of Coronavirus (COVID-19), declared by the World
Health Organisation as a global pandemic in 2020, has impacted many
aspects of daily life and the global economy. Travel movements and
operational restrictions were implemented by many countries
throughout 2019-2021. However in 2022, most economies globally have
fully reopened and the pace of recovery has varied from country to
country. Countries and their workforce have successfully adapted to
living and working in this pandemic environment. As we move into
the latter half of 2022, there continues to be potential unforeseen
economic consequences from this virus and market reaction to such
consequences could be rapid, unpredictable and vary significantly
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 30
June 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.
20. POST BALANCE SHEET EVENTS
The Gabelli Merger Plus+ Trust conducted and completed the
Tranche One 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 3,055,957 Qualifying Shares were validly
tendered under the Tranche One Tender Offer at the Tender Price of
938.15 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 13 October 2022.
The post tender remaining Shareholder base may result in the
Company being deemed a Close Company for the purposes of taxation
and is separately under advice. The Company is committed to
delivering its investment programme for the long term and is
examining alternatives to minimise taxes, costs and expenses for
its Shareholders .
Regulatory Disclosures
Information to be disclosed in accordance with Listing Rule
9.8.4
The disclosures below are made in compliance with the
requirements of Listing Rule 9.8.4.
9.8.4 (1) The Company has not capitalised any interest in the
year under review.
9.8.4 (2) The Company has not published any unaudited financial
information in a class 1 circular or prospectus or any profit
forecast or profit estimate.
9.8.4 (4) The Company does not have any long term incentive
schemes in operation.
9.8.4 (5) and (6) The Chairman Mr Gabelli has waived or agreed
to waive any current or future emoluments from the Company.
9.8.4 (7) During the year to 30 June 2021 , the Company has not
issued shares.
9.8.4 (8) and 9.8.4 (9) are not applicable.
9.8.4 (10) As President of the Portfolio Manager's parent
company, GGCP, and an employee of the Portfolio Manager, Mr Gabelli
is/ was deemed to be interested in the Company's portfolio
management agreement. There were no other contracts of significance
subsisting during the year under review to which the Company is a
party and in which a Director of the Company is or was materially
interested; or between the Company and a controlling
shareholder.
9.8.4 (11) This provision is not applicable to the Company.
9.8.4 (12) and (13) There were no arrangements under which a
shareholder has waived or agreed to waive any dividends or future
dividends.
9.8.4 (14) This provision is not applicable to the Company.
Enquiries:
Email: Info@Gabelli.co.uk
LEI: 5493006X09N8HK0V1U37
Date: 26 October 2022
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FR FZMZGRKZGZZM
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