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Gabelli Value Plus+ (GVP)

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Wednesday 09 June, 2021

Gabelli Value Plus+

Final Results

RNS Number : 3940B
Gabelli Value Plus+ Trust PLC
09 June 2021
 

Gabelli Value Plus+ Trust Plc

Legal Entity Identifier: 213800FZFN1SD1GNNZ11

 

Annual Report and Accounts 2021

OVERVIEW AND PERFORMANCE

AT A GLANCE

GABELLI VALUE PLUS+ TRUST PLC ("GVP" or the "Company") was launched in February 2015 to invest in U.S. equities. The Company is a public company, limited by shares. Trading on the London Stock Exchange under the symbol GVP, the Company brings the "best of" Gabelli Funds through an actively managed fund investing in U.S. companies, giving UK investors direct access to the Gabelli value investment methodology. It incorporates a portfolio of Gabelli Funds all cap U.S. equity ideas with selective deployment of their classic merger arbitrage approach. The merger arbitrage approach aims to earn absolute returns in excess of short term interest rates, non-correlated with the overall equity markets.

 

Through its Manager, Gabelli Funds, LLC ("Gabelli Funds"), the Company provides access to Gabelli's core methodology, which has delivered annualised outperformance of the Standard & Poor's 500 Index of 5% since the launch of this strategy in 1977. The Company's investment portfolio is diversified across securities, capitalisations, sectors, and event time horizons; it is flexible through various market cycles and opportunistic where appropriate.

 

The Company is part of the lineage of Gabelli Closed-End Funds. The Gabelli Fund complex currently includes 14 U.S.-based closed-end funds, two funds based in the UK, 24 open-end funds and a SICAV, with two sub-funds.

 

FINANCIAL HIGHLIGHTS

Performance (unadjusted for distributions)

As at 
31 March 2021

As at 
31 March 2020

Net asset value per share (cum income)

 168.5p 

 103.0p 

Net asset value per share (ex income)

167.2p

101.9p 

Share price

162.0p

82.5p 

Discount relative to the NAV (cum income) §

3.9%

 19.9% 

Exchange Rate (US$/ £)

1.38

1.24




 

Total returns

Year ended 
31 March 2021 

Year ended 
31 March 2020 




Net asset value per share# §

64.3%

(25.0%) 

Russell 3000 Value Index (£)

42.3%

(14.0%) 

Standard & Poor's 500 Index (£)

40.5%

(2.5%) 

Share price §

98.2%

(32.7%) 




Income



Revenue return per share

1.32p 

1.09p 




Ongoing charges*



Annualised ongoing charges** §

1.32% 

1.24% 




 

Source: Investment Manager (Gabelli Funds, LLC), verified by the Administrator, State Street Bank and Trust Company.

#   The net asset value ("NAV") total return for the year reflects the movement in the NAV, adjusted for the reinvestment of any dividends paid.

† The total share price return for the year to 31 March 2021 reflects the movement in the share price during the year, adjusted to reflect the reinvestment of any dividends paid.

*  Ongoing charges are calculated as a percentage of shareholders' funds using the average net assets over the year and calculated in line with the AIC's recommended methodology.

**  The annualised ongoing charges are the recurring operating and investment management costs of the Company, expressed as a percentage of the average net assets. The breakdown is set out in the following table. Portfolio transaction charges are shown for transparency, although they do not form part of the ongoing charges under the AIC's recommended methodology.

§  Alternative Performance Measure (please refer to the Glossary in the Annual Report and Financial Statements)

 


£000

Year ended 
31 March 2021 
% of average net 
assets 

£000 

Year ended 
31 March 2020 
% of average net 
assets 

Revenue expenses

543

0.41

474

0.34

Investment management fees

1,193

0.91

1,258

0.90


1,736

1.32

1,732

1.24

Transaction costs

103

0.08

94

0.07

 

CHAIRMAN'S STATEMENT

Introduction

I a m   p l e as e d   t o p r esentthe Company's annualresults fortheyearto31March 2021. Theperiodunderreview saw financialmarkets,intheUnitedStates and worldwide, reacting to the spread ofthe COVID-19pandemic,with governments steppingintoprovide fiscal stimulus fortheeconomythrough financial supportforbothindividuals andcompanies. Whilstinitiallyheavily impactedintheearlypartof2020 withgovernments' stimulus and,more recently,the availabilityof a numberof vaccines,markets haverecoveredthe earlylosses andmore.

Performance

B y all measures,the fiscal year ending on31March2021was a verygood year inperformance terms for Gabelli Value Plus+Trust.Forthe year,NAV performance was up 64.33% and share price performance was upby 98.15%.Ofcourse,this was comingoff a disappointingprioryear,whenthe global pandemicwas hittingthe U.S. stockmarket, and all global markets, exceptionallyhard.Our investment manager, Gabelli Funds,does not benchmark itself against anypassive index,butrathertries togenerate absolute returns overthe longterm. Forcomparisonpurposes,the S&P 500 Indexwas up40.5%(in sterling), or56.35%%(in U.S.dollars)during the year. The Russell 3000 Value Index increasedby42.3%(in sterling),or58.4% (in U.S. dollars) over the same period. The Boardwould like tocongratulate the investmentmanagerforthe performance duringthe pastyear.

Through30 June2020,the S&P 50 0 Indexwas off a mere 3%fromthe startof 2020,havingrallied almost40 %from its March low. Growth stocks continuedtheir winning streak,poweredby Facebook, Amazon,Netflix, Google/Alphabet, Microsoft, andApple.Atmid-2020,these six stocks had an aggregate market capitalizationof$6.3trillion,comprising 23%ofthe S&P 500 andcontributing5.4 points ofpositive year-to-date return. In late May/earlyJune smallercapitalization andvalue stocks snatchedmarket leadershipbefore reversing.

S t o c k s continuedtorise duringthe third quarterof2020,withthe S&P 500 Indexup 8.9%, as gains in July and August were partiallyoffsetby a decline in September. The main issues stillfacing the markets centred largely aroundthe COVID-19pandemic: specifically,how longwould itpersist,would"second wave"cases spike significantlyhigher, leadingto a returntofurther economic shutdowns andwhenwouldtherapeutics andvaccines be readyfordevelopment anddistribution?

Ittook COVID-19to endthe United States' longestbull market,which lasted 131months,onlytogive wayto its shortestbearmarketof justoverone month.Afterdeclining34%peak-to-troughFebruarytoMarch,the S&P 500 Index endedup18%for2020 (in U.S. dollars),65%higherthan its March low. Unfortunately, even inthe face ofrising assetprices and anoverall increased savings rate,the extended economic shutdown strainedthe balance sheets of many small businesses and impairedthe skills ofmany employees.

The firstquarterof2021,the Company's final fiscal quarter,provided a significant contrasttothe firstquarterof2020. Lastyear,markets were hitting lows amiduncertainty regardingthe ultimate reachof COVID-19 andthe resulting economic wreckage at a time when evengetting a diagnostictestwas exceedinglydifficult.More recently, notonlyhave effective vaccines been developed,butmost U.S.States have opened up their vaccine programs to all adults,orhave announcedthatthey will inthe nearfuture.Atthe same time othercountries are seeing increases in infectionrates andreintroducingor increasingrestrictions tocombatthem. Duringthe quarter,markets were at all time highs amidoptimism aboutthe "reopening"ofthe economy andthe pentupdemandforvarious activities andgoods, especiallytravel, leisure, and entertainment.

D i v i d e n d

The Company's portfolio is constructed with total return in mind rather than any splitbetween income andcapital return. The portfolio is likelytovary considerablyrelative tothatofthe U.S. stockmarket, accordingtothe investment stock selections. Revenue earnings per share duringthe yearwere 1.32pence per share,whichcompares with1.0 9pence inthe prioryear.

 

The Directors have declared an interim dividendof 1.2 pence per share (2020:1.10 penceper share,comprising a final dividendof1.0 penceper share and an interimdividendof0.1pence per share) for the year. The dividend will be paid on 2 July 202to shareholders onthe register atthe close ofbusiness on18June 2021. The ex-dividenddate is 17 June 2021.

 

Sharepricerating andbuybacks

The share price startedthe period at a discountof19.9%toNAV andfinished the year at a discountof3.9%. In light ofthe outcome ofthe continuationvote at lastyear's Annual General Meeting ('AGM')the Boarddidnotconsider it appropriate toundertake any share buybacks duringthe year.

 

A s shareholders are aware,the managementfee paidtothe Investment Manager is calculatedonmarket capitalisation, since this is thoughtto better align its interests withthatof shareholders.

 

B o ard

A s reported in lastyear's Annual Report, Kasia Robinski steppeddown as Director andAudit Chairfollowingthe conclusion ofthe AGMon30 July2020. I should like tothankherforhervaluable contribution to the Company and wish her well for the future.

 

Continuation Vote

A s shareholders will be aware,the continuation vote at last year's AGM was overwhelminglydefeated. The outcome of the vote provided the Boardwith a clear indicationthat the majorityof independent shareholders wishedtorealise their investment inthe Company at,orclose,tothe prevailing net assetvalue. The Board,together withthe Company's Broker,have liaised extensivelywiththe majorityof shareholders to seektodeliveronthe outcome ofthatvote. The significant shareholding of Associated Capital Group('ACG'), an affiliate ofthe InvestmentManager,wouldhave been sufficienttodefeat any special resolution thatcouldbe putbefore a general meetingofthe Company, including anyvote toplace the Company into members' voluntary liquidation.

 

A s announcedon8February2021, however,ACG irrevocablyundertookto abstainfromvotingon a continuation resolution andon a resolutiontoplace the Company into members' voluntary liquidation,tobe proposed at a general meetingofthe Companywhich is to followthe AGM.

 

Since the outcome ofthe continuation and liquidationvotes are bynomeans certain,this represents a material uncertaintywhichmaycast significant doubtonthe Company's future and its abilitytocontinue as a goingconcern. Notwithstandingthis,the financial statements have beenpreparedon a goingconcernbasis. In arriving atthe decisionon the basis ofpreparation, the Boardconsideredthe financial positionofthe Company, its cashflow and liquidityposition as well as the uncertainty surroundingthe outcome ofthe continuation and liquidation votes. Furthercommentary onthe continuation and liquidation resolutions, including the voting recommendation of the Board of Directors, is included in the circular convening the GM which will be sent to shareholders shortly.

 

A nnu a l G e n e r a l   Mee t i n g a n d   General Meeting

The Company's Annual General Meeting is tobe held atthe offices of Gabelli, 3 St. James's Place,LondonSW1A1NP on Monday, 12July2021 at11.00 am. The AGM will, by necessity, be purely functional in nature. Arrangements will be made to ensure thatthe minimumnumberof shareholders requiredtoform a quorum will be in attendance inorderthatthe meetingmayproceed andthe business be concluded.  The Boardconsiders these arrangements tobe inthe best interests of shareholders giventhe currentcircumstances.

 

The AGMwill be followedby a general meetingofthe Company atwhich a continuation resolution and a resolution to place the Company intomembers' voluntary liquidation will be proposed.Acircular inconnectionwith the general meetingreferredto above will be postedto shareholders shortly.

 

The Board stronglydiscourages shareholders from attendingthe AGM andthe subsequent GMon 12July2021 and entrywill be refused if Government guidance sorequires or ifthe Chairmanconsiders ittobe necessary. Shareholders are encouragedto exercise theirvotes inrespectofthe meeting in advance.

 

O n behalfofthe Board, I should like tothank shareholders in advance for theirco-operation andunderstanding.

 

O u t l oo k

L oo k ing ahead,the outlookforthe Company appears promising,with the InvestmentManager's bottom-up,value style investmentphilosophy finally delivering favourable returns for shareholders. The U.S. economy is thriving,helpedby an aggressive vaccine roll out andmassive fiscal stimulus. In addition,the Federal Reserve has statedthattheyplanto keep short-term interest rates near zeroforthe foreseeable future, even if inflationreaches its 2% annual target. Furthermore,the probability is highthat a large infrastructure spendingbill will be passedbythe U.S. Congress and signed into lawby PresidentBiden. The largest sector allocation inthe portfolio is in industrial stocks, andthis sector should benefitfrom such a bill.

 

N o t w ithstandingthe promisingoutlook forthe U.S. economy andmarkets,the Boardrecognises that shareholders have exercisedpatience since the previous continuationvote andmaywishtotake the opportunity,representedbythe upcomingvotes oncontinuation and members' voluntary liquidation,tovote fordiscontinuation and subsequent members' voluntary liquidationofthe Company.

 

PeterDicks

Chairmanofthe Board

9 June 2 0 21

 

 

INVESTMENT MANAGER'S REVIEW

B o t h t he Company and its Investment Manager are economicallyviable and in strongfinancial positions. The Company maintains a highly liquid investment portfolio.

 

A t t he upcoming GM, scheduledfor 12July2021, a continuationvote will be held.Due tothis vote,throughoutthis Annual Report there is language related tothe "goingconcern"ofthe Company. The goingconcernofthe Company relates ONLYtothe uncertaintyofthe outcome ofthis continuationvote.

 

Gabelli Philosophy and Process

Gabelli Funds would like tothankour investors for entrusting a portionof their assets tothe Gabelli Value Plus+ Trust. We appreciate the confidence and trustyouhave offered ourorganisation through an investment in GVP.Today, as formore thanfortyyears,we remainvigilant inthe applicationofour investmentphilosophy and inour search for opportunities.Before we reviewthe fiscal year justcompleted and self-assess the performance since our launch in 2015, we would like toremindour shareholders ofour investmentphilosophy and process.

 

W e   a t   Ga b e lli a r e   a c t i v e ,   b o t t o m - u p , value investors, and seekto achieve real capital appreciation(relative to inflation) overthe longterm,regardless ofmarket cycles.We achieve returns through investing inbusinesses utilisingour proprietary Private Market Value ("PMV") with a Catalyst methodology. PMV is the value thatwe believe an informedbuyer wouldbe willingtopayto acquire an entire company in a private transaction. Ourteam arrives at a PMVvaluation throughthe rigorous assessmentof fundamentals,frompublicly available information and judgmentgained fromourcomprehensive, accumulated knowledge of a varietyof sectors.We focus on the balance sheet, earnings, free cashflow, andthe managementof prospective companies.We are not index benchmarked, andconstructportfolios agnosticofmarketcapitalisation and indexweightings.We have investedthis way since 1977.

 

O u r researchprocess identifies differentiatedfranchise businesses, typically with strong organiccash flowcharacteristics,balance sheet opportunities, andoperational flexibility. We seekto identifybusinesses whose securities trade inthe publicmarkets at a significantdiscounttoour assessmentof their PMV estimate,or"MarginofSafety". Having identified such securities,we lookto identifyone ormore "catalysts" thatwill narrowor eliminate the discount associatedwiththat"MarginofSafety". Catalysts cancome in manyforms including,butnot limitedtocorporate restructurings (such as de-mergers and asset sales),operational improvements, regulatoryormanagerial changes, special situations (such as liquidations), and mergers and acquisitions.

 

It is throughthis process ofbottom-up stock selection andthe implementation of disciplinedportfolioconstruction thatwe expecttocreate value forour shareholders.

 

T h e   Y e a r   i n Re v i e w : W h a t a Difference a YearMakes!

O n 3 1 March2020,the UnitedStates and the entire worldwere inthe early stages ofdealingwiththe COVID-19global pandemic.Lockdowns were going into place across the UnitedStates, andmany businesses came to a complete standstill. The stockmarketwas droppingquickly duringthe monthofMarch, and investors were at a loss tryingtofigure outhow the pandemicwouldplayout. Ithadbeen approximatelyone hundredyears since the lastpandemic, andprojections for potential deaths were all overthe map. Stockmarkets throughoutoverthe world were sufferinggreat losses.

 

Fastforwardtotoday, and it is a very different story in the U.S. Vaccine rollouts are infull force, and states are graduallyreopeningforbusiness. The Federal governmenthas injectedmassive fiscal stimulus intothe economy and the Federal Reserve has pumpedhuge amounts of liquidity intothe markets. Unemployment has dropped significantly, to approximately6%, and is expectedto dropfurtherthroughout2021. The stock markethas more thanrecovered and is hittingnewhighs. Value stocks,which have beenoutoffavorformanyyears, are startingtoperformwell. In addition, small- andmid-capitalization stocks are also startingtoperformwell aftermany years ofdisappointingperformance.

 

W e are happytoreportthatthe net assetvalue (NAV)of(y)ourFund is also hittingnewhighs.Withthe potential for an infrastructure spendingbill topass Congress andgo into law,we feel the significant exposure ofthe Trusttothe industrial sector shouldhelpthe overall portfoliotoperformwell.Aftermany years of value investing being outof style, it is nice tofinallyhave the windto ourbacks.

 

S e l f - A s s e s s m e n t

Ithas nowbeen justover sixyears since Gabelli Value Plus+ Trust was launched in Februaryof2015. When we were conducting the road show for the launch of the Trust, many potential UK investors wantedtoparticipate inthe U.S. stock market,buttheywanted a defensive exposure.Our Private Market Value with a CatalystTM approach,with its absolute return focus, seemedtobe a goodfitfor manyofthese investors, especiallygiven that a portionofthe portfoliowas to be invested in announcedmergerdeals. Atthe time,manypotential investors commentedthat ifwe couldgenerate high single digitreturns over a market cycle,theywouldbe veryhappy.

 

A s we reflectonthose years,we are happytopointoutthatoriginal investors paid 100pence at launch, andon 31March2021,the NAVof Gabelli Value Plus+Trustwas 170pence. Thatworks outto a compounded average rate of returnofover9%overthe past sixyears. Ifone includes the dividends thathave beenpaidoutto shareholders,thenthe total return is evenhigher. It is worth nothingthat, since the launchofthe Trust, leverage was neverused at any time.

 

O n e concern expressedtous during the initial roadshowwas thatAmerican moneymanagers were knownforcoming tothe UKtoraise money andthennever comingbackto update investors ontheir investment.Atthattime,we promised thatwe wouldbe active inclient service. Todate,the NewYork-basedportfolio managers onthe Trusthave conducted dozens and dozens of in-person meetings with investors all overthe UK

.

In summary,we feel stronglythatwe have done exactlywhatwe promised we woulddoduringthe road show. We pointthis outbecause inJulythere will be another continuationvote for shareholders. We hope thatyou share our beliefthatwe have deliveredonwhatwe saidwe woulddoover sixyears ago, and thatthis Trustcontinues tomeetyour investmentobjectives.

 

PerformanceSummary2020/ 21

D u r ingthe pastyear,ourbestfive contributors toourreturns were our holdings inthe shares ofHerc,Freeport McMoRan,Viacom,Discovery, and Navistar.Bycontrast,ourholdings inHertz, RymanHospitality, General Electric, andAerojet Rocketdyne were all laggards.

 

 

L e t 's TalkStocks:

A erojet Rocketdyne Holdings Inc. (AJRD-$46.96-NYSE),based in El Segundo, California, is a manufacturerof aerospace and defense products and systems fordefense and space applications. The manufacturingoperation is a leadingtechnology-baseddesigner, developer, andmanufacturerof aerospace anddefense products for the U.S. government, includingthe DepartmentofDefense andNASA. AJRD alsomanufactures products forgovernmental contractors andthe commercial sector.On20 December

2 0 2 0 , t he company announced ithad agreedtobe acquiredby LockheedMartin Corporation in an all-cashtransactionwithtotal equity value of $5 billion, or $56 per share. As partofthe transaction,Aerojet Rocketdyne declared a $5.00 per share pre-closing special dividend, whichwas paidon 24March2021. The transaction is expectedtoclose inthe secondhalfof2021.

 

B K BankofNewYorkMellon Corp. (BK-$47.29-NYSE) is a global leader in providing financial services to institutions and individuals. The companyoperates inmore thanone hundredmarkets worldwide and strives tobe the global providerof choice for investmentmanagement and investment services.As of December2020,the Firmhad$41.1 trillion in assets undercustody and$2.0 trillion in assets under management. Goingforward,we expectBKtobenefitfromhigher interestrates,risingglobal incomes andthe cross bordermovementof financial transactions.

 

CNH INDUSTRIALNV(CNHI - $15.64-NYSE),withheadquarters inLondon, England, andBurr Ridge, Illinois, is a global capital equipment manufacturer that was demerged fromparentFiat in2013. CNHI is unique inthat ithas leadingpositions in a varietyofglobal machinery markets. It is bestknownfor its agricultural equipmentbusiness, consistingof Case IH,NewHolland Agriculture, andSteyrbrands. The company's otherbusinesses include IVECO, a leadingglobal truck andbus manufacturer, as well as Caseand New Hollandconstructionmachinery. Finally, its FPT Industrial brand provides engines andtransmissions forthe company's captive businesses and also sells toothermachinery manufacturers. The new CEO, Scott Wise, is committedto CNHI's financial engineeringplan,bywhich itwill separate its OffHighwaybusiness from its Truck and Engine business via a taxfree spin.

 

PNC Financial Services Group Inc. (PNC -$175.41-NYSE) is one ofthe nation's largestdiversifiedfinancial services organizations.Fromthe company's Pittsburghheadquarters, PNC provides retail andcommercial banking services inthe Northeast, Southeast, andMidwest U.S.via a regional branchnetworkofover two-thousand locations alongwith mortgage and deposit businesses on a national basis. InNovember2020, PNC announcedtheir intentionto acquire the U.S. subsidiaryof Spanish bankBBVAfor$11.6billion incash, whichwould add$10 4billion in assets to PNC and expandthe company's footprintthroughoutthe Southwest andWest Coast. The company expects the mergertoclose nearthe middle of2021, andprovide annual earnings accretion in excess of20 % duringthe firstfull yearofcombined operations.

 

RSG Republic Services Inc.(RSG - $99.35-NYSE),based in Phoenix, Arizona,became the second largest solidwaste company inNorth America after its acquisitionofAllied Waste Industries inDecember20 0 8. Republicprovides nonhazardous solidwaste collection services for commercial, industrial, municipal, andresidential customers inforty- one states and Puerto Rico. Republic serves more than2,800 municipalities andoperates 186 landfills,220 transfer stations,345collection operations, and 76recyclingfacilities. Since the Alliedmerger, Republic has benefitedfrom synergies driven byroute density,beneficial use of acquired assets, andreduction in redundantcorporate overhead. Republic is committed to its core solidwaste business. While other providers have strayed into alternative waste resource technologies and strategies,we view Republic's plan toremain steadfast inthe traditional solidwaste business positively.We expectcontinued solidwaste growth acquisitions, earnings improvement, and incremental route density and internalizationgrowth in already establishedmarkets togenerate real value inthe neartomediumterm, highlightingthe company's potential.

 

Gabelli Funds, LLC

9 June 2021

 

PORTFOLIO

PORTFOLIO SUMMARY

Portfolio distribution as at 31 March 2021 (%)*


 


GVP Portfolio 

Russell 3000
Value 

S&P 500 

Communication Services

15.3

9.9

10.9

Consumer Discretionary

6.6

12.3

12.5

Consumer Staples

15.5

5.6

6.1

Energy

2.6

2.6

2.8

Financials

10.4

11.7

11.3

Health Care

8.6

13.5

13.0

Industrials

33.3

9.7

8.8

Information Technology

3.9

25.8

26.7

Materials

9.1

3.0

2.7

Real Estate

0.0

3.3

2.5

Utilities

4.7

2.6

2.7

Total

100.0  

100.0  

100.0  

 

*  Excludes cash and short-term investments.

 

By asset class (%)


As at 
31 March 2021 

As at 
31 March 2020 

Equities

77.4

88.5 

Cash and short-term investments

22.6

11.5 

Total

100.0  

100.0  

 

Portfolio holdings


As at 31 March 2021


Market value 
£000 

% of total 
portfolio 

Navistar International Corp

6,063

4.7

Bank Of New York Mellon Corp

4,456

3.4

PNM Resources Inc

4,194

3.2

PNC Financial Services Group

4,068

3.2

Freeport-McMoRan Inc

4,009

3.1

Mueller Industries Inc

3,966

3.1

CNH Industrial N.V.

3,911

3.1

GCP Applied Technologies

3,881

3.0

State Street Corp

3,836

3.0

Republic Services Inc

3,748

2.9

Cubic Corp

3,513

2.7

Textron Inc

3,435

2.7

Aerojet Rocketdyne Holdings Inc

3,407

2.6

Sinclair Broadcast Group

2,969

2.3

Energizer Holdings Inc

2,649

2.0

Flowserve Corp

2,588

2.0

Loral Space & Communications Inc

2,566

2.0

Myers Industries Inc

2,518

1.9

Dana Inc

2,381

1.8

Fox Corp

2,379

1.8

Sub-total - top 20 holdings

70,537

54.5

Sub-total - top 21 - 40 holdings

33,824

26.1

Sub-total - top 41 - 60 holdings

15,717

12.1

Sub-total - remaining holdings

9,481

7.3

Total holdings* : 101 positions

129,559

100.0  

 

* Excludes cash and short-term investments.

All holdings are ordinary shares.

GOVERNANCE

STRATEGIC REPORT

The Directors presentthe Strategic Report of the Companyforthe year ended 31 March 2021. The aim of the Strategic Report is toprovide shareholders withthe abilityto assess howthe Directors have performedtheir dutytopromote the success ofthe Companyduringthe yearunderreview.

 

The Chairman's Statement andthe InvestmentManager's Reviewformpartofthe Strategic Report.

 

B u siness Review

S t r u c t u r e adObjectiveofthe Company  

Ga b elli Value Plus+ Trust PLC (GVP or the Company) is an investmenttrust companythathas a premium listingon the LondonStock Exchange.

 

The Company's strategy is togenerate returns for its shareholders bypursuing its investmentobjective while mitigating shareholderrisk,by investing in a diversified spreadof equity investments. Through a process ofbottom-up stock selection andthe implementationof disciplinedportfolioconstruction,the Company aims tocreate value for its shareholders.

 

In seekingto achieve its investment objective the Companyhas contractually delegatedthe managementofthe investmentportfolioto Gabelli Funds, LLC, (the "Manager"). Gabelli Funds, LLC is alsothe Company's Alternative InvestmentFundManager.

 

The Company's existing investment objective and investmentpolicy are set outbelow.

 

I n v e s t m e n t P o li c y , R e s t r i c t i o n s a n d Guidelines

The Companywill seetomeet its investmentobjective by investing predominantly in equity securities of U.S. companies,of anymarketcapitalisation.

 

In selecting such securities the Manager will utilise its proprietary Private Market Value ("PMV")with a CatalystTM methodology. PMV is the value thatthe Managerbelieves an informed industrial buyerwouldbe willingtopayto acquire an entire company. The Manager arrives at a PMVvaluationby a rigorous assessment offundamentals (focusing on the balance sheet, earnings and free cashflow)frompublicly available information and judgment gained from its comprehensive, accumulated knowledge of a varietyof sectors.

 

The Manager's fundamental research seeks to identify investments typicallyfeaturing,butnot limitedto, differentiatedfranchise businesses withorganiccashflow,balance sheet

o pp o r t un ities andoperational flexibility. The Managerwill seeto identify businesses whose securities trade inthe publicmarkets at a significantdiscount totheir PMV estimate whichthe Manager refers to as a "Marginof Safety".

 

H aving identified such securities,the Managerwill seeto identifyone ormore "catalysts"thatwill helptonarrowor eliminate the Marginof Safety. Catalysts cancome inmanyforms including,but not limitedto,corporate restructurings (such as demergers and asset sales), operational improvements,regulatoryor managerial changes, special situations (such as liquidations) andmergers and aquisitions.

 

The Manager seeks value creation through its process ofbottom-up stock selection and its implementationof a disciplinedportfolioconstruction process.

 

A s at31March2021,the top60 holdings represent92.7%ofthe total investments, in line with expectations at launch. Cash holdings currentlyrepresent22.6%ofthe portfolio.

 

In additionto equity securities of U.S. companies,the Companymay(subject tothe investmentrestrictions setout below) also invest inother securities fromtime totime includingnon-U.S. securities,convertible securities,fixed interest securities,preferred stock,non- convertible preferred stock,depositary receipts,warrants andotherrights. Subject to the investment restrictions setoutbelow,there is no limitation onthe numberof investments which maybe exposedto anyone type of catalyst event, including demergers, restructurings or announced mergers and acquisitions.

 

The Companymay investthrough derivatives for efficientportfolio management andfor investment purposes.Anyuse ofderivatives for efficientportfoliomanagement andfor investmentpurposes will be subjectto the investmentrestrictions setoutbelow.

 

Riskdiversification

General

Portfolioriskwill be mitigatedby investing in a diversified spreadof investments. Inparticular,the Company will observe the following investment restrictions:

 

  n   o single investment shall, atthe time of investment, accountformore than 10 percent.ofthe Gross Assets;

  n   o m o re than15percent.ofthe Gross Assets, atthe time of investment, shall be invested in securities issuedby companies otherthan U.S.companies; and

  n   o m o re than25percent.of the Gross Assets, atthe time of investment, shall be exposedto any one industry(as definedbythe MSCI industry groups according to the GICS (global industryclassification standards categorisation).

 

The Companymay adopt a temporary defensive positionwhere itdetermines that adverse marketconditions exist and invest some or all ofthe portfolio in:

 

  c   ashorcash equivalents,money market instruments,bonds, commercial paperorotherdebt obligations withbanks orother counterparties having a single A(or equivalent) or higher credit rating as determinedby an internationally recognisedrating agency;or

  a   n y " g o vernment andpublic securities" as definedforthe purposes ofthe FCAHandbook.

 

In addition,uninvestedcashor surplus capital or assets maybe investedon a temporarybasis in such assets.

 

D e r i v atives and short selling

Ifthe Company invests inderivatives and/or structuredfinancial instruments for investmentpurposes and/or for efficientportfoliomanagement purposes,the total notional value of derivatives and/or structuredfinancial instruments atthe time of investment will not exceed, in aggregate,10 percent. of its Gross Assets. The Companymay take both long and shortpositions. The Company may short up to a limit of 10 percent.of its Gross Assets.For shorting purposes,the Companymayuse indices or individual stocks.

 

When investingvia derivatives and/or structuredfinancial instruments (whether for investment purposes and/ orfor efficientportfoliomanagement purposes),the Companywill seekto mitigate and/or spread its counterparty risk exposure by collateralisation and/or contracting with a potential range of counterparty banks, as appropriate, each of whom shall, at the time of entering into such derivatives and/or structured financial instruments, have a single A (or equivalent) or higher credit rating as determined by an internationally recognised rating agency.

 

In the event of a breach of the investment guidelines and restrictions set out above, the Manager will inform the Board upon becoming aware of the same and, if the Board considers the breach to be material, notification will be made to a Regulatory Information Service and the Manager will look to resolve the breach with the agreement of the Board.

 

Borrowing policy

The Company may borrow up to 15 per cent. of Net Asset Value (calculated at the time of draw down). Borrowings may be used for investment and/or working capital purposes.

 

In accordance with the requirements of the UK Listing Authority, any material change to the Company's investment policy will require the approval of Shareholders by way of an ordinary resolution at a general meeting.

 

There has been no change to the investment policy since the launch of the Company in February 2015.

 

Culture and Values

The Directors seek to discharge their responsibilities and meet shareholder expectations in an open and transparent manner. The Board seeks to recruit Directors who have diverse experience. The industry experience on the Board ensures that there is detailed knowledge and constructive challenge in the decision-making process. This helps the Company achieve its overarching aim

of enhancing shareholder value. The Directors are mindful of costs and seek to ensure that the best value for money is achieved in managing the Company.

 

The Company's values of skill, knowledge and integrity are aligned to the delivery of its investment objective and are closely monitored by the Board.

 

The Board seeks to employ third party providers who share the Company's culture and, importantly, will work with the Directors in an open and transparent manner to achieve the Company's aims.

 

Performance

Details of the Company's performance during the year are provided in the Chairman's Statement. The Investment Manager's Review includes a review of developments during the year as well as information on investment activity within the portfolio.

 

Total Return, Revenue and Dividends  

The Company's revenue earnings for the year amounted to 1.32 pence per share (2020: 1.09 pence).

 

The Company intends to pay dividends annually. Dividend yield is a by-product of the investment process as part of the total return sought. Investors should have no expectation that the Company will pay dividends as anticipated, or at all, and past dividends are not an indication of future dividend payments.

 

On 21 January 2021, the Directors declared an interim dividend of 0.1 pence per ordinary share for the year ended 31March 2020. The dividend was paid on 19 February 2021 to shareholders on the register at the close of business on 29 January 2021.

 

On 9 June 2021 the Directors declared an interim dividend of 1.2 pence per ordinary share in respect of the year ended 31 March 2021. The dividend is payable on 2 July 2021 to shareholders on the register at close of business on 18 June 2021.

 

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 to manage any discount or premium at which the Company's shares trade. The principal KPIs are described below:

 

• Performance

At each meeting, the Board reviews the performance of the portfolio as well as the net asset value and share price. Although the Company does not have a benchmark the Board reviews performance in the context of the performance of the S&P 500 and Russell 3000 Value indices.

 

• Performance attribution

The purpose of performance attribution analysis is to assess how the Company achieved its performance and to understand the impact on the Company's relative performance of the various components, such as stock selection.

 

• Share price discount to net asset value per share

The Board operates a share repurchase programme that seeks to address imbalances in supply and demand for the Company's shares within the market and thereby reduce the volatility of the discount to NAV per share at which the Company's shares trade. In the year to 31 March 2021, the discount ranged between 19.9% and 3.9% based on daily data. The Company did not buy back any ordinary shares during the year ended 31 March 2021.

 

The Board, at its regular meetings, undertakes reviews of marketing and investor sentiment.

 

• Ongoing charges

The ongoing charges represent the Company's management fee and all other recurring operating expenses expressed as a percentage of average net assets. The ongoing charges for the year ended 31 March 2021 were 1.32% (2020: 1 .24%).

 

 


Year ended 
31 March 2021 

Year ended 
31 March 2020 

Net asset value total return1

64.3%

  (25.0%) 

Share price total return1

98.2%

  (32.7%) 

Discount to net asset value2

3.9%

19.9% 

 

This measures the Company's NAV and share price total returns, which assumes dividends paid by the Company have been reinvested.

This is the difference between the share price and the cum-income NAV per share at the year end.

The KPIs forthe Company are setout above. These KPIs fall withinthe definitionof "Alternative Performance Measures" (APMs) under guidance issuedbythe European Securities and Markets Authority(ESMA) and additional information explaininghowthese are calculated is setout inthe Glossaryin the Annual Report.

 

Principal Risks

T h e D i r e c t o r s confirmthattheyhave carriedout a robust assessmentof the principal risks facingthe Company includingthose thatwouldthreaten its business model,future performance, solvency or liquidity, including the impactofthe COVID-19pandemic.

 

W iththe assistance ofthe Manager, the Boardhas produced a rismatrix which identifies the Company's keyrisks. In assessing these risks and how they canbe mitigated,the Boardhas given particular attentiontothose issues that threatenthe viabilityofthe Company. These keyrisks remainunchanged since lastyear and are setoutbelow, togetherwithdetails ofhowthese have beenmitigatedormanaged,where appropriate.

 

Investment Portfolio Risks

O n e ofthe mainrisks of an investment in GVP is a decline inthe U.S. equity markets. This is bestmitigatedby investing in a diversified portfolio and by adheringto a carefullymonitored series of investmentrestrictions, enabled by automatedpre-trade compliance features anddailyreviewoftrade tickets. These strictures mandate thatno single securitypurchase can, atthe time of investment, account for more than 10 % ofthe gross assets ofthe Company;no more than15%ofthe gross assets, at the time ofpurchase,canbe invested in securities issuedbycompanies other than U.S. companies; andnomore than25%ofthe gross assets, atthe time ofpurchase,canbe exposedto anyone industry as definedbythe MorganStanley Capital Industrygroups accordingtothe GICS categorisations. In addition,the Boardmeets the portfolio management team quarterly at the Boardmeetings toreviewthe riskfactors andtheir effectonthe portfolio, and a thorough analysis ofthe investment strategy is completed.

 

GlobalMacro Event Risks

Global instabilityor events, such as the COVID-19pandemic,could undermine markets and therefore affectthe Company's share price and NAV.Tothis end,global economic, geopolitical, andfinancial conditions are constantlymonitored.Diversificationof Company assets is incorporated intothe investment strategy and, ifdisruptive events occur,the Managermaybe preparedto adopt a temporarydefensive position and invest some or all ofthe Company's portfolio incashorcash equivalents,moneymarket instruments, bonds,commercial paperorother debtobligations withbanks orother counterparties,with appropriate ratings as determinedby an internationally recognisedrating agency and approved bythe Board.Anotheroption is the investment in"government andpublic securities" as defined for the purposes ofthe Financial ConductAuthority Handbook.

 

O p e r ational Risks

The operational functions ofthe Company are outsourcedtothirdparties, which include Computershare (registrar andreceiving agent),State Street Bank andTrust Company(custodian, administrator, anddepositary), MaitlandAdministration Services Limited(company secretary) and Peel Hunt(shareholdercommunications). Disruptions tothe systems atthese companies orcontrol failures could impactthe Company.All ofthese third parties reporttothe Companyon a regularbasis andtheirreports and representations are reviewedbythe Board andthe Manager.

 

The COVID-19pandemicresulted inthe operational functions ofthe Company's thirdparty service providers transitioning toremote workingundertheirrespective business continuityplans. Service levels are monitoredbythe Board andthey have continuedtooperate effectively.

 

C o r p o r a t e G o v e r n a n c e a n d R e g u l a t o r y Risks

The Companycan sufferdamage to its reputationthroughpoorcorporate governance. The Board activelyperforms self-assessments ofcompliance with bestgovernance practices.Also, shareholder discontent due to a lack of appropriate communications and/ or inadequate financial reporting couldcause shareholders toreduce or liquidate theirpositions,whichcould impactthe marketprice ofthe shares. The Board is incontactwith its major shareholders on a regularbasis, and itmonitors shareholder sentiment. In addition,regulatoryrisks, inthe form offailure tocomplywithmandatory regulations,couldhave an impacton the Company's continuity. The Company receives, andresponds to,guidance from both its external and internal advisors on compliance withthe Listing Rules, and Disclosure andTransparency Rules, as well as other applicable regulations.

 

T ax Risks

Inordertoqualify as an investment trust,the Companymustcomplywith Sections 1158-59ofthe Corporation TaxAct2010.Abreachofthese sections couldresult inthe Company losing investment trust status and, as a consequence,capital gains realizedwithinthe Company's portfoliowouldbe subjectto CorporationTax. The criteria are monitoredbyboththe Board andthe Manager.

 

M a r k e t P r i c e   of   t h e   Sares maytrade at a discounttoNetAsset Value

The marketprice ofthe Company's shares mayfall belowthe NAVper share. To address a discount,the Companyhas authoritytomake use of share buybacks, throughwhich shares are repurchased whentrading at a discounttoNAV. The Companymaypurchase upto a maximumof14.99%of its issued share capital. In addition, as discussedunder "Corporate Governance and Regulatory Risks,"the Companyhas increased its shareholdercommunications programmes to increase its visibility and interactionwith existing andpotential investors.

 

Me r g e r ad EventDriven Risks

This risk is inherenttothe mergers and acquisitions componentofthe Company's strategy and addresses the possibilitythat a deal does notgo through, is delayedbeyondthe original closingdate,orthatthe terms ofthe proposedtransactions change adversely. This risk is addressedbythe portfolio management team's careful selection and active monitoringofmergers and acquisitions deals, andmaintaining a thoroughknowledge ofthe selected securities inthe portfolio.

 

Climate Change Risk

The Board and InvestmentManager consider how climate change could affect the Company's portfolio companies and shareholderreturns. Currently, the near term effects of climate change andclimate change regulation onthe Company's investments are notconsideredtobe material.

 

F o r discussionof additional risks, please refertoNote 11tothe financial statements.

 

Section172Statement

The Directors are mindful oftheirduties topromote the success ofthe Company forthe benefitof its shareholders,while alsoconsideringthe interests of its wider stakeholders, as per section172ofthe Companies Act20 0 6. The matters set out in section172(1)(a)to(f) are:

 

( a)  the likelyconsequences of any decision inthe longterm;

( b )     t h e interests ofthe Company's employees;

 

( c ) the needtofosterthe company's business relationships with suppliers, customers andothers;

 

( d )     t h e impactofthe company's operations on the community and the environment;

 

( e)  the desirabilityofthe company maintaining a reputationforhigh standards ofbusiness conduct; and

 

( f )     t h e needto actfairlybetween members ofthe company.

 

The Board acknowledges that engagementwithkey stakeholders assists the Board inmeetingthese obligations andhas identified its key stakeholders below. The following outlines the Board's engagementwith stakeholders inthe year. The Company has no employees andtherefore no employee stakeholdermatters to consider.

 

Stakeholder Group

Engagement in the year and their material issues

Investors

Shareholders play an important role in monitoring and safeguarding the governance of the Company and have access to the Board via the Company Secretary throughout the year and, under normal circumstances, are encouraged to attend the AGM.

 

During the year to 31 March 2021, the Board has had increased engagement with shareholders as it seeks to deliver a satisfactory outcome on the result of the continuation vote, which was defeated at last year's AGM.

 

Suppliers

Key suppliers are required to report to the Board on a regular basis. The Company employs a collaborative approach and looks to build long term partnerships based on open terms of business and fair payment terms.

 

Investee Companies

The Manager meets with the management of all companies in which the Company has a significant interest and reports on findings to the Board on a quarterly basis.

 

Regulators

The Board ensures compliance with the necessary rules and regulations relevant to the Company in order to build trust and reputation in the market.

 

 

We define principal decisions as both those that are material to the Company but also those that are significant to any of our key stakeholders as identified above. In making the following principal decisions, the Board considered the outcome from its stakeholder engagement as well as the need to maintain a reputation for high standards of business conduct and the need to act fairly between the members of the Company.

 

Principal Decision 1

 


Requisitioned General Meeting

During the year to 31 March 2021, the Board has had increased engagement with shareholders as it seeks to deliver a satisfactory outcome on the result of the continuation vote, which was defeated at last year's AGM.

 

Principal Decision 2

 


Continuation Vote

The Board considered, and unanimously agreed, to recommend that shareholders vote against the continuation of the Company and that they vote in favour of the resolution to place the Company into members' voluntary liquidation at the forthcoming GM.

 

Viability Statement

 

In accordance withthe provisions ofthe UK Corporate Governance Code,the Directors have assessedthe prospects of the Companyover a longerperiodthan the 12months referredto inthe 'Going Concern' guidelines.

 

A t t he AGM held in 2020 a majority of shareholders voted againstthe continuation of the Company. At a general meetingofthe Company requisitioned byACG andheld inDecember 2020, a majorityof shareholders voted against all  the resolutions. In the period since the AGM the Directors have consulted widely with a majority of the shareholders. The consensus amongstthe majority of independent shareholders,that is, excludingACG,which is an affiliate ofthe Investment Manager, is thatthe Company shouldbe placed into members' voluntary liquidation as soon as practicable.Ageneral meeting('GM')has beenconvenedto followthe AGM atwhich a further continuation resolutionwill be proposed, and also a resolutionthatthe Companybe placed intomembers' voluntary liquidation. In the shareholder circular convening the GM, the BoardofDirectors is unanimously recommendingthat shareholders vote againstthe continuationofthe Company andthattheyvote infavour ofthe resolutionto place the Company into liquidation; however,the outcome ofthe continuation and liquidationvotes are bynomeans certain and, as such,the votes represent a material uncertainty inthe contextof assessingthe future prospects ofthe Company.Notwithstandingthis,the Directors have assessed the viability of the Companyover a three yearperiodto March 2024. This periodwas selected as the Company is subjectto a continuation vote everytwoyears andtherefore, ifthe forthcomingcontinuationvote is passed, and the liquidation vote is defeated, a furthervote wouldbe requiredtobe put t o shareholders in 2023.Dependingon the outcome ofthat subsequentvote the Directors maybe requiredtoput forward proposals towind-up, reorganise or reconstructthe Company. It is not unreasonable to estimate thatthis process couldtake upto a further12 months. In makingthis assessmentthe Board also consideredthe Company's principal risks.

 

Investmenttrusts inthe UKoperate in a well established androbustregulatory environment and,forthe purposes of assessingthe viabilityofthe Company andnotwithstanding the uncertainty surroundingthe outcome ofthe continuation and liquidationvotes,the Directors have assumedthat:

 

  Investors will continue towantto invest inclosed-end investment trusts because the fixedcapitalisation structure is better suitedtopursuing the InvestmentManager's proprietary longterm PMV investment strategy;

The Company's remitof investing predominantly inthe securities of U.S. listed companies will continue to be an activitytowhich investors will wish tohave exposure.(Manyclosed-end funds were originally created in the UK to facilitate investment in the "NewWorld.")

 

A s with all investmentvehicles,there is a risthatthe performance of individual investments will vary and that capital maybe lost,butthis is notregarded as a threattothe viabilityofthe Company.Operationally,the Company retains title to all assets, andcash and securities are heldwith a custodianbank recommendedbythe Manager and approvedbythe Board.

 

T h e nature ofthe Company's investments means that solvency and liquidity risks are lowbecause the portfolio is investedmainly inreadilyrealisable listed securities:

 

The closed-endnature ofthe Companymeans that,unlike an open-endedfund, itdoes notneedto realise investments when shareholders wishto sell their shares; and

 

The expenses ofthe Company are predictable andreasonable in comparisonwiththe assets andthere are nocapital commitments currently foreseenwhichwould alterthat position.

 

T aingthese factors into account, and inthe eventthatthe continuation and liquidationvotes donotrequire the Companytobe woundup inthe next12 months,the Directors confirmthatthey have a reasonable expectationthatthe Companycouldcontinue tooperate and meet its expenses as theyfall due over the nextthree years.

 

The Company's portfolioconsists ofNorthAmerican investments. Accordingly, the Board believes that the ongoing"Brexit"transitionprocess will notmaterially affectthe prospects forthe Company,butthe Board and InvestmentManagercontinue tokeep developments underreview.

 

The COVID-19pandemic initially had a significant impactonworld stockmarkets;however,withthe pandemicbeingbroughtundercontrol andthe availabilityof a numberof effective vaccines, stockmarkets have recovered. The Boardcontinues to monitorthe COVID-19 situationbut it does not expect itto impactthe future viabilityofthe Company.

 

F u t u r e developments

The future ofthe Company is dependent uponthe success ofthe investment strategy. The outlookforthe Company is discussed in the Chairman's Statement, InvestmentManager's report,the viability statement andthe goingconcern statement.

 

B o ardDiversity

Whenrecruiting a newDirector,the Board's policy is to appoint individuals on merit. The Board believes diversity is important inbringing an appropriate range of skills, knowledge and experience to the Board andgives thatconsideration whenrecruitingnewDirectors.

 

A s at31March2021there were three male Directors.Followingthe departure fromthe BoardofKasia Robinski atthe conclusion of the 2020 AGM, and in lightofthe uncertainty surroundingthe continuationofthe Company,the Board has not soughttoreplace Ms Robinski. In the eventthatthe Companycontinues in its currentform,considerationwouldbe giventorecruiting an additional director. Due considerationwouldbe givento gender and ethnic diversity as part of the recruitmentprocess.

 

E m p l oy ee s , S o c i a l , C o mm un i t y a n d H u man Rights Issues

A s an investmentvehicle the Company has no employees and accordingly ithas no direct social or community impact and limited environmental impact from its operations.However,the Company believes that it is in shareholders' interests toconsiderhumanrights issues, environmental, social andgovernance factors when selecting andretaining investments.

 

The Chairman's Statement,the InvestmentManagers Report andthe portfolio analysis alsoformpartofthis Strategic Report.

 

T h e S t r ategic Reportwas approvedby the Boardon9 June2021.

 

O n behalfofthe board

 

 

PeterDicks

Chairman

9 June 2 0 2 1

 

 

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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law). 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 United Kingdom Accounting Standards, comprising FRS 102, 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.

 

Each of the directors, whose names and functions are listed in Board of Directors section confirm that, to the best of their knowledge:

 

• the company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law), give a true and fair view of the assets, liabilities, financial position and loss of the company; and

 

• the Directors' Report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that it faces.

 

In the case of each director in office at the date the Directors' 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.

 

On behalf of the Board

 

 

Peter Dicks

Chairman of the Board

9 June 2021

 

 

 

 

STATEMENT OF COMPREHENSIVE INCOME



Year ended 31 March 2021

Year ended 31 March 2020


Note 

Revenue 
£000 

Capital 
£000 

Total 
£000 

Revenue 
£000 

Capital 
£000 

Total 
£000 

Dividend income


2,497

2,497

2,119 

2,119 

Interest on deposits


19 

19 

Other income


3

3

Total dividends and interest


2,500

2,500

2,138 

2,138 

Net realised and unrealised (losses)/gains on investments

67,586

67,586

(33,893)

(33,893)

Net realised and unrealised currency (losses)/gains


(5)

(2,522)

(2,527)

5

76

81

Investment management fee

(303)

(890)

(1,193)

(310)

(948)

(1,258)

Other expenses

(543)

(11)

(554)

(474)

(9)

(483)

Net return on ordinary activities before finance costs and taxation


1,649 

64,163

65,812

1,359 

(34,774)

(33,415)

Interest expense and similar charges


(1) 

(1) 

-

Net return on ordinary activities before taxation


1,648

64,163

65,811

1,359 

(34,774)

(33,415)

Taxation on ordinary activities

(346)

-

(346)

(281)

(281)

Net returns attributable to shareholders


1,302

64,163

65,465

1,078 

(34,774)

(33,696)

Net returns per ordinary share - basic and diluted

1.32p 

65.28p 

66.60p 

1.09p 

(35.25)p

(34.16)p

The total columns of this statement are the profit and loss accounts of the Company for the respective periods.

The revenue and capital items are presented in accordance with the AIC's Statement of Recommended Practice ('SORP') 2014, and updated 2019.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued in the year ended 31 March 2021 (2020: none).

The notes form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2021

Note 

Called up 
Share 
Capital 
£000 

Special 
Distributable 
Reserve* 
£000 

 
Capital 
Reserve 
£000 

 
Revenue 
Reserve* 
£000 

 
 
Total 
£000 

Net assets as at 1 April 2020


1,001 

95,885 

3,106

1,278

101,270

Realised gains on investments at fair value

12,733

12,733

Unrealised gains on investments at fair value

54,853

54,853

Net realised and unrealised currency losses


(2,522)

(2,522)

Capital expenses

(901)

(901)

Transfer to revenue reserve for the year


1,302

1,302

Dividends paid

(1,081)

(1,081)

Net assets as at 31 March 2021

1,001 

95,885

67,269

1,499

165,654

 

 

Year ended 31 March 2020







Net assets as at 1 April 2019


1,001 

97,699 

37,880 

944

137,524 

Realised gains on investments at fair value

4,943 

4,943 

Unrealised losses on investments at fair value

(38,836)

(38,836)

Net realised and unrealised currency gains


76 

76 

Capital expenses

(957)

(957)

Ordinary shares bought back into treasury

10 

(1,814)

(1,814)

Transfer to revenue reserve for the year


1,078 

1,078 

Dividends paid

(744)

(744)

Net assets as at 31 March 2020

1,001 

95,885

3,106 

1,278

101,270 

 

 

*  These reserves are distributable.

 

The notes form part of these financial statements.

STATEMENT OF FINANCIAL POSITION


Note 

As at 31 March 2021

As at 31 March 2020

£000 

£000 

£000 

£000 

Fixed assets






Investments held at fair value through profit or loss


129,559


89,892

Current assets






Cash and cash equivalents

37,862


12,372 


Receivables

808


231




38,670


12,603 


Current liabilities






Payables

(2,575)


(1,225)


Net current assets



36,095


11,378

Net assets



165,654


101,270







Capital and reserves






Called-up share capital

10 

1,001 


1,001 


Special distributable reserve*


95,885 


95,885 


Capital reserve


67,269


3,106 


Revenue reserve*


1,499


1,278 


Total shareholders' funds



165,654


101,270

Net asset value per ordinary share


168.5p


103.0p 

 

*  These reserves are distributable.

 

Gabelli Value Plus+ Trust Plc is registered in England and Wales under Company number 9361576.

The financial statements were approved by the Board of Directors on 9 June 2021 and signed on its behalf by

Peter Dicks

Chairman

 

The notes form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

1 Accounting policies

(a)  Basis of preparation - For the year ended 31 March 2021, the Company applied FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland, which forms part of the revised Generally Accepted Accounting Practice (UK GAAP) issued by the Financial Reporting Council ('FRC') in 2015.

 

As noted in the Company's Notice of Annual Results announcement, released on 9 June 2021, the Board of Directors is recommending that shareholders vote against the resolution to approve the continuation of the Company and that they vote in favour of the resolution to place the Company into members' voluntary liquidation, both of which are to be proposed at the general meeting which will follow the AGM. These decisions were reached after consultation with a range of shareholders over the period since the defeat of the continuation vote at the 2020 AGM. A vote of 50% plus 1 of votes cast in favour is required for continuation. A vote of 75% plus 1 of votes cast in favour of members' voluntary liquidation is required for the resolution to be passed.

 

The voting will be such that if the relevant continuation resolution is not passed and the liquidation resolution is passed at the general meeting which follows the AGM, the Company will be placed into members' voluntary liquidation with effect from the conclusion of the GM.

 

As such, the outcome of the continuation and liquidation votes at the GM respectively on 12 July 2021 represent a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern. In arriving at the decision on the basis of preparation, the Board has considered the financial position of the Company, its cashflow and liquidity position as well as the uncertainty surrounding the outcome of the continuation and liquidation votes. The Board further concluded that, as the liquidation vote was contingent on shareholder approval and the Company is considered solvent in all other regards, there is no irrevocable path to liquidation and thus going concern remained the most appropriate basis for preparation.

 

If it were not appropriate to prepare the financial statements on a going concern basis of accounting then adjustments would be required to reclassify all assets as current, and a provision for further liabilities, including liquidation costs, would be made. In the Directors' opinion the impact of these adjustments on the financial statements is not expected to be significant.

 

These financial statements have been prepared on a going concern basis in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, FRS 102 issued by the FRC in September 2015, the revised Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (SORP) issued by the AIC in November 2014 and updated in October 2019 and Companies Act 2006.

 

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 year.

 

Cash flow statement - The statement of cash flows has not been included in the financial statements as the Company meets the conditions set out in paragraph 7.1A of FRS 102, which state that a statement of cashflows is not required to be provided by investment funds that meet all of the following conditions:

 

(i) substantially all of the entity's investments are highly liquid;

 

(ii) substantially all of the entity's investments are carried at market value; and

 

(iii) the entity provides a statement of changes in net assets.

 

(b) 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.

 

(c) Expenses - The investment management fees are allocated seventy-five percent to capital and twenty-five percent to revenue in the Statement of Comprehensive Income in accordance with the Board's expected long term split of returns in the form of capital gains and revenue, respectively. 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.

 

(d)   Cash and cash equivalents - Cash comprises cash on hand and on demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash.

 

(e) 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 Section 11 and Section 12 of FRS 102.

 

The Company's listed investments are fair valued using the closing bid price of the valuation date.

 

(f) Foreign currency - Foreign currencies are translated at the rates of exchange prevailing on the year end date. Revenue received/receivable and expenses paid/ payable in foreign currencies are translated at the rates of exchange prevailing at the transaction date.

 

(g)Fair value - All financial assets and liabilities are recognised in the financial statements at fair value.

 

(h) Dividends payable - Interim dividends are recognised in the period in which they are paid. Final dividends are not recognized until approved by the shareholders in the general meeting.

 

(i) Capital reserve - Capital distributions received, realised gains or losses on investments that are readily convertible to cash, and capital expenses are transferred to the capital reserve. Share buybacks are funded through the capital reserve, with details of buybacks disclosed in note 10.

 

(j) 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 year end date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the year 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.

 

(k)Functional and presentation currency - The functional and presentation currency of the Company is GBP sterling.

 

(l) Alternative Performance Measures ("APM's")

The Company's APMs are set out in the glossary in the Annual Report.

 

 

2 Investments held at fair value through profit or loss


As at 
31 March 2021 
£000 

As at 
31 March 2020 
£000 

Opening book cost

120,116

128,532 

Opening investment holding (losses)/gains

(30,224)

8,612 

Opening market value

89,892

137,144 

Additions at cost

71,739

60,402 

Disposal proceeds received

(99,658)

(73,761)

Gains/(losses) on investments

67,586

( 33,893)

Market value of investments

129,559

8 9,892




Closing book cost

104,930 

120,116 

Closing investment holding gains/(losses)

24,629

(30,224) 

Closing market value

129,559

89,892 

 

The Companyreceived£99,658,000 (2020:£73,761,000)from investments sold inthe year. The bookcostofthese investments whentheywere purchasedwas £86,925,000 (2020:£68,818,000).

 

Fair value hierarchy

The Company has adopted the 'Amendments to FRS 102 - Fair value hierarchy disclosure', where an entity is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:

 

• Level 1 - The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

 

• Level 2 - Inputs other than quoted prices included within Level 1 that are observable, i.e., developed using market data, for the asset or liability, either directly or indirectly.

 

• Level 3 - Inputs are unobservable, i.e., for which market data is unavailable, for the asset or liability.

The financial assets measured at fair value through profit or loss in the financial statements are grouped into the fair value hierarchy as follows:


As at 31 March 2021


Level 1 
£000 

Level 2 
£000 

Level 3 
£000 

Total 
£000 

Financial assets at fair value through profit or loss





Quoted equities

129,517

- 

129,517

Registered Investment Companies

-

42

42

Net fair value

129,517

-  

129,559

 


As at 31 March 2020


Level 1 
£000 

Level 1 
£000 

Level 1 
£000 

Level 1 
£000 

Financial assets at fair value through profit or loss





Quoted equities

89,892 

89,892 

89,892 

89,892 

Net fair value

89,892  

89,892  

89,892  

89,892  

 

 

Net realised and unrealised gains/(losses) on investments


Year ended 
31 March 2021 
£000 

Year ended 
31 March 2020 
£000 

Realised gains on investments

12,733

4,943

Movement in unrealised gains/(losses) on investments

54,853

(38,836)

Net realised and unrealised gains/(losses) on investments

67,586

(33,893)

 

Transaction costs

During the year, commissions and other expenses were incurred in acquiring or disposing of investments classified at fair value through profit or loss. G.research, LLC, an affiliate of the investment manager, remained the largest recipient of these. These have been expensed through capital and are within gains/ (losses) in the Statement of Comprehensive Income. The total costs were as follows:


Year ended
31 March 2021
£000

Year ended
31 March 2020
£000

Purchases

47

53

Sales

56

41

Total

103

94

 

3 Management fees and other expenses


Year ended 
31 March 2021 
£000 

Year ended 
31 March 2020 
£000 

Revenue expenses



Directors' remuneration

103

88 

Accounting fees

57

54

Custody fees

15

8

Registrar - Computershare

26

17

Marketing and advertisement

-

13

Company secretary fees

62

77

Broker retainer

36

57

Auditors' remuneration (inclusive of VAT)

42

39

Directors' insurance

11 

11 

Miscellaneous

192

110

Sub total

543

474

 

Management Fees



Manager fee - Revenue

303

310

Manager fee - Capital

890

948

Total

1,193

1,258




Capital expenses



Transaction charges

11 

9

Total

11  

9

 

Details of the contract between the Company and Gabelli Funds, LLC for provision of investment management services are given in the Directors' Report contained in the Annual Report and Financial Statements.

4 Dividends


Year ended 
31 March 2021 
£000 

Year ended 
31 March 2020 
£000 

Final dividend

983

744

Interim dividend

98

-

Total

1,081

744

 

5 Taxation on ordinary activities


Year ended 31 March 2021

Analysis of the charge in the year

Revenue 
£000 

Capital 
£000 

Total 
£000 

Foreign withholding taxes on dividends

348

348

Foreign withholding taxes on REIT

(2)

(2)

Total

346

346

 


Year ended 31 March 2020

Analysis of the charge in the year

Revenue 
£000 

Capital 
£000 

Total 
£000 

Foreign withholding taxes on dividends

272 

272 

Foreign withholding taxes on REIT

Total

281

281

 

The effective corporation tax rate was 19% (2020:19%). The tax charge for the year differs from the charge resulting from applying the standard rate of corporation tax in the UK for an investment trust company. The differences are explained below.


Year ended 31 March 2021

Factors affecting the tax charge for the year

Revenue 
£000 

Capital 
£000 

Total 
£000 

Net return before taxation

1,648

64,163

65,811

UK Corporation tax at effective rate of 19%

313

12,191

12,504

Effects of:




Gains on investments held at fair value through profit or loss

(12,841)

(12,841)

Expenses not allowable for tax purposes

2

2

Losses on foreign currencies

479

479

Non taxable overseas dividends

(473)

(473)

Foreign withholding taxes on dividends

346

346

Increase in excess management and overdraft expenses

165 

169

334

Decrease in excess management and overdraft expenses: adjustment in respect of prior years

(5) 

(5)

Total

346

346

 


Year ended 31 March 2020

Factors affecting the tax charge for the year

Revenue 
£000 

Capital 
£000 

Total 
£000 

Net return before taxation

1,359 

(34,774) 

(33,415) 

UK Corporation tax at effective rate of 19%

258 

(6,607) 

(6,349) 

Effects of:




Losses on investments held at fair value through profit or loss

6,439

6,439

Overseas tax expensed

(1)

(1)

Expenses not allowable for tax purposes

2

Gains on foreign currencies

(14)

(14)

Non taxable overseas dividends

(393)

(393)

Foreign withholding taxes on dividends

281

281

Increase in excess management and overdraft expenses

136 

180

316

Total

281

281

 

At the year end, after offset against income taxable on receipt, there is a potential deferred tax asset of £1,894,467 (2020: £,560,390) in relation to surplus tax reliefs. It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these amounts and therefore no deferred tax asset has 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 .

 

6 Return per ordinary share and net asset value

The return and net asset value per ordinary share are calculated with reference to the following amounts:


Year ended 
31 March 2022 

Year ended 
31 March 2020 

Revenue return



Revenue return attributable to ordinary shareholders

£1,302,000 

£1,078,000 

Weighted average number of shares in issue during year

98,282,193 

98,650,562 

Total revenue return per ordinary share

1.32p  

1.09p  

Capital return



Capital return attributable to ordinary shareholders

£64,163,000

(£34,774,000)

Weighted average number of shares in issue during year

98,282,193 

98,650,562 

Total capital return per ordinary share

65.28p

(35.25p)  

Total return



Total return per ordinary share

66.60p

(34.16p)  

 

Net asset value per share

As at 
31 March 2021 

As at 
31 March 2020 

Net assets attributable to shareholders

£165,654,000 

£101,270,000 

Number of shares in issue at year end

98,282,193 

98,282,193 

Net asset value per share

168.5p

103.0p 

 

7 Cash and cash equivalents


As at 
31 March 2021 
£000 

As at 
31 March 2020 
£000 

GBP Sterling

199

659 

Canadian Dollar

10

7

U.S. Dollar

37,653

11,706

Total

37,862

12,372

 

8 Receivables: amounts falling due within one year


As at 
31 March 2021
£000 

As at 
31 March 2020 
£000 

Dividends receivable

127

218 

Due from brokers

652

Prepaid expenses

29

13 

Total

808

231

 

None of the Company's receivables were past due or impaired as at the year end date.

9 Payables: amounts falling due within one year


As at 
31 March 2021 
£000 

As at 
31 March 2020 
£000 

Due to brokers

2,313

936 

Due to Manager (Gabelli Funds, LLC)

133

101 

Other payables

129

188 

Total

2,575

1,225

 

10 Called up share capital


As at 
31 March 2021 
£000 

As at 
31 March 2020 
£000 

Authorised:



250,000,000 Ordinary shares of 1p each - equity

2,500 

2,500 




Allotted, called up and fully paid:



98,282,193 (2020: 98,282,193) Ordinary shares of 1p each - equity

983

997 




Treasury shares:



1,818,808 (2020: 1,818,808) Ordinary shares of 1p each - equity

18

Total shares

1,001  

1,001  

 

During the year ended 31 March 2021, no shares (2020: 1,424,500) were bought back into treasury (2020: at a cost of £1,813,513).

 

11 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. No derivatives transactions were undertaken during the year.

 

The main risks the Company faces from its financial instruments are (i) market price risk (comprising interest rate risk, currency risk, and other price risk), (ii) liquidity risk, and (iii) credit risk.

 

The Board regularly reviews, and agrees upon, policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short term receivables and payables, other than for currency disclosures.

 

(i) Market price risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk, and other price risk.

 

Interest rate risk

Interest rate movements may affect the level of income receivable and payable on cash deposits.

 

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions .

 

Interest risk profile

The interest rate risk profile of the portfolio of financial assets and liabilities at the year end date was as follows:

 


As at 31 March 2021


Interest 
rate 

Local 
currency 
000 

Foreign 
exchange 
rate 

Sterling 
equivalent 
£000 

Assets:





GBP Sterling

0.00

199

1.00 

199

Canadian Dollar

0.00

18

1.73 

10

U.S. Dollar

0.00

51,950

1.38 

37,653

Total




37,862

 


As at 31 March 2020


Interest 
rate 

Local 
currency 
000 

Foreign 
exchange 
rate 

Sterling 
equivalent 
£000 

Assets:





GBP Sterling

0.00 

659

1.00 

659 

Canadian Dollar

0.15 

13

1.76 

7

U.S. Dollar

0.00 

14,514 

1.24 

11,706 

Total




12,372 

 

Interest rate sensitivity

The sensitivity analyses below have 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 year in the case of instruments that have floating rates.

 

If interest rates had been 10 (2020: 10) basis points higher or lower and all other variables were held constant, the Company's profit or loss for the reporting year to 31 March 2021 would increase / decrease by £38,000 (2020: £12,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances.

 

As at 31 March 2021 an interest rate of 0.10% is used, given the prevailing Bank of England base rate 0.10%. This level is considered possible based on observations of market conditions and historic trends.

 

Foreign currency risk

The Company's investment portfolio is invested mainly in foreign securities and the year end can be significantly affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investments with foreign currency borrowings.

 

The revenue account is subject to currency fluctuation arising from overseas income.

 

Foreign currency risk exposure by currency of denomination:

 


As at 31 March 2021


Investments 
£000 

Net monetary 
assets 
£000 

Total currency 
exposure 
£000 

Canadian Dollar

1,894

10

1,904

Euro

402

(1)

401

Norwegian Krone

395

-

395

Swiss Franc

3

-

3

U.S. Dollar

126,865

35,993

162,858

Total

129,559

36,002

165,561

 

 

 


As at 31 March 2020


Investments 
£000 

Net monetary 
assets 
£000 

Total currency 
exposure 
£000 

Canadian Dollar

1,442

7

1,449

U.S. Dollar

88,450 

10,987 

99,437 

Total

89,892

10,994

100,886

 

The asset allocation between specific markets can vary from time to time based on the Manager's opinion of the attractiveness of the individual markets.

Foreign currency sensitivity

The following table details the Company's sensitivity to a 15% increase and decrease in sterling against the relevant foreign currencies and the resultant impact that any such increase or decrease would have on net return before tax and equity shareholders' funds. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 15% change in foreign currency rates.

 


As at 
31 March 2021
£000 

As at 
31 March 2020 
£000 

Canadian Dollar

2

1

Euro

-


Norwegian Krone

-


Swiss Franc

-


U.S. Dollar

5,399

1,648

Total

5,401

1,649

 

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 to review investment strategy. The investments held by the Company are listed on recognised stock exchanges.

 

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 31 March 2021 would have increased / decreased by £19,434,000. The calculations are based on the portfolio valuations as at the year end date, and are not representative of the year as a whole.

 

(ii) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. All creditors are payable within three months.

 

Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary.

 

(iii) Credit risk

This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

 

The risk is managed as follows:

 

• Investment transactions are carried out mainly with one broker, G.research, LLC, whose credit ratings are reviewed periodically by the Investment Manager.

 

• Most transactions are made delivery versus payment on recognised exchanges.

 

• Cash is held only with reputable banks.

 

The maximum credit risk exposure as at 31 March 2021 was £38,670,000 (2020: £12,603,000) This was due to cash and receivables as per notes 7 and 8.

 

12 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. This review includes the nature and planned level of gearing, which takes account of the Investment 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 
31 March 2021 
£000 

As at 
31 March 2020 
£000 

Equity share capital

1,001 

1,001 

Special distributable reserve*

95,885 

95,885 

Capital reserve

67,269

3,106 

Revenue reserve*

1,499

1,278 

Total

101,270  

101,270  

 

*  These reserves are distributable.

13 Alternative Investment Fund Managers ("AIFM") Directive

In accordance with the Alternative Investment Fund Managers Directive ("AIFMD"), the Company is an Alternative Investment Fund ("AIF") and has appointed Gabelli Funds, LLC as its Alternative Investment Fund Manager (the "AIFM") to provide portfolio management and risk management services to the Company in accordance with the investment management agreement.

 

The Company is categorised as an externally managed European Economic Area ("EEA") domiciled AIF for the purposes of the AIFMD. Since the Investment Manager is a non-EEA AIFM, the Investment Manager is only subject to the AIFMD to the extent that it markets an EEA AIF in the EEA. Accordingly, the Investment Manager is required to make only certain financial and nonfinancial disclosures.

 

The Company's maximum leverage levels at 31 March 2021 are shown below:

 

Leverage Exposure

Gross method 

Commitment method 

Maximum permitted limit

115%  

115%  

 

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.

 

14 Related party transactions

During the year ended 31 March 2021, with the exception of Investment Management fees, Directors' remuneration, Directors' shareholdings, secretarial fees, and other administrative fees, the Company paid brokerage commissions on security trades of £43,206 (2020: £76,776) to G.research, LLC, an affiliate of the Investment Manager.

 

15 Contingent Liabilities and Commitments

As at 31 March 2021, the Company had no contingent liabilities or commitments (31 March 2020: Nil).

 

16 Post balance sheet events

On 9 June 2021 the Board declared an interim dividend of 1.2 pence per share. The dividend is payable on 2 July 2021, to shareholders on the register as at close of business on 18 June 2021.

 

On 9 June 2021 the Board declared a further interim dividend on 0.2 pence per share in respect of the year ending 31 March 2022. This dividend is being paid in order to ensure that the Company meets the distribution requirements to maintain investment trust status during the period from 1 April 2021 to the date of the General Meeting. The dividend is payable on 2 July 2021 to shareholders on the register as at close of business on 18 June 2021.

 

There are no other significant post balance sheet events to report.

 

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