9 Jun 2021 17:45
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 am pleased to present the Company's annual results for the year to 31 March 2021. The period under review saw financial markets, in the United States and worldwide, reacting to the spread of the COVID-19 pandemic, with governments stepping in to provide fiscal stimulus for the economy through financial support for both individuals and companies. Whilst initially heavily impacted in the early part of 2020 with governments' stimulus and, more recently, the availability of a number of vaccines, markets have recovered the early losses and more.
Performance
By all measures, the fiscal year ending on 31 March 2021 was a very good year in performance terms for Gabelli Value Plus+ Trust. For the year, NAV performance was up 64.33% and share price performance was up by 98.15%. Of course, this was coming off a disappointing prior year, when the global pandemic was hitting the U.S. stock market, and all global markets, exceptionally hard. Our investment manager, Gabelli Funds, does not benchmark itself against any passive index, but rather tries to generate absolute returns over the long term. For comparison purposes, the S&P 500 Index was up 40.5% (in sterling), or 56.35% % (in U.S. dollars) during the year. The Russell 3000 Value Index increased by 42.3% (in sterling), or 58.4% (in U.S. dollars) over the same period. The Board would like to congratulate the investment manager for the performance during the past year.
Through 30 June 2020, the S&P 50 0 Index was off a mere 3% from the start of 2020, having rallied almost 40 % from its March low. Growth stocks continued their winning streak, powered by Facebook, Amazon, Netflix, Google/Alphabet, Microsoft, and Apple. At mid-2020, these six stocks had an aggregate market capitalization of $6.3 trillion, comprising 23% of the S&P 500 and contributing 5.4 points of positive year-to-date return. In late May/early June smaller capitalization and value stocks snatched market leadership before reversing.
Stocks continued to rise during the third quarter of 2020, with the S&P 500 Index up 8.9%, as gains in July and August were partially offset by a decline in September. The main issues still facing the markets centred largely around the COVID-19 pandemic: specifically, how long would it persist, would "second wave" cases spike significantly higher, leading to a return to further economic shutdowns and when would therapeutics and vaccines be ready for development and distribution?
It took COVID-19 to end the United States' longest bull market, which lasted 131 months, only to give way to its shortest bear market of just over one month. After declining 34% peak-to-trough February to March, the S&P 500 Index ended up 18% for 2020 (in U.S. dollars), 65% higher than its March low. Unfortunately, even in the face of rising asset prices and an overall increased savings rate, the extended economic shutdown strained the balance sheets of many small businesses and impaired the skills of many employees.
The first quarter of 2021, the Company's final fiscal quarter, provided a significant contrast to the first quarter of 2020. Last year, markets were hitting lows amid uncertainty regarding the ultimate reach of COVID-19 and the resulting economic wreckage at a time when even getting a diagnostic test was exceedingly difficult. More recently, not only have effective vaccines been developed, but most U.S. States have opened up their vaccine programs to all adults, or have announced that they will in the near future. At the same time other countries are seeing increases in infection rates and reintroducing or increasing restrictions to combat them. During the quarter, markets were at all time highs amid optimism about the "reopening" of the economy and the pent up demand for various activities and goods, especially travel, leisure, and entertainment.
Dividend
The Company's portfolio is constructed with total return in mind rather than any split between income and capital return. The portfolio is likely to vary considerably relative to that of the U.S. stock market, according to the investment stock selections. Revenue earnings per share during the year were 1.32 pence per share, which compares with 1.0 9 pence in the prior year.
The Directors have declared an interim dividend of 1.2 pence per share (2020: 1.10 pence per share, comprising a final dividend of 1.0 pence per share and an interim dividend of 0.1 pence per share) for the year. The dividend will be paid on 2 July 2021 to shareholders on the register at the close of business on 18 June 2021. The ex-dividend date is 17 June 2021.
Share price rating and buybacks
The share price started the period at a discount of 19.9% to NAV and finished the year at a discount of 3.9%. In light of the outcome of the continuation vote at last year's Annual General Meeting ('AGM') the Board did not consider it appropriate to undertake any share buybacks during the year.
As shareholders are aware, the management fee paid to the Investment Manager is calculated on market capitalisation, since this is thought to better align its interests with that of shareholders.
Board
As reported in last year's Annual Report, Kasia Robinski stepped down as Director and Audit Chair following the conclusion of the AGM on 30 July 2020. I should like to thank her for her valuable contribution to the Company and wish her well for the future.
Continuation Vote
As shareholders will be aware, the continuation vote at last year's AGM was overwhelmingly defeated. The outcome of the vote provided the Board with a clear indication that the majority of independent shareholders wished to realise their investment in the Company at, or close, to the prevailing net asset value. The Board, together with the Company's Broker, have liaised extensively with the majority of shareholders to seek to deliver on the outcome of that vote. The significant shareholding of Associated Capital Group ('ACG'), an affiliate of the Investment Manager, would have been sufficient to defeat any special resolution that could be put before a general meeting of the Company, including any vote to place the Company into members' voluntary liquidation.
As announced on 8 February 2021, however, ACG irrevocably undertook to abstain from voting on a continuation resolution and on a resolution to place the Company into members' voluntary liquidation, to be proposed at a general meeting of the Company which is to follow the AGM.
Since the outcome of the continuation and liquidation votes are by no means certain, this represents a material uncertainty which may cast significant doubt on the Company's future and its ability to continue as a going concern. Notwithstanding this, the financial statements have been prepared on a going concern basis. In arriving at the decision on the basis of preparation, the Board 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. Further commentary on the 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.
Annual General Meeting and General Meeting
The Company's Annual General Meeting is to be held at the offices of Gabelli, 3 St. James's Place, London SW1A 1NP on Monday, 12 July 2021 at 11.00 am. The AGM will, by necessity, be purely functional in nature. Arrangements will be made to ensure that the minimum number of shareholders required to form a quorum will be in attendance in order that the meeting may proceed and the business be concluded. The Board considers these arrangements to be in the best interests of shareholders given the current circumstances.
The AGM will be followed by a general meeting of the Company at which a continuation resolution and a resolution to place the Company into members' voluntary liquidation will be proposed. A circular in connection with the general meeting referred to above will be posted to shareholders shortly.
The Board strongly discourages shareholders from attending the AGM and the subsequent GM on 12 July 2021 and entry will be refused if Government guidance so requires or if the Chairman considers it to be necessary. Shareholders are encouraged to exercise their votes in respect of the meeting in advance.
On behalf of the Board, I should like to thank shareholders in advance for their co-operation and understanding.
Outlook
Looking ahead, the outlook for the Company appears promising, with the Investment Manager's bottom-up, value style investment philosophy finally delivering favourable returns for shareholders. The U.S. economy is thriving, helped by an aggressive vaccine roll out and massive fiscal stimulus. In addition, the Federal Reserve has stated that they plan to keep short-term interest rates near zero for the foreseeable future, even if inflation reaches its 2% annual target. Furthermore, the probability is high that a large infrastructure spending bill will be passed by the U.S. Congress and signed into law by President Biden. The largest sector allocation in the portfolio is in industrial stocks, and this sector should benefit from such a bill.
Notwithstanding the promising outlook for the U.S. economy and markets, the Board recognises that shareholders have exercised patience since the previous continuation vote and may wish to take the opportunity, represented by the upcoming votes on continuation and members' voluntary liquidation, to vote for discontinuation and subsequent members' voluntary liquidation of the Company.
Peter Dicks
Chairman of the Board
9 June 2021
INVESTMENT MANAGER'S REVIEW
Both the Company and its Investment Manager are economically viable and in strong financial positions. The Company maintains a highly liquid investment portfolio.
At the upcoming GM, scheduled for 12 July 2021, a continuation vote will be held. Due to this vote, throughout this Annual Report there is language related to the "going concern" of the Company. The going concern of the Company relates ONLY to the uncertainty of the outcome of this continuation vote.
Gabelli Philosophy and Process
Gabelli Funds would like to thank our investors for entrusting a portion of their assets to the Gabelli Value Plus+ Trust. We appreciate the confidence and trust you have offered our organisation through an investment in GVP. Today, as for more than forty years, we remain vigilant in the application of our investment philosophy and in our search for opportunities. Before we review the fiscal year just completed and self-assess the performance since our launch in 2015, we would like to remind our shareholders of our investment philosophy and process.
We at Gabelli are active, bottom-up, value investors, and seek to achieve real capital appreciation (relative to inflation) over the long term, regardless of market cycles. We achieve returns through investing in businesses utilising our proprietary Private Market Value ("PMV") with a Catalyst™ methodology. PMV is the value that we believe an informed buyer would be willing to pay to acquire an entire company in a private transaction. Our team arrives at a PMV valuation through the rigorous assessment of fundamentals, from publicly available information and judgment gained from our comprehensive, accumulated knowledge of a variety of sectors. We focus on the balance sheet, earnings, free cash flow, and the management of prospective companies. We are not index benchmarked, and construct portfolios agnostic of market capitalisation and index weightings. We have invested this way since 1977.
Our research process identifies differentiated franchise businesses, typically with strong organic cash flow characteristics, balance sheet opportunities, and operational flexibility. We seek to identify businesses whose securities trade in the public markets at a significant discount to our assessment of their PMV estimate, or "Margin of Safety". Having identified such securities, we look to identify one or more "catalysts" that will narrow or eliminate the discount associated with that "Margin of Safety". Catalysts can come in many forms including, but not limited to corporate restructurings (such as de-mergers and asset sales), operational improvements, regulatory or managerial changes, special situations (such as liquidations), and mergers and acquisitions.
It is through this process of bottom-up stock selection and the implementation of disciplined portfolio construction that we expect to create value for our shareholders.
The Year in Review: What a Difference a Year Makes!
On 31 March 2020, the United States and the entire world were in the early stages of dealing with the COVID-19 global pandemic. Lockdowns were going into place across the United States, and many businesses came to a complete standstill. The stock market was dropping quickly during the month of March, and investors were at a loss trying to figure out how the pandemic would play out. It had been approximately one hundred years since the last pandemic, and projections for potential deaths were all over the map. Stock markets throughout over the world were suffering great losses.
Fast forward to today, and it is a very different story in the U.S. Vaccine rollouts are in full force, and states are gradually reopening for business. The Federal government has injected massive fiscal stimulus into the economy and the Federal Reserve has pumped huge amounts of liquidity into the markets. Unemployment has dropped significantly, to approximately 6%, and is expected to drop further throughout 2021. The stock market has more than recovered and is hitting new highs. Value stocks, which have been out of favor for many years, are starting to perform well. In addition, small- and mid-capitalization stocks are also starting to perform well after many years of disappointing performance.
We are happy to report that the net asset value (NAV) of (y)our Fund is also hitting new highs. With the potential for an infrastructure spending bill to pass Congress and go into law, we feel the significant exposure of the Trust to the industrial sector should help the overall portfolio to perform well. After many years of value investing being out of style, it is nice to finally have the wind to our backs.
Self-Assessment
It has now been just over six years since Gabelli Value Plus+ Trust was launched in February of 2015. When we were conducting the road show for the launch of the Trust, many potential UK investors wanted to participate in the U.S. stock market, but they wanted a defensive exposure. Our Private Market Value with a CatalystTM approach, with its absolute return focus, seemed to be a good fit for many of these investors, especially given that a portion of the portfolio was to be invested in announced merger deals. At the time, many potential investors commented that if we could generate high single digit returns over a market cycle, they would be very happy.
As we reflect on those years, we are happy to point out that original investors paid 100 pence at launch, and on 31March 2021, the NAV of Gabelli Value Plus+ Trust was 170 pence. That works out to a compounded average rate of return of over 9% over the past six years. If one includes the dividends that have been paid out to shareholders, then the total return is even higher. It is worth nothing that, since the launch of the Trust, leverage was never used at any time.
One concern expressed to us during the initial roadshow was that American money managers were known for coming to the UK to raise money and then never coming back to update investors on their investment. At that time, we promised that we would be active in client service. To date, the New York-based portfolio managers on the Trust have conducted dozens and dozens of in-person meetings with investors all over the UK
.
In summary, we feel strongly that we have done exactly what we promised we would do during the road show. We point this out because in July there will be another continuation vote for shareholders. We hope that you share our belief that we have delivered on what we said we would do over six years ago, and that this Trust continues to meet your investment objectives.
Performance Summary 2020/ 21
During the past year, our best five contributors to our returns were our holdings in the shares of Herc, Freeport McMoRan, Viacom, Discovery, and Navistar. By contrast, our holdings in Hertz, Ryman Hospitality, General Electric, and Aerojet Rocketdyne were all laggards.
Let's Talk Stocks:
Aerojet Rocketdyne Holdings Inc. (AJRD - $46.96 - NYSE), based in El Segundo, California, is a manufacturer of aerospace and defense products and systems for defense and space applications. The manufacturing operation is a leading technology-based designer, developer, and manufacturer of aerospace and defense products for the U.S. government, including the Department of Defense and NASA. AJRD also manufactures products for governmental contractors and the commercial sector. On 20 December
2020, the company announced it had agreed to be acquired by Lockheed Martin Corporation in an all-cash transaction with total equity value of $5 billion, or $56 per share. As part of the transaction, Aerojet Rocketdyne declared a $5.00 per share pre-closing special dividend, which was paid on 24 March 2021. The transaction is expected to close in the second half of 2021.
BK Bank of New York Mellon Corp. (BK - $47.29 - NYSE) is a global leader in providing financial services to institutions and individuals. The company operates in more than one hundred markets worldwide and strives to be the global provider of choice for investment management and investment services. As of December 2020, the Firm had $41.1 trillion in assets under custody and $2.0 trillion in assets under management. Going forward, we expect BK to benefit from higher interest rates, rising global incomes and the cross border movement of financial transactions.
CNH INDUSTRIAL NV (CNHI - $15.64 - NYSE), with headquarters in London, England, and Burr Ridge, Illinois, is a global capital equipment manufacturer that was demerged from parent Fiat in 2013. CNHI is unique in that it has leading positions in a variety of global machinery markets. It is best known for its agricultural equipment business, consisting of Case IH, New Holland Agriculture, and Steyr brands. The company's other businesses include IVECO, a leading global truck and bus manufacturer, as well as Case and New Holland construction machinery. Finally, its FPT Industrial brand provides engines and transmissions for the company's captive businesses and also sells to other machinery manufacturers. The new CEO, Scott Wise, is committed to CNHI's financial engineering plan, by which it will separate its Off Highway business from its Truck and Engine business via a tax free spin.
PNC Financial Services Group Inc. (PNC - $175.41 - NYSE) is one of the nation's largest diversified financial services organizations. From the company's Pittsburgh headquarters, PNC provides retail and commercial banking services in the Northeast, Southeast, and Midwest U.S. via a regional branch network of over two-thousand locations along with mortgage and deposit businesses on a national basis. In November 2020, PNC announced their intention to acquire the U.S. subsidiary of Spanish bank BBVA for $11.6 billion in cash, which would add $10 4 billion in assets to PNC and expand the company's footprint throughout the Southwest and West Coast. The company expects the merger to close near the middle of 2021, and provide annual earnings accretion in excess of 20 % during the first full year of combined operations.
RSG Republic Services Inc. (RSG - $99.35 - NYSE), based in Phoenix, Arizona, became the second largest solid waste company in North America after its acquisition of Allied Waste Industries in December 20 0 8. Republic provides nonhazardous solid waste collection services for commercial, industrial, municipal, and residential customers in forty- one states and Puerto Rico. Republic serves more than 2,800 municipalities and operates 186 landfills, 220 transfer stations, 345 collection operations, and 76 recycling facilities. Since the Allied merger, Republic has benefited from synergies driven by route density, beneficial use of acquired assets, and reduction in redundant corporate overhead. Republic is committed to its core solid waste business. While other providers have strayed into alternative waste resource technologies and strategies, we view Republic's plan to remain steadfast in the traditional solid waste business positively. We expect continued solid waste growth acquisitions, earnings improvement, and incremental route density and internalization growth in already established markets to generate real value in the near to medium term, highlighting the company's potential.
Gabelli Funds, LLC
9 June 2021
PORTFOLIO
PORTFOLIO SUMMARY
Portfolio distribution as at 31 March 2021 (%)*
| |||
GVP Portfolio | Russell 3000Value | 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 present the Strategic Report of the Company for the year ended 31 March 2021. The aim of the Strategic Report is to provide shareholders with the ability to assess how the Directors have performed their duty to promote the success of the Company during the year under review.
The Chairman's Statement and the Investment Manager's Review form part of the Strategic Report.
Business Review
Structure and Objective of the Company
Gabelli Value Plus+ Trust PLC (GVP or the Company) is an investment trust company that has a premium listing on the London Stock Exchange.
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, the Company aims to create value for its shareholders.
In seeking to achieve its investment objective the Company has contractually delegated the management of the investment portfolio to Gabelli Funds, LLC, (the "Manager"). Gabelli Funds, LLC is also the Company's Alternative Investment Fund Manager.
The Company's existing investment objective and investment policy are set out below.
Investment Policy, Restrictions and Guidelines
The Company will seek to meet its investment objective by investing predominantly in equity securities of U.S. companies, of any market capitalisation.
In selecting such securities the Manager will utilise its proprietary Private Market Value ("PMV") with a CatalystTM methodology. PMV is the value that the Manager believes an informed industrial buyer would be willing to pay to acquire an entire company. The Manager arrives at a PMV valuation by a rigorous assessment of fundamentals (focusing on the balance sheet, earnings and free cash flow) from publicly available information and judgment gained from its comprehensive, accumulated knowledge of a variety of sectors.
The Manager's fundamental research seeks to identify investments typically featuring, but not limited to, differentiated franchise businesses with organic cash flow, balance sheet
opportunities and operational flexibility. The Manager will seek to identify businesses whose securities trade in the public markets at a significant discount to their PMV estimate which the Manager refers to as a "Margin of Safety".
Having identified such securities, the Manager will seek to identify one or more "catalysts" that will help to narrow or eliminate the Margin of Safety. Catalysts can come in many forms including, but not limited to, corporate restructurings (such as demergers and asset sales), operational improvements, regulatory or managerial changes, special situations (such as liquidations) and mergers and acquisitions.
The Manager seeks value creation through its process of bottom-up stock selection and its implementation of a disciplined portfolio construction process.
As at 31 March 2021, the top 60 holdings represent 92.7% of the total investments, in line with expectations at launch. Cash holdings currently represent 22.6% of the portfolio.
In addition to equity securities of U.S. companies, the Company may (subject to the investment restrictions set out below) also invest in other securities from time to time including non-U.S. securities, convertible securities, fixed interest securities, preferred stock, non- convertible preferred stock, depositary receipts, warrants and other rights. Subject to the investment restrictions set out below, there is no limitation on the number of investments which may be exposed to any one type of catalyst event, including demergers, restructurings or announced mergers and acquisitions.
The Company may invest through derivatives for efficient portfolio management and for investment purposes. Any use of derivatives for efficient portfolio management and for investment purposes will be subject to the investment restrictions set out below.
Risk diversification
General
Portfolio risk will be mitigated by investing in a diversified spread of investments. In particular, the Company will observe the following investment restrictions:
• n o single investment shall, at the time of investment, account for more than 10 per cent. of the Gross Assets;
• n o more than 15 per cent. of the Gross Assets, at the time of investment, shall be invested in securities issued by companies other than U.S. companies; and
• n o more than 25 per cent. of the Gross Assets, at the time of investment, shall be exposed to any one industry (as defined by the MSCI industry groups according to the GICS (global industry classification standards categorisation).
The Company may adopt a temporary defensive position where it determines that adverse market conditions exist and invest some or all of the portfolio in:
• c ash or cash equivalents, money market instruments, bonds, commercial paper or other debt obligations with banks or other counterparties having a single A (or equivalent) or higher credit rating as determined by an internationally recognised rating agency; or
• a ny "government and public securities" as defined for the purposes of the FCA Handbook.
In addition, uninvested cash or surplus capital or assets may be invested on a temporary basis in such assets.
Derivatives and short selling
If the Company invests in derivatives and/or structured financial instruments for investment purposes and/or for efficient portfolio management purposes, the total notional value of derivatives and/or structured financial instruments at the time of investment will not exceed, in aggregate, 10 per cent. of its Gross Assets. The Company may take both long and short positions. The Company may short up to a limit of 10 per cent. of its Gross Assets. For shorting purposes, the Company may use indices or individual stocks.
When investing via derivatives and/or structured financial instruments (whether for investment purposes and/ or for efficient portfolio management purposes), the Company will seek to 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% |
1 This measures the Company's NAV and share price total returns, which assumes dividends paid by the Company have been reinvested.
2 This is the difference between the share price and the cum-income NAV per share at the year end.
The KPIs for the Company are set out above. These KPIs fall within the definition of "Alternative Performance Measures" (APMs) under guidance issued by the European Securities and Markets Authority (ESMA) and additional information explaining how these are calculated is set out in the Glossary in the Annual Report.
Principal Risks
The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity, including the impact of the COVID-19 pandemic.
With the assistance of the Manager, the Board has produced a risk matrix which identifies the Company's key risks. In assessing these risks and how they can be mitigated, the Board has given particular attention to those issues that threaten the viability of the Company. These key risks remain unchanged since last year and are set out below, together with details of how these have been mitigated or managed, where appropriate.
Investment Portfolio Risks
One of the main risks of an investment in GVP is a decline in the U.S. equity markets. This is best mitigated 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 10 % of the gross assets of the Company; no more than 15% of the gross assets, at the time of purchase, can be invested in securities issued by companies other than U.S. companies; and no more than 25% of the gross assets, at the time of purchase, can be exposed to any one industry as defined by the Morgan Stanley Capital Industry groups according to the GICS categorisations. In addition, the Board meets the portfolio management team quarterly at the Board meetings to review the risk factors and their effect on the portfolio, and a thorough analysis of the investment strategy is completed.
Global Macro Event Risks
Global instability or events, such as the COVID-19 pandemic, could undermine markets and therefore affect the Company's share price and NAV. To this end, global economic, geopolitical, and financial conditions are constantly monitored. Diversification of Company assets is incorporated into the investment strategy and, if disruptive events occur, the Manager may be 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.
Operational Risks
The operational functions of the Company are outsourced to third parties, which include Computershare (registrar and receiving agent), State Street Bank and Trust Company (custodian, administrator, and depositary), Maitland Administration Services Limited (company secretary) and Peel Hunt (shareholder communications). Disruptions to the systems at these companies or control failures could impact the Company. All of these third parties report to the Company on a regular basis and their reports and representations are reviewed by the Board and the Manager.
The COVID-19 pandemic resulted in the operational functions of the Company's third party service providers transitioning to remote working under their respective business continuity plans. Service levels are monitored by the Board and they have continued to operate effectively.
Corporate Governance and Regulatory Risks
The Company can suffer damage to its reputation through poor corporate governance. The Board actively performs self-assessments of compliance with best governance practices. Also, shareholder discontent due to a lack of appropriate communications and/ or inadequate financial reporting could cause shareholders to reduce or liquidate their positions, which could impact the market price of the shares. The Board is in contact with its major shareholders on a regular basis, and it monitors shareholder sentiment. In addition, regulatory risks, in the form of failure to comply with mandatory regulations, could have an impact on the Company's continuity. The Company receives, and responds to, guidance from both its external and internal advisors on compliance with the Listing Rules, and Disclosure and Transparency Rules, as well as other applicable regulations.
Tax Risks
In order to qualify as an investment trust, the Company must comply with Sections 1158-59 of the Corporation Tax Act 2010. A breach of these sections could result in the Company losing investment trust status and, as a consequence, capital gains realized within the Company's portfolio would be subject to Corporation Tax. The criteria are monitored by both the Board and the Manager.
Market Price of the Shares may trade at a discount to Net Asset Value
The market price of the Company's shares may fall below the NAV per share. To address a discount, the Company has authority to make use of share buybacks, through which shares are repurchased when trading at a discount to NAV. The Company may purchase up to a maximum of 14.99% of its issued share capital. In addition, as discussed under "Corporate Governance and Regulatory Risks," the Company has increased its shareholder communications programmes to increase its visibility and interaction with existing and potential investors.
Merger and Event Driven Risks
This risk is inherent to the mergers and acquisitions component of the Company's strategy and addresses the possibility that a deal does not go through, is delayed beyond the original closing date, or that the terms of the proposed transactions change adversely. This risk is addressed by the portfolio management team's careful selection and active monitoring of mergers and acquisitions deals, and maintaining a thorough knowledge of the selected securities in the portfolio.
Climate Change Risk
The Board and Investment Manager consider how climate change could affect the Company's portfolio companies and shareholder returns. Currently, the near term effects of climate change and climate change regulation on the Company's investments are not considered to be material.
For discussion of additional risks, please refer to Note 11 to the financial statements.
Section 172 Statement
The Directors are mindful of their duties to promote the success of the Company for the benefit of its shareholders, while also considering the interests of its wider stakeholders, as per section 172 of the Companies Act 20 0 6. The matters set out in section 172(1)(a) to (f) are:
(a) the likely consequences of any decision in the long term;
(b) the interests of the Company's employees;
(c) the need to foster the company's business relationships with suppliers, customers and others;
(d) the impact of the company's operations on the community and the environment;
(e) the desirability of the company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly between members of the company.
The Board acknowledges that engagement with key stakeholders assists the Board in meeting these obligations and has identified its key stakeholders below. The following outlines the Board's engagement with stakeholders in the year. The Company has no employees and therefore no employee stakeholder matters 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 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.
At the AGM held in 2020 a majority of shareholders voted against the continuation of the Company. At a general meeting of the Company requisitioned by ACG and held in December 2020, a majority of shareholders voted against all of the resolutions. In the period since the AGM the Directors have consulted widely with a majority of the shareholders. The consensus amongst the majority of independent shareholders, that is, excluding ACG, which is an affiliate of the Investment Manager, is that the Company should be placed into members' voluntary liquidation as soon as practicable. A general meeting ('GM') has been convened to follow the AGM at which a further continuation resolution will be proposed, and also a resolution that the Company be placed into members' voluntary liquidation. In the shareholder circular convening the GM, the Board of Directors is unanimously recommending that shareholders vote against the continuation of the Company and that they vote in favour of the resolution to place the Company into liquidation; however, the outcome of the continuation and liquidation votes are by no means certain and, as such, the votes represent a material uncertainty in the context of assessing the future prospects of the Company. Notwithstanding this, the Directors have assessed the viability of the Company over a three year period to March 2024. This period was selected as the Company is subject to a continuation vote every two years and therefore, if the forthcoming continuation vote is passed, and the liquidation vote is defeated, a further vote would be required to be put to shareholders in 2023. Depending on the outcome of that subsequent vote the Directors may be required to put forward proposals to wind-up, reorganise or reconstruct the Company. It is not unreasonable to estimate that this process could take up to a further 12 months. In making this assessment the Board also considered the Company's principal risks.
Investment trusts in the UK operate in a well established and robust regulatory environment and, for the purposes of assessing the viability of the Company and notwithstanding the uncertainty surrounding the outcome of the continuation and liquidation votes, the Directors have assumed that:
• Investors will continue to want to invest in closed-end investment trusts because the fixed capitalisation structure is better suited to pursuing the Investment Manager's proprietary long term PMV investment strategy;
• The Company's remit of investing predominantly in the securities of U.S. listed companies will continue to be an activity to which investors will wish to have exposure. (Many closed-end funds were originally created in the UK to facilitate investment in the "New World.")
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 recommended by the Manager and approved by the Board.
The nature of the Company's investments means that solvency and liquidity risks are low because the portfolio is invested mainly in readily realisable listed securities:
• The closed-end nature of the Company means that, unlike an open-ended fund, it does not need to realise investments when shareholders wish to sell their shares; and
• The expenses of the Company are predictable and reasonable in comparison with the assets and there are no capital commitments currently foreseen which would alter that position.
Taking these factors into account, and in the event that the continuation and liquidation votes do not require the Company to be wound up in the next 12 months, the Directors confirm that they have a reasonable expectation that the Company could continue to operate and meet its expenses as they fall due over the next three years.
The Company's portfolio consists of North American investments. Accordingly, the Board believes that the ongoing "Brexit" transition process will not materially affect the prospects for the Company, but the Board and Investment Manager continue to keep developments under review.
The COVID-19 pandemic initially had a significant impact on world stockmarkets; however, with the pandemic being brought under control and the availability of a number of effective vaccines, stockmarkets have recovered. The Board continues to monitor the COVID-19 situation but it does not expect it to impact the future viability of the Company.
Future developments
The future of the Company is dependent upon the success of the investment strategy. The outlook for the Company is discussed in the Chairman's Statement, Investment Manager's report, the viability statement and the going concern statement.
Board Diversity
When recruiting a new Director, the Board's policy is to appoint individuals on merit. The Board believes diversity is important in bringing an appropriate range of skills, knowledge and experience to the Board and gives that consideration when recruiting new Directors.
As at 31 March 2021 there were three male Directors. Following the departure from the Board of Kasia Robinski at the conclusion of the 2020 AGM, and in light of the uncertainty surrounding the continuation of the Company, the Board has not sought to replace Ms Robinski. In the event that the Company continues in its current form, consideration would be given to recruiting an additional director. Due consideration would be given to gender and ethnic diversity as part of the recruitment process.
Employees, Social, Community and Human Rights Issues
As an investment vehicle the Company has no employees and accordingly it has no direct social or community impact and limited environmental impact from its operations. However, the Company believes that it is in shareholders' interests to consider human rights issues, environmental, social and governance factors when selecting and retaining investments.
The Chairman's Statement, the Investment Managers Report and the portfolio analysis also form part of this Strategic Report.
The Strategic Report was approved by the Board on 9 June 2021.
On behalf of the board
Peter Dicks
Chairman
9 June 2021
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 | 2 | - | 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 | 3 | (303) | (890) | (1,193) | (310) | (948) | (1,258) |
Other expenses | 3 | (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 | 5 | (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 | 6 | 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 | 2 | - | - | 12,733 | - | 12,733 |
Unrealised gains on investments at fair value | 2 | - | - | 54,853 | - | 54,853 |
Net realised and unrealised currency losses | - | - | (2,522) | - | (2,522) | |
Capital expenses | 3 | - | - | (901) | - | (901) |
Transfer to revenue reserve for the year | - | - | - | 1,302 | 1,302 | |
Dividends paid | 4 | - | - | - | (1,081) | (1,081) |
Net assets as at 31 March 2021 | 6 | 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 | 2 | - | - | 4,943 | - | 4,943 |
Unrealised losses on investments at fair value | 2 | - | - | (38,836) | - | (38,836) |
Net realised and unrealised currency gains | - | - | 76 | - | 76 | |
Capital expenses | 3 | - | - | (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 | 4 | - | - | - | (744) | (744) |
Net assets as at 31 March 2020 | 6 | 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 | 2 | 129,559 | 89,892 | ||
Current assets | |||||
Cash and cash equivalents | 7 | 37,862 | 12,372 | ||
Receivables | 8 | 808 | 231 | ||
38,670 | 12,603 | ||||
Current liabilities | |||||
Payables | 9 | (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 | 6 | 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 | 89,892 |
Closing book cost | 104,930 | 120,116 |
Closing investment holding gains/(losses) | 24,629 | (30,224) |
Closing market value | 129,559 | 89,892 |
The Company received £99,658,000 (2020: £73,761,000) from investments sold in the year. The book cost of these investments when they were purchased was £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 ended31 March 2021£000 | Year ended31 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 | 9 | - | 9 |
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 | 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 | 4 |
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.