GVP.L Regulatory News (GVP)

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 11 November 2020

GABELLI VALUE PLUS+ TRUST PLC ("the Company")

Legal Entity Identifier: 213800FZFN1SD1GNNZ11

Publication of General Meeting Circular

Further to the announcement made by the Company on 23 October 2020, the Board of Directors of the Company (the "Board") announces that it has today published a circular (the "Circular") in connection with the notice requisitioning a general meeting of the Company from Associated Capital Group Inc. ("ACG").

A copy of the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The Circular will also be available on the Company's website (www.gabelli.co.uk/the-gabelli-value-plus-trust/) and at the registered office of the Company (64 St. James's Street, London SW1A 1NF).

Introduction

On 22 October 2020, the Company received a notice requisitioning a general meeting of the Company from ACG. Under section 303 of the Companies Act, ACG as a holder of Shares representing at least 5 per cent. of the paid up capital of the Company (which carries the right of voting at a general meeting) is entitled to require the Company to call a general meeting to propose resolutions. The resolutions proposed by ACG (the "Requisitioned Resolutions") are set out in the Notice of General Meeting in the Circular.

The purpose of the Circular is to convene the General Meeting to propose the Requisitioned Resolutions in accordance with the requirements imposed by section 304 of the Companies Act and to explain why the Board recommends shareholders vote AGAINST the Requisitioned Resolutions at the General Meeting.

Background and reasons for rejecting the Requisitioned Resolutions

At the annual general meeting held by the Company on 30 July 2020 (the "AGM") an ordinary resolution was put to shareholders in connection with the continuation of the Company (the "Continuation Resolution"). The Continuation Resolution required over 50 per cent. of all votes cast to be in favour of continuation for it to be passed. The number of shares in issue and eligible to vote at the meeting was 98,282,193 Shares and the total number of votes cast (i.e. for, against and withheld) on the Continuation Resolution was 91,612,481 Shares, representing a 93.2 per cent. turnout. The result was that approximately 65.6 per cent. of total votes cast (excluding those withheld) were against continuation. The Board considers that this represents both an exceptionally high level of Shareholder votes cast with a clear majority of Shareholders against the continuation of the Company, particularly when the number of Shares held by ACG that were voted in favour of continuation are taken into account.

As a result of the vote, following the AGM, in accordance with the terms of the investment management agreement, the Company served 24 months' protective notice on Gabelli Funds, the Company's discretionary investment manager.

As noted in the announcement published by the Company on 6 October 2020, and following that date, the Board has consulted widely with Shareholders. The resultant feedback continues to indicate that a clear majority of all Shareholders (by percentage of the Company's issued share capital) and the overwhelming majority of Shareholders other than ACG support discontinuation of the Company and the return of their (and their underlying investors') capital as soon as practicable, ideally by way of a members' voluntary liquidation of the Company.

Aside from ACG's support for the continuation of the Company with its current investment manager, the result of the Continuation Resolution demonstrates that there is hardly any other Shareholder support for this course of action. Therefore, the Board considers that the Requisitioned Resolutions put forward by ACG, as a whole, do not form the basis of an acceptable way forward for a significant majority of Shareholders in the Company. The letter from ACG, dated 22 October 2020, containing the Requisitioned Resolutions also noted that: "If the proposals set out above are approved by shareholders and implemented by the Board of the Company, we agree that if the majority of shareholders vote against continuation of the Company at the annual general meeting of the Company to be held no earlier than July 2022 we will not vote against the subsequent liquidation of the Company". The Board has been informed that a clear majority of Shareholders do not wish the Company to continue in existence for that length of time.

Turning to the individual resolutions within the Requisitioned Resolutions.

In terms of resolution 1 ("That the Directors re-introduce an active buy-back programme with the aim of acquiring 10 per cent. of the Company's issued share capital."), the Board already has the ability to repurchase up to approximately 15 per cent. of the Company's total issued share capital pursuant to the authority passed at the AGM. It will continue to evaluate the appropriateness of the Company repurchasing its Shares pursuant to this authority. But, in view of the expressed desire of the majority of Shareholders for a liquidation of the Company, the Board believes it wholly inappropriate to commit to a repurchase of up to 10 per cent. of the Company's issued share capital.

The Board is fully aware of the arguments for and against the proposal embodied in resolution 2 ("That, conditional on the passing of resolution 1 above, the Directors implement a distribution programme targeting distributions equivalent to 6 per cent. of the Company's net asset value per annum paid semi-annually."). Effectively this is a dividend paid almost entirely from capital, which, amongst other things, would have negative tax implications for some shareholders, and, is not considered an appropriate policy for the Company. The Board believes that a majority of Shareholders would not be in favour and that any potential benefits to the Company's discount to net asset value may be transient. Long-term performance is the key objective for Shareholders and such a policy reduces that objective, and, alongside resolution 1, it could result in a material reduction in the size of the Company over the medium-term.

In relation to resolution 3 ("That, conditional on the passing of resolutions 1 and 2 above, the Directors enter into negotiations with Gabelli Funds, LLC, the Company's investment manager, to reduce the fee paid under the investment management agreement to 50 bps per annum (calculated on the basis of the Company's net asset value)."). Given that protective notice has been served on Gabelli Funds the Board does not feel it appropriate to recommend Shareholders vote in favour. However, the Board would welcome Gabelli Funds reducing its fee terms for the remainder of its 24 month notice period.

Following careful consideration of Shareholders' views, the current size and operational costs of the Company and Takeover Code considerations, the Board continues to believe that it would be in the best interests of the Company and Shareholders as a whole to put forward further proposals for the members' voluntary liquidation of the Company. A circular to convene a general meeting to put forward proposals for the members' voluntary liquidation of the Company will be published shortly. This is the most straightforward and cost effective means to effect the clear expressed desire of the majority of Shareholders' for a discontinuation of the Company, inter alia from a tax perspective. It does, of course, require a special resolution to be passed and ACG may again decide to block it. The Board (again) requests that ACG take full account of the wishes of the clear majority of Shareholders, since a members' voluntary liquidation represents the most effective means of effecting discontinuation for Shareholders as a whole. However, as noted in its announcement on 6 October 2020, if the Board puts forward the above as a resolution to a general meeting and should the special resolution not pass at that general meeting, the Board at the same general meeting intends, subject to obtaining any necessary regulatory and Shareholder approvals, to propose a separate ordinary resolution to effect a substantial capital return to Shareholders likely by way of a tender offer.

As stated in the Company's announcement on 15 September 2020, the Board, following extensive Shareholder consultation, was due to put forward proposals for the members' voluntary liquidation of the Company. However, ACG announced on 15 September 2020 that it would not support the special resolution needed to effect proposals for a members' voluntary liquidation and associated return of capital to Shareholders. As ACG holds more than 25 per cent. of the voting rights of the Company, and the proposals would require the approval of not less than 75 per cent. of the votes cast by Shareholders at a general meeting pursuant to a special resolution, the Board therefore announced that it was not putting the proposals forward to Shareholders at that time.

As previously announced, the Board has consulted with ACG, both before and after the AGM, and, the Board believes that the Requisitioned Resolutions put forward by ACG will be unacceptable to the majority of Shareholders, as they involve the continuation of the Company and the retention of Gabelli Funds as investment manager. However, the Board continues to encourage ACG to discuss with the Board what it would like to do with its shareholding should the Company discontinue. Given ACG's public statements in support of the Company's existing investment strategy, the Board would be happy to discuss with it options that the Company could offer as part of a members' voluntary liquidation of the Company, such as potentially distributing to ACG its pro rata share of the Company's assets in specie, or, offering the option of a rollover vehicle with a similar strategy and manager to the Company for those Shareholders not requiring a cash exit.

The Board is surprised that, given ACG's relationship with Gabelli Funds, and its stated support for the investment strategy currently followed by the Company, it cannot discuss with Gabelli Funds a way to continue its exposure to that strategy using another means and not through holding Shares in the Company.

The ultimate parent company of Gabelli Funds is GAMCO Investors, Inc. ("GAMCO"), of which Mr. Mario J. Gabelli, is the Chairman and Chief Executive Officer. Mr Gabelli is one of the senior portfolio managers responsible for the discretionary management of the Company and is also the executive chairman of ACG, a US publicly traded company whose Class A common stock is admitted to trading on the New York Stock Exchange. ACG was admitted to trading on 30 November 2015 following the spin-out of the business from GAMCO. The Board understands, pursuant to an announcement made on 7 May 2020, that Mr Mario J. Gabelli is interested in 27.8 per cent. of the voting rights of the Company (being 27,326,000 Shares), 0.4 per cent. directly and 27.4 per cent. indirectly through ACG, the Company's largest shareholder.

It is worth noting that in the original prospectus issued by the Company in connection with its initial public offering in 2015 (the "IPO"), GAMCO Investors, Inc. undertook to the Company that it, or one of its affiliated entities, would subscribe, pursuant to the relevant subscription agreement, for such number of Shares as would equal 10 per cent. of the total number of shares allotted in the IPO. However, since the Company fell short of raising the minimum gross proceeds required to proceed with the IPO of £100 million, the ACG shareholding as a per cent. of total issued share capital became materially larger.

General Meeting

The Requisitioned Resolutions will be put to Shareholders at the General Meeting in accordance with the requirements of section 304 of the Companies Act. A notice convening the General Meeting which is to be held at the Company's registered office 64 St. James's Street, London, SW1A 1NF on 7 December 2020 at 4.00 p.m. is set out at the end of the Circular. 

The Board has been advised that, as the Requisitioned Resolutions are seeking to direct the Board in the exercise of its powers of management in relation to the Company, pursuant to Article 108 of the Articles of Association, the Requisitioned Resolutions need to be proposed as special resolutions.

In order to be passed, each of the Requisitioned Resolutions will, therefore, require the approval of Shareholders representing at least 75 per cent. of the votes cast at the General Meeting.

It should be noted that resolution 2 to be proposed at the General Meeting is conditional on the passing of resolution 1 at the General Meeting. In the event that resolution 1 is not passed at the General Meeting, resolution 2 will not become unconditional and will consequently not be presented to the General Meeting.

In addition, it should be noted that resolution 3 to be proposed at the General Meeting is conditional on the passing of both resolutions 1 and 2 at the General Meeting. In the event that either resolution 1 or 2 is not passed at the General Meeting, resolution 3 will not become unconditional and will consequently not be presented to the General Meeting.

The Articles of Association provide that at the General Meeting each Shareholder present in person or by proxy or who (being a corporation) is present by a representative shall, on a show of hands, have one vote and on a poll, shall have one vote for each Share of which he/she is a holder.

The quorum for the General Meeting shall be two persons entitled to attend and to vote, each being a Shareholder or a proxy of a Shareholder or a duly authorised representative of a corporation which is a Shareholder.

Given the risks posed by the spread of COVID 19 and in accordance with the provisions of the Company's articles of association, the Corporate Insolvency and Governance Act 2020 and Government guidance, the Directors will impose entry restrictions on attendance at the General Meeting in order to ensure the health, wellbeing and safety of the Company's shareholders and officers as well as compliance with the venue's security requirements. It should be noted that, in the light of these current circumstances, it is anticipated that only the Directors, advisers and representatives of Gabelli Funds will be present in person to ensure that the quorum requirement under the Company's articles of association is met. However, Shareholders may and are strongly encouraged to participate in the business of the General Meeting by exercising their votes in advance of the General Meeting by completing and returning the Form of Proxy.

Shareholders are requested to complete and return the Form of Proxy accompanying the Circular, in accordance with the instructions printed thereon so as to be received by the Registrars as soon as possible but in any event by no later than 4.00 p.m. on 3 December 2020. The completion and return of the Form of Proxy will ensure shareholder votes are registered despite shareholders being precluded from attending the General Meeting and voting in person.

Requisitioned Resolutions

1. THAT the Directors re-introduce an active buy-back programme with the aim of acquiring 10 per cent. of the Company's issued share capital.

2. THAT, conditional on the passing of resolution 1 above, the Directors implement a distribution programme targeting distributions equivalent to 6 per cent. of the Company's net asset value per annum paid semi-annually.

3. THAT, conditional on the passing of resolutions 1 and 2 above, the Directors enter into negotiations with Gabelli Funds, LLC, the Company's investment manager, to reduce the fee paid under the investment management agreement to 50 bps per annum (calculated on the basis of the Company's net asset value).

Timetable

Notes

1. References to times in this document are to London time.

2. The dates set out in the expected timetable may be adjusted by the Company, in which event details of the new dates will be notified to Shareholders by an announcement made by the Company through a Regulatory Information Service.

Recommendation

For the reasons outlined above, the Board does not consider that the package of measures represented by the Requisitioned Resolutions represents a solution to the clearly expressed wishes of the significant majority of Shareholders to see the Company make a substantial return of capital. The proposals put forward by the Requisitioned Resolutions would also see the Company continue with its current investment strategy under the management of Gabelli Funds, something which has been roundly rejected by the substantial majority of Shareholders.

Accordingly, for these reasons, the Board unanimously recommends that Shareholders vote AGAINST the Requisitioned Resolutions to be proposed at the General Meeting. As mentioned, above, the Board will be shortly presenting to Shareholders its own proposals for the future of the Company.

For further information please contact:

Maitland Administration Services Limited

Email: cosec@maitlandgroup.co.uk

Phone: +44 (0) 1245 398950

Peel Hunt LLP

Luke Simpson / Liz Yong

Telephone: +44 (0) 20 7418 8900