Aberforth Split Level Income Trust plc
Annual Report and Financial Statements
30 June 2022
Contents
Strategic Report
Investment Objective 1
Financial Highlights 1
Chairman’s Statement 2
I
nvestment Policy and Strategy 4
Principal Risks 5
Directors’ Duty to Promote the Success of the Company 6
Viability Statement 7
Key Performance Indicators 7
Hurdle Rates & Redemption Yields 7
Managers’ Report 8
Thirty Largest Investments 13
Investment Portfolio 14
Other Portfolio Information 16
Other Business Information 17
Governance Report
Board of Directors 18
Directors’ Report 19
Corporate Governance Report including Stewardship and Environmental, Social and Governance 23
Audit Committee Report 27
Directors’ Remuneration Policy 30
Directors’ Remuneration Report 31
Directors’ Responsibility Statement 33
Financial Report
Independent Auditor’s Report 34
Income Statement 40
Reconciliation of Movements in Shareholders’ Funds 41
Balance Sheet 42
Cash Flow Statement 43
Notes to the Financial Statements 44
Shareholder Information
General Information 52
Glossary 54
Corporate Information 56
Annual General Meeting
Notice of the Annual General Meeting 57
Notes to the Notice of the Annual General Meeting 58
Investor Disclosure Document
The EU Alternative Investment Fund Managers Directive (AIFMD) requires certain information to be made
available to investors prior to their investment in the shares of a company. The Company’s Investor Disclosure
Document is available to view at www.aberforth.co.uk and contains details of the Company’s investment
objective, policy and strategy together with leverage and risk policies.
Net Asset Ordinary Special
Value per Share Discount/ Dividends Dividends Ongoing
Share
2
Price (Premium)
1
per Share
2
per Share Charges
3
Gearing
3
30 June 2022 73.0p 64.2p 12.1% 4.30p 0.25p 1.2% 40.6%
30 June 2021
95.7p 87.2p 8.8% 3.05p – 1.2% 29.9%
30 June 2020 52.5p 47.3p 10.0% 4.22p – 1.3% 52.6%
Strategic Report Aberforth Split Level Income Trust plc 1
Strategic Report
Source: Aberforth Partners LLP
1
Alternative Performance Measure (refer to Glossary on page 54).
2
UK GAAP Measure (refer to Glossary on page 54).
3
Defined in the Glossary on page 55.
The valuation statistics above consisting of Redemption Yields and Final Cumulative Cover are projected, illustrative and do not represent profit forecasts. There is no
guarantee these returns will be achieved.
At inception an Ordinary Share had a NAV of 100p and a gearing
3
level of 25%.
At inception a ZDP Share had a NAV of 100p, a Projected Final Cumulative Cover
3
of 3.4x, and a Redemption Yield
3
of 3.5%.
Zero Dividend Preference Share (ZDP Share)
Financial Highlights
Total Return Performance
1
Ordinary Share
T
he Board is pleased to present the Strategic Report (pages 1 to 17), which incorporates the Chairman’s Statement and
Managers’ Report. It has been prepared by the Directors in accordance with Section 414 of the Companies Act 2006, as
amended.
Investment Objective
The investment objective of Aberforth Split Level Income Trust plc (ASLIT) is to provide Ordinary Shareholders with a high
level of income, with the potential for income and capital growth, and to provide Zero Dividend Preference Shareholders
with a pre-determined final capital entitlement of 127.25p on the planned winding-up date of 1 July 2024.
Net Asset Return Projected Final
Value Share Discount/ per Cumulative Redemption
per Share
2
Price (Premium)
1
Share
2
Cover
3
Yield
3
30 June 2022 118.6p 116.0p 2.2% 4.1p 3.0x 4.7%
30 June 2021 114.5p 114.0p 0.4% 4.0p 3.6x 3.7%
30 June 2020 110.5p 106.0p 4.0% 3.8p 2.3x 4.7%
Periods to 30 June Ordinary Share ZDP Share
2022 Total Assets
1
NAV
1
Share Price
1
NAV
1
Share Price
1
1 year -14.9% -20.7% -23.2% 3.6% 1.8%
Annualised
5 year and since inception
3
-0.7% -1.9% -4.1% 3.5% 3.0%
Cumulative
5 year and since inception
3
-3.5% -9.3% -19.1% 18.6% 16.0%
2 Strategic Report Aberforth Split Level Income Trust plc
Chairman’s Statement
Introduction
This fifth annual report of Aberforth Split Level Income Trust (“ASLIT” or “the Company”) is for the financial year to 30
June 2022.
These twelve months have been challenging and tragic on many fronts. The lingering influence of Covid-19, the brutal
war in Ukraine and economic conditions not witnessed since the 1970s would be notable in isolation, let alone all
occurring together.
It seems a distant memory, but the financial year started well, with economies re-opening from their Covid-19 stasis and
share prices reflecting a more positive outlook. However, towards ASLIT’s half year end, valuations came under pressure
from the rise of the Omicron variant, the continued challenge of well publicised supply chain issues and inflation that
was proving to be more persistent than transitory. The downward trend in share prices was further exacerbated by
Russia’s invasion of Ukraine in February, which gave renewed impetus to energy prices, and by further Covid-19
lockdowns in China. Both these issues, coupled with strong demand, disrupted the already stretched supply chains and
stoked even higher inflation. With central bankers apparently slow to appreciate the risks, they belatedly embarked on
what they promise will be a phase of rapid monetary tightening.
In the initial stages of this cycle of higher interest rates and persistent inflation, the value investment style espoused by
the Managers held up relatively well, while growth investment strategies, which had worked very well over the last
decade, struggled. However, concern about the cost of living and recession has intensified and has taken its toll on all
investment styles. This challenging backdrop has not been helpful for an investment trust with ASLIT’s capital structure
and investment policy.
Performance
Against this background, share prices fell in most stockmarkets around the world. The Numis Smaller Companies Index
(excluding Investment Companies) (“the Index” or “NSCI (XIC)”), which defines ASLIT’s opportunity base, generated a
total return of -17.2% over the twelve-month period. Larger companies in the UK were a notable exception to the trend
lower in share prices. The FTSE All-Share Index recorded a total return of +1.6%, supported by its significant exposure
to commodity producers and defensive companies.
ASLIT’s total assets total return, which measures its ungeared portfolio performance, was -14.9% during the year.
However, when geared by the Zero Dividend Preference (ZDP) Shares, the net asset value total return of the Ordinary
Shares was -20.7%, which reflects the return attributable to equity shareholders of -19.0p per Ordinary Share together
with the effect of the reinvestment of previously declared dividends.
As the capital value of the portfolio has declined, the projected cumulative cover of the ZDP shares has reduced to 3.0
times at 30 June 2022, compared to 3.6 times twelve months earlier.
Further detail on portfolio performance is provided in the Managers’ Report.
Earnings and Dividends
On a brighter note, the recovery in dividends from small UK quoted companies continued at a higher pace than previously
expected. ASLIT has seen more investee companies either resuming dividend payments or declaring higher dividends. In
addition, it has received special dividends from seven holdings. This positive experience is reflected in ASLIT’s revenue
return per Ordinary Share of 4.81p in the year to 30 June 2022, which is 66% higher than the 2.90p earned in the year to
30 June 2021. Special dividends from investee companies represent 0.51p per Ordinary Share of the 4.81p of revenue
generated for this financial year.
The revenue generated in the year to 30 June 2022 marks a bounce back from the pandemic lows in a remarkably short
space of time. It is testament to the cost and capital discipline exercised by investee companies’ boards during the
pandemic. Looking forward over the remaining two years of ASLIT’s planned life, the Managers’ dividend forecasts are
still encouraging and are supported by the investee companies’ strong balance sheets. However, the threat of economic
slowdown inevitably justifies some caution.
The Board is pleased to declare a second interim dividend of 2.79p per Ordinary Share for the year to 30 June 2022, which
represents an increase of 31% compared to the 2.13p in respect of the previous year. Together with the first interim
dividend of 1.51p paid on 8 March 2022, the total underlying ordinary dividend with respect to the year to 30 June 2022
is 4.30p per Ordinary Share, which represents all of the underlying (i.e. excluding special dividends) revenue return per
Ordinary Share in the year. The 4.30p compares with 3.05p in respect of the previous pandemic-affected year and with
4.22p in respect of the year prior to that.
Strategic Report Aberforth Split Level Income Trust plc 3
Chairman’s Statement
In addition, the Board is declaring a special dividend of 0.25p per Ordinary Share. This reflects the contribution from
special dividends to the positive income performance for the year to 30 June 2022.
A
fter accounting for the second interim dividend and the special dividend, retained revenue reserves will be 0.97p per
O
rdinary Share at 30 June 2022. These revenue reserves will be returned to Ordinary Shareholders as dividends by the
e
nd of ASLIT’s planned life in two years.
The second interim dividend of 2.79p and special dividend of 0.25p per Ordinary Share will be paid on 26 August 2022 to
Ordinary Shareholders on the register on 5 August 2022. The ex dividend date is 4 August 2022. The Company operates
a Dividend Reinvestment Plan. Details of the plan, including the Form of Election, are available from Aberforth Partners
LLP or on the website, www.aberforth.co.uk.
Stewardship
As part of its stewardship responsibilities, the Board regularly reviews the Managers’ approach to environmental, social
and governance issues, which is described on page 26. The Board endorses the Managers’ stewardship policy, which is
set out in their submission as a signatory to the UK Stewardship Code. This, together with examples relating to voting and
engagement with investee companies, can be found in the literature library of the Managers’ website at
www.aberforth.co.uk.
Annual General Meeting (“AGM”)
The AGM will be held at 14 Melville Street, Edinburgh EH3 7NS at 11.00 a.m. on 31 October 2022 and details of the
resolutions to be considered by Shareholders are set out in the Notice of the Meeting on page 57. Shareholders are
encouraged to submit their votes by proxy in advance of the meeting in case restrictions related to the Covid-19
pandemic apply and prevent shareholders from attending in person. An update on performance and the portfolio will
be available on the Managers’ website following the meeting.
Outlook
The current market conditions are more challenging than most people have experienced before. The de-rating of
financial assets has been sharp. However, it is often darkest before the dawn and valuations, especially those in ASLIT’s
opportunity base, look attractive from a long-term perspective and should generate good investment returns over time.
These low valuations are being recognised by corporate and financial buyers, which is evident in the higher frequency of
M&A deals and is benefiting ASLIT, as described in the Managers’ Report.
In such trying times for economies and financial markets, it is helpful to focus on the attributes of the investee
companies, which, after all, will be the main influence on investment returns over time. The boards of these companies
have coped well with the series of tests set them so far. Confidence in their resilience is enhanced by the health of their
balance sheets at the current time. As described in the Managers’ Report, strong balance sheets should enable the
holdings to ride out an economic slowdown, to invest in sunnier times and to support ASLIT’s income generation from
what is already a high base yield.
The pandemic and the war in Ukraine have ensured that ASLIT’s short life thus far has been rather more eventful than
we would have wished. It is frustrating that the remaining two years of the planned life are afflicted by economic
uncertainty. The Board is alive to the risk that the significant upside inherent in the qualities and valuations of the
investee companies might not be recognised fully within this timeframe. We are mindful of our commitment to examine
means by which Shareholders will have the option either to realise or to continue their investments. In due course, the
Board will review future options with the Managers and will keep Shareholders updated over the next two years.
Finally, my fellow directors and I welcome the views of shareholders and are available should you wish to discuss these
with us. My email address is noted below. Thank you for your support.
Angus Gordon Lennox
Chairman
27 July 2022
Angus.GordonLennox@aberforth.co.uk
Investment Policy
The Company aims to achieve its objective by investing in a diversified portfolio of securities issued by small UK quoted
c
ompanies. Small UK quoted companies are those having a market capitalisation, at time of purchase, equal to or lower than
the largest company in the bottom 10%, by market capitalisation, of the London Stock Exchange’s Main Market for listed
securities or companies in the Numis Smaller Companies Index (excluding investment companies) (“NSCI (XIC)”). As at 1 January
2022 (the date of the last annual NSCI (XIC) rebalancing), the NSCI (XIC) included 337 companies, with an aggregate market
capitalisation of £156 billion. Its upper market capitalisation limit was £1.6 billion, although this limit changes owing to
m
ovements in the stockmarket. If any holding no longer satisfies this definition of a small UK quoted company its securities
become candidates for sale unless the Managers determine that the Company’s investment objective would be better served
by their retention. Notwithstanding the above, the Managers would not normally expect more than 10% of the value of the
Company’s portfolio to be invested in a combination of: (i) securities issued by small UK quoted companies that are neither
securities with equity rights, nor securities convertible to such; and/or (ii) holdings in companies that satisfied the definition of
a small UK quoted company at the time of purchase but no longer do so and that are not categorised as candidates for sale.
The Company may, at the time of purchase, invest up to 15% of its assets in securities issued by any one company although, in
practice, each exposure will typically be substantially less and, at market value, will generally represent less than 5% of the
portfolio on an on-going basis. The Board expects that this approach will normally result in a portfolio comprising holdings in
between 50 and 100 companies. The Company will not invest in securities issued by other UK listed closed-ended investment
funds except where they are eligible to be included in the NSCI (XIC). In any event, the Company will invest no more than 15%
of total assets in other listed closed-ended investment funds.
Investment will only be made in companies with securities traded on the Main Market or, in limited circumstances, in AIM listed
investments. AIM listed investments will only be held in the Company’s portfolio if they have given a formal commitment to
move to the Main Market, or in the situation where an existing investee company has moved its listing from the Main Market
to AIM.
The Company will aim to be near to fully invested at all times. There will normally be no attempt to engage in market timing by
holding high levels of liquidity though due consideration will be given to liquidity requirements as the Company nears the end
of its planned life. The Company does not intend to utilise any bank borrowings other than short term overdraft or working
capital facilities. The Directors expect that, in normal market conditions, bank borrowings will not exceed 2.5% of Total Assets.
The Articles limit the level of such bank borrowings to a maximum of 5% of Total Assets at the time of drawdown. The Company
has a policy to maintain total gearing, including the ZDP Shares, below the total of: (i) the accrued capital entitlement of the ZDP
Shares from time to time; plus (ii) 5% of its Total Assets at the time of drawdown. The Directors have delegated responsibility
to the Managers for the operation of the Company’s overdraft and working capital facilities within the above parameters.
Subject to the prior approval of the Board, the Managers may use derivative instruments, such as financial futures, exchange
traded funds, and options, for the purpose of efficient portfolio management. The Board’s current expectation is that
derivatives will rarely be used, if at all.
Any material changes to the Company’s investment objective and policy will be subject to Shareholder approval at a general
meeting. In the event of a breach of the Company’s investment policy, the Directors will announce through a Regulatory
Information Service the actions that will be taken to rectify the breach.
Investment Strategy
The Managers adhere to a value investment philosophy. While there can be extended periods when the value investment style
is out of favour, there is compelling evidence that the value approach within small UK quoted companies has resulted in superior
returns to those of the NSCI (XIC) as a whole over the long term.
In valuing businesses, the Managers place emphasis on the ratio of total enterprise value (which is the market capitalisation of
the small UK quoted company adjusted for the average debt or cash level of such company) to the earnings before interest, tax
and amortisation that the company generates (in short, the EV/EBITA ratio). The Managers also utilise other valuation metrics,
recognising that flexibility is required when assessing businesses in different industries and that buyers of these businesses may
include other corporates as well as stockmarket investors. As a result of the value investment approach, the average valuation
metrics of the Company’s holdings will usually be more modest than those of the NSCI (XIC), the investment universe.
The Managers select companies for the Company’s portfolio on the basis of fundamental or “bottom-up” analysis. The “bottom-
up” analysis includes the Managers scrutinising prospective investee companies’ financial statements and assessing their
market positions within their sectors. An important part of the process is regular engagement with the board members and
management of prospective and existing investments. In addition, a “top down” evaluation is undertaken regularly.
Opportunities are often found in businesses where short-term trading, broad macro economic concerns or the vagaries of
stockmarket sentiment have caused valuations to fall to levels at which the Managers consider significant upside to be available.
The closing of valuation gaps usually requires the passage of time but can be expedited by a change of strategy, a change of
management or takeover.
In seeking to achieve the investment objective, the Managers believe that the portfolio must be adequately differentiated from
the NSCI (XIC), the investment universe. Therefore, within the diversification parameters described in the Company’s
investment policy, the Managers will regularly review the level of differentiation, with the aim of achieving a meaningful active
weight for each holding within the Company’s portfolio. Holdings are expected to be sold when their valuations reach the
targets determined by the Managers.
Investment Policy and Strategy
4 Strategic Report Aberforth Split Level Income Trust plc
Strategic Report Aberforth Split Level Income Trust plc 5
Principal Risks
The Board carefully considers the risks faced by the Company and seeks to manage these risks through continual review,
e
valuation, mitigating controls and action as necessary. A risk matrix for the Company is maintained. It groups risks into the
following categories: portfolio management; investor relations; regulatory and legal; and financial reporting. Further
information regarding the Board’s governance oversight of risk, its review process and the context for risks can be found in the
Corporate Governance Report. The Audit Committee Report (pages 27 to 29) details matters considered and actions taken on
internal controls and risks during the year. The Company outsources all the main operational activities to recognised, well-
e
stablished firms and the Board receives internal control reports from these firms, where available, to review the effectiveness
of their control frameworks. Since the start of the Covid-19 pandemic, these firms have deployed flexible operational practices,
including staff working remotely, to ensure continued business service.
Emerging risks are those that could have a future impact on the Company. The Board regularly reviews them and, during the
year, it added to the risk matrix potential economic risks arising from inflation and supply chain constraints. This risk was
grouped under the principal risk category of market risk, as described below. The Board regularly monitors how the Managers
integrate such risks into the investment decision making.
Principal risks are those risks derived from the matrix that have the highest risk ratings. They tend to be relatively consistent
from year to year given the nature of the Company and its business. On a forward looking basis, the principal risks faced by the
Company, together with the approach taken by the Board towards them, are summarised below. To indicate the level of
monitoring required during this year, each principal risk has been categorised as either dynamic risk, requiring detailed
monitoring as it can change regularly, or stable risk.
Investment policy/performance risk
The Company’s investment policy and strategy expose the portfolio to share price movements. The performance of the
investment portfolio will be influenced by stock selection, liquidity and market risk (see (ii) below and Note 19 for further
details). Investment in small companies is generally perceived to carry more risk than investment in large companies. While
this is reasonable when comparing individual companies, it is much less so when comparing the risks inherent in diversified
portfolios of small and large companies. The Board's aim is to achieve the investment objective by ensuring the investment
portfolio is managed in accordance with the policy and strategy. The Board has outsourced portfolio management to
experienced investment managers with a clearly defined investment philosophy and investment process. The Board receives
regular and detailed reports on investment performance including detailed portfolio and risk profile analysis. Senior
representatives of Aberforth Partners attend each Board meeting. This remains a dynamic risk, with detailed consideration
during the year. The Managers’ Report contains information on portfolio investment performance and risk.
Market risk
Investment performance is impacted by a number of market risk factors, including uncertainty about future price
movements of investments. The Board delegates consideration of market risk to the Managers to be carried out as part of
the investment process. The Managers regularly assess the exposure to market risk when making investment decisions and
the Board monitors the results via the Managers’reporting. The Board and Managers closely monitor economic and political
developments and, in particular, are mindful of the continuing uncertainty following the departure of the UK from the EU
and the impacts of the Covid-19 pandemic and government responses. This remained a dynamic risk during the year, in which
the Managers reported on market risks including inflation and supply-chain pressures and other geopolitical issues referred
to in the Managers’ Report. Some market risks have become more severe during the reporting period and scrutiny of these
by the Board and Managers has increased accordingly.
Structural conflicts of interest
The different rights and expectations of the holders of Ordinary Shares and the holders of ZDP Shares may give rise to
conflicts of interest between them. While the Company’s investment objective and policy seek to strike a balance between
the interests of both classes of Shareholder, there can be no guarantee that such a balance will be achieved and maintained
during the life of the Company. This is a stable risk.
Significant fall in investment income
A significant fall in investment income could lead to the inability to provide a high level of income and income growth. The
Board receives regular and detailed reports from the Managers on income performance together with income forecasts. The
Board and Managers have been monitoring the impact of the pandemic on investment income and it is considered a dynamic
risk.
Loss of key investment personnel
The Board believes that a risk exists in the loss of key investment personnel at the Managers. The Board recognises that the
collegiate approach employed by the Managers mitigates this risk. Board members are in regular contact with the partners
and staff of the Managers and monitor personnel changes. This is a stable risk.
Regulatory risk
Breach of regulatory rules could lead to suspension of the Company’s share price listings, financial penalties or a qualified
audit report. Breach of Section 1158 of the Corporation Tax Act 2010 could lead to the Company losing investment trust
status and, as a consequence, any capital gains would then be subject to capital gains tax. The Board reviews regular reports
from the Secretaries to monitor compliance with regulations. This is a stable risk.
6 Strategic Report Aberforth Split Level Income Trust plc
The Directors have a duty to promote the success of the Company for the benefit of Shareholders as a whole and to
describe how they have done so having regard to matters set out in section 172(1) of the Companies Act 2006. In fulfilling
this duty, the Directors consider the likely consequences of their actions over the Company’s planned life on
Shareholders and on other stakeholders.
Stakeholders – As an externally managed investment company, the Company does not have employees. Its main
stakeholders therefore comprise its Shareholders, who are also its customers, and a small number of suppliers. These
suppliers are external firms engaged by the Board to provide, amongst others, investment management, secretarial,
depositary, custodial and banking services. The principal relationship is with the Managers and page 19 contains further
information. Their investment management services are fundamental to the success of the Company through the pursuit
of the investment objective. The Board regularly monitors the Company’s investment performance in relation to its
objective and also to its investment policy and strategy. It seeks to maintain a constructive working relationship with the
Managers and on an annual basis reviews their continuing appointment to ensure it is in the best interests of
Shareholders. The Board receives and reviews detailed presentations and reports from the Managers and other suppliers
to enable the Directors to exercise effective oversight of the Company’s activities. Further information on the Board’s
review process is set out in the Corporate Governance Report. The Managers seek to maintain constructive relationships
with other suppliers on behalf of the Company, typically through regular communications, provision of relevant
information and update meetings.
Shareholder communications and engagement – To act fairly as between the members of the Company, the Board seeks
to strike a balance between the interests of Ordinary Shareholders and ZDP Shareholders, undertaking a level of risk that
is consistent with the Company’s investment policy and investment objective. The Board acts in a manner that it
considers fair, reasonable and equitable to both classes of Shareholder, having regard to the entitlements of each class
of Shares under the Company’s Articles of Association. To help the Board in its aim to act fairly as between the
Company’s members, it encourages communications with all Shareholders. The Annual and Interim reports are issued to
Shareholders and are available on the Managers’ website together with other relevant information including monthly
factsheets. The Managers offer to meet the larger Shareholders twice a year to provide detailed reports on the progress
of the Company and to receive feedback, which is provided to and considered by the Board. Directors are also available
to meet with Shareholders during the year and, in normal circumstances, at the AGM. The Board decides on dividends
payable to Ordinary Shareholders each year in accordance with the Company’s dividend policy, based on the income
received from the Company’s investment portfolio.
Board decisions and planned life – The Board’s decisions are focused on the period of the Company’s planned life lasting
until 1 July 2024. However, before this date, the Board will examine means whereby holders of Ordinary Shares may
effectively continue their investment, while allowing the ZDP Shareholders to realise their investment.
Corporate Governance – As described in more detail within the Corporate Governance Report, the Board is committed
to maintaining and demonstrating high standards of corporate governance in relation to the Company’s business
conduct.
Stewardship matters – Many investment cases are influenced by environmental, social and governance (ESG) matters,
particularly as the increased profile of such issues affects the stockmarket’s valuations of companies. The successful
design and implementation of environmental and social policies are the responsibility of a company’s board and
governance regime. Whilst the Managers do not exclude investments from the portfolio based on ESG matters alone,
and a broad range of factors is used for evaluation, ESG considerations are an important component of the investment
case assessment. Where ESG matters impinge upon the investment case, the Managers engage with investee companies
to encourage the issues to be addressed and improved. The Managers are well placed to undertake this activity, since
engagement has always been a fully integrated element of their investment process. The Managers are signatories to
the UK Stewardship Code highlighting the engagement and voting activity undertaken. Their investment team is well
resourced and, collectively, has a deep knowledge and understanding of small UK quoted companies, derived from many
years of interaction and fundamental research. The Managers’ long history of investing in small UK quoted companies
and their willingness to take significant stakes in investee companies can also be helpful in their engagement with
investee company boards. Further detail on the Managers’ stewardship policy, and supporting ESG documentation, is
available within the 'About Aberforth' section of the Managers’ website, at www.aberforth.co.uk.
Summary – In summary, the Board’s primary focus in promoting the success of the Company for the benefit of its
Shareholders as a whole is to direct the Company with a view to achieving the investment objective in a manner
consistent with its stated investment policy and strategy. In doing so, and as described above, it has due regard to the
impact of its actions on other stakeholders and the wider community.
Directors’ Duty to Promote the Success of the Company
Strategic Report Aberforth Split Level Income Trust plc 7
Key Performance Indicators
The Board assesses the Company’s performance in meeting its Investment Objective as set out on page 1 against the
following key performance indicators.
• Total Assets total return
• Ordinary Share Net Asset Value total return
• Ordinary Share Net Asset Value
• Ordinary Share Price discount
• Dividend per Ordinary Share
• ZDP Share Net Asset Value
• ZDP Share Projected Final Cumulative Cover
• Hurdle Rates
A record of these measures is provided within Financial Highlights (page 1) and the Hurdle Rates and Redemption Yields
below. Further analysis is provided within the Chairman’s Statement (pages 2 to 3) and the Managers’ Report (pages 8
to 12). The Managers’ Report has been prepared by Aberforth Partners LLP and the Board endorses the analysis provided
in respect of the key performance indicators. A glossary of Alternative Performance Measures can be found on page 54.
Hurdle Rates & Redemption Yields
1
Ordinary Shares ZDP Shares
Annualised Hurdle Rates to return
2
Annualised Hurdle Rates to return
At 30 June 100p Share Price Zero Value 127.25p Zero Value
2022 16.2% -0.7% -42.6% -42.6% -94.8%
2021 3.4% -0.1% -35.5% -35.5% -87.0%
Inception
2
1.5% n/a -17.0% -17.0% -57.2%
Hurdle Rates
2
Redemption Yields
2
as at 30 June 2022 (Ordinary Shares)
Annualised Ordinary Share Redemption Yields
2
Dividend Growth (per annum)
Capital Growth (per annum) -20.0% -10.0% +0.0% +10.0% +20.0% Terminal NAV
1,2
-20.0% -26.0% -24.7% -23.1% -21.4% -19.5% 30.4p
-10.0% -9.3% -8.1% -6.7% -5.2% -3.4% 47.0p
+0.0% 6.1% 7.3% 8.6% 10.1% 11.7% 65.6p
+10.0% 20.9% 22.0% 23.3% 24.7% 26.3% 86.2p
+20.0% 35.2% 36.3% 37.5% 38.9% 40.4% 108.7p
1
The valuation statistics in the tables above are projected, illustrative and do not represent profit forecasts. There is no guarantee these returns will be achieved.
2
Defined in the Glossary on page 55.
Viability Statement
Shareholders will be required to vote on proposals from the Directors, relating to the Company’s planned life, on or
before 1 July 2024. The nature of these proposals and the outcome of the vote represent material uncertainties in the
context of assessing the prospects of the Company beyond 1 July 2024. Notwithstanding the outcome of the vote the
Directors have assessed the viability of the Company over the five year period to June 2027. The assessment took
account of the Company’s position, its investment strategy and the potential impact of the relevant principal risks
described on page 5. Based on this assessment, the Directors have a reasonable expectation that the Company will meet
its liabilities as they fall due and, subject to the outcome of the vote on the Company’s planned life, will be able to
continue in operation over the five year period to June 2027.
In making this assumption, the Directors took comfort from the results of a series of stress tests that considered the
impact of a number of severe market downturn scenarios on the Company's financial position and, in particular, its
ability to settle projected liabilities of the Company as they fall due. Portfolio liquidity modelling was conducted to
identify values that could be liquidated within different time periods. The Company invests in companies listed and
traded on the London Stock Exchange. These shares are actively traded and, whilst less liquid than larger quoted
companies, the portfolio is well diversified by both number of holdings and industry sector. The Directors determined
that a five year period to June 2027 is an appropriate period for which to provide this statement given the Company’s
investment objective, the simplicity of the business model, the resilience demonstrated by the stress testing and the
relatively low working capital requirements.
8 Strategic Report Aberforth Split Level Income Trust plc
Managers’ Report
Introduction
Stockmarket performance deteriorated through ASLIT’s last financial year. The modest positive returns of the first half gave
w
ay to bear market conditions in the second half, as macro-economic and geopolitical concerns overtook the vaccine rally.
ASLIT’s total assets total return – essentially its ungeared portfolio performance – was -14.9% over the twelve months to 30
June 2022. This was substantially below the rate at which the ZDP Shares’ entitlement increases and so the gearing from
the ZDP Shares took the net asset value total return of the Ordinary Shares to -20.7%. The ZDP Shares’ final cumulative
cover fell from 3.6x to 3.0x over the twelve months.
The principal influence on these negative returns was the general share price weakness among the companies in ASLIT’s
investment universe. The total return of the NSCI (XIC) over the twelve months was -17.2%. ASLIT therefore proved more
resilient at the portfolio level, the reasons for which are explored later in this report. However, the strongest performers
in the UK stockmarket over the period were the large companies. The FTSE All-Share managed to rise over the twelve
months, which set it apart from most other stockmarkets around the world. Its 1.6% total return was helped by its high
exposure to commodity producers and its low exposure to technology – characteristics that had previously proved distinctly
unhelpful for several years but that were well suited to the changing economic conditions over the past twelve months.
The negative shift within stockmarkets was due to a confluence of macro-economic challenges, several of which have been
in evidence for some time.
• The newest challenge was Russia’s invasion of Ukraine. Beyond the suffering of the Ukrainian people, the immediate
impact was to raise risk aversion as financial markets contemplated a war in Europe involving a nuclear power. The
economic effects stem from Ukraine’s industrial and agricultural importance, which intensifies pre-existing supply chains
constraints and inflationary pressures. Over the longer term, the war and the unintended consequences of the sanctions
deployed against Russia may accentuate pre-existing geopolitical tensions between the world’s major economic regions.
This threatens to undermine the benefits of globalisation, which has been a disinflationary force over recent decades.
• The oil price has rebounded sharply from its mid pandemic low point. Recovering demand has been mainly responsible,
but the supply-side has also been influential as a result of years of under-investment in hydrocarbon exploration. The
supply pressures have been exacerbated by the Ukrainian war, as Russian energy sales to Europe are brought into
question. The consequent jump in oil and gas prices has severely aggravated the cost-of-living pressures that are being
felt in the UK and elsewhere. Ultimately, high energy prices are an effective tax on economic activity and complicate the
decision-making of central banks as they raise interest rates to address inflation. A longer term consequence of the war
is likely to be a reprioritisation of energy security. Notwithstanding arbitrary windfall taxes on oil companies, this may
involve renewed investment in hydrocarbon exploration to ease the transition to alternative energy sources.
• COVID is still with us. While widespread and efficient vaccine campaigns have allowed western economies to live with
the virus, that is not the case in China. Important manufacturing centres, such as Shanghai, were subject to strict
lockdowns through much of the first half of calendar 2022. This has again worsened the supply chain difficulties and
inflationary pressures that have plagued economies since demand started to recover in calendar 2021.
• Inflation has proved considerably more persistent than most had expected. Caught out, central banks are now using
their most aggressive rhetoric in decades. Their words, though, have not yet translated into meaningful action: interest
rates are now rising in the UK, US and EU, but they remain deeply negative in real inflation-adjusted terms. The same is
true for government bond yields, despite them more than doubling over the twelve months to 30 June 2022 to 2.2% in
the UK and 3.0% in the US. Perhaps bond markets are confident that the presently severe inflationary pressures will
abate or that the relatively high levels of debt in western economies will require smaller interest rates rises to affect
activity. However, the effect of wage settlements on inflation rates is yet to be determined. Moreover, the historical
record for central banks’ commitment to dealing with inflation is mixed, especially when they are under political pressure
to achieve the so-called “soft landing” for the economy.
The combination of these challenges has been to increase the risk of a recession later this year or in early 2023. Since most
companies within the NSCI (XIC) and the portfolio are sensitive to the economic cycle, the impact of a potential recession
on corporate profitability explains much of the pronounced weakness in share prices experienced in the first half of calendar
2022.
Stockmarkets have also had to contend with pressure on the valuation ratios ascribed to company profits. The war,
tightening monetary policy and rising bond yields have served to shorten investment horizons. In other words, investors
are now less comfortable to ascribe high valuation ratios to profits or, in the case of loss-making companies, to their sales.
The valuation stretch within equity markets – that is, the gap between the highest and the lowest PE ratios – has contracted
markedly. This has particularly penalised the share prices of companies that previously enjoyed higher PE ratios, typically
the growth stocks, and other long duration assets with little near term cash flow. Consequently, the value style has enjoyed
a period of good relative performance. This valuation effect has been of benefit to ASLIT and, by mitigating the corporate
profitability effect previously described, has helped mitigate the decline experienced by the NSCI (XIC).
Analysis of performance
The following paragraphs set out the principal influences on ASLIT’s ungeared portfolio performance over the twelve
months to 30 June 2022. In that period, the total asset total return was -14.9%, while that of the opportunity base
represented by the NSCI (XIC) was -17.2%.
Strategic Report Aberforth Split Level Income Trust plc 9
Managers’ Report
Style
It was a relatively good period for the Managers’ value style. Shorter investment horizons, higher bond yields and a narrower
range of PE ratios within equity markets worked to the detriment of longer duration growth stocks and to the relative benefit
o
f value stocks. The London Business School produces style data for the NSCI (XIC), using price to book ratios to categorise
stocks as growth or value. This analysis is a useful indication of the pervading style climate, though the Managers’ investment
process takes into account numerous other fundamental factors and utilises a broader range of valuation metrics, including
EV/EBITA, free cash flow and dividend yields. For the twelve months to 30 June 2022, the London Business School calculates
that its value cohort out-performed its growth cohort by 11.6%. This reverses some of the relative gains enjoyed by growth
s
tocks in recent years, particularly in the midst of the pandemic, and suggests that investment style helped ASLIT’s relative
returns in the past financial year.
Size
The NSCI (XIC) is defined as the bottom 10% by value of the entire UK stockmarket. This means that FTSE 250 stocks represent
around 63% of its total value. For the purpose of explaining the effect of size on ASLIT’s performance relative to the NSCI (XIC),
it is useful to compare the fortunes of the FTSE 250, which is indicative of the index’s larger constituents, with those of the
FTSE SmallCap, which represents its smaller constituents. In the twelve months to 30 June 2022, the FTSE SmallCap (XIC) out-
performed the FTSE 250 (XIC) by 1.5% to extend what has been a remarkable run of performance for the NSCI (XIC)’s smaller
constituents since the vaccine rally started in late 2020. Out-performance by these “smaller small” companies benefits ASLIT’s
returns since the portfolio has a relatively high exposure to them. This positioning reflects the considerably lower stockmarket
valuations accorded to these companies over the past several years, despite comparable growth prospects and returns on
equity. It is pleasing that some of the valuation disparity has been addressed by recent share price performance.
Geography
Where companies make their sales and profits has been an important influence on share prices in recent years, owing to the
effects of the EU referendum in 2016 and then the pandemic. The weakness of sterling since the referendum reflected a
reluctance of international investors to engage with the UK and, through currency translation, benefited the profitability of
those companies that generate revenue outside the UK. The share prices of domestic businesses lagged those of their
overseas counterparts, which gave ASLIT the opportunity to increase its exposure to them. Through 2021 and so far in 2022,
the fortunes of the two groups shifted. The overseas facing companies have more quickly felt the supply chain problems
that followed the pandemic, though cost-of-living pressures were starting to catch up with domestics towards the end of the
period. In the twelve months to 30 June 2022, the share prices of the NSCI (XIC)’s domestically oriented businesses out-
performed overseas facing businesses by 8%. This was advantageous to ASLIT, since at the start of the financial year the
portfolio had a weighting of 58% in the domestics, higher than the NSCI (XIC)’s 52%. A note of caution is appropriate. Recent
months have seen the debate intensify about Northern Ireland’s status within the Brexit agreement. This threatens to
complicate again the UK’s trading relationship with the EU, which has contributed to renewed pressure on sterling.
Geography is therefore likely to remain a noteworthy influence on ASLIT’s performance in coming months.
Balance sheets
The finances of small UK quoted companies are in remarkably good shape. This primarily reflects the efforts of management
teams to conserve cash during the pandemic and, subsequently, the benefits of the recovery in demand. Playing a less
significant role were government support schemes amid lockdowns and equity issuance. The upshot is that small companies’
balance sheets are as strong as they have been since 2014. The significance of that year is that companies prioritised de-
leveraging for several years after the shock of the global financial crisis.
The table below sets out the weight of the portfolio and the tracked universe in four leverage categories. Using the
Managers’ estimates, it also shows those weights at the end of 2022. The tracked universe is those companies in the NSCI
(XIC) that the Managers follow closely and represents 98% by value of the NSCI (XIC).
The table suggests that, by the end of 2022, around 46% of the portfolio will be exposed to companies with net cash on
the balance sheet and that 88% will be exposed to companies with leverage ratios (net debt to EBITDA) below 2x. This
unusually robust position has been influenced by the Managers’ investment process. Through the vaccine recovery
period, the stockmarket has been more focused on sales and profit growth and less interested in balance sheets. This has
meant that balance sheet strength has been under-valued, which has allowed portfolio capital to rotate into companies
that display it. Given the uncertain economic outlook, exposure to strong balance sheets feels appropriate, but in due
course companies will have to articulate how they plan to utilise their resources. Organic investment to support the
progress of the business should be the priority. Thereafter, acquisitions may make sense, if their risk-adjusted returns
compare favourably with lower risk alternatives, such as returning surplus cash through a special dividend accompanied
by a pro rata share consolidation. Strong balance sheets can reveal much about boards’ ability to allocate capital, but their
value is clear amid economic uncertainty such as today’s.
Net debt/EBITDA Net debt/EBITDA
Weight in companies with: Net cash < 2x > 2x Others*
ASLIT: 2022 46% 42% 9% 4%
Tracked universe 2022 37% 32% 25% 6%
*Includes loss-makers and lenders
Dividends
The present strength of balance sheets is helping the recovery in dividends paid by UK companies. Within the NSCI (XIC),
dividends fell by 52% in real terms in 2020 before rebounding by 70% in 2021. The current year will see further progress,
with dividends for the index as a whole likely to return close to pre-pandemic levels. The portfolio is benefiting from this
f
avourable background as the table below demonstrates. It categorises the 66 holdings at 30 June 2022 by their most
recent dividend action.
Nil payer Cutter Unchanged payer Increased payer Returner Other*
85933 10 1
*Other denotes companies paying dividends for the first time
As the dividend recovery continues, ASLIT enjoyed a strong income performance in the twelve months to 30 June 2022.
Within the table, the important categories are Nil Payers and Returners. Numerous companies passed dividends amid
2020’s lockdowns. However, many of these Nil Payers have restarted dividend payments and are now classified as
Returners. It is expected that the number of Nil Payers will decrease further over the next 18 months, which should boost
ASLIT’s investment income. In due course, the number of Returners should also subside as companies exit the recovery
phase and their distributions to shareholders are determined by normal dividend policies. In addition to the strong
recovery in underlying dividends, ASLIT’s investment income in the year to 30 June 2022 was enhanced by seven special
dividends paid by investee companies.
Corporate Activity
Overseas interest in British assets declined in the wake of 2016’s EU referendum. Sterling devalued, M&A activity within
the NSCI (XIC) collapsed, and UK stockmarket valuations relative to the rest of the world fell to multi-decade lows. The
clarity that should have emerged from the UK’s exit agreement with the EU was quickly overwhelmed by the pandemic,
but signs developed last year of a renewed appetite on the part of overseas companies and investors to take advantage
of low UK valuations. M&A activity targeting constituents of the NSCI (XIC) rose sharply, with 19 companies acquired in
calendar 2021. Despite a reduction globally in the value of M&A in 2022, the uptrend has continued among small UK
quoted companies: 12 members of the 2022 vintage of the NSCI (XIC) received bids in the six months to 30 June 2022. This
would imply a large increase in activity for the full year, though the recent jitteriness among equities is also evident in debt
markets and may complicate the funding of deals through the second half of calendar 2022. The acquirers during the first
half were evenly split between corporates and private equity, and also between UK and overseas. Of the 12 companies,
the portfolio held four and so M&A provided a useful fillip to ASLIT’s investment performance.
For a value investor, M&A can often be the catalyst for valuation realisation and the vindication of an investment case.
However, discipline is required, particularly in an equity market such as the UK’s where valuations have been depressed
for some time. The gaps between share prices and the true worth of many small companies are substantial, so the
customary 30% or so premium for control offered by an acquirer may simply be inadequate. Conscious of this risk, the
Managers encourage the boards of the investee companies to consult early in a potential bid process and are prepared to
back boards in rejecting undervalued offers, even though this might mean forgoing a boost to short term performance.
Portfolio turnover
Over the twelve months to 30 June 2022, annualised portfolio turnover – defined as the lower of purchases and sales
divided by average portfolio value – was 18%. This was lower than the previous year’s rate of 20%. The reduction is
influenced by the weaker equity market conditions, which tend to increase the upsides to the Managers’ target prices for
each holding. All else equal, there was less incentive to reduce positions and circulate capital as part of what the Managers
term the “value roll”.
Active share
Active share is a measure of how different a portfolio is from an index. It is calculated as half of the sum of the absolute
differences between each stock’s weighting in an index and its weighting in the portfolio. The higher a portfolio’s active
share, the higher its chance of either out or under-performing the index. At 30 June 2022, the portfolio’s active share
was 75% relative to the NSCI (XIC), which was above the Managers’ target ratio of at least 70%.
Valuations
10 Strategic Report Aberforth Split Level Income Trust plc
Managers’ Report
30 June 2022 30 June 2021
Portfolio Characteristics ASLIT NSCI (XIC) ASLIT NSCI (XIC)
Number of companies 66 323 69 324
Weighted average market capitalisation £622m £795m £761m £996m
Price earnings (PE) ratio (historical) 8.3x 9.8x 15.3x 17.4x
Dividend yield (historical) 4.5% 3.1% 2.5% 1.7%
Dividend cover 2.7x 3.3x 2.6x 3.4x
Strategic Report Aberforth Split Level Income Trust plc 11
Managers’ Report
Over ASLIT’s financial year, the historical valuations of small companies fell as share prices declined and as the recovery
from the pandemic increased trailing profits. The PE of the NSCI (XIC) dropped from 17.4x at 30 June 2021 to the 9.8x,
shown in the table above. Meanwhile, the average PE of ASLIT’s portfolio fell from 15.3x to 8.3x. At 8.3x, the portfolio
is more than one standard deviation below the 11.5x long term average PE of Aberforth’s longest running portfolio. This
h
as happened on three previous occasions throughout that portfolio’s 31 year history: in the early 1990s, amid the global
financial crisis, and during the pandemic in 2020. Each episode was associated with a UK recession. Clearly, the threat
of a demand downturn, spurred by high energy prices and tighter monetary policy, is preoccupying equity investors at
present. The table below is intended to give a feel for how much the risk of a potential recession may already be
reflected in valuations.
ASLIT’s historical PE at 30 June 2022 was 28% below the average for the long running Aberforth portfolio of 11.5x.
Leaving the peculiarities of the pandemic recession aside, other downturns have been associated with a reduction in
small company earnings of around 30%. This would imply a forward PE multiple on what might be trough earnings of
just over 12x, which would be broadly in line with the long run average PE. Taking a medium term view, this might
suggest that much of the risk is already baked into share prices, especially since during recovery phases the stockmarket
is prepared to take share prices to high multiples of trailing trough earnings. In practice, the stockmarket is rarely so
poised as to take the medium term view. The reality of a recession, together with the accompanying profit warnings
from companies, would likely elicit further near term weakness in share prices. However, it is clear that the stockmarket
is doing its job – it is much closer to reflecting the risk of recession than are today’s profit estimates for companies and,
in a similar vein, it will start to recover well before an upturn in profits.
The following table shows forward valuations using EV/EBITA, which is the metric that the Managers use most often
when valuing companies. EV/EBITA is ratio of enterprise value to earnings before interest, tax and amortisation. Ratios
are set out for the portfolio, the tracked universe and certain subdivisions of the tracked universe. The profit estimates
underlying the ratios are made by the Managers. An important influence on shaping estimates is engagement with
management teams. Recent discussions suggest that many companies retain full order books and are not yet
experiencing pressure on demand. These estimates do not therefore fully reflect a recession scenario
.
Number
EV/EBITA of stocks 2021 2022 2023 2024
ASLIT 66 7.5x 6.7x 6.2x 5.1x
Tracked Universe 235 10.3x 8.8x 7.6x 6.2x
Growth stocks 44 14.6x 14.1x 12.3x 9.1x
The rump 191 9.6x 8.0x 6.9x 5.7x
Stocks <£600m market cap. 159 8.4x 6.8x 6.6x 5.7x
Stocks >£600m market cap. 76 11.8x 10.4x 8.4x 6.5x
A notable feature of the table is ASLIT’s relatively low valuation, compared with those of both the tracked universe of
small companies and the growth stocks, despite their greater share price declines in 2022. Furthermore, the smaller
small companies, represented by stocks with market capitalisations below £600m, retain a sizeable discount to the larger
small caps, despite superior share price performance this year. This valuation disparity explains why ASLIT retains a
higher exposure to smaller small companies. Finally, it is worth comparing the 2022 multiples on display in the table with
the average EV/EBITA multiple of 15x paid in the 12 M&A transactions announced this year. The gap highlights the deep
value that the UK stockmarket continues to offer.
Outlook & Conclusion
From the top-down perspective, the challenges to equity valuations are clear. The war in Ukraine rumbles on and helps
keep the oil price high. In turn, this adds to the inflationary pressure that emerged from the economic dislocation of the
pandemic, and increases the cost of living, which threatens to tip economies into recession. Were that not enough, we
must trust the judgement of central banks, which have been slow to respond thus far and now seem to be making up for
lost time with their aggressive rhetoric. The gap between near double digit rates of inflation and low single digit
government bond yields implies that the central banks are in control, but history would underline the risk of a less benign
outcome. The chances of the “soft landing” appear slim.
Aberforth portfolio ASLIT ASLIT at 30 June 2022
P
rice earnings ratio 31 year average at 30 June 2022 with earnings –30%
Portfolio 11.5x 8.3x 11.9x
NSCI (XIC) 13.4x 9.8x 14.0x
12 Strategic Report Aberforth Split Level Income Trust plc
Managers’ Report
Even deep into the second half of ASLIT’s financial year, these challenges contrasted with composure on the part of
companies. There were some disappointing updates, notably from consumer-oriented businesses towards the end of
the period, but in general trading has been better than might be expected, given macro-economic concerns, and a year
o
f profit progress in calendar 2022 still seems likely. The disparity between the top-down and the bottom-up viewpoints
is likely one of timing. In the current “phoney war” phase, profit estimates have not yet moved in a meaningful way –
companies’ order books are generally full, the demand recovery from the pandemic still has momentum, and price
pressures are being passed on. From the perspective of company boards, little else matters and there is no incentive to
risk letting customers down.
However, the actual fullness of order books is moot. In times of inflation and compromised supply chains, a degree of
over-ordering on the part of customers would not be surprising. Moreover, it is plausible that, in the initial stages of an
inflationary shock that many still see as transitory, it has been relatively straightforward to pass through price increases.
This may prove trickier on subsequent occasions, particularly when demand begins to ebb. Overall, therefore, it would
seem prudent to expect that some of the top-down gloom catches up with companies through the second half of
calendar 2022, perhaps indeed to precipitate a recession in 2023.
Clearly, the stockmarket has already judged that this is the likely outcome. However, the duration and depth of an
economic downturn are far from certain. There are mitigating factors at play, including the scope for governments to
offset the worst of the pressures on the cost of living. Additionally, private sector balance sheets have emerged from
the pandemic in good shape and employment rates are relatively high, which should help the gap between the rates of
wage growth and inflation close in 2023. A final consideration is that the current macro-economic challenges might ease.
A resolution to the war in Ukraine would bring down energy costs. China’s restrictive policies may be relaxed after
November’s Communist Party congress. Central banks’ actions may not prove as hawkish as their words, particularly if
these words themselves – so-called jawboning – succeed in cooling activity.
Nevertheless, a recession is what the stockmarket currently expects. It would be bad for the profits earned both by
ASLIT’s portfolio of relatively cyclical value stocks and by companies in general. However, share prices will also be
influenced by the valuation that investors ascribe to corporate profits. Valuations in turn will continue to be affected by
inflation and monetary policy. Uncertainty about these factors should hinder the ability of growth stocks to return to
the very high valuations that they enjoyed as recently as six months ago. Numerous growth stocks are also having to
contend with pressure on their own profitability or, for the loss-makers, their forecast path to profitability. Whether
provoked by general economic conditions or by company-specific issues, redundancies and cost cutting programmes are
not a good look for glamorous growth companies aspiring to high valuation multiples. The stockmarket is less inclined
to give the benefit of the doubt as its focus shifts to companies’ near term profits and cash flows. In the tussle between
value and growth styles, this backdrop is suggestive of a better outlook for the value style or, at least, a more level
playing field than has been the case in recent years. This should be supportive of ASLIT’s returns given the Managers’
consistent adherence to a value investment philosophy.
The more consistent influence on ASLIT’s investment returns is likely to be the underlying progress of its diversified
portfolio of 66 investee companies. Should an economic downturn materialise over the next twelve months, the
profitability of these companies would suffer. However, there is reason for optimism. The holdings have proved
themselves through a series of challenges including Brexit and the pandemic. Their profits are resilient and grow from
economic cycle to economic cycle. Their balance sheets are notably strong at present, which affords their boards
optionality around the deployment of capital. And, significantly, their share prices already discount at least some of the
risk of an economic slowdown. As the previous section on valuations noted, historical PE ratios and forward EBITA ratios
are at unusually low levels. Coming at it from a different perspective, companies whose share prices at 30 June 2022
were lower than at 31 December 2019 account for over 74% by weight of the portfolio. This suggests that there is still
significant potential for share price recovery as the stockmarket rebuilds confidence in economic activity returning to
pre-pandemic levels.
The remaining two years of ASLIT’s planned life promise to be eventful. To have full confidence that Shareholders will
benefit from today’s unusually low valuations and a recovery in share prices, more time would be ideal. To address this,
the Managers would intend to work with the Board to offer Shareholders, no later than 1 July 2024, the option either to
realise their investment in cash or to continue their exposure to the Managers’ investment approach in some form. In
the meantime, the portfolio continues to generate good levels of income and, through the Managers’ value investment
philosophy and the underlying resilience of the investee companies, offers significant upside.
Aberforth Partners LLP
Managers
27 July 2022
Strategic Report Aberforth Split Level Income Trust plc 13
Thirty Largest Investments
As at 30 June 2022
% of
No. Company £’000 Total Business Activity
1 Rathbones Group 8,231 4.3 Private client fund manager
2 Go-Ahead Group 7,053 3.7 Bus & rail operator
3
Redde Northgate 6,304 3.3 Van rental
4 Wincanton 6,284 3.3 Logistics
5 Morgan Advanced Materials 5,164 2.7 Manufacture of carbon & ceramic materials
6 Centamin 5,077 2.6 Gold miner
7 Anglo Pacific Group 4,718 2.4 Natural resources royalties
8 Bloomsbury Publishing 4,412 2.3 Independent publishing house
9 Wilmington Group 4,307 2.2 Business publishing & training
10 CMC Markets 4,217 2.1 Financial derivatives dealer
Top Ten Investments 55,767 28.9
11 Micro Focus 4,028 2.1 Legacy software assets
12 Videndum 3,948 2.0 Photographic & broadcast accessories
13 Bakkavor Group 3,893 2.0 Food manufacturer
14 Vistry Group 3,831 2.0 Housebuilding
15 Energean 3,823 2.0 Oil & gas exploration and production
16 Reach 3,802 2.0 UK newspaper publisher
17 Paypoint 3,683 1.9 Alternative payment services
18 Vesuvius 3,610 1.9 Metal flow engineering
19 Kenmare Resources 3,525 1.8 Miner of titanium minerals
20 Crest Nicholson 3,506 1.8 Housebuilding
Top Twenty Investments 93,416 48.4
21 STV Group 3,496 1.8 Multi-channel digital media
22 RPS Group 3,475 1.8 Energy & environmental consulting
23 TI Fluid Systems 3,425 1.8 Automotive parts manufacturer
24 International Personal Finance 3,414 1.8 Home credit provider
25 Drax Group 3,411 1.7 Electricity generation
26 Provident Financial 3,401 1.7 Personal credit provider
27 C&C Group 3,322 1.7 Brewer and drinks distributor
28 Sabre Insurance Group 3,059 1.6 Car insurance
29 Chesnara 3,041 1.6 Life insurance
30 Devro 3,026 1.6 Sausage casings
Top Thirty Investments 126,486 65.5
Other Investments (36) 66,576 34.5
Total Investments 193,062 100.0
Net Liabilities (54,110)
Total Net Assets 138,952
14 Strategic Report Aberforth Split Level Income Trust plc
Software and Computer Services 5,547 2.9
Micro Focus Legacy software assets 4,028 2.1
Moneysupermarket.com Price comparison websites 1,519 0.8
Technology Hardware and Equipment 2,022 1.0
T
T Electronics Sensors & other electronic components 2,022 1.0
Finance and Credit Services 8,335 4.3
International Personal Finance Home credit provider 3,414 1.8
Provident Financial Personal credit provider 3,401 1.7
S & U Personal credit provider 1,520 0.8
Investment Banking and Brokerage Services 21,270 11.0
Brewin Dolphin Holdings Private client fund manager 1,873 0.9
City of London Investment Group Asset manager 2,447 1.3
CMC Markets Financial derivatives dealer 4,217 2.1
Jupiter Fund Management Investment manager 2,997 1.6
Rathbones Group Private client fund manager 8,231 4.3
XPS Pensions Group Pension Consultancy 1,505 0.8
Life Insurance 4,161 2.2
Chesnara Life insurance 3,041 1.6
Hansard Global Life assurance savings products 1,120 0.6
Non-life Insurance 5,761 3.0
Conduit Holding Bermuda based (re)insurer 2,702 1.4
Sabre Insurance Group Car insurance 3,059 1.6
Real Estate Investment and Services 854 0.4
Foxtons Estate Agent 854 0.4
Real Estate Investment Trusts 1,190 0.6
Workspace Group Property - rental to small businesses 1,190 0.6
Automobiles and Parts 3,425 1.8
TI Fluid Systems Automotive parts manufacturer 3,425 1.8
Consumer Services 1,912 1.0
RM IT services for schools 1,912 1.0
Household Goods and Home Construction 9,799 5.1
Crest Nicholson Housebuilding 3,506 1.8
Headlam Group Distributor of floor coverings 2,462 1.3
Vistry Group Housebuilding 3,831 2.0
Media 17,686 9.2
Bloomsbury Publishing Independent publishing house 4,412 2.3
Centaur Media B2B publishing 1,669 0.9
Reach UK newspaper publisher 3,802 2.0
STV Group Multi-channel digital media 3,496 1.8
Wilmington Group Business publishing & training 4,307 2.2
Retailers 8,285 4.3
Card Factory Retailing - greetings cards 1,038 0.6
DFS Furniture Furniture retailer 2,578 1.3
Lookers Motor vehicle retailer 2,674 1.4
Topps Tiles Ceramic tile retailer 1,995 1.0
Travel and Leisure 11,900 6.2
Go-Ahead Group Bus & rail operator 7,053 3.7
Hollywood Bowl Operator of bowling centres 1,179 0.6
Hostelworld Group Hostel booking platform 1,518 0.8
Rank Group Multi-channel gaming operator 2,150 1.1
Value % of Total
Sector/Security Business Activity £’000 Investments
Investment PortfolioA
As at 30 June 2022
Strategic Report Aberforth Split Level Income Trust plc 15
Value % of Total
Sector/Security Business Activity £’000 Investments
Investment Portfolio
As at 30 June 2022
Beverages 3,322 1.7
C&C Group Brewer and drinks distributor 3,322 1.7
Food Producers 6,919 3.6
Bakkavor Group Food manufacturer 3,893 2.0
Devro Sausage casings 3,026 1.6
Construction and Materials 9,137 4.8
Eurocell Manufacture of UPVC building products 3,004 1.6
Forterra Manufacture of bricks 1,682 0.9
Galliford Try Holdings Housebuilding & construction 1,826 0.9
Keller Ground engineering services 2,625 1.4
Aerospace and Defence 1,336 0.7
Senior Aerospace & automotive engineering 1,336 0.7
Electronic and Electrical Equipment 5,164 2.7
Morgan Advanced Materials Manufacture of carbon & ceramic materials 5,164 2.7
Industrial Engineering 10,442 5.4
Castings Engineering - automotive castings 2,884 1.5
Vesuvius Metal flow engineering 3,610 1.9
Videndum Photographic & broadcast accessories 3,948 2.0
Industrial Support Services 17,643 9.1
Essentra Filters & packaging products 757 0.4
PageGroup Recruitment 2,416 1.3
Paypoint Alternative payment services 3,683 1.9
Robert Walters Recruitment 2,084 1.1
RPS Group Energy & environmental consulting 3,475 1.8
SIG Specialist building products distributor 1,639 0.8
Smiths News Newspaper distribution 2,051 1.1
Speedy Hire Plant hire 1,538 0.7
Industrial Transportation 13,712 7.2
Redde Northgate Van rental 6,304 3.3
VP Equipment rental 1,124 0.6
Wincanton Logistics 6,284 3.3
Industrial Metals and Mining 8,243 4.2
Anglo Pacific Group Natural resources royalties 4,718 2.4
Kenmare Resources Miner of titanium minerals 3,525 1.8
Precious Metals and Mining 5,077 2.6
Centamin Gold miner 5,077 2.6
Chemicals 1,235 0.6
RHI Magnesita Refractory products 1,235 0.6
Oil, Gas and Coal 5,274 2.7
Energean Oil & gas exploration and production 3,823 2.0
Genel Energy Oil & gas exploration and production 1,451 0.7
Electricity 3,411 1.7
Drax Group Electricity generation 3,411 1.7
Total Investments 193,062 100.0
30 June 2021 30 June 2022
Net Net
Portfolio Portfolio Purchases/ Appreciation/ Portfolio Portfolio
Weight Valuation (Sales)
1
(Depreciation)
1
Valuation Weight
Sector % £’000 £’000 £’000 £’000 %
16 Strategic Report Aberforth Split Level Income Trust plc
Other Portfolio Information
Summary of Investment Transactions
For the year to 30 June 2022
Cost Proceeds
Purchases £’000 Sales £’000
Jupiter Fund Management 5,070
Energean 4,365
Micro Focus 3,444
PageGroup 2,813
Centamin 2,655
C
&C Group 2,487
Go-Ahead Group 2,053
XPS Pensions Group 1,680
Conduit Holding 1,538
DFS Furniture 1,522
Reach 1,452
Galliford Try Holdings 1,443
Provident Financial 1,401
Moneysupermarket.com 1,169
CMC Markets 1,033
Speedy Hire 811
Sabre Insurance Group 768
Smiths News 745
RM 656
Devro 651
Other Purchases 2,862
Total Cost of Purchases
1
40,618
Brewin Dolphin Holdings 9,297
McKay Securities 3,890
Ultra Electronics Holdings 3,751
Reach 3,396
Zegona Communications 2,844
S
tagecoach Group 2,576
Vivo Energy 2,368
U and I Group 2,324
Drax Group 2,026
Essentra 1,998
Keller 1,749
Bloomsbury Publishing 1,637
PageGroup 1,516
Forterra 529
Provident Financial 395
STV Group 328
Videndum 267
McColl’s Retail Group 36
Total Proceeds of Sales
1
40,927
FTSE Industry Classification Exposure Analysis
Technology 3 6,720 4,613 (3,763) 7,570 4
Telecommunications 1 2,892 (2,844) (48) – –
Health care – – – – – –
Financials 19 44,003 1,798 (6,272) 39,529 20
Real Estate 3 7,112 (6,074) 1,006 2,044 1
Consumer Discretionary 30 71,176 (2,831) (15,339) 53,006 27
Consumer Staples 4 9,634 3,420 (2,813) 10,241 5
Industrials 32 74,395 (3,399) (13,564) 57,432 30
Basic Materials 6 14,330 2,668 (2,443) 14,555 8
Energy 1 1,583 4,366 (675) 5,274 3
Utilities 1 3,603 (2,026) 1,834 3,411 2
100 235,448 (309) (42,077) 193,062 100
1
Includes transaction costs.
1
Includes transaction costs.
Strategic Report Aberforth Split Level Income Trust plc 17
FTSE Index Classification Exposure Analysis
30 June 2021 30 June 2022
Portfolio Portfolio
Number of Valuation Weight Number of Valuation Weight
Index Classification Companies £’000 % Companies £’000 %
FTSE 100 – – – –––
FTSE 250 20 86,080 36.5 21 73,337 38.0
FTSE SmallCap 36 117,220 49.8 34 92,783 48.1
FTSE Fledgling 4 5,224 2.2 4 6,752 3.5
Other 9 26,924 11.5 7 20,190 10.4
69 235,448 100.0 66 193,062 100.0
The Strategic Report, contained on pages 1 to 17, has been approved by the Board of Directors on 27 July 2022 and
signed on its behalf by:
Angus Gordon Lennox
Chairman
Other Portfolio Information
Other Business Information
Company Status
The Company is a closed-ended investment trust listed on the London Stock Exchange and an Alternative Investment
Fund under the Alternative Investment Fund Managers (AIFM) Directive. The Company has been approved by HM
Revenue & Customs as an investment trust from 3 July 2017 subject to the Company continuing to meet the eligibility
conditions. The Company will continue to conduct its affairs as an investment trust. Furthermore, the Company is an
investment company as defined within the meaning of Section 833 of the Companies Act 2006.
Board Diversity
The Board's diversity policy recognises the importance of diversity in its broadest sense (including skills, experience,
gender and tenure) in enabling it to fulfil the present and future needs of the Company. The policy is always to appoint
the best person available for the role. Brief biographical details of the Board are shown on page 18. In respect of gender
representation, as at 30 June 2022, there were four male directors and one female director.
Environmental, Human Rights, Employee, Social Community Issues
The requirement to detail information about environmental matters, human rights, social and community issues does
not apply to the Company as it has no employees, all Directors are non-executive and it has outsourced its functions to
third party service providers. The Company’s and the Managers’ approach to environmental, social and governance
matters is set out within the Corporate Governance Report on page 26.
18 Governance Report Aberforth Split Level Income Trust plc
Board of Directors
Governance Report
Angus Gordon Lennox (Chairman)
Appointed: 19 April 2017
Shareholding in the Company: 619,738 Ordinary Shares
A
ngus Gordon Lennox has an extensive knowledge of the investment industry with 23 years at Cazenove, latterly J.P.
Morgan Cazenove, where he was a managing director and Head of the Investment Companies Department. He held this
position until 2010 when he retired. Angus is also the executive chairman of two family businesses, chairman of The
Mercantile Investment Trust plc and senior independent director of Securities Trust of Scotland plc.
Graeme Bissett
Appointed: 19 April 2017
Shareholding in the Company: 84,404 Ordinary Shares and 6,000 ZDP Shares
Graeme Bissett is chairman of the Audit Committee and is a chartered accountant. He was a senior partner of Arthur
Andersen LLP, with responsibility for its corporate finance and audit practices in Scotland from 1990 to 1998. Graeme
has previously served as non-executive chairman of Macfarlane Group plc. Graeme has also previously served as finance
director of international groups and as a non executive director on a number of private and listed company boards.
Graeme is a non-executive director with Smart Metering Systems plc, Calnex Solutions plc and Cruden Holdings Ltd. He
is a trustee of the Scottish Association of Citizens Advice Bureaux, a trustee of the Entrepreneurial Scotland Foundation
and a trustee of Pitlochry Festival Theatre.
Dominic Fisher OBE
Appointed: 19 April 2017
Shareholding in the Company: 298,328 Ordinary Shares
Dominic Fisher is a member of the Audit Committee. He was a director of Aberforth Geared Income Trust plc from 2010
to 2017. He is the founder of Thistledown Investment Management Ltd and has worked as an investment manager since
1989. From 1992 to 2001 he worked for Mercury Asset Management (subsequently Merrill Lynch Investment Managers),
heading the charities division responsible for management of £2.4 billion of funds and was a member of the smaller
companies team.
Lesley Jackson
Appointed: 24 April 2019
Shareholding in the Company: 34,305 Ordinary Shares
Lesley Jackson is a member of the Audit Committee and is a chartered accountant. She was the Group Chief Financial
Officer (‘CFO’) for Stock Spirits PLC from 2011 to 2018. She has previously served as the Group CFO for William Grant &
Sons, and as Group CFO of United Breweries (an Indian listed public company). She is a non-executive Director of Devro
plc, The Artisanal Spirits Company plc and also serves as a Governor on the Federation of Victoria School and Cherry Oak
School, special needs schools in South Birmingham.
Graham Menzies
Appointed: 19 April 2017
Shareholding in the Company: 478,786 Ordinary Shares (Beneficial) and 62,835 (Non-beneficial)
Graham Menzies was a director of Aberforth Geared Income Trust plc from 2010 to 2017. He was group chief executive
of Adwest Automotive plc until 1999 and group chief executive of Senior plc until 2008. He has been a non-executive
director on several industrial company boards, including five public companies and four private companies.
Governance Report Aberforth Split Level Income Trust plc 19
Directors’ Report
The Directors present their Annual Report and the audited financial statements for the year to 30 June 2022.
Directors
The Directors of the Company during the year to 30 June 2022 are listed on page 18. Further information about the Board
can be found in the Corporate Governance Report, which forms part of this Directors’ Report. It is the responsibility of
the Board to ensure that there is effective stewardship of the Company’s affairs. In common with the majority of
investment trusts, the Company has neither executive directors nor any employees. However, the Board has engaged
e
xternal firms to undertake the investment management, secretarial, depositary and custodial activities of the Company.
Details of Directors’ remuneration and shareholdings are shown within the Directors’ Remuneration Report on pages 31
and 32.
Objective, Investment Policy, Investment Strategy, Risks and Dividend Policy
These are explained fully on pages 1, 4, 5 and 21.
Return and Dividends
The total return attributable to Ordinary Shareholders for the year to 30 June 2022 amounted to a loss of £36,112,000
(2021: profit of £88,943,000). As at 30 June 2022 the Net Asset Value per Ordinary Share was 73.04p (2021: 95.66p) and
per ZDP Share was 118.57p (2021: 114.46p).
Your Board is pleased to declare a second interim dividend of 2.79p and a special dividend of 0.25p (total of £5,783,000),
which produces total dividends for the year to 30 June 2022 of 4.55p (total of £8,656,000). The second interim dividend
and the special dividend have an ex dividend date of 4 August 2022 and will be paid on 26 August 2022 to Ordinary
Shareholders on the register at the close of business on 5 August 2022. The first interim dividend of 1.51p (total of
£2,873,000) per Ordinary Share was paid on 8 March 2022.
Managers
Aberforth Partners LLP (the firm, Managers or Aberforth) act as Alternative Investment Fund Manager and Secretaries
to the Company. The business was established in 1990 to provide institutional and wholesale investors with a high level
of resources focused exclusively on small UK quoted companies and deployed in accordance with a value investment
philosophy.
At 30 June 2022, funds under management were £1.8 billion, of which 81% was represented by investment trusts, 7% by
a unit trust and 12% by segregated charity funds. All these funds are managed in line with the value philosophy applied
to the Company’s portfolio. The Managers believe that diseconomies of scale come with managing too much money
within an asset class such as small UK quoted companies. Accordingly, they impose a ceiling on funds under
management, which in normal circumstances would be equivalent to 1.5% of the total market capitalisation of the NSCI
(XIC) investment universe. Consistent with this, current capacity is circa £100 million of funds under management.
The firm is wholly owned by six partners – five investment partners and an operations partner, who is responsible for
the firm's administration. The investment team comprised the five investment partners and two other investment
managers. Analytical responsibilities are divided by stockmarket sector among the investment managers, but investment
decisions and portfolio management are undertaken on a collegiate basis by the full team.
The investment managers are remunerated on the basis of the success of the firm and its funds as a whole. Alignment with
Company’s Shareholders is further enhanced by the team’s meaningful personal investments in the Company’s equity
.
These services can be terminated by either party at any time by giving six months’ notice of termination. Compensation
would be payable in respect of this six month period only if termination were to occur sooner. Aberforth receives a
management fee, calculated and payable quarterly in advance, equal to 0.1875% of the Company’s Total Assets at the
end of the quarter preceding that to which the fee relates. Assuming a constant level of Total Assets, this would be
equivalent to 0.75% of Total Assets over the course of a year. The management fee amounted to £1,737,000 (2021:
£1,316,000) in the year to 30 June 2022.
The Board reviews the Company’s investment management and secretarial arrangements on an on-going basis and
formally at its July meeting, where each Director completes a Managers’ Evaluation questionnaire. The Board then
considers the results of the questionnaire and discusses the following matters, amongst others, in its review.
• Investment performance in relation to the investment objective, policy and strategy
• The continuity and quality of personnel managing the assets
• The level of the management fee
• The quality of reporting to the Board
• The administrative services provided by the Secretaries
• The frequency and quality of both verbal and written communications with Shareholders
Following the most recent review, the Board has formed the view that the continued appointment of Aberforth as
Manager on the terms agreed is in the best interests of Shareholders.
20 Governance Report Aberforth Split Level Income Trust plc
Directors’ Report
Depositary
NatWest Trustee & Depositary Services Limited carries out the duties of Depositary as specified in the Alternative
Investment Fund Managers (AIFM) Directive in relation to the Company, including:
• holding or controlling all assets of the Company that are entrusted to it for safekeeping;
•
cash monitoring and verifying the Company’s cash flows; and
•
oversight of the Company and the Managers.
In carrying out such duties, the Depositary acts in the best interests of the Shareholders of the Company. The Depositary is
contractually liable to the Company for the loss of any securities entrusted to it. The Depositary is also liable to the Company
for all other losses suffered as a result of the Depositary’s fraud, negligence and/or failure to fulfil its duties properly.
The Depositary receives an annual fee, payable quarterly in arrears, of 0.0085% of the net assets of the Company and its
appointment may be terminated at any time by giving at least six months’ notice. A Depositary may only be removed from
office when a new Depositary is appointed by the Company.
Company Status
The Company is registered as a public limited company and is an investment company as defined by Section 833 of the
Companies Act 2006. The Directors are of the opinion that the Company has conducted its affairs during the year to 30 June
2022 so as to maintain approval as an Investment Trust under section 1158 of the Corporation Tax Act 2010.
The Company has share capital consisting of Ordinary Shares and ZDP Shares. The Company is listed and its two share
classes trade on the London Stock Exchange. Furthermore the Company is subject to the laws and regulations relating to
UK listed companies. The Company is a member of the Association of Investment Companies (AIC).
Capital Structure
The Company has two classes of Shares. At 30 June 2022 the Company’s share capital consisted of Ordinary Shares, of
which 190,250,000 were issued, allotted and fully paid, and, ZDP Shares, of which 47,562,500 were issued, allotted and
fully paid. The Ordinary Shares represent 80% of the Company’s issued share capital and the ZDP Shares represent 20%
of the Company’s issued share capital. No Shares were held in treasury as at 30 June 2022.
Ordinary Shares
Ordinary Shareholders are entitled to the net assets of the Company on a winding-up, after all liabilities of the Company
have been settled and the entitlements of the ZDP Shares have been met. In addition, Ordinary Shareholders will be
entitled on a winding-up to receive any undistributed revenue reserves of the Company, which will be paid in the form
of a pre-liquidation dividend or during the course of the liquidation, subject to all creditors of the Company having been
paid out in full and even if the cover on the ZDP Shares is at the time less than one. The Company’s capital structure is
such that the underlying value of assets attributable to the Ordinary Shares will be geared by the rising capital
entitlements of the ZDP Shares. Accordingly, the Ordinary Shares should be regarded as carrying above average risk.
Zero Dividend Preference Shares
The ZDP Shares were issued with a targeted final capital entitlement of 127.25p per ZDP Share on the planned winding-
up date of 1 July 2024. This represents a redemption yield of 3.5% per annum over the life of the ZDP Shares, based on
the issue price of 100p at inception on 30 June 2017. Under current legislation, the increase from the issue price of 100p
to 127.25p per ZDP Share will generally be treated as a capital gain for UK tax purposes. The holders of ZDP Shares are
not entitled to receive dividend payments. ZDP Shares have been recorded as a liability in the Company’s Balance Sheet.
Investment Trust Status
The Company is exempt from corporation tax on capital profits, provided it qualifies as an Investment Trust. In respect
of the year to 30 June 2022, the main qualifying requirements included the following.
• The Company must invest in shares, land or other assets with the aim of spreading investment risk and giving
members of the Company the benefit of the results of the management of its funds.
• The Company’s Shares are listed on a regulated market such as the London Stock Exchange.
• The Company must not retain in respect of each accounting period more than 15% of its total income (for tax
purposes.
• The Company must not be a close company.
The Company has been approved by HM Revenue & Customs as an Investment Trust for accounting periods commencing
on or after 3 July 2017 subject to the Company continuing to meet the eligibility conditions. The Company intends to
continue to conduct its affairs as an Investment Trust.
Duration of the Company
The Company has a planned life lasting until 1 July 2024. The Directors are required by the Company’s Articles of Association
to convene a general meeting of the Company on, or within the three months prior to 1 July 2024, at which a special
resolution will be proposed to wind up the Company voluntarily by not later than the planned winding-up date. As these
arrangements are designed to ensure that the ZDP Shareholders will be entitled to realise their investment, weighted voting
Governance Report Aberforth Split Level Income Trust plc 21
Directors’ Report
provisions shall apply so as to ensure that this resolution will be passed if any Shareholder votes in favour. However, before
this date, the Directors will examine means whereby holders of Ordinary Shares may effectively continue their investment
while allowing the ZDP Shareholders to realise their investment. The Directors may be released from the obligation to call
a general meeting if a special resolution has been passed to that effect not later than 1 July 2024.
Overdraft facility
The Company has a £2 million overdraft facility with The Northern Trust Company, which is subject to an annual review.
T
he interest rate applying to overdrawn balances is 1.5% over the UK Base Rate. In addition an annual arrangement fee
of £2,500 is incurred in respect of the facility. During the year to 30 June 2022 the highest utilisation of the overdraft
facility was £1.6 million.
Dividend Policy
The Company’s dividend policy is to distribute a significant proportion of its net revenue (after payment of expenses and
taxation) in the form of dividends to Ordinary Shareholders. As an investment trust the Company must not retain in
respect of any accounting period an amount which is greater than 15 per cent of its income for such accounting period.
Ordinary Shareholders are entitled to receive all such dividends. The holders of the ZDP Shares are not entitled to receive
dividend payments. The Company’s dividend policy is to pay two dividends in respect of each financial year: a first
interim dividend is paid in February/March and a second interim dividend is paid in August/September. A second interim
dividend is paid rather than a final dividend in order to expedite the disbursement for the benefit of Ordinary
Shareholders.
Going Concern
The Audit Committee has undertaken and documented an assessment of whether it is appropriate for the Company to
adopt the going concern basis of accounting. This assessment included the continued impact on the Company of Covid-
19. The Committee reported the results of its assessment to the Board.
The Company’s business activities, capital structure and borrowing facility, together with the factors likely to affect its
development and performance, are set out in the Strategic Report. In addition, the Annual Report includes the
Company’s objectives, policies and processes for managing its capital, its financial risk, details of its financial instruments
and its exposures to credit risk and liquidity risk. The Company’s assets comprise mainly readily realisable equity
securities, which, if necessary, can be sold to meet any funding requirements, though funding flexibility can typically be
achieved through the use of the bank overdraft facility. The Company has adequate financial resources to enable it to
meet its day-to-day working capital requirements.
In summary and taking into consideration all available information, the Directors have concluded it is appropriate to
prepare the financial statements on a going concern basis.
Voting Rights of Shareholders
Ordinary Shareholders have the right to receive notice of, to attend and to vote at general meetings of the Company.
Each Ordinary Shareholder has one vote on a show of hands and, on a poll, one vote for every Ordinary Share held. The
right of Ordinary Shareholders to vote on certain resolutions on the winding-up, reconstruction or reorganisation of the
Company is subject to the restrictions set out in the Articles. Votes are required to be lodged with the Company’s
Registrar 48 hours before a meeting (excluding non-working days). The holders of ZDP Shares do not have the right to
receive notice of any general meeting of the Company or to attend or vote at any such meeting except in respect of any
resolution: (i) to vary the special rights or privileges attached to the ZDP Shares; (ii) to wind up the Company. Their
separate approval as a class will be required for certain proposals that would be likely to affect their position materially.
The Board is pleased to offer electronic proxy voting, including CREST voting capabilities. Further details can be found in
the Notice of the AGM.
AGM.
Notifiable Share Interests
The Board has received notifications of the following interests in 3% or more of the total voting rights of the Company
as at 30 June 2022. The percentage calculation is based on the total voting rights of 190,250,000 Ordinary Shares.
Notified interests Percentage
of Voting
Rights Held
Brompton Asset Management LLP 8.3%
1607 Capital Partners LLC 7.8%
Brooks Macdonald Asset Management Ltd 5.0%
Mr Alistair Whyte 4.0%
Mr David Ross 3.8%
Artemis Investment Management LLP 3.1%
Mr Euan Macdonald 3.0%
22 Governance Report Aberforth Split Level Income Trust plc
Directors’ Report
Annual General Meeting
The AGM will be held at 14 Melville Street, Edinburgh EH3 7NS at 11.00 a.m. on 31 October 2022. Shareholders are encouraged to
submit their votes by proxy in advance of the meeting in case restrictions related to the pandemic apply and it is therefore not possible
f
or shareholders to attend in person. The Board will continue to consider carefully the arrangements for the AGM. The Company will
issue a regulatory news announcement, which will also be posted on the Company’s website, if the only attendees permitted will be
those required to form the quorum and allow the business to be conducted. The Notice of the Meeting and explanatory notes are set
out on pages 57 to 58 of the Annual Report and Financial Statements.
The Directors consider each resolution being proposed at the AGM to be in the best interests of Shareholders as a whole and they
u
nanimously recommend that all Shareholders vote in favour of them, as they intend to do in respect of their own beneficial
shareholdings.
Additional information in respect of the Companies Act 2006
The following information is disclosed in accordance with Section 992 of the Companies Act 2006.
• The Company’s capital structure and voting rights are summarised on pages 20 to 21.
• Details of the substantial Ordinary Shareholders in the Company are listed on page 21.
• The rules concerning the appointment and replacement of Directors are contained in the Company’s Articles of Association and
the Board’s policy is set out on page 24.
• Amendment of the Company’s Articles of Association and powers to issue on a non pre-emptive basis or buy back the Company’s
Shares require a special resolution to be passed by Shareholders.
• There are no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached
to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements
to which the Company is party that might affect its control following a takeover bid.
• There are no agreements between the Company and its Directors concerning compensation for loss of office.
Greenhouse Gas Emissions
As the Board has engaged external firms to undertake the principal operational activities of the Company, the Company has no
greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions-producing sources
under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013. For the same reasons, the Company is not
required to disclose information under the Streamlined Energy and Carbon Reporting regulations. Further explanation is provided in
the Environmental, Social and Governance section of the Corporate Governance Report.
Bribery Act 2010
The Company does not tolerate bribery and is committed to carrying out business fairly, honestly and openly. Aberforth, the
Company’s Managers, have confirmed that they have anti-bribery policies and procedures in place and they do not tolerate bribery.
Modern Slavery Statement
The Company is not within scope of the Modern Slavery Act 2015 and is not, therefore, obliged to make a human trafficking
statement. The Company has no employees and its supply chain consists mainly of professional advisers so is considered to be low
risk in relation to this matter.
Criminal Finances Act 2017
The Company does not tolerate the criminal facilitation of tax evasion.
Post Balance Sheet Events
Since 30 June 2022 there are no post balance sheet events that would require adjustment of or disclosure in the financial statements.
Independent Auditor
Deloitte LLP has expressed its willingness to be re-appointed as Auditor and a resolution proposing its re-appointment will be put to
the forthcoming Annual General Meeting.
Disclosure of Information to Auditor
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no
relevant audit information of which the Company’s Auditor is unaware; and each Director has taken all steps that they ought to have
taken as a Director to make themselves aware of any relevant audit information, and to establish that the Company’s Auditor is aware
of that information.
Future Developments
The future success of the Company is dependent primarily on the performance of its investments. Although the Company invests in
companies that are listed or quoted in the United Kingdom, the underlying businesses of those companies are affected by various
economic factors, many of an international nature. The Board’s intention is that the Company will continue to pursue its investment
objective and the stated investment strategy and policy.
Approved and authorised for issue by the Board of Directors
Angus Gordon Lennox
Chairman
27 July 2022
Governance Report Aberforth Split Level Income Trust plc 23
Corporate Governance Report
Introduction
The Board is committed to maintaining and demonstrating high standards of corporate governance. The Board has
considered the principles and provisions of the AIC Code of Corporate Governance (the AIC Code). The AIC Code
addresses all the principles and provisions set out in the UK Corporate Governance Code, as well as setting out additional
provisions on issues that are of specific relevance to investment trusts. The Board considers that reporting in accordance
w
ith the principles and provisions of the AIC Code provides more relevant and comprehensive information to
Shareholders. The AIC Code is available on the AIC website at www.theaic.co.uk. This report forms part of the Directors’
Report on pages 19 to 22.
Compliance
Throughout the year to 30 June 2022 the Company complied with the recommendations of the AIC Code except, as
explained below, where the Board does not believe it appropriate to comply.
• The Board, being small in size and composed entirely of independent non-executive Directors, has not appointed a
Remuneration or a Nomination Committee. Directors’ fees and the appointment of new Directors are considered by
the Board as a whole.
• The Board has decided not to nominate a Deputy Chairman or a Senior Independent Director, although the Chairman
of the Audit Committee fulfils this role when necessary, for example in taking the lead in the annual evaluation of
the Chairman.
The UK Corporate Governance Code includes provisions relating to the role of the chief executive, executive Directors’
remuneration and the need for an internal audit function. For reasons set out in the AIC Code, the Board considers these
provisions are not relevant to the Company as it is an externally managed investment company. In particular, all of the
Company’s day-to-day management and administrative functions are outsourced to third parties. As a result, the
Company has no executive Directors, employees or internal operations. The Company has therefore not reported further
in respect of these provisions.
The Board
The Board is responsible for the effective stewardship of the Company’s affairs. Strategic issues and all operational
matters of a material nature are considered at its meetings. The Board comprises five non-executive Directors, of whom
Angus Gordon Lennox is Chairman. The Board has engaged external firms to provide investment management,
secretarial, depositary and custodial services. Contractual arrangements are in place between the Company and these
firms.
The Board carefully considers the various guidelines for determining the independence of non-executive Directors,
placing particular weight on the view that independence is evidenced by an individual being independent of mind,
character and judgement. An individual may therefore be considered to be independent even though the length of
service may exceed nine years. No limit on the overall length of service of any of the Directors, including the Chairman,
has therefore been imposed, but the Company has a planned life of less than nine years. All Directors are presently
considered to be independent. All Directors retire at the AGM each year and, if appropriate, seek re-election. Each
Director has signed a letter of appointment to formalise the terms of their engagement as a non-executive Director,
copies of which are available on request.
Meetings
The Board meets at least quarterly to review the overall business of the Company and to consider the matters specifically
reserved for it. Detailed information is provided by the Managers and Secretaries for these meetings and additionally at
regular intervals to enable the Directors to monitor compliance with the investment objective and the Company’s
investment performance, and to review its investment universe. Other matters reviewed by the Directors include:
• the stockmarket environment;
• the Company’s investment activity over the quarter relative to its investment policy;
• performance in relation to comparable investment trusts;
• the revenue account, balance sheet and gearing position;
• share price discount;
• Shareholder register (including significant changes);
• regulatory matters; and
• relevant industry issues.
Annual Plan
The following highlights various additional matters considered by the Board during the reporting period.
The following table sets out the Directors of the Company during the financial period, together with the number of Board
and Committee meetings held and the number of meetings attended by each Director (whilst a Director or Committee
member). Directors who are not members of the Audit Committee are invited to be present at meetings of the Audit
Committee.There has been no change to Directors between 30 June 2022 and 27 July 2022.
Appointments to the Board
The Board regularly reviews its composition, having regard to the Board’s structure and to the present and future needs of
the Company. The Board takes into account its diversity, the balance of expertise and skills brought by individual Directors,
and length of service, where continuity and experience can add significantly to the strength of the Board. The Board has not
yet set diversity targets but its diversity policy is described on page 17.
Board performance and election of Directors
The Board undertakes a formal annual assessment of Directors and their collective performance on a range of issues
including the Board’s role, processes and interaction with the Managers. This review of the Board and the Audit Committee
was conducted by way of evaluation questionnaires, the results of which were summarised and discussed in July 2022,
providing valuable feedback for improving Board effectiveness and highlighting areas for further development. The
appraisal of the Chairman was led by the Chairman of the Audit Committee. The Board keeps under review the need for
the use of external facilitators to conduct the annual evaluation of the Board.
In line with the Board’s policy all Directors, being eligible, offer themselves for election at the forthcoming AGM. The Board
believes that each Director continues to be effective, bringing a wealth of knowledge and experience to the Board, and the
Chairman recommends their election to Shareholders.
Directors’ and Officers’ Liability Insurance
The Company maintains appropriate insurance cover in respect of legal action against its Directors. The Company has
also entered into qualifying third party deeds of indemnity with each Director to cover any liabilities that may arise to a
third party, other than the Company, for negligence, default or breach of trust or duty. The deeds were in force during
the year to 30 June 2022 and up to the date of approval of this report. The Directors are not indemnified in respect of
liabilities to the Company or costs incurred in connection with criminal proceedings in which the Director is convicted or
required to pay any regulatory or criminal fines.
24
Governance Report Aberforth Split Level Income Trust plc
Corporate Governance Report
Board Audit Committee
Eligible to Eligible to
Director attend Attended attend Attended
Angus Gordon Lennox, Chairman 4 4 – –
Graeme Bissett 4 4 3 3
Dominic Fisher 4 4 3 3
Lesley Jackson 4 4 3 3
Graham Menzies 4 4 – –
October January April July
C
orporate
Governance,
i
ncluding the
I
nvestment
Managers’
p
olicy on
Stewardship
Risks &
C
ontrols
Matrix
I
nvestment
Trust Peer
G
roup
B
oard and
Committee
Evaluation
R
egulatory
update, including
I
nvestment Trust
S
tatus
A
nnual Report
and Second
I
nterim Dividend
M
anagers’
Review,
i
ncluding
c
ontinued
appointment
a
nd
remuneration
Risks &
C
ontrols Matrix
H
alf Yearly
Report
F
irst Interim
Dividend
Governance Report Aberforth Split Level Income Trust plc 25
Corporate Governance Report
Training and Advice
New Directors are provided with an induction programme that is tailored to the particular requirements of the
appointee. Thereafter regular briefings are provided on regulatory developments that affect the Company. Directors are
also encouraged to attend industry and other seminars. Directors, in the furtherance of their duties, may also seek
independent professional advice at the expense of the Company. No Director took such advice during the financial year
u
nder review.
All Directors have access to the advice and services of the Company’s Secretaries, Aberforth Partners LLP, who are
responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are
c
omplied with. The Secretaries are also responsible for advising the Board through the Chairman on all governance
matters.
Conflicts of Interest
Company directors have a statutory obligation to avoid a situation in which they (and connected persons) have, or can have,
a direct or indirect interest that conflicts, or may possibly conflict, with the interests of the Company. The Board has in place
procedures for managing any actual or potential conflicts of interest. No interests conflicting with those of the Company
arose during the year under review.
Risk Management and Internal Control
The Board has overall responsibility for the Company’s risk management and internal control systems and for reviewing
their effectiveness. The Company applies the guidance published by the Financial Reporting Council on internal controls.
Internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve the business objective
and can provide only reasonable and not absolute assurance against material misstatement or loss. These controls aim to
ensure that the assets of the Company are safeguarded, that proper accounting records are maintained and that the
Company’s financial information is reliable. The Directors have a robust process for identifying, evaluating and managing
the significant risks faced by the Company, which are recorded in a risk matrix. As part of its risk process, the Board seeks
to identify emerging risks to ensure that they are effectively managed as they develop and are recorded in the risk matrix.
The Board considers each risk as well as reviewing the mitigating controls in place. Each risk is rated for its “likelihood” and
“impact” and the resultant numerical rating determines its ranking into High, Medium or Low Risk. The principal risks faced
by the Company and the Board’s approach to managing these are set on page 5. This process was in operation during the
reporting period and continues in place up to the date of this report. It principally involves the Audit Committee receiving
and examining regular reports from the main service providers. The Board then receives a detailed report from the Audit
Committee on its findings. Further information on internal control and risks is contained in the Audit Committee Report on
page 29. The Directors have not identified any significant failures or weaknesses in respect of the Company’s internal control
systems.
Communications with Shareholders
The Board places great importance on communication with Shareholders. Directors of the Company are available to meet
any Shareholder on request. The Managers meet the larger Shareholders twice a year to provide them with a detailed
report on the progress of the Company and to receive feedback. The Board receives reports from the Managers on these
Shareholder meetings. The Directors may be contacted via the Secretaries whose details are shown on the Corporate
Information page or through the Chairman’s email address, Angus.GordonLennox@aberforth.co.uk.
Shareholders have the opportunity, in normal circumstances, to attend the AGM where the Directors and Managers are
available to discuss important issues affecting the Company. Proxy voting figures are available at the AGM and via the
Managers’ website shortly thereafter. In addition to the annual and half yearly reports, daily Net Asset Values, monthly
factsheets and other relevant information are published at www.aberforth.co.uk.
26 Governance Report Aberforth Split Level Income Trust plc
Stewardship
Environmental, Social and Governance Oversight
The Board is encouraged that the Managers consistently and proactively engage with investee companies on
environmental, social and governance (‘ESG’) matters. It is recognised that these can be material to investment cases
a
nd therefore to the long term success of the Company. The Managers believe that sound ESG policies make good
business sense and make assessments of these factors in their company valuations and investment decisions. The
Managers do not exclude companies from their investment universe purely on the grounds of ESG considerations.
Instead, the Managers reflect these considerations in their target valuations for companies and adopt a positive
approach, engaging with company directors with the aim of improving operations, culture, profitability and, ultimately,
valuation. The Board supports Aberforth’s continued integration of ESG considerations into the investment process,
which reflects broader society’s increased awareness and its implications for companies’ actual and potential valuations.
UK Stewardship Code
The UK Stewardship Code, issued by the FRC, sets out the principles of effective stewardship by institutional investors.
The Company’s investment portfolio is managed by Aberforth Partners LLP who invest exclusively in small UK quoted
companies and, as a significant investor within this asset class, the Managers have a strong commitment to effective
stewardship. As early adopters of the UK Stewardship Code, the Managers have embraced the principles and were
recognised as an approved signatory of the code in September 2021. The Managers have also published on their website
more detailed supporting documents. These outline their Stewardship Policy, Investment Philosophy, Engagement and
Voting Framework, as well as providing examples of Engagement and Voting.
The Board has reviewed, and endorses, the Managers’ Stewardship Policy.
UN Principles For Responsible Investment ('UNPRI')
The Managers are also a signatory to, and participate in, the annual UNPRI assessment, the results of which are available
within the 'About Aberforth' section of the Managers' website, at www.aberforth.co.uk.
Voting Policy
The Board has given discretionary voting powers to the Managers to exercise the voting rights on every resolution that is
put to shareholders of the companies in which the Company is invested. The Board endorses the Managers’ voting
philosophy, which treats clients as part owners of the underlying companies. Exercising the rights, they vote on all matters
at all meetings. The Managers vote against resolutions that they believe may damage shareholders’ rights or economic
interests, which specifically includes consideration of environmental and social matters. Under normal circumstances these
concerns would have been raised with directors of the company concerned. The Board receives quarterly reports from the
Managers on governance issues, including voting, pertaining to investee companies.
Activity during the Company's year
The Board reviewed the Managers’ engagement activity and assessment during the year. The Managers conducted a survey
of investee companies to assess their approach to certain environmental and social issues. The results of the survey help
with the assessment of ESG influences on company valuations and to prioritise engagement. In an increasingly congested
regulatory environment for ESG rules, guidance and recommendations, the Managers have also developed a proprietary
methodology for the analysis of ESG factors relevant for each investment. This directs engagement activity and helps track
underlying investee company progress.
The Board welcomed Aberforth’s publication of its own Governance and Corporate Responsibility statement, which
provides information about the firm’s approach to ESG matters. The Board considered the applicability to the Company of
the Streamlined Energy & Carbon Reporting Statement (‘SECR’); however, such a disclosure would be meaningless, since
the Company has no direct employees and does not own, operate or lease any tangible assets. More relevant are the
Managers’ voluntary disclosures under SECR, which are included in their Governance and Corporate Responsibility
disclosures.
Policies and practices
Further detail on the Managers’ Stewardship and ESG policies and practices, including engagement examples and voting
disclosures, is available within the ‘About Aberforth’ section of the Managers’ website, at www.aberforth.co.uk.
By Order of the Board
Angus Gordon Lennox
Chairman
27 July 2022
Corporate Governance Report
Governance Report Aberforth Split Level Income Trust plc 27
Audit Committee Report
The Committee members are all independent non-executive directors who have been selected by the Board to fulfil
the Committee’s duties based upon their range of financial and commercial expertise. They are Graeme Bissett
(Chairman), Dominic Fisher and Lesley Jackson. The members’ biographies can be found on page 18.
Objective
The main objective of the Committee is to provide assurance to the Board as to the effectiveness of the Company’s
internal controls and the integrity of its financial records and externally published results. In doing so, the Committee
o
perates within terms of reference that have been agreed by the Board. These are reviewed annually and are available
upon request.
Principal Responsibilities
The Committee has been given the following principal responsibilities.
• Reviewing the Company’s financial statements, the accounting policies adopted and judgemental areas.
• Ensuring that the Annual Report, taken as a whole, is fair, balanced and understandable.
• Agreeing the external Auditor’s terms of appointment, determining the independence and objectivity of the
Auditor and assessing the effectiveness of the audit.
• Considering whether it is appropriate for certain non-audit services to be carried out by the Auditor.
• Reviewing the effectiveness of the Company’s internal control and risk management systems and monitoring the
mitigating controls that have been established.
• Monitoring compliance with the relevant statutory, regulatory and taxation requirements for a UK based
investment trust that is listed on the London Stock Exchange.
The Chairman reports formally to the Board on the Committee’s proceedings after each meeting. to
Audit Committee Annual Plan
To assist with the various duties of the Committee, a Meeting Plan has been adopted and is reviewed annually.
Meetings
Three meetings are usually held each year. Representatives of Aberforth, who provide the Company with secretarial
services, attend all of the meetings. Deloitte LLP (Deloitte), the external Auditor, attends the meetings in January and
July.
October
April
January July
Audit
Committee
Annual Plan
Internal
Controls
including
reports from
the Managers
and other
third parties
Risks &
Controls
Matrix
Investment Trust
Status
Cyber
Security
Measures
(Aberforth
Partners)
Half Yearly
Report
including
judgemental
areas, expense
analysis and
Half Yearly
Report
announcement
Audit meeting/
evaluation of
the audit
including auditor
independence
Risks &
Controls
Matrix
Investment
Trust Status
Audit Plan,
together with
the Terms of
Engagement
Annual Report
including
judgemental
areas, going
concern, expense
analysis and
Annual Report
announcement
Self evaluation
of the
Committee
Investment
Trust Status
Risks & Controls
Matrix
Corporate
Governance
Compliance
M
e
e
ti
n
g
to
b
e
c
al
l
e
d
i
f
re
q
u
i
re
d
Financial Reporting
T
he Committee’s business in January 2022 was focused on the preparation and content of the Half Yearly Report and Interim
Accounts, together with other aspects such as going concern and fair value of a suspended security, including supporting
documentation from the Secretaries. Preparation of the Interim Accounts to 31 December 2021 was required under the
Companies Act 2006 to support the payment of the first interim dividend. The 2021 Half Yearly Report was published on 25
January 2022 and was unaudited, as is customary for half yearly reports of investment trusts.
In July 2022, the Committee received a report and supporting presentation from the external Auditor on its audit of the Annual
Report and Financial Statements for the year to 30 June 2022. This included details of the steps taken by the Auditor to confirm
the valuation and ownership of the investment portfolio and recognition of income. In addition, the Secretaries reported on
the preparation of the financial results and other relevant matters. The Committee considered these reports in detail and its
conclusions were further supported by the risk and controls reviews discussed below. The Chairman of the Committee had
discussed the outcome of the audit process and the Annual Report with the audit partner without representatives of the
Managers being present.
As part of its review of the financial statements, the Committee considered the following
significant issues.
The Committee read and discussed this Annual Report and concluded that, taken as a whole, it is fair, balanced and
understandable and provides the information necessary for Shareholders to assess the Company’s performance, investment
objective and strategy. As a result, the Committee agreed that it would recommend to the Board that the Annual Report be
approved for publication.
Going Concern and Viability Statement
The Committee received reports on going concern from the Secretaries in January and July, reflecting the guidance published
by the Financial Reporting Council. These reports included assessment of the impact of Covid-19 on the Company. The content
of the investment portfolio, trading activity and portfolio diversification were also discussed. After due consideration, the
Committee concluded it was appropriate to prepare the Company’s accounts on a going concern basis and made this
recommendation to the Board. The relatively low working capital requirements and the levels of liquidity of the portfolio were
the main factors that led to this conclusion.
The Committee also assessed the viability of the Company including, in July 2022, a series of stress tests that considered the
impact of severe market downturn scenarios on Shareholders’ funds and investment income and the impact of losing
investment trust status. The Committee concluded that it was appropriate to provide a Viability Statement for a five year period
for the reasons set out in the Statement on page 7 and recommended adoption of the Viability Statement to the Board.
Audit Committee Report
28 Governance Report Aberforth Split Level Income Trust plc
Matter Considered and Action taken by the Committee
Significant Issue How the issue was addressed
Ownership and valuation of
the investment portfolio as
at 30 June 2022
The Committee reviewed the Managers’ control framework, which includes controls over
valuation and ownership of investments. The appointed Depositary is responsible for
holding and controlling all assets of the Company entrusted for safekeeping. Ownership of
investments is verified through reconciliations by the Managers to Custodian records. The
Committee reviewed internal control reports from the Company’s Custodian. The
valuation of the portfolio is undertaken in accordance with the accounting policy for
investments as stated in Note 1 to the financial statements.
Revenue recognition including
dividend completeness and
the accounting treatment of
special dividends
The Committee reviewed the Managers’ control framework, which includes controls over
revenue recognition. The Committee reviewed actual and forecast revenue entitlement at
each meeting. The accounting treatment of all special dividends was reviewed by the
Committee and the external Auditor.
Investment Trust Status
The Committee confirmed the position of the Company in respect of compliance with
investment trust status at each meeting with reference to a checklist prepared by the
Secretaries. The position was also confirmed by the external Auditor as part of the audit
process.
Calculation of
management fees
The Committee reviewed the Managers’ internal control framework, which includes
controls over expenses, including management fees. The Committee reviewed
management fees payable to the Manager. The external Auditor independently
recalculated the management fees as part of the audit and no exceptions were reported.
Impact of pandemic on
the Company
The Committee considered the impact of Covid-19 on the Company’s financial statements
and the references in the Annual Report, including those contained in the ‘Principal Risks’,
‘Going Concern’ and ‘Managers’ Report’ sections.
During the last reporting period the Committee focused on the areas described below.
Governance Report Aberforth Split Level Income Trust plc 29
Audit Committee Report
Graeme Bissett
Audit Committee Chairman
27 July 2022
Matter Considered and Action taken by the Committee
Principal Risks and Controls, together with Cyber Security
The Committee carefully considered a matrix of the Company’s principal risks and the mitigating controls at each meeting. In
October 2021 the risks and controls were addressed in more detail. The Committee further enhanced the content of the matrix
during the reporting period. This included updating risk ratings where appropriate and adding inflation and supply-chain
pressures to the market risks category in the matrix. The Committee also considered identification and inclusion of emerging
r
isks and assessed the Company's risks using an alternative risk lens to review and validate the matrix. The Committee believes
that the matrix continues to reflect accurately the Company’s principal risks. These risks, which are detailed on page 5 of this
Report, changed during the reporting period and the Committee's scrutiny of the response to the risks has adapted accordingly.
I
n October 2021 the Committee received the Managers’ report on internal controls, including an assurance report issued by
PricewaterhouseCoopers LLP (PwC) on the nature and effectiveness of the control framework that has been established by the
Managers. A representative of PwC attended the meeting. In addition, the Committee received internal control reports from
the custodian, Northern Trust, and the registrar, Link Group. The Committee reviewed these reports, including the independent
audit opinions thereon, and concluded that there were no significant control weaknesses or other issues that needed to be
brought to the Board’s attention.
The Committee continues to monitor closely the increasing risk arising from cyber threats. In October 2021, the Committee
received presentations from Aberforth and their external service provider for cyber security, covering the measures that are in
place to protect the Managers’ systems and the Company information that these systems contain. The Committee noted the
assurances that have been given about the effectiveness of control measures. It concluded that, although cyber-attack
represents an increasing threat to companies and public bodies worldwide, the Company has taken all reasonable steps to
ensure that appropriate protection measures are in place. Nevertheless, this threat will continue to be monitored closely.
The Committee also discussed whether there was a need for a dedicated internal audit function. It concluded that, as the
Company has no employees and sub-contracts its principal operations to third party suppliers who are able to demonstrate the
effectiveness of their own internal control procedures, an internal audit function is not necessary.
External Audit, Audit Planning and Audit Fees
Deloitte was appointed as the Company’s auditor upon launch of the Company following a tender process. Based upon existing
legislation, another tender process would not be required until 2027; however, under the Company’s Articles, the Company’s
planned winding-up date is 1 July 2024. The Company is therefore in compliance with the provisions of “The Statutory Audit
Services for Large Companies Market Investigation” (Mandatory use of competitive tender processes and audit committee
responsibilities) Order 2014 as issued by the Competition & Markets Authority.
The external audit partner from Deloitte presented the detailed audit plan to the Committee in January in advance of the audit
of the 2022 Annual Report. The plan set out the scope of the audit, the principal risks that would be addressed (as detailed in
the Independent Auditor's Report), the timetable and the proposed fees. These amounted to £40,380, including VAT, in respect
of the Annual Report (2021: £36,000). The Committee considered the increase in line with general audit market trends. There
were no non-audit activities carried out by Deloitte.
Evaluation of the Auditor
Following the completion of the audit in July 2022, the Committee reviewed the Auditor’s effectiveness. The Committee
acknowledged that the audit team comprised staff with appropriate levels of knowledge and experience. The Committee noted
positive feedback from the Secretaries on Deloitte's performance of the audit. To ensure auditor independence, the external
audit partner will change for the 2022/23 financial year, in accordance with Deloitte's five-year rotation policy.
Taking these factors into account, the Committee was satisfied that the external audit was carried out effectively. It has
therefore recommended the re-appointment of Deloitte as the Company's auditor for the 2022/23 financial year. The Board
has given its support and a proposal will be put to Shareholders at the forthcoming AGM.
Committee Evaluation
A formal internal review of the Committee’s effectiveness, using an online evaluation questionnaire, was undertaken
during the year. The outcome was positive with no significant concerns expressed.
Directors’ Remuneration Policy
30 Governance Report Aberforth Split Level Income Trust plc
T
his section provides details of the remuneration policy applying to the Directors of the Company. All Directors are non-
executive, appointed under the terms of letters of appointment and none has a service contract. The Company has no
employees. The Board has prepared this report in accordance with the requirements of the Companies Act 2006.
This policy was approved by Shareholders at the AGM held in October 2021. The policy provisions continue to apply until they
are next put to Shareholders for approval, which must be at intervals not exceeding three years. This Policy, together with the
Directors’ letters of appointment, may be inspected at the Company’s registered office.
The Board considers and determines all matters relating to the Directors’ remuneration at the beginning of each financial year.
A Remuneration Committee has not been formed as all of the Directors are non-executive and considered independent.
Company’s Policy on Directors’ Remuneration
The Company’s policy is that the remuneration of the Directors should be commensurate with the duties and responsibilities
of the role and consistent with the requirement to attract and retain Directors of appropriate quality and experience. No
Shareholder has expressed any views to the Company in respect of Directors’ remuneration. Remuneration Policy is not subject
to employee consultation as the Company has no employees. It is intended that this policy will remain in place for the following
financial year and subsequent periods.
The Board, at its discretion, will determine Directors’ remuneration subject to the aggregate annual fee limit set out in the
Company’s Articles of Association. The present limit is £200,000 per annum and this may not be changed without seeking
Shareholder approval. Such remuneration solely comprised Directors’ fees as set out below and Directors are not eligible for
any other remuneration.
The table below sets out the annual fees paid to Directors in respect of the year to 30 June 2022 and the fees payable in respect
of the year to 30 June 2023. The fees payable to Directors in subsequent financial periods will be determined following an
annual review.
Loss of Office
A Director may be removed without notice and no compensation will be due on loss of office.
Expenses
All Directors are entitled to the reimbursement of expenses paid by them in order to perform their duties as a Director of the
Company.
Review of the Remuneration Policy
The Board has agreed to review the above policy at least annually to ensure that it remains appropriate.
Annual Fees Annual Fees
Year to Year to
30 June 2022 30 June 2023
£ £
Chairman of the Company 31,350 32,900
Director and Chairman of the Audit Committee 28,850 30,300
Director and Member of the Audit Committee 25,800 27,100
Director 24,500 25,700
Governance Report Aberforth Split Level Income Trust plc 31
Directors’ Remuneration Report
Introduction
The Board presents the Directors’ Remuneration Report for the year to 30 June 2022, which has been prepared in accordance
with the requirements of the Companies Act 2006. An ordinary resolution for the approval of this report will be put to
Shareholders at the forthcoming Annual General Meeting. The remuneration policy, which is subject to a triennial vote by
Shareholders, is set out on page 30. The law requires the Company’s Auditor to audit certain elements of this report and these
elements are described below as “Audited”. The Auditor’s opinion is included in the Independent Auditor’s Report on page 34.
Directors’ Letters of Appointment
In accordance with the Board’s policy, all Directors retire at the Annual General Meeting each year and, if appropriate, seek re-
e
lection. Accordingly, each Director has entered into a letter of appointment with the Company for an initial period to the date
of the first Annual General Meeting following appointment. Subject to election/re-election by Shareholders at the Annual
General Meeting and agreement by the Board, the appointment is renewed for a further period to the date of the subsequent
Annual General Meeting.
The terms also provide that a Director may be removed without notice and that no compensation will be due on loss of office.
The terms and conditions of appointment of Directors are available for inspection on request at the office of Aberforth Partners
LLP during normal business hours and at the registered office of the Company.
The following Directors held office during the year.
Directors’ Fees (Audited)
The emoluments of the Directors who served in the year from 1 July 2021 to 30 June 2022 were as follows.
Date of Date of
Director Appointment re-election
Angus Gordon Lennox, Chairman 19 April 2017
AGM 2022
Graeme Bissett 19 April 2017
AGM 2022
Dominic Fisher 19 April 2017
AGM 2022
Graham Menzies 19 April 2017
AGM 2022
Lesley Jackson 24 April 2019
AGM 2022
The following table shows the remuneration of the Directors in relation to distributions to Shareholders by way of dividends.
Absolute
2022 2021 Change
£’000 £’000 £’000
Total Directors’ remuneration 136 136 0
Total dividends in respect of the year 8,656 5,802 2,854
Angus Gordon Lennox, Chairman 31,350 31,350
Graeme Bissett, Chairman of the Audit Committee 28,850 28,850
Dominic Fisher 25,800 25,800
Graham Menzies 24,500 24,500
Lesley Jackson 25,800 25,428
136,300 135,928
Directors are remunerated exclusively by fixed fees and do not receive bonuses, share options, pension contributions or other
benefits apart from the reimbursement of allowable expenses.
Fees Fees
2022 2021
Director £ £
Directors’ Remuneration Report
32 Governance Report Aberforth Split Level Income Trust plc
Statement of Directors’ Shareholdings and Share Interests (Audited)
The Directors who held office at any time during the year to 30 June 2022 and their interests (in respect of which transactions
are notifiable to the Company) in the Shares of the Company as at 30 June 2022 were as follows.
Directors Nature of Interest Share Class 30 June 2022 30 June 2021
Angus Gordon Lennox Beneficial Ordinary Shares 619,738 619,738
Graeme Bissett Beneficial Ordinary Shares 84,404 55,058
Beneficial ZDP Shares 6,000 6,000
Dominic Fisher Beneficial Ordinary Shares 298,328 185,259
Lesley Jackson Beneficial Ordinary Shares 34,305 32,728
Graham Menzies Beneficial Ordinary Shares 478,786 348,036
Non-beneficial Ordinary Shares 62,835 62,835
There has been no change in the beneficial or non-beneficial holdings of the Directors between 30 June 2022 and 27 July
2022. The Company has no share options or share schemes. Directors are not required to own Shares in the Company.
Consideration of Shareholders' Views and Statement of Voting
An ordinary resolution to approve the Directors’ Remuneration Report is put to members at each Annual General
Meeting. At the Annual General Meeting held on 28 October 2021, Shareholders, on a show of hands, passed the
resolution to approve the Directors' Remuneration Report: of the 70,364,882 proxy votes, 69,394,816 were cast in
favour, 136,592 were cast against, 815,481 were discretionary and 17,993 were withheld. At the Annual General Meeting
held on 28 October 2021, Shareholders, on a show of hands, passed the resolution to approve the Directors'
Remuneration Policy: of the 70,364,882 proxy votes, 69,394,816 were cast in favour 136,592 were cast against, 815,481
were discretionary and 17,993 were withheld. To date, no Shareholders have commented in respect of the Directors’
Remuneration Report or Policy.
Performance Graph
The adjacent graph compares the performance of
the Ordinary Share price with the Numis Smaller
Companies Index (excluding investment
companies) on a total return basis (assuming all
dividends reinvested). The index has been
selected since it represents the universe of
companies in which the Company may invest.
However, the more important influence on the
share price performance of the Ordinary Shares
over the Company’s lifetime is likely to be its
success in meeting the investment objective, as
described on page 1. Specifically, the portfolio
must generate a high level of income and
sufficient capital growth to pay the final
entitlement of the ZDP Shareholders and the
costs incurred by the Company. The main
influences on performance over the year are
described in the Managers' Report.
Annual Statement
On behalf of the Board, I confirm that the above Directors’ Remuneration Report summarises, as appropriate, for the year to
30 June 2022:
(a) the major decisions on Directors’ remuneration;
(b) any substantial changes relating to Directors’ remuneration made during the year; and
(c) the context in which those changes occurred and decisions have been taken.
On behalf of the Board,
Angus Gordon Lennox
Chairman
27 July 2022
Jun-17 Jun-18Dec 17 Dec 18 Dec 19 Dec 20 Dec 21Jun-19 Jun-21 Jun-22Jun-20
Ordinary Share Price
Total return performance since launch
NSCI (XIC)
-60%
-50%
-40%
-20%
-30%
-10%
0%
10%
20%
40%
50%
30%
7.4%
-19.1%
Governance Report Aberforth Split Level Income Trust plc 33
Directors’ Responsibility Statement
The Directors are required to prepare financial statements for each financial period in accordance with applicable law and
regulations. The Directors are also required to prepare a Strategic Report, Directors’ Report, Corporate Governance Statement
and Directors’ Remuneration Report.
The Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (Financial Reporting Standard 102 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 these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed
and explained in the financial statements; 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 responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions, that disclose with reasonable accuracy at any time the financial position of the Company and
that enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the
Companies Act 2006. They 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 Annual Report is published on www.aberforth.co.uk. This website is maintained by Aberforth and its integrity is, so
far as it relates to the Company, the responsibility of Aberforth. The work carried out by the Auditor does not involve
consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for
any changes that have occurred to the financial statements since they were initially presented on the website. Visitors
to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of
the financial statements may differ from legislation in other jurisdictions.
Declaration
The Directors who were in office at the date of approving these financial statements, and who are listed on page 18,
confirm to the best of their knowledge that:
• the financial statements, which have been prepared in accordance with applicable accounting standards, give a true
and fair view of the assets, liabilities, financial position and profit/loss of the Company;
• the Strategic Report includes a fair review of the development and performance of the business and financial
position of the Company, together with a description of the principal risks and uncertainties that it faces; and
• the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company’s performance, business model and strategy.
On behalf of the Board
Angus Gordon Lennox
Chairman
27 July 2022
34 Financial Report Aberforth Split Level Income Trust plc
Independent Auditor’s Report
To the Members of Aberforth Split Level Income Trust plc
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting
included:
• assessing the Directors’ considerations regarding whether they consider it appropriate to adopt the going concern basis of
accounting;
• assessing the relevance and reliability of underlying data and key assumptions, such as cash flows and liquidity assumptions used
in the prepared forecasts, and evaluating management's viability and stress testing papers;
• evaluated management’s plans for future actions in relation to their going concern assessment; and
• assessing the appropriateness of the going concern disclosures in the financial statements.
K
e
y
audi
t
mat
t
e
r
s
M
at
e
r
i
al
i
t
y
S
co
pi
ng
Significant changes
i
n our
appr
oac
h
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements
section of our report.
We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit
services prohibited by the FRC’s Ethical Standard were not provided to the company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3.
Sum
m
ary
of
our
audit
approach
The key audit matter that we identified in the current year was valuation and ownership of quoted
investments.
The materiality that we used in the current year was £1.38m which was determined as 1% of net assets.
Audit work to respond to the risks of material misstatement was performed directly by the audit
engagement team.
There have been no significant changes in our audit approach for the current year.
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Aberforth Split Level Income Trust plc (the ‘company’):
• give a true and fair view of the state of the company’s affairs as at 30 June 2022 and of its loss for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial
Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” and the Statement of
Recommended Practice issued by the Association of Investment Companies in April 2021 “Financial Statements of Investment
Trust Companies and Venture Capital Trusts; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
W
e have audited the financial statements which comprise:
• the income statement;
• the reconciliation of movement in shareholders’ funds;
• the balance sheet;
• the cash flow statement; and
• the related notes 1 to 23.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”
(United Kingdom Generally Accepted Accounting Practice) and the Statement of Recommended Practice issued by the Association of
Investment Companies (‘SORP’) in April 2021 “Financial Statements of Investment Trust Companies and Venture Capital Trusts.
Financial Report Aberforth Split Level Income Trust plc 35
Independent Auditor’s Report
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
5.1. Key audit matter (Valuation and Ownership of Quoted Investments)
Key audit matter
description
The quoted investments of the company of £193.1m (2021: £235.4m) are key to its performance and
account for the majority of the total assets, at 30 June 2022 98.8% (2021: 99.3%). Quoted investments are
valued at their fair value, which is represented by the market bid price. Please see Accounting Policy 1(b)
and note 11.
Investments listed on recognised exchanges are valued at the closing bid price at the year end.
There is a risk that the investments disclosed in the Accounts may not represent the property of the
Company. Given the nature and size of the balance and its importance to the entity, we have considered
that there is a potential risk of fraud in this area.
The description of this key audit matter should be read in conjunction with significant issues considered by
the Audit Committee on page 28.
How the scope of
our audit responded
to the key audit
matter
We have performed the following procedures to test the valuation and ownership of quoted investments
at 30 June 2022:
• Obtained an understanding of the controls over valuation and ownership of quoted investments;
• Agreed 100% of the Company’s investment portfolio at the year-end to confirmations received directly
from the depositary;
• Independently agreed 100% of the bid prices of quoted investments on the investment ledger at year
end to closing bid prices published by an independent pricing source; and
• Inspected the internal controls report over the custodian to obtain an understanding of relevant
controls.
In addition to the above, we also tested the recording of a sample of purchases and sales of listed
investments and reviewed the appropriateness of relevant disclosures.
Key observations
Based on the work performed we concluded that the valuation and ownership of quoted investments is
appropriate.
4. Conclusions relating to going concern (continued)
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the company has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
36 Financial Report Aberforth Split Level Income Trust plc
Independent Auditor’s Report
7. An overview of the scope of our audit
7.1. Scoping
Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control and assessing the
risks of material misstatement through quantitative and qualitative factors relating to each account balance, class of transactions
and disclosure. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.
7.2. Our consideration of the control environment
As part of our risk assessment, we assessed the control environment in place at Aberforth Partners LLP (the Managers and
Secretaries) to the extent relevant to our audit. This was achieved through review of the Aberforth Partners LLP controls report. As
part of this we relied upon the controls report and adopted a controls reliance approach with respect to valuation and existence of
investments.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the business and its financial statements. The
company continues to develop its assessment of the potential impacts of environmental, social and governance (“ESG”) related risks,
including climate change, as outlined on page 26. As a part of our audit, we held discussions to understand the process of identifying
climate-related risks and the impact on the Company’s financial statements. We have read the annual report to consider whether
they are materially consistent with the financial statements and our knowledge obtained in the audit.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole. Performance materiality was set at 70%
of materiality for the 2022 audit (2021: 70%). In determining performance materiality, we considered the following factors:
a. the quality of the control environment over financial reporting; and
b. there have been no uncorrected misstatements noted in audits during prior years.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £69,500 (2021:
£91,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report
to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
£1.38m (2021: £1.82m)
1% (2021: 1%) of net assets
Net assets has been chosen as the benchmark as it is the main focus for investors and is a
key driver of shareholder value. Additionally, it is the standard industry benchmark for
materiality for investment trusts.
Materiality
Basis of determining
materiality
Rationale for the benchmark
applied
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Financial Report Aberforth Split Level Income Trust plc 37
Independent Auditor’s Report
8. Other information
The other information comprises the information included in the annual report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained in the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our auditor’s report.
We have nothing to report in this regard.
11. Extent to w
hic
h the audit w
as
c
ons
idered c
apable of detec
ting irregularities
, inc
luding fraud
Irreg
ula
rit
ies,
including
fra
ud,
a
re inst
a
nces of non-complia
nce w
it
h la
w
s a
nd reg
ula
t
ions. We desig
n procedures in line w
it
h our
responsibilit
ies,
out
line
d
a
bove,
t
o
det
ect
ma
t
eria
l
misst
a
t
eme
nt
s
in
re
spect
of
irreg
ula
rit
ie
s,
including
fra
ud.
T
he
ext
ent
t
o
w
hich
our
procedures
a
re
ca
pa
ble
of
det
e
ct
ing
irreg
ula
rit
ies,
including
fra
ud
is
det
a
iled
below
.
11.
1.
I
de
n
tif
yin
g
and
asse
ssing
po
te
ntial
risk
s
re
late
d
to
irre
gularitie
s
In
ide
nt
ify
ing
a
nd
a
ssessing
risk
s
of
ma
t
eria
l
misst
a
t
ement
in
respect
of
irre
g
ula
rit
ies,
including
fra
ud
a
nd
non-complia
nce
w
it
h
la
w
s
a
nd
reg
ula
t
ions,
w
e
conside
re
d
t
he
follow
ing
:
•
t
he na
t
ure
of t
he
indust
ry
a
nd sect
or,
cont
rol environment
a
nd business performa
nce including
t
he desig
n of t
he compa
ny
’
s
remunera
t
ion
policies,
k
ey
drivers
for
dire
ct
ors’
a
nd
t
he
Ma
na
g
er’
s,
re
munera
t
ion
a
nd
performa
nce
t
a
rg
e
t
s;
•
result
s
of
our
enquiries
of
t
he
Ma
na
g
ers
a
nd
t
he
a
udit
commit
t
ee
a
bout
t
heir
ow
n
ident
ifica
t
ion
a
nd
a
ssessment
of
t
he
risk
s
of
irre
gularitie
s;
•
any ma
t
ters
we identi
fi
ed ha
vi
ng obt
ai
ned a
nd reviewed the company’s documentation of their policies and procedures relating to
:
–
identifying, e
v
aluating and co
m
plying w
ith laws and regulations and whether they were aware of any instances of non-
com
pliance
;
–
de
te
cting
and re
sponding to
the
risks o
f fraud and whether they have knowledge of any actual, suspected or alleged fraud;
–
the
inte
rnal controls e
stablishe
d to
m
itigate
risks of fraud or non-compliance with laws and regulations;
•
the
m
atte
rs discusse
d am
ong the
audit e
ngagement team regarding how and where fraud might occur in the financial
state
me
nts and any po
te
ntial indicators o
f fraud.
As a re
sult of the
se
proce
dure
s, w
e
conside
re
d the
opportunities and incentives that may exist within the organisation for fraud and
ide
ntifie
d the
gre
ate
st pote
ntial for fraud in the
valuation and ownership of quoted investments. In common with all audits under
ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the company operates in, focusing on provisions of
those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules and UK tax
legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the company’s ability to operate or to avoid a material penalty. This included the
requirements of the United Kingdom’s Financial Conduct Authority (FCA).
38 Financial Report Aberforth Split Level Income Trust plc
Independent Auditor’s Report
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have
not identified any material misstatements in the strategic report or the directors’ report.
11.2. Audit response to risks identified
As a result of performing the above, we identified valuation and ownership of quoted investments as the key audit matter related to
the potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also describes the
specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
• enquiring of management and the audit committee concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
m
isstatement due to fraud;
• reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC and the FCA; and
•
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, and
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
13. Cor
por
ate Gover
nance Statement
Th
e
Lis
t
in
g
Ru
le
s
r
e
q
u
ir
e
u
s
t
o r
e
v
ie
w
t
h
e
d
ir
e
c
t
or
s
'
s
t
a
t
e
me
n
t
in
r
e
la
t
ion
t
o g
oin
g
c
on
c
e
r
n
, lon
g
e
r
-t
e
r
m v
ia
b
ilit
y a
n
d
t
h
a
t
p
a
r
t
of t
h
e
C
or
p
or
a
t
e
Gov
e
r
n
a
n
c
e
St
a
t
e
me
n
t
r
e
la
t
in
g
t
o t
h
e
c
omp
a
n
y’s
c
omp
lia
n
c
e
w
it
h
t
h
e
p
r
ov
is
ion
s
of t
h
e
U
K
C
or
p
or
a
t
e
Gov
e
r
n
a
n
c
e
C
od
e
s
p
e
c
ifie
d
for
ou
r
r
e
v
ie
w
.
Ba
s
e
d
on
t
h
e
w
or
k
u
n
d
e
r
t
a
ke
n
a
s
p
a
r
t
of
ou
r
a
u
d
it
,
w
e
h
a
v
e
c
on
c
lu
d
e
d
t
h
a
t
e
a
c
h
of
t
h
e
follow
in
g
e
le
me
n
t
s
of
t
h
e
C
or
p
or
a
t
e
Gov
e
r
n
a
n
c
e
St
a
t
e
me
n
t
is
ma
t
e
r
ia
lly
c
on
s
is
t
e
n
t
w
it
h
t
h
e
fin
a
n
c
ia
l
s
t
a
t
e
me
n
t
s
a
n
d
ou
r
kn
ow
le
d
g
e
ob
t
a
in
e
d
d
u
r
in
g
t
h
e
a
u
d
it
:
•
the di
rectors
’
s
tatement wi
th regards
to the
appropriateness of adopting the going concern basis of accounting and any material
uncertai
nties
i
denti
fi
ed
s
et
out
on
page
2
1
;
•
the
di
rectors’ explanati
on as
to its as
ses
sment of the company’s prospects, the period this assessment covers and why the
peri
od
i
s
appropriate set out on
page
2
1;
•
the
di
recto
rs
'
statement
on
fai
r,
bal
anc
ed
and
understandable set out on page 33;
•
the
board’
s
confi
rmati
on
that
i
t
has
carri
ed
out
a robust assessment of the emerging and principal risks set out on page 25;
•
the s
ecti
on of the annual
report that des
cri
bes the review of effectiveness of risk management and internal control systems set
out
on
page
2
5
;
and
•
the
s
ecti
on
des
c
ri
bi
ng
the
work
of
the
audi
t
c
ommittee set out on page 27.
Financial Report Aberforth Split Level Income Trust plc 39
Independent Auditor’s Report
Andrew Partridge CA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Edinburgh, United Kingdom
27 July 2022
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
14. Matter
s
on
w
h
i
c
h
w
e
ar
e
r
eq
u
i
r
ed
to
r
ep
or
t
b
y
ex
c
ep
ti
on
1
4
.
1
.
A
d
eq
u
a
cy
o
f
exp
la
n
a
t
io
n
s
r
ec
eived
a
n
d
a
c
co
u
n
t
in
g
r
ec
o
r
d
s
U
n
d
e
r
t
h
e
C
omp
a
n
ie
s
A
c
t
2
0
0
6
w
e
a
r
e
r
e
q
u
ir
e
d
t
o
r
e
p
or
t
t
o
y
ou
if
,
in
ou
r
op
in
ion
:
• w
e
h
a
v
e
n
ot
r
e
c
e
iv
e
d
a
ll
t
h
e
in
f
or
ma
t
ion
a
n
d
e
xp
la
n
a
t
ion
s
w
e
r
e
q
u
ir
e
f
or
ou
r
a
u
d
it
;
or
• a
d
e
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15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the audit committee, we were appointed by the board of directors on 8 December 2017 to audit
the financial statements for the period ending 30 June 2018 and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments of the firm is 5 years, covering the periods ending 30 June 2018 to 30
June 2022.
15.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with
ISAs (UK).
We have nothing to report in respect of these matters.
We have nothing to report in respect of these matters.
40 Financial Report Aberforth Split Level Income Trust plc
Income Statement
Year to 30 June 2022
Year to 30 June 2022 Year to 30 June 2021
Revenue Capital Total Revenue Capital Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Net (losses)/gains on investments 11 – (41,748) (41,748) – 86,522 86,522
Investment income 3 10,024 – 10,024 6,258 – 6,258
Investment management fee 4 (521) (1,216) (1,737) (395) (921) (1,316)
Portfolio transaction costs 6 – (329) (329) – (285) (285)
Other expenses 5 (335) – (335) (316) – (316)
Net return before finance costs and tax 9,168 (43,293) (34,125) 5,547 85,316 90,863
Finance costs:
Appropriation to ZDP Shares 7 – (1,956) (1,956) – (1,889) (1,889)
Interest expense and overdraft fee 7 (3) (6) (9) (3) (6) (9)
Return on ordinary activities before tax 9,165 (45,255) (36,090) 5,544 83,421 88,965
Tax on ordinary activities 8 (22) – (22) (22) – (22)
Return attributable to Equity Shareholders 9,143 (45,255) (36,112) 5,522 83,421 88,943
Returns per Ordinary Share 10 4.81p (23.79)p (18.98)p 2.90p 43.85p 46.75p
The Board declared on 27 July 2022 a second interim dividend of 2.79p per Ordinary Share and a special dividend of 0.25p per
Ordinary Share. The Board also declared on 25 January 2022 an interim dividend of 1.51p per Ordinary Share.
The total column of this statement is the profit and loss account of the Company. All revenue and capital items in the above
statement derive from continuing operations. No operations were acquired or discontinued in the period. A Statement of
Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.
The accompanying notes form an integral part of this statement.
Financial Report Aberforth Split Level Income Trust plc 41
Reconciliation of Movements in Shareholders’ Funds
Year to 30 June 2022
Share Special Capital Revenue
capital reserve reserve reserve Total
Note £’000 £’000 £’000 £’000 £’000
Balance as at 30 June 2021 1,902 187,035 (12,365) 5,417 181,989
R
eturn on ordinary activities after tax – – (45,255) 9,143 (36,112)
Equity dividends paid 9 – – – (6,925) (6,925)
Balance as at 30 June 2022 1,902 187,035 (57,620) 7,635 138,952
The accompanying notes form part of these financial statements.
Year to 30 June 2021
Share Special Capital Revenue
capital reserve reserve reserve Total
Note £’000 £’000 £’000 £’000 £’000
Balance as at 30 June 2020 1,902 187,035 (95,786) 6,801 99,952
Return on ordinary activities after tax – – 83,421 5,522 88,943
Equity dividends paid 9 – – – (6,906) (6,906)
Balance as at 30 June 2021 1,902 187,035 (12,365) 5,417 181,989
The accompanying notes form an integral part of this statement.
42 Financial Report Aberforth Split Level Income Trust plc
Balance Sheet
As at 30 June 2022
30 June 30 June
2022 2021
Note £’000 £’000
Fixed assets
Investments at fair value through profit or loss 11 193,062 235,448
Current assets
Debtors 12 755 416
Cash at bank 18 1,590 1,200
2,345 1,616
Creditors (amounts falling due within one year) 13 (62) (638)
Net current assets 2,283 978
TOTAL ASSETS LESS CURRENT LIABILITIES 195,345 236,426
Creditors (amounts falling due after more than one year)
ZDP Shares 14 (56,393) (54,437)
TOTAL NET ASSETS 138,952 181,989
CAPITAL AND RESERVES: EQUITY INTERESTS
Share capital:
Ordinary Shares 15 1,902 1,902
Reserves:
Special reserve 17 187,035 187,035
Capital reserve 17 (57,620) (12,365)
Revenue reserve 17 7,635 5,417
TOTAL SHAREHOLDERS’ FUNDS 138,952 181,989
Net Asset Value per Ordinary Share 16 73.04p 95.66p
Net Asset Value per ZDP Share 16 118.57p 114.46p
Approved and authorised for issue by the Board of Directors on 27 July 2022 and signed on its behalf by:
Angus Gordon Lennox
Chairman
Company Number: 10730910.
Registered in England and Wales.
Financial Report Aberforth Split Level Income Trust plc 43
Cash Flow Statement
For the year to 30 June 2022
Year to Year to
30 June 2022 30 June 2021
Note £’000 £’000
Operating activities
Net revenue before finance costs and tax 9,168 5,547
Stock dividends 3 – (328)
Tax (withheld) from income (20) (22)
Investment management fee charged to capital 4 (1,216) (921)
(Increase)/decrease in debtors (excluding stock dividends receivable) (421) 22
Increase/(decrease) in creditors 9 (2)
Cash inflow from operating activities 7,520 4,296
Investing activities
Purchases of investments excluding transaction costs (41,203) (35,708)
Sales of investments excluding transaction costs 41,007 39,437
Cash (outflow)/inflow from investing activities (196) 3,729
Financing activities
Equity dividends paid 9 (6,925) (6,906)
Interest and fees paid 7 (9) (9)
Cash outflow from financing activities (6,934) (6,915)
Change in cash during the period 390 1,110
Cash at the start of the period 1,200 90
Cash at the end of the period 1,590 1,200
The accompanying notes form an integral part of this statement.
44 Financial Report Aberforth Split Level Income Trust plc
Notes to the Financial Statements
1 Significant Accounting Policies
A summary of the principal accounting policies adopted, all of which have been applied consistently throughout the period, is
set out below.
(a) Basis of accounting
The financial statements have been presented under Financial Reporting Standard 102 (FRS 102) and the AIC’s Statement of
Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (SORP) issued in
2021. The financial statements have been prepared on a going concern basis under the historical cost convention, modified to
include the revaluation of the Company’s investments as described below. The Directors’ assessment of the basis of going
concern is described on page 21. The functional and presentation currency is pounds sterling, which is the currency of the
environment in which the Company operates. The Board confirms that no significant accounting judgements or estimates have
been applied to the financial statements and therefore there is not a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
(b) Investments
The Company’s investments have been categorised as “financial assets at fair value through profit or loss” as the Company’s
business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
Quoted investments are valued at their fair value, which is represented by the bid price. Where trading in the securities of an
investee company is suspended, the investment is valued at the Board’s estimate of its fair value. Purchases and sales of
investments are accounted for on trade date. Gains and losses arising from changes in fair value are included in the capital
return for the period and transaction costs on acquisition or disposal of a security are expensed to the capital reserve.
(c) Income
Dividends receivable on quoted equity shares are accounted for on the ex dividend date as revenue, except where, in the
opinion of the Board, the dividend is capital in nature, in which case it is treated as a return of capital. Where the Company has
received its dividends in the form of additional shares rather than in cash, an amount equivalent to the cash dividend is
recognised as income. Any surplus or deficit in the value of the shares received compared with the cash dividend forgone is
recognised as capital. Other income is accounted for on an accruals basis.
(d) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged to revenue except as follows:
• expenses that are incidental to the acquisition and disposal of an investment are charged to capital; and
• expenses are charged to the capital reserve where a connection with the maintenance or enhancement of the value of
the investments can be demonstrated, in which respect the investment management fee and finance costs incurred in
connection with the overdraft facility have been allocated 70% to capital reserve and 30% to revenue reserve.
(e) Finance costs
The ZDP Shares are designed to provide a pre-determined capital growth from their original issue price of 100p on 30 June 2017
to a final capital entitlement of 127.25p on 1 July 2024, on which date the Company is planned to be wound up. The final capital
entitlement of 127.25p per ZDP Share represents a gross redemption yield of 3.5% per annum over the life of the ZDP Shares,
based on the issue price of 100p. No dividends are payable on the ZDP Shares. The provision for the capital growth entitlement
of the ZDP Shares is included as a finance cost and charged to capital within the Income Statement. Finance costs incurred in
connection with the overdraft facility are accounted for on an accruals basis.
(f) Capital reserve
The following are accounted for in this reserve:
• gains and losses on the realisation of investments;
• increases and decreases in the valuation of investments held at the period end;
• gains on the return of capital by way of investee companies paying dividends that are capital in nature; and
• expenses, together with the related taxation effect, charged in accordance with the above policies.
(g) Special reserve
This reserve may be treated as distributable profits for all purposes, including the payment of dividends to Ordinary
Shareholders and the buy-back of shares, provided, in both cases, that the final cumulative cover of the ZDP Shares does not
fall below 3.3 times immediately following any distribution to the Ordinary Shareholders from this reserve.
(h) Revenue reserve
Dividends can be funded from this reserve.
Financial Report Aberforth Split Level Income Trust plc 45
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Year to 30 June 2022 Year to 30 June 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Year to Year to
30 June 2022 30 June 2021
£’000 £’000
Year to 30 June 2022 Year to 30 June 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
8 Taxation
UK corporation tax charge for the period – – – – – –
Factors affecting current tax charge for the period
The tax assessed for the period is lower than the standard rate of corporation tax in the UK for a large company. The differences
are explained below.
Returns on ordinary activities before tax 9,165 (45,255) (36,090) 5,544 83,421 88,965
Notional corporation tax at 19% (2021: 19%) 1,741 (8,598) (6,857) 1,053 15,850 16,903
Adjusted for the effects of:
Non-taxable UK dividend income (1,694) – (1,694) (988) – (988)
Non-taxable overseas dividend income (210) – (210) (82) – (82)
Non-taxable capital losses/(gains) – 7,932 7,932 – (16,439) (16,439)
Expenses not deductible for tax purposes – 63 63 – 54 54
Excess expenses for which no relief has been taken 163 603 766 17 535 552
UK corporation tax charge for the year – – – – – –
Overseas taxation suffered 22 – 22 22 – 22
Total tax charge for the year 22 – 22 22 – 22
The Company has not recognised a potential asset for deferred tax of £1,664,000 (2021: £1,269,000) in respect of unutilised
management expenses because it is unlikely that there will be suitable taxable profits from which the future reversal of a
deferred tax asset may be deducted.
46 Financial Report Aberforth Split Level Income Trust plc
Notes to the Financial Statements
6 Portfolio Transaction costs
Expenses incurred in acquiring or disposing of investments classified at fair value through profit or loss are charged to capital
and are analysed below.
Analysis of total purchases
Purchase consideration before expenses 40,342 36,416
Commissions 84 65
Taxes 192 140
Total purchase expenses (a) 276 205
Total purchase consideration 40,618 36,621
Analysis of total sales
Sales consideration before expenses 40,980 39,489
Commissions (b) (53) (80)
Total sale proceeds net of expenses 40,927 39,409
Total transaction costs (a+b) 329 285
7 Finance Costs
Appropriation to ZDP Shares – 1,956 1,956 – 1,889 1,889
Overdraft facility – fee and interest 3 6 9 3 6 9
Total 3 1,962 1,965 3 1,895 1,898
Year to 30 June 2022 Year to 30 June 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Analysis of tax charged on return on ordinary activities
Year to 30 June 2022 Year to 30 June 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Year to Year to
30 June 2022 30 June 2021
£’000 £’000
Financial Report Aberforth Split Level Income Trust plc 47
9 Dividends paid
Amounts recognised as distributions to equity holders:
Second interim dividend for year ended 30 June 2020 of 2.71p (paid on 28 August 2020) – 5,156
First interim dividend for year ended 30 June 2021 of 0.92p (paid on 9 March 2021) – 1,750
Second interim dividend for year ended 30 June 2021 of 2.13p (paid on 27 August 2021) 4,052 –
First interim dividend for year ended 30 June 2022 of 1.51p (paid on 8 March 2022) 2,873 –
Total 6,925 6,906
The second interim dividend for the year ended 30 June 2022 of 2.79p (2021: 2.13p) per Ordinary Share, and the special dividend
for the year to 30 June 2022 of 0.25p (2021: nil) per Ordinary Share, are both payable on 26 August 2022 and have not been
recognised in the financial statements as at 30 June 2022. Deducting the second interim dividend and the special dividend from
the Company's revenue reserves at 30 June 2022 leaves revenue reserves equivalent to 0.97p per Ordinary Share.
10 Returns per Share
Net return for the period (£36,112,000) £88,943,000
Weighted average Ordinary Shares in issue during the period 190,250,000 190,250,000
Return per Ordinary Share (18.98)p 46.75p
Appropriation to ZDP Shares for the period £1,956,000 £1,889,000
Weighted average ZDP Shares in issue during the period 47,562,500 47,562,500
Return per ZDP Share 4.11p 3.97p
There are no dilutive or potentially dilutive shares in issue.
11 Investments held at fair value through profit or loss
Investments at fair value through profit or loss
Opening fair value 235,448 151,999
Opening fair value adjustment (9,102) 78,901
Opening book cost 226,346 230,900
Purchases at cost 40,342 36,416
Sale proceeds (40,980) (39,489)
Realised gains/(losses) on sales 6,186 (1,481)
Closing book cost 231,894 226,346
Closing fair value adjustment (38,832) 9,102
Closing fair value 193,062 235,448
All investments are in ordinary shares listed on the London Stock Exchange.
Gains/(losses) on investments:
Net realised gains/(losses) on sales 6,186 (1,481)
Movement in fair value adjustment (47,934) 88,003
Net (losses)/gains on investments (41,748) 86,522
The company received £40,980,000 (2021: £39,489,000) from investments sold in the year. The book cost of these investments
was £34,794,000 (2021: £40,970,000). These investments have been revalued over time and until they were sold any
unrealised gains/losses were included in the fair value of the investments.
Notes to the Financial Statements
Ye
a
r
to Y
e
a
r
to
30
J
u
n
e
2022
30
J
u
n
e
2021
Year to Year to
30 June 2022 30 June 2021
£’000 £’000
Year to Year to
30 June 2022 30 June 2021
£’000 £’000
48 Financial Report Aberforth Split Level Income Trust plc
Notes to the Financial Statements
11 Investments held at fair value through profit or loss (continued)
In accordance with FRS 102, fair value measurements have been classified using the fair value hierarchy.
Level 1 - using unadjusted quoted prices for identical instruments in an active market.
L
evel 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on
market data).
Level 3 - using inputs that are unobservable (for which market data is unavailable).
All investments are held at fair value through profit or loss, have been classified as Level 1 and are traded on a recognised
stock exchange.
12 Debtors
Investment income receivable 747 327
Amounts due from brokers – 80
Other debtors 8 9
Total 755 416
13 Creditors
Amounts due to brokers – 585
Other creditors 62 53
Total 62 638
14 Zero Dividend Preference Shares
Opening balance 54,437 52,548
Issue costs amortised during the period 46 44
Capital growth of ZDP Shares 1,910 1,845
Closing balance 56,393 54,437
Expenses of £312,000 associated with the issue of the ZDP Shares have been capitalised. These are being amortised over the
expected life of the ZDP Shares and charged to capital as a finance cost within the Income Statement.
15 Share Capital
Issued and Allotted:
Ordinary Shares of 1p each 190,250,000 1,902 190,250,000 1,902
ZDP Shares of 1p each 47,562,500 476 47,562,500 476
Total issued and allotted 237,812,500 2,378 237,812,500 2,378
30 June 2022 30 June 2021
No. of No. of
Shares £’000 Shares £’000
30 June 2022 30 June 2021
£’000 £’000
30 June 2022 30 June 2021
£’000 £’000
Year to Year to
30 June 2022 30 June 2021
£’000 £’000
Financial Report Aberforth Split Level Income Trust plc 49
16 Net Asset Value (“NAV”) per Share
The Net Assets and the Net Asset Value per share attributable to the Ordinary Shares and ZDP Shares are as follows.
Net Assets attributable £138,952,000 £56,393,000 £195,345,000 £181,989,000 £54,437,000 £236,426,000
Number of Shares at the
reporting date 190,250,000 47,562,500 237,812,500 190,250,000 47,562,500 237,812,500
NAV per Share (a) 73.04p 118.57p 82.14p 95.66p 114.46p 99.42p
Dividend reinvestment factor
1
(b) 1.242432 – 1.174303 1.196195 – 1.140600
NAV per Share on a total return basis
at the end of the period (c) = (a) x (b) 90.75p 118.57p 96.46p 114.43p 114.46p 113.40p
NAV per Share on a total return basis
at the start of the period (d) 114.43p 114.46p 113.40p 58.85p 110.48p 70.04p
Total Return performance (c) ÷ (d) -1 -20.7% 3.6% -14.9% 94.4% 3.6% 61.9%
1
Defined in the Glossary on pages 54-55.
17 Capital and Reserves
At 30 June 2021 1,902 187,035 (12,365) 5,417 181,989
Net gain on sales of investments – – 6,186 – 6,186
Movement in fair value adjustment – – (47,934) – (47,934)
Cost of investment transactions – – (329) – (329)
Investment management fee charged to capital – – (1,216) – (1,216)
Interest charged to capital – – (6) – (6)
ZDP Shares - Appropriation – – (1,910) – (1,910)
ZDP Shares - Amortised issue costs – – (46) – (46)
Revenue return attributable to Equity Shareholders – – – 9,143 9,143
Equity dividends paid – – – (6,925) (6,925)
At 30 June 2022 1,902 187,035 (57,620) 7,635 138,952
At 30 June 2020 1,902 187,035 (95,786) 6,801 99,952
Net losses on sales of investments – – (1,481) – (1,481)
Movement in fair value adjustment – – 88,003 – 88,003
Cost of investment transactions – – (285) – (285)
Investment management fee charged to capital – – (921) – (921)
Interest charged to capital – – (6) – (6)
ZDP Shares - Appropriation – – (1,845) – (1,845)
ZDP Shares - Amortised issue costs – – (44) – (44)
Revenue return attributable to Equity Shareholders – – – 5,522 5,522
Equity dividends paid – – – (6,906) (6,906)
At 30 June 2021 1,902 187,035 (12,365) 5,417 181,989
Subsequent to the issue of the Ordinary Shares, the Court of Session confirmed, in November 2017, the cancellation of the
entire amount standing to the credit of the Share Premium account and the creation of the Special Reserve.
Share Special Capital Revenue
capital reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000
Share Special Capital Revenue
capital reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000
Notes to the Financial Statements
30 June 2022 30 June 2021
Ordinary ZDP Ordinary ZDP
Shares Shares Total Shares Shares Total
50 Financial Report Aberforth Split Level Income Trust plc
Notes to the Financial Statements
18 Cash and cash equivalents
equivalents
Handelsbanken 22 501
The Northern Trust Company 1,568 699
Total cash and cash equivalents 1,590 1,200
19 Financial instruments
The Company’s financial instruments comprise its investment portfolio, cash balances, ZDP Shares, debtors and creditors that
arise directly from its operations such as sales and purchases awaiting settlement, and investment income receivable. Note 1
sets out the significant accounting policies, including criteria for recognition and the basis of measurement applied for
significant financial instruments excluding cash at bank, which is carried at fair value. Note 1 also includes the basis on which
income and expenses arising from financial assets and liabilities is recognised and measured.
The main risks that the Company faces arising from its financial instruments are as follows.
(i) Market price risk is the risk that the market value of investment holdings will fluctuate as a result of changes in market
prices caused by factors other than interest rate or currency rate movement.
(ii) Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
(iii) Liquidity risk is the risk that the Company will encounter difficulty raising funds to meet its cash commitments as they fall
due. Liquidity risk may result either from the inability to sell financial instruments quickly at their fair values or from the
inability to generate cash inflows as required.
(iv) Interest rate risk is the risk that the interest receivable/payable and the market value of investment holdings may
fluctuate because of changes in market interest rates. The Company’s investment portfolio is currently not directly
exposed to interest rate risk. The Company’s policy is to hold cash in variable rate bank accounts.
The Company’s financial instruments are all denominated in sterling and therefore the Company is not directly exposed to
significant currency risk. However, it is recognised that most investee companies, whilst listed in the UK, will be exposed to
global economic conditions and currency fluctuations.
Market price risk
The Company’s investment portfolio is exposed to market price fluctuations, which are monitored by the Managers in pursuance
of the investment objective. It is not the Managers’ policy to use derivatives or hedging instruments to manage market price risk.
If the investment portfolio valuation fell by 10% at 30 June 2022, the impact on the profit or loss and therefore Shareholders’ funds
would have been negative £19.3m (2021: negative £23.5m). If the investment portfolio valuation rose by 10% at 30 June 2022, the
impact on the profit or loss and therefore Shareholders’ funds would have been positive £19.3m (2021: positive £23.5m). The
calculations are based on the portfolio valuation as at the balance sheet date and are not representative of the period as a whole
and assume all other variables remain constant. The level of change is used as a reasonable illustration for Shareholders to assess
stockmarket volatility on the investment portfolio.
As at 30 June 2022, all of the Company’s financial instruments were included in the balance sheet at fair value. The investment
portfolio consisted of investments valued at their bid price, which represents fair value. Any cash balances, which are held in
variable rate bank accounts, can be withdrawn on demand with no penalty.
Credit risk
The Company invests in UK equities traded on the London Stock Exchange. Investment transactions are carried out with a number
of Financial Conduct Authority ('FCA') regulated brokers, with trades typically undertaken on a delivery versus payment basis and
on a short settlement period.
The Depositary, NatWest Trustee & Depositary Services Limited, is responsible for overseeing the assets of the Company and
has strict liability in certain circumstances should assets of the Company be lost. In the event of the loss of assets the Company
could potentially claim against NatWest Trustee & Depositary Services Limited.
The investment portfolio assets of the Company are held by The Northern Trust Company, the Company’s Custodian, in a
segregated account. In the event of the bankruptcy or insolvency of Northern Trust the Company’s rights with respect to the
securities held by the Custodian may be delayed or limited. Cash balances are held at Northern Trust or Handelsbanken. The
Secretaries monitor the Company’s risk by reviewing the credit ratings of Northern Trust and Handelsbanken. Where provided,
the Secretaries also review internal control reports from these organisations. As at 27 July 2022 credit ratings for Northern Trust
and Handelsbanken were considered acceptable. Outstanding investment income is reconciled to receipts on payment date.
30 June 2022 30 June 2021
£’000 £’000
Financial Report Aberforth Split Level Income Trust plc 51
19 Financial instruments (continued)
The exposure to credit risk on the Company’s financial instruments was as follows.
Investment income receivable (representing dividends from investee companies) 747 327
Amounts due from brokers – 80
Other receivables 8 9
Cash and cash equivalents 1,590 1,200
Total 2,345 1,616
All of the above financial assets are current, their fair values are considered to be the same as the values shown, and the
likelihood of a material credit default is considered to be low.
Liquidity risk
The Company’s assets comprise mainly readily realisable equity securities, which, if necessary, can be sold to meet funding
requirements, though short-term funding flexibility can typically be achieved through the use of the bank overdraft facility.
These securities are all Level 1 assets and actively traded, and, whilst less liquid than larger quoted companies, the portfolio is
well diversified by both numbers of holdings and industry sector. The Company’s current liabilities all have a remaining
contractual maturity of less than three months. The ZDP Shares have a planned repayment date of 1 July 2024. The remaining
contractual maturities were as follows.
Due within 1 month: Accrued expenses 62 53
Amounts due to brokers – 585
Due in 2 to 5 years: ZDP Shares 60,523 60,523
Total liabilities 60,585 61,161
Interest rate risk
If the bank base rate had increased by 1% point, or decreased by 0.75% point, the impact on the profit or loss and Total Equity
Shareholders’ Funds would be de minimis. There would be no direct impact on the portfolio valuation. The calculations are based
on the cash balances as at the Balance Sheet date and are not representative of the financial period as a whole and assume all
other variables remain constant. The level of change is a reasonable illustration based on current market conditions.
Capital Management Policies and Procedures
The Company’s capital management policies and procedures are to support the Company’s investment objective and to
ensure that the Company will be able to continue as a going concern. To achieve the investment objective the Board has a
responsibility to ensure the Company is able to continue as a going concern and details of the principal risks and how they
are managed are set out on page 5. The Board monitors and reviews the structure of the Company’s capital including the
extent to which revenue in excess of that which is required to be distributed should be retained. The Companies Act 2006 and
Corporation Tax Act 2010 impose capital requirements on the respective ability and obligation to pay dividends. The Board
monitors, and has complied with, the externally imposed capital requirements. The Company’s investment objective, capital
management policies and monitoring processes are unchanged during the period.
20 Contingencies, guarantees, financial commitments and contingent assets
The Company had no contingencies, guarantees, financial commitments or contingent assets as at 30 June 2022 (2021: Nil).
21 Post Balance Sheet Events
Since 30 June 2022 there are no post balance sheet events that would require adjustment of or disclosure in the financial
statements.
22 Related party transactions
The Directors have been identified as related parties and their fees and interests have been disclosed in the Directors’
Remuneration Report on pages 31 and 32. During the year no Director or entity controlled by a Director was interested in any
contract or other matter requiring disclosure under section 412 of the Companies Act 2006.
23 Company information
Aberforth Split Level Income Trust plc is a closed-ended investment company, registered in England No. 10730910, with its
Ordinary Shares and ZDP Shares listed on the London Stock Exchange. The address of the registered office is Level 13,
Broadgate Tower, 20 Primrose Street, London, EC2A 2EW.
Notes to the Financial Statements
30 June 2022 30 June 2021
£’000 £’000
30 June 2022 30 June 2021
Maturity profile of the Company’s financial liabilities £’000 £’000
52 Shareholder Information Aberforth Split Level Income Trust plc
General Information
Shareholder register enquiries
All administrative enquiries relating to Shareholders, such as queries concerning holdings, dividend payments,
notification of change of address, loss of certificate or an addition to a mailing list should be directed to the Company’s
Registrar, Link Group (contact details on page 56).
Payment of dividends
Dividends can be received more quickly by instructing Link Group (contact details on page 56) to pay them directly into
a bank account; tax vouchers are then mailed to Shareholders separately. This method avoids the risk of dividend
cheques being delayed or lost in the post.
Dividend Reinvestment Plan (DRIP)
The Company operates a Dividend Reinvestment Plan to allow shareholders to use their cash dividends to buy shares
easily and at a low cost via the Company’s Registrar from whom the necessary forms are available. For further
information contact Link Group (contact details on page 56).
Electronic Communications and Voting
Shareholders can choose to receive communications (including the Annual and Interim reports) from the Company in
electronic format. This method may be more convenient and secure for many Shareholders, reduces costs and has
environmental benefits. To use this service, Shareholders can register and provide their email address on the Registrar’s
share portal at www.signalshares.com. Thereafter, Shareholders will receive an email providing the website address link
to the relevant document(s). After registering, Shareholders will be able to request paper copies in the future.
Shareholders can return proxy votes electronically by logging onto the Registrar’s share portal at www.signalshares.com
and following the instructions. Shareholders do not need to register for electronic communications to use electronic
proxy voting.
If Shareholders have any queries about this electronic service contact the Registrars, Link Group (contact details on
page 56).
Sources of further information
The prices of the Ordinary Shares and ZDP Shares are quoted daily in the Financial Times under the abbreviation of “Abf
Spl Inc”. The prices are listed in the “Conventional (Ex Private Equity)” and “Zero Dividend Preference Shares” sections.
These prices, together with the Net Asset Values and other financial data, can be found on the TrustNet website at
www.trustnet.com. Other websites containing useful information on the Company are www.ft.com, www.theaic.co.uk
and www.morningstar.co.uk. Company performance and other information, including the Investor Disclosure Document,
are available on the Aberforth Partners LLP website at www.aberforth.co.uk.
How to invest
The Company’s Ordinary Shares and ZDP Shares are traded on the London Stock Exchange. They can be bought or sold
by placing an order with a stockbroker or asking a professional advisor. The Company’s Managers, Aberforth Partners
LLP, do not offer any packaged products such as ISAs, Savings Schemes or Pension Plans. Each of the Company’s listed
securities is eligible for inclusion in the “Stocks and Shares” component of an Individual Savings Account (ISA).
Retail Distribution/NMPI Status
The Company’s shares are intended for UK investors including retail investors, professionally advised private clients and
institutional investors who are seeking exposure to smaller companies in the UK, and who understand and are willing to
accept the risks of exposure to equities. The Company currently conducts its affairs, and intends to continue to conduct
its affairs, so that its Ordinary Shares and ZDP Shares can be recommended by Independent Financial Advisers (IFAs) to
ordinary retail investors in accordance with the rules of the Financial Conduct Authority (FCA) in relation to non-
Financial Calendar
Dividends in respect of the year to 30 June 2022
1st Interim 2nd Interim Special Dividend
Rate per Ordinary Share: 1.51p 2.79p 0.25p
E
x dividend date: 10 February 2022 4 August 2022 4 August 2022
Record date: 11 February 2022 5 August 2022 5 August 2022
Pay date: 8 March 2022 26 August 2022 26 August 2022
Half Yearly Report Published in late January/early February
Annual Report and Financial Statements Published in late July/early August
Annual General Meeting 31 October 2022
Publication of Net Asset Values Daily (via a Primary Information Provider and
the Managers’ website)
Shareholder Information Aberforth Split Level Income Trust plc 53
General Information
mainstream pooled investment NMPI products. The Company’s Ordinary Shares and ZDP Shares are excluded from the
FCA’s restrictions that apply to NMPI products because they are shares in an Investment Trust. Please note that past
performance is not a guide to the future. Your investment may be at risk as the value of investments may go down as
w
ell as up and is not guaranteed. Therefore you may not get back the amount originally invested.
Alternative Investment Fund Managers Directive (AIFMD)
The Company has appointed Aberforth Partners as its Alternative Investment Fund Manager (AIFM). In accordance with
the AIFMD, information in relation to the Company’s leverage is required to be made available to Shareholders. The
Company’s maximum and actual leverage levels as at 30 June 2022 are shown below. There have been no changes to,
o
r breaches of the maximum level of leverage employed by the Company.
Maximum limit 1.05:1 1.05:1 1.05:1 1.05:1
Actual Level 1.00:1 1.00:1 1.00:1 1.00:1
Leverage, for the purposes of the AIFM Directive, is any method which increases the Company’s exposure to stock
markets whether through borrowings, derivatives or any other means. It is expressed as a ratio of the Company’s
exposure to its Net Asset Value. In summary, the Gross method measures the Company’s exposure before applying
hedging or netting arrangements. The Commitment method allows certain hedging or netting arrangements to be offset.
ASLIT has no hedging or netting arrangements. The ZDP Shares are part of the share capital of the Company and are not
considered as borrowings under the AIFM Directive.
In accordance with the AIFMD, the AIFM’s remuneration policy and the numerical disclosures in respect of the AIFM’s
relevant reporting period (year to 30 April 2022) are available from Aberforth Partners’ website (www.aberforth.co.uk).
The Company’s capital structure is such that the underlying value of assets attributable to the Ordinary Shares will be
geared by the rising capital entitlements of the ZDP Shares. Accordingly, the Ordinary Shares should be regarded as
carrying above average risk.
Security Codes
Ordinary Shares GB00BYPBD394 BYPBD39 ASIT LN
ZDP Shares GB00BYPBD519 BYPBD51 ASIZ LN
Company Identification Numbers
Global Intermediary Identification Number (GIIN) JM0CLZ.99999.SL.826
Legal Entity Identifier (LEI) 21380013QYWO82NZV529
Association of Investment Companies (AIC)
The Company is a member of the AIC, which produces a detailed Monthly Information Service on the majority of
investment trusts. This is available at www.theaic.co.uk.
The Common Reporting Standard
The OECD Common Reporting Standard for Automatic Exchange of Financial Account Information (Common Reporting
Standard) requires investment trust companies to provide personal information to HMRC on certain investors who
purchase shares in investment trusts. Accordingly the Company provides information annually to HMRC on the tax
residences of non-UK based certificated Shareholders and corporate entities. All new Shareholders, excluding those
whose shares are held in CREST, who come on to the share register will be sent a certification form for the purpose of
collecting this information. See HMRC’s Quick Guide – information for account holders at the address below.
https://www.gov.uk/government/publications/exchange-of-information-account-holders
Beware of Share Fraud
Investment scams are designed to look like genuine investment opportunities. You might have been contacted by
fraudsters if you have been approached out of the blue, promised tempting returns and told the investment is safe,
called repeatedly or told the offer is only available for a limited time. Shareholders may receive unsolicited phone calls
or correspondence concerning investment matters that imply a connection to the Company. These may be from
overseas based ‘brokers’ who target UK shareholders offering to sell them what often turn out to be worthless or high
risk shares. Shareholders may also be advised that there is an imminent offer for the Company, and the caller may offer
to buy shares at significantly above the market price if an administration fee is paid. Shareholders should treat all such
approaches with caution.
You can find more information about investment scams at the Financial Conduct Authority (FCA) website:
www.fca.org.uk/consumers/protect-yourself-scams. You can also call the FCA Consumer Helpline on 0800 111 6768.
Data Protection
The Company is committed to ensuring the privacy of any personal data provided to it. Further details can be found in
the privacy policy set out on the Aberforth website (www.aberforth.co.uk).
30 June 2022 30 June 2021
Commitment Gross Commitment Gross
Leverage Exposure Method Method Method Method
ISIN SEDOL Bloomberg/Reuters
54 Shareholder Information Aberforth Split Level Income Trust plc
G
l
o
s
s
a
r
y
Glossary of UK GAAP Measures
Net Asset Value – also described as Shareholders’ Funds, is the value of total assets less all liabilities. The Net Asset Value
o
r NAV per Ordinary Share is calculated by dividing this amount by the total number of Ordinary Shares in issue.
Net Asset Value (ZDP Share) – is the value of the entitlement to the ZDP Shareholders. The Net Asset Value or NAV per
ZDP Share is calculated by dividing this amount by the total number of ZDP Shares in issue.
Glossary of Alternative Performance Measures
Total Assets Total Return represents the theoretical return of the combined funds of the Ordinary Shareholders and ZDP
Shareholders assuming that dividends paid to Ordinary Shareholders were reinvested at the NAV per Ordinary Share at
the close of business on the day the Ordinary Shares were quoted ex dividend. Total Assets less current liabilities as at
30 June 2022 was £195,345,000 (2021: £236,426,000) and the total number of shares in issue (Ordinary Shares plus ZDP
Shares) was 237,812,500 (2021: 237,812,500) producing a Total Assets per Share of 82.14p (2021: 99.42p). Multiplying
by the dividend reinvestment factor of 1.174303 (2021: 1.1406) results in a Total Assets per Share on a Total Return basis
of 96.46p (2021: 113.40p). The Total Assets Total Return was therefore -14.9% (2021: 61.9%), being the sum of the Total
Assets per Share at the end of the period, multiplied by the dividend reinvestment factor divided by the Total Assets per
Share calculated on a total return basis at the start of the period, expressed as a percentage (see note 16 on page 49).
Ordinary Share NAV Total Return represents the theoretical return on the NAV per Ordinary Share, assuming that
dividends paid to Ordinary Shareholders were reinvested at the NAV per Ordinary Share at the close of business on
the day the shares were quoted ex dividend. The NAV per Ordinary Share as at 30 June 2022 was 73.04p (2021:
95.66p) and the dividend reinvestment factor was 1.242432 (2021: 1.196195). The Ordinary Share NAV Total Return
was therefore -20.7% (2021: 94.4%), being the Ordinary Share NAV at the end of the period, multiplied by the dividend
reinvestment factor divided by the Ordinary Share NAV calculated on a total return basis at the start of the period,
expressed as a percentage (see note 16 on page 49).
ZDP Share NAV Total Return represents the return on the entitlement value of a ZDP Share. The ZDP Share NAV as at 30
June 2022 was 118.57p (2021: 114.46p). The ZDP Share NAV Total Return was therefore 3.6% (2021: 3.6%), being the
ZDP Share NAV at the end of the period divided by the ZDP Share NAV at the start of the period, expressed as a
percentage (see note 16 on page 49).
Ordinary Share Price Total Return represents the theoretical return to an Ordinary Shareholder, on a closing market
price basis, assuming that all dividends received were reinvested, without transaction costs, into the Ordinary Shares of
the Company at the close of business on the day the shares were quoted ex dividend. The Ordinary Share price as at
30 June 2022 was 64.2p (2021: 87.2p) and the dividend reinvestment factor was 1.260220. The Ordinary Share Price
Total Return was therefore -23.2%, being the Ordinary Share price at the end of the period, multiplied by the dividend
reinvestment factor divided by the Ordinary Share price calculated on a total return basis at the start of the period,
expressed as a percentage.
ZDP Share Price Total Return represents the theoretical return to a ZDP Shareholder, on a closing market price basis.
The ZDP Share price as at 30 June 2022 was 116.00p (2021: 114.00p). The ZDP Share Price Total Return was therefore
1.8%, being the ZDP Share price at the end of the period divided by the ZDP Share price at the start of the period.
Discount is the amount by which the stockmarket price per Share is lower than the NAV per Share. The discount is
normally expressed as a percentage of the NAV per Share.
Premium is the amount by which the stockmarket price per Share exceeds the NAV per Share. The premium is normally
expressed as a percentage of the NAV per Share.
Shareholder Information Aberforth Split Level Income Trust plc 55
Glossary
Other Glossary Terms
Active Share Ratio is the sum of the absolute differences between a portfolio’s weight in a stock and an index’s weight
i
n a stock for all stocks in the portfolio or index. The total is then divided by two to give a ratio between 0% and 100%.
Active Share is addressed in “How Active is Your Fund Manager?” (Antti Petajisto and Martijn Cremers, Yale School of
Management, 2009).
Dividend Reinvestment Factor is calculated on the assumption that dividends paid by the Company were reinvested into
Ordinary Shares of the Company at the NAV per Ordinary Share/share price, as appropriate, on the day the Ordinary
Shares were quoted ex dividend.
Gearing is calculated by dividing the asset value attributable to the ZDP Shares by the asset value attributable to the
Ordinary Shares.
Hurdle Rate is the rate of capital growth per annum in the Company’s investment portfolio to return a stated amount
per Share at the planned winding-up date.
Important Dates
Company Incorporation Date 19 April 2017
Inception Date 30 June 2017
Launch/Listing Date 3 July 2017
Planned Winding-Up Date 1 July 2024
Ongoing Charges represents the percentage per annum of investment management fees and other operating expenses
to the average published Ordinary Shareholders’ NAV over the period.
Portfolio Turnover is calculated by summing the lesser of purchases and sales over a one year period divided by the
average portfolio value for that period.
Projected Final Cumulative Cover is the ratio of the total assets of the Company as at the calculation date, to the sum
of the assets required to pay the final capital entitlement of 127.25p per ZDP Share on the planned winding-up date, the
future estimated investment management fees charged to capital, and estimated winding-up costs.
Redemption Yield (Ordinary Share) is the annualised rate at which projected future income and capital cash flows
(based on assumed future capital/dividend growth rates) is discounted to produce an amount equal to the share price
at the date of calculation.
Redemption Yield (ZDP Share) is the annualised rate at which the total discounted value of the planned future payment
of capital equates to its share price at the date of calculation.
Retained Revenue per Share is a cumulative figure calculated after accounting for dividends, including those not yet
recognised in the financial statements.
Terminal NAV (Ordinary Share) is the projected NAV per Ordinary Share at the planned winding-up date at a stated rate
of capital growth in the Company’s investment portfolio after taking into account the final capital entitlement of the ZDP
Shares, future estimated costs charged to capital and estimated winding-up costs.
56 Shareholder Information Aberforth Split Level Income Trust plc
Directors
Angus Gordon Lennox (Chairman)
Graeme Bissett
Dominic Fisher, OBE
L
esley Jackson
Graham Menzies
Managers and Secretaries
Aberforth Partners LLP
14 Melville Street
Edinburgh EH3 7NS
Tel: 0131 220 0733
enquiries@aberforth.co.uk
www.aberforth.co.uk
Registered Office and Company
Number
Level 13
Broadgate Tower
20 Primrose Street
London EC2A 2EW
Registered in England and Wales
Number 10730910
Depositary
NatWest Trustee & Depositary Services Limited
House A, Floor 0
Gogarburn
175 Glasgow Road
Edinburgh EH12 1HQ
Custodian
The Northern Trust Company
50 Bank Street
Canary Wharf
London E14 5NT
Bankers
H
andelsbanken
2nd Floor, Apex 3
95 Haymarket Terrace
Edinburgh EH12 5HB
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Shareholder enquiries:
Tel: 0871 664 0300 (Calls cost 12p per minute
plus network extras)
enquiries@linkgroup.com
www.linkassetservices.com
Shareholder Portal:
www.signalshares.com
Independent Auditor
Deloitte LLP
Saltire Court
20 Castle Terrace
Edinburgh EH2 2DB
Solicitors
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Sponsors
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Corporate Information
Annual General Meeting Aberforth Split Level Income Trust plc 57
Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of Aberforth Split Level Income Trust plc will be held at
1
4 Melville Street, Edinburgh EH3 7NS on 31 October 2022 at 11.00 a.m. for the following purposes.
Ordinary Business
T
o consider and, if thought fit, pass the following Ordinary Resolutions.
1. That the Report and Financial Statements for the year to 30 June 2022 be adopted.
2. That the Directors’ Remuneration Report be approved.
3. That Graeme Bissett be re-elected as a Director.
4. That Dominic Fisher be re-elected as a Director.
5. That Angus Gordon Lennox be re-elected as a Director.
6. That Graham Menzies be re-elected as a Director.
7. That Lesley Jackson be re-elected as a Director.
8. That Deloitte LLP be re-appointed as Auditor.
9. That the Audit Committee be authorised to determine the remuneration of the Auditor for the year to 30 June
2023.
By Order of the Board
Aberforth Partners LLP, Secretaries
27 July 2022
58 Annual General Meeting Aberforth Split Level Income Trust plc
Notes to the Notice of the Annual General Meeting
1. Attending the Annual General Meeting in person
A member who is entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attend, speak and vote on
their behalf. Such a proxy need not also be a member of the Company. Shareholders are encouraged to submit their votes by proxy in
advance of the meeting in case restrictions due to the Covid-19 pandemic apply and it is not possible for shareholders to attend in
person. The Board will continue to carefully consider the arrangements for the AGM in the light of the Government guidance and the
Company will issue a regulatory news announcement, which will also be posted on the Company’s website, if the only attendees
permitted will be those required to form the quorum and allow the business to be conducted.
To be entitled to attend and vote at the Annual General Meeting (and for the purpose of determining the votes they may cast),
members must be registered in the Company’s register of members at 11.00 a.m. on 27 October 2022 (or, if the Annual General
Meeting is adjourned, 11.00 a.m. on the day two days (excluding non working days) prior to the adjourned meeting). Changes to the
register of members after the relevant deadline will be disregarded in determining the rights of any person to attend and vote at the
Annual General Meeting.
2. Appointment of Proxy
A Form of Proxy for use by Shareholders is enclosed. Completion of the Form of Proxy will not prevent a Shareholder from attending
the meeting and voting in person. To register your vote electronically, log on to the Registrars’ website at www.signalshares.com and
follow the instructions on screen.
You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different Shares. You may not
appoint more than one proxy to exercise rights attached to any one Share. To appoint more than one proxy, please contact the
Registrars of the Company. If you submit more than one valid proxy appointment, the appointment received last before the latest time
for the receipt of proxies will take precedence.
To be valid the proxy form must be completed and lodged, together with the power of attorney or any authority under which it is
signed, or a notarially certified copy of such power of authority, with the Registrars of the Company no later than 48 hours (excluding
non-working days) before the time set for the meeting, or any adjourned meeting.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the
Annual General Meeting to be held on 31 October 2022 and any adjournment(s) thereof by using the procedures described in the
CREST Manual. The message must be transmitted so as to be received by the Company’s agent, Link Group (CREST Participant ID: RA10),
no later than 48 hours (excluding non working days) before the time appointed for the meeting.
3. Questions and Answers
The Board continues to welcome questions from shareholders at the AGM. However, it asks shareholders to please submit any
questions to the Board by email, to the following address enquiries@aberforth.co.uk before 11.00 a.m. on 27 October 2022 in case
attendance at the AGM has to be restricted due to the Covid-19 pandemic. In the event the AGM proceeds in its usual format as
currently anticipated, pursuant to section 319A of the Companies Act 2006, the Company must provide an answer to any question that
is put by a member attending the Annual General Meeting relating to the business being considered, except if a response would not
be in the interest of the Company or for the good order of the meeting or if to do so would involve the disclosure of confidential
information. The Company may, however, elect to provide an answer to a question within a reasonable period of days after the
conclusion of the Annual General Meeting.
4. Total Voting Rights
As at 27 July 2022, the latest practicable date prior to publication of this document, the Company had 190,250,000 Ordinary Shares and
47,562,500 ZDP Shares in issue. The holders of ZDP Shares will not normally be entitled to vote at general meetings of the Company.
In respect of the resolutions the Ordinary Shareholders have a total of 190,250,000 voting rights.
5. Information on the Company’s website
In accordance with section 311A of the Companies Act 2006, the contents of this notice of meeting, details of the total number of
Shares in respect of which members are entitled to exercise voting rights at the AGM and, if applicable, any members’ statements,
members’ resolutions or members’ matters of business received by the Company after the date of this notice will be available on the
Managers’ website at www.aberforth.co.uk.
6. Nominated Persons
Any person to whom this notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to enjoy information
rights (a Nominated Person) may, under an agreement between such person and the Shareholder nominating such person, have a right
to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such
proxy appointment right or does not wish to exercise such right, the Nominated Person may, under any such agreement, have a right
to give instructions to the registered Shareholder as to the exercise of voting rights.
7. Audit concerns
The members of the Company may require the Company (without payment) to publish, on its website, a statement (which is also to
be passed to the Auditor) setting out any matter relating to the audit of the Company’s Financial Statements, including the Auditor’s
report and the conduct of the audit. The Company will be required to do so once it has received such requests from either members
representing at least 5% of the total voting rights of the Company or at least 100 members who have a relevant right to vote and hold
Shares in the Company on which there has been paid up an average sum per member of at least £100. Such requests must be made
in writing, state full names and addresses, and be sent to the registered address of the Company.
Aberforth Split Level Income Trust plc 59
Notes
60 Aberforth Split Level Income Trust plc
Notes
J. Thomson Colour Printers Glasgow 205485
