Final Results

Aberforth Split Level Income Trust plc
Audited Annual Results for the year to 30 June 2023

The following is an extract from the Company's Annual Report and Financial Statements for the year to 30 June 2023. The Annual Report is expected to be posted to shareholders by 7 August 2023.  Members of the public may obtain copies from Aberforth Partners LLP, 14 Melville Street, Edinburgh EH3 7NS or from its website: www.aberforth.co.uk. A copy will also shortly be available for inspection at the National Storage Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

FINANCIAL HIGHLIGHTS (SUMMARY)

Performance (Total Return)	Year to 30 June 2023
	------------
Total Assets	+9.7%
Ordinary Share NAV	+12.2%
Ordinary Share Price	+20.0%
ZDP Share NAV	+3.6%
ZDP Share Price	+3.0%
Refer to Note 2, Alternative Performance Measures, and Glossary.
Dividends Declared
Second Interim Dividend per Ordinary Share		3.30p
Together with the first interim dividend of 1.70p, the total underlying dividend for the year to 30 June 2023 is 5.00p per Ordinary Share. This is an increase of 16% compared to last year’s underlying dividend of 4.30p, which represents the total dividend of 4.55p less the special dividend of 0.25p per Ordinary Share. The second interim dividend has an ex-dividend date of 10 August 2023, record date of 11 August 2023 and pay date of 31 August 2023.

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 (ZDP) Shareholders with a pre-determined final capital entitlement of 127.25p on the planned winding-up date of 1 July 2024.  

CHAIRMAN’S STATEMENT

Introduction

This is the sixth annual report of Aberforth Split Level Income Trust (the Company), which covers the financial year to 30 June 2023.

Many of the significant challenges highlighted in my recent reports remain firmly in focus. Elevated geopolitical tensions, persistently high inflation, especially in the UK, and rising interest rates continue to influence the direction of stockmarkets. With consumer budgets and profit margins under pressure, recession is a realistic threat either in this or next year.

The financial year started well as the initial shock of Russia’s invasion of Ukraine and the impact on energy prices eased. M&A activity also contributed to positive returns, but the UK’s well documented Budget debacle in September 2022 led to weak share prices, higher bond yields and sterling approaching parity with the US dollar. Calm was restored towards ASLIT’s half year with the change of Prime Minister and Chancellor. Share prices responded well to this development and further impetus was provided by the emergence of more benign inflation data in the US. However, enthusiasm about the prospects of lower interest rates in the US was interrupted by the rapid demise of Silicon Valley Bank and Credit Suisse, which provoked a sharp reappraisal of risk in March. Swift regulatory action reassured the markets that these bankruptcies were isolated cases and enabled stockmarkets to shift their focus back to subsiding rates of inflation. The exception was the UK, where stubbornly persistent inflation is requiring the Bank of England to continue to raise interest rates and, by extension, the risk of recession.

Given this ‘wall of worry’ it was pleasing to see positive index returns for UK equities during the period, albeit marginal ones for mid and small cap companies, who underperformed their large cap brethren. However, UK indices remain deeply unpopular from a global perspective, which is reflected in lower returns generated during the year compared to most international peers.

Performance

I appreciate that it doesn’t really feel like it but in fact, over the financial year as a whole, UK equities generated positive returns. The Numis Smaller Companies Index (excluding Investment Companies) (“the Index” or “NSCI (XIC)”), which defines ASLIT’s investment opportunity base, generated a positive total return of 4.4% over the twelve months to 30 June 2023. Larger companies in the UK, in the form of the FTSE All-Share Index, recorded a total return of 7.9%.

It is pleasing to report that ASLIT’s total assets total return, which measures its ungeared portfolio performance, was up 9.7% during the year. When geared by the Zero Dividend Preference (ZDP) Shares, the net asset value total return of the Ordinary Shares was 12.2%. This reflects the return attributable to equity Shareholders of 8.87p per Ordinary Share together with the effect of the reinvestment of previously declared dividends. The Ordinary Share price total return of 20.0% was helped by a narrowing of the share price’s discount to net asset value from 12.1% to 6.7%.

As the capital value of the portfolio has increased, the projected cumulative cover of the ZDP shares increased to 3.2 times at 30 June 2023 from 3.0 times twelve months earlier.

Turning to the longer-term perspective from ASLIT’s inception in 2017 to 30 June 2023, the cumulative total assets total return and net asset value total return are 5.8% and 1.8% respectively. These modest returns are clearly not what the Board envisaged when ASLIT launched but in its short life, ASLIT has had to battle with the fraught aftermath of the EU referendum, the pandemic and the war in Ukraine, as well as the macro-economic headwinds of the past year. Any one of these events would have been challenging enough for a company with ASLIT’s geared structure, let alone all four. Detail about the effect of these challenges on ASLIT’s valuation opportunity is provided in the Managers’ Report.

Earnings and Dividends

The twists and turns of share prices over the year to 30 June 2023 contrast with the steady progress of ASLIT’s revenue stream. The upward trend from the pandemic lows has continued, which reflects positively on how well investee companies’ boards stewarded capital during what was a very challenging period. ASLIT’s dividend experience in the twelve months was enhanced by the receipt of seven special dividends.

ASLIT’s revenue return per Ordinary Share was 5.35p in the year to 30 June 2023, which is 11% higher than the 4.81p earned in the year to 30 June 2022. Special dividends from investee companies represent 0.42p per Ordinary Share of the 5.35p of revenue generated for this financial year.

The Board is pleased to declare a second interim dividend of 3.30p per Ordinary Share for the year to 30 June 2023, which represents an increase of 18% compared to the 2.79p in respect of the previous year. Together with the first interim dividend of 1.70p paid on 8 March 2023, the total underlying ordinary dividend with respect to the year to 30 June 2023 is 5.00p per Ordinary Share. This is an increase of 16% compared to last year’s ordinary underlying dividend of 4.30p, which represents the total dividend of 4.55p less the special dividend of 0.25p per Ordinary Share.

After accounting for the second interim dividend, retained revenue reserves were 1.32p per Ordinary Share at 30 June 2023. There are two reasons for the Board’s decision to increase revenue reserves. First, notwithstanding the resilience of the investee companies, an economic downturn could affect the dividend performance of the portfolio. Second, prudent portfolio and liquidity management activities in the run-up to the end of ASLIT’s planned life might affect dividend receipts. Retained revenue reserves give the Board scope to offset such factors and sustain dividends paid by ASLIT. Any revenue reserves not utilised will be distributed to Ordinary Shareholders before or at the end of ASLIT’s planned life next year.

The second interim dividend of 3.30p per Ordinary Share will be paid on 31 August 2023 to Ordinary Shareholders on the register on 11 August 2023. The ex-dividend date is 10 August 2023. 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. Pages 13 to 15, of the Annual Report, describe the Board’s and Managers’ oversight and activities in the year to 30 June 2023. 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 “About Aberforth” section of the Managers’ website.

Annual General Meeting (“AGM”)

The AGM will be held at 14 Melville Street, Edinburgh EH3 7NS at 11.00 a.m. on 30 October 2023 and details of the resolutions to be considered by Shareholders are set out in the Notice of the Meeting on page 62 of the Annual Report. Shareholders are encouraged to submit their votes by proxy in advance of the meeting. An update on performance and the portfolio will be available on the Managers’ website following the meeting.

Conclusion

The Board is conscious that ASLIT’s capital performance over its life so far has not matched expectations at the time of launch. However, despite the various top-down challenges along the way, the investee companies have made underlying progress, as may be gauged from the growth in ASLIT’s dividend over the six years. The upshot of muted capital returns and resilient profits is that the portfolio’s valuations today appear even more attractive than was the case at inception. The consequent opportunity is addressed in detail in the Managers’ Report and influences the Board’s thinking as it contemplates the end of ASLIT’s planned life.

That planned life ends on 1 July 2024, on which date or in the three months prior, the Board is obliged by the Company’s Articles to convene a general meeting to propose that the Company be wound up. The spectre of recession and the general apathy towards UK assets mean that the upside in ASLIT’s portfolio is unlikely to be fully realised by 1 July 2024. Therefore, before then, the Board intends to examine means whereby holders of both classes of Share will be given the opportunity to continue their investment in some form, alongside the option to realise their investment in cash.

The Board is working with the Managers and at this stage nothing has yet been decided or, indeed, ruled out. We shall seek specialist advice in due course and shall also take account of feedback received from Shareholders when developing proposals, which we would expect to finalise during the second calendar quarter of 2024.

My fellow directors and I would welcome the views of Shareholders about these or any other matters pertinent to the Company, to which end my email address is noted below.

Angus Gordon Lennox

Chairman

27 July 2023

[e-mail]

Managers’ Report

Introduction

Equity returns over the twelve months to 30 June 2023 were positive. The FTSE All-Share index, which is representative of large UK companies, recorded a total return of +7.9%. The gain from smaller companies was more modest. The total return of the NSCI (XIC), which is ASLIT’s investment universe, was +4.4%. ASLIT’s total asset total return, which is a measure of the portfolio’s ungeared performance, was +9.7%. This backdrop of rising share prices benefited both classes of shareholder: the Ordinary Shares’ net asset value total return was +12.2%, while the final cumulative cover of the ZDP Shares rose from 3.0x to 3.2x.

The positive returns from equity markets around the world in the twelve months to 30 June 2023 contrast with the falling share prices that characterised ASLIT’s previous financial year. Several factors contributed to the improved mood. The initial shock of Russia’s war in Ukraine has subsided, while some of the worst fears about energy supplies and prices have so far proved misplaced. The reopening of China’s economy, following strict pandemic lockdowns, should contribute to global economic activity and promises to ease pressure on supply chains. Related to these points, inflationary forces appear to be abating: in most major economies, the rate of change in consumer prices is declining, though it remains elevated in comparison with the period before the pandemic.

The response to inflation has been the large and rapid increases in interest rates over the past 18 months. These have complicated economic activity and asset valuations. They have also precipitated financial accidents, such as the UK’s brief LDI crisis in the autumn followed by the spring’s regional bank failures in the US. The markets’ calculation is that subsiding inflation will soon allow the Federal Reserve to signal that the all-important US Fed Funds rate has peaked. In stockmarket terms, the main beneficiaries so far of this expectation of falling interest rates have been the large technology companies in the US: their valuations thrived in the low inflation and low interest rate environment preceding the pandemic and they are perceived as being best placed to exploit the emerging fascination with artificial intelligence.

The likelihood of the UK’s monetary policy following suit seems more distant. Consumer price inflation is proving more persistent, forcing the Bank of England to raise interest rates to 5% and bringing recession closer as higher mortgage rates bite. Reawakened memories of a British problem with inflation have contributed to a pervasive and thorough pessimism about the UK’s prospects. Domestic politics of recent years have not helped. A succession of prime ministers has struggled with the additional challenges that the country’s departure from the EU has presented to economic activity. Ideology has too often won out over pragmatism, culminating only nine months ago in Liz Truss’s extraordinary and short-lived premiership.

These concerns have affected investment in the UK. Open-ended equity funds have experienced persistent outflows for several years and institutional asset allocation decisions appear influenced more by what has been rather than what will be. Valuations attributed to UK assets languish. Against the dollar and euro, sterling remains 15% or so below its levels before the EU referendum. Gilt yields are on a wide premium to government bond yields in the US and Europe. And UK stockmarket valuations are towards their lowest in over 30 years when compared with global equity market averages.

Equity valuations are examined in greater detail later in this report, but the important point is that they contrast sharply with the recent performance of the underlying businesses. The majority of small UK quoted companies and of the portfolio’s holdings increased profits and dividends over the past year, notwithstanding the slew of macro-economic challenges. Cost inflation was passed on successfully, which confounds a recurring concern that small companies lack pricing power. Balance sheets were strengthened and are as strong as they have been in Aberforth’s 32 years history. This underlying progress and resilience have persisted through the first part of 2023.

Performance and portfolio analysis

The following paragraphs describe the main influences on ASLIT’s performance over the twelve months to 30 June 2023, as well as some of the significant characteristics of the portfolio.

Style

The Managers’ value investment style has often been a significant influence on ASLIT’s returns, and that was again the case in the twelve months to 30 June 2023. Over this period, the value cohort of the NSCI (XIC) significantly out-performed the index’s growth stocks, according to data from the London Business School. Continuing the trend since the pandemic recovery started, investment style was therefore beneficial to ASLIT’s returns. It is notable that most of this benefit came in the earlier part of the twelve month period. Over recent months, the glamour of artificial intelligence has contributed to a strong rebound in the share prices of the American technology leviathans, which has been to the advantage of the growth style.

Size

The NSCI (XIC) is formed from companies in the bottom ten per cent by value of the entire UK stockmarket. This meant that the largest company in the index on its 1 January 2023 rebalancing had a market capitalisation of £1.6bn and that the index has a significant overlap with the FTSE 250. ASLIT’s portfolio has a relatively low exposure to companies in this overlap. It has relatively high exposure to the NSCI (XIC)’s smaller constituents. This reflects these “smaller small” companies’ much more attractive valuations, which are set out later in this report. Over the twelve months to 30 June 2023, the portfolio’s size positioning was modestly unhelpful to investment performance, as can be gauged by the fact that the FTSE 250 out-performed the FTSE SmallCap by 3%.

Balance sheets

The table below shows the balance sheet profile of the portfolio and of the Tracked Universe at 30 June 2023, which is the subset of the NSCI (XIC) that the Managers follow closely and which represents 98% by value of the total index.

Weight in companies with:	Net cash	Net debt/EBITDA < 2x	Net debt/EBITDA > 2x	Others*
Portfolio 2023	47%	42%	5%	5%
Tracked Universe 2023	34%	36%	23%	8%
*Includes loss-makers and lenders

The portfolio’s balance sheet profile compares well with that of the index, having a relatively high exposure to companies with net cash and a relatively low exposure to those with higher leverage. This profile has emerged from the Managers’ bottom-up stock selection – the stockmarket is not giving small companies credit in their valuations for balance sheet strength.

The other important point to make about small companies’ balance sheets is that they have not been so strong since around 2014. Companies had entered the 2009 recession with too much leverage and spent the next five years repairing their balance sheets. Today, in contrast, companies would be entering a slowdown or recession with healthy balance sheets. Clearly, there are exceptions, but the broad-based balance sheet resilience is an under-appreciated feature of small companies at present.

Income

ASLIT’s aim to generate income growth from its portfolio was impeded by the pandemic, which forced many small companies to pass their dividends and necessitated a cut in ASLIT’s dividend two years ago. However, since the pandemic recovery started, smaller companies have displayed their resilience and their commitment to their shareholders by promptly resuming dividend payments. The rebound has been surprisingly and pleasingly quick, which has allowed ASLIT’s revenue return attributable to Equity Shareholders in the twelve months to 30 June 2023 to exceed its pre-pandemic level.

The table below illustrates the dividend performance of the portfolio over the past year. It splits the 63 holdings into five categories, which are determined by each company’s most recent dividend action.

Nil Payer	Cutter	Unchanged Payer	Increased Payer	New / Returner
4	8	8	40	3

The majority of the holdings increased their most recent dividends. A further boost to the income performance comes from the New / Returners category. Its constituents are companies that are paying dividends for the first time or that have resumed payments, having paid nothing through the pandemic. It is anticipated that three of the current Nil Payers will move into the New / Returner category over the next twelve months. ASLIT’s income also benefited from seven special dividends announced by investee companies in the year to 30 June 2023.

The average historical yield of the portfolio’s holdings at 30 June 2023 was 5.2%, while the average dividend cover was 2.4x. An economic downturn would threaten dividend forecasts, but its impact should be mitigated by the portfolio’s high dividend cover and strong balance sheets.

Corporate Activity

There was a flurry of M&A activity in the first part of 2022, but this petered out as interest rates and the cost of corporate debt rose through the second half of the year. Entering 2023, the Managers believed that the volatility of debt markets would continue to discourage takeovers. In the event, however, six new bids were announced for constituents of the NSCI (XIC) in the six months to 30 June 2023, with ASLIT owning two of them. The average EV/EBITA of the six at their deal prices was 16.2x, while the average premium to the pre-announcement share prices was 67%.

More surprising than the rebound in M&A has been the nature of the bidders: in five of the six deals, the buyers have been private equity firms. The surprise reflects the fact that debt is the lifeblood of private equity and debt markets have not yet settled down amid on-going tightening of monetary policy. However, it would appear that the very low valuations of small UK quoted companies mean that private equity does not need debt at the outset to make their M&A models work. This is a stark illustration of the opportunity currently embedded in the valuations of small UK quoted companies.

ASLIT may benefit from further takeover premiums for its holdings as long as stockmarket valuations remain at their present low levels. However, in these circumstances, it remains important to guard against opportunism on the part of the buyers. Large takeover premiums may still not bring valuations to appropriate levels and the Managers are prepared to vote against deals where this is the case. The best M&A experiences are often those in which boards of directors consult shareholders well in advance. Such consultation reduces the risk of embarrassment, should shareholders find proposed terms unacceptable, and can lead to better outcomes, which may be that the company in question retains its independence. The Managers make it clear to the boards of the investee companies that they should be consulted in such situations and that they are willing to be insiders for extended periods.

Active share

Active share is a measure of how different a portfolio is from an index. The ratio is calculated as half of the sum of the absolute differences between each stock’s weighting in the index and its weighting in the portfolio. The higher a portfolio’s active share, the higher its chance of performing differently from the index, for better or worse. The Managers target an active share ratio of at least 70%. At 30 June 2023, it stood at 78%.

Portfolio turnover

Portfolio turnover is defined as the lower of purchases and sales divided by average portfolio value. Over the twelve months to 30 June 2023, turnover was 18%. This relatively subdued rate of turnover is due to the low stockmarket valuations of the portfolio’s holdings – discounts to the Managers’ target prices have not generally narrowed, so the opportunity for “value roll” within the portfolio has been limited. “Value roll” is the term that the Managers use to describe the recycling of capital from companies with less upside to target prices into those with greater upside.

Some of the turnover in the period reflected investment in companies that entered the NSCI (XIC) on 1 January 2023. As described in the last Interim Report, this was the largest ever rebalancing of the index. The 29 companies that were injected into the index offered the Managers additional opportunity: the portfolio owned three of these so-called “fallen angels” at 30 June 2023.

Valuations

The table below sets out the forward valuations of the portfolio, the Tracked Universe and certain subdivisions of the Tracked Universe. The metric displayed is enterprise value to earnings before interest, tax and amortisation (EV/EBITA), which the Managers use most often in valuing companies. The forecasts underlying the ratios are the Managers’. The bullet points following the table summarise its main messages.

EV/EBITA	2022	2023	2024
ASLIT	6.7x	7.6x	6.0x
Tracked Universe (234 stocks)	9.4x	9.6x	8.7x
-      40 growth stocks	14.5x	13.6x	13.7x
-      194 other stocks	8.7x	9.0x	7.9x
-      78 stocks > £600m market cap	11.0x	10.8x	10.2x
-      156 stocks < £600m market cap	7.4x	7.9x	6.6x

• The average EV/EBITA multiples of the portfolio are much lower than those of the Tracked Universe. This has   been a consistent feature over ASLIT’s history and is consistent with the Managers’ value investment style.

• The portfolio’s 7.6x EV/EBITA ratio for 2023 is considerably lower than the average multiple of 16.2x at which this year’s M&A deals in the NSCI (XIC) have been struck.

• The profit forecasts underlying the EV/EBITA multiples for 2023 and 2024 are subject to uncertainty about the timing and intensity of an economic downturn. It can be inferred from the progression of the multiple across the three years that the Managers presently expect a slowdown in 2023, followed by a recovery in 2024.

• The growth stocks within the Tracked Universe are on much higher multiples than both the portfolio and the rest of the Tracked Universe.

• The “smaller small” companies within the index – here illustrated by those with market capitalisations less than

£600m – are on vast valuation discounts to their larger peers. The Managers identify no reason for this beyond a

general concern about liquidity and so the portfolio has a relatively high exposure to these “smaller small” companies.

The table below set out some of the main characteristics of ASLIT’s diversified portfolio of smaller companies. The point above about exposure to “smaller small” companies is reinforced in the weighted average market capitalisation row.

Portfolio characteristics	30 June 2023		30 June 2022
	ASLIT	NSCI (XIC)	ASLIT	NSCI (XIC)
Number of companies	63	339	66	323
Weighted average market capitalisation	£630m	£945m	£622m	£795m
Price earnings (PE) ratio (historical)	8.0x	10.8x	8.3x	9.8x
Dividend yield (historical)	5.2%	3.5%	4.5%	3.1%
Dividend cover	2.4x	2.6x	2.7x	3.3x

Alongside the 5.2% dividend yield, the portfolio’s most notable feature of the table is average historical price earnings ratio (PE). It has fallen from 8.3x to 8.0x over the twelve months to 30 June 2023. Given ASLIT’s positive total assets total return in this period, it can be inferred that the reduction in the PE was due to growth in the earnings per share of the portfolio’s holdings. An advantage of historical valuation measures, particularly when a recession looms, is that they are not susceptible to forecast uncertainties. To give a longer term perspective than ASLIT’s six years, the chart below plots the historical PE ratio for the Managers’ longest standing portfolio, which shares many of ASLIT’s holdings.

The messages from the chart are that PE ratios are unusually low at present and that they fall so low when recession threatens: the earlier low-points in the chart were the early 1990s recession, the global financial crisis and the pandemic. It is therefore possible that much of the risk of an economic downturn is already embedded within share prices. Taking this argument further, small company profits typically fall by around 30% in a recession. A repeat of this would take the historical PE ratio of ASLIT’s portfolio of 8.0x to a forward ratio of 11.4x. This multiple of what can be thought of as trough profits would still be below the long term average PE multiple shown in the chart of 12.1x.

An influence on the portfolio’s low valuation at present is its exposure to UK equities. These are out of favour with global investors for reasons previously set out in this report. Data from Panmure Gordon help quantify the scale of this disenchantment. The PE of the UK stockmarket is presently 27% lower than the PE of global equities, which is much more than the average discount of 15% over Aberforth’s 32 year history. Comparing ASLIT’s portfolio directly with global equities, the current PE discount is 46%, whereas the 32 year average for Aberforth’s longest standing portfolio has been 24%. The valuation elastic is therefore extremely stretched at present, with ASLIT on a triple discount by virtue of its value investment style, its exposure to small companies and its Britishness. This appears incongruous given the resilience of the portfolio’s investee companies and the fact 42% of their revenues on average are generated outside the UK. An easing of the tension in valuations, as one or more of these relationships returns towards the normal levels of the past 32 years, should bode well for ASLIT’s returns.

Outlook

Stockmarkets’ immediate obsession is US interest rates – each data release is scrutinised exhaustively for a hint of what the Federal Reserve might do next. The positive start to 2023 for equities indicates an expectation that US interest rates are close to their peak. However, there are important caveats. The speed and extent of the interest rate increases threaten further accidents – the financial world has grown used to more than a decade of almost costless money. Moreover, it is not clear that inflation will return conveniently and reliably to its pre-pandemic levels – the rate of increase will subside, but underlying inflationary pressures from labour markets and from forces such as de-globalisation linger.

While equity investors are presently enthused by the outlook for US monetary policy, they remain nervous about prospects for UK politics and economics over the next couple of years. On the political front, there will be a UK General Election within the next eighteen months. This will come at a time when the influence of the more extreme elements of both main political parties appears to be waning. However, a change of government looks likely, which brings incremental risk.

Meanwhile, the UK economy is blighted by more persistent inflation than are its peers. This threatens a more aggressive monetary response by the Bank of England and potentially a more severe downturn in economic activity. Recessions are unpleasant. They increase hardship faced by households and businesses. They reduce incomes and profits. But they are also inevitable and even necessary in order to address the effects of past policy mistakes and of unforeseeable developments such as the pandemic.

The near term risks are undeniable. But so is the attractiveness of the valuations attributed to the portfolio’s holdings by the stockmarket. Importantly, the stress-testing of today’s valuations described above suggests that much of the risk of a recession may already be embedded in share prices. Ironically, therefore, there is less uncertainty about the medium and long term outlook for returns from the companies in ASLIT’s portfolio. History is rather convincing: when valuations have reached today’s levels in the past, total returns over the next five years have been strong.

Conclusion

Herein lies the frustration for ASLIT. By virtue of its closed end structure and its gearing, it is well suited to take advantage of today’s valuations, but it has just one year of its planned life left. It is not clear that the qualities of ASLIT’s portfolio – its strong balance sheets, resilient income profile and very low valuations – will be recognised widely by investors within this time frame. Further takeover activity will help close value gaps, but more time is likely to be necessary to benefit fully from the opportunity in today’s valuations. Therefore, the Managers are working with the Board to offer Shareholders the option, no later than 1 July 2024, either to realise their investment in cash or to continue their exposure to the Managers’ investment approach in some form.

Aberforth Partners LLP

Managers

27 July 2023

FINANCIAL HIGHLIGHTS

TOTAL RETURN PERFORMANCE

		Ordinary Share			ZDP Share
	Total Assets1		NAV2	Share Price3	NAV4	Share Price5
Year to 30 June 2023	9.7%		12.2%	20.0%	3.6%	3.0%
Annualised 3 years	14.8%		20.0%	22.1%	3.6%	4.1%
5 years	0.1%		-0.9%	-0.7%	3.6%	2.3%
Since inception14	0.9%		0.3%	-0.5%	3.5%	3.0%
Cumulative 3 years	51.1%		72.9%	82.2%	11.2%	12.7%
5 years	0.3%		-4.2%	-3.6%	19.3%	12.2%
Since inception14	5.8%		1.8%	-2.9%	22.8%	19.5%
The total return per Ordinary Share2 for the year to 30 June 2023 was 8.87p (2022: (18.98)p).

ORDINARY SHARE

	Net Asset Value per Share			Share Price	Discount / (Premium)	Revenue Return per Share	Ordinary Dividends per Share	Special Dividends per Share	Ongoing Charges6	Gearing7
	-----------		----------		------------	-----------	------------	------------	------------	------------
30 June 2023		77.2p	72.0p		6.7%	5.35p	5.00p	-	1.3%	39.8%
30 June 2022		73.0p	64.2p		12.1%	4.81p	4.30p	0.25p	1.2%	40.6%
30 June 2021		95.7p	87.2p		8.8%	2.90p	3.05p	-	1.2%	29.9%

At inception14 an Ordinary Share had a NAV of 100p and a gearing7 level of 25%.

ZERO DIVIDEND PREFERENCE SHARE (ZDP SHARE)

	Net Asset Value per Share	Share Price	Discount / (Premium)	Return per Share	Projected Final Cumulative Cover8	Redemption Yield9
	------------	-----------	------------	----------	------------	------------
30 June 2023	122.8p	119.5p	2.7%	4.3p	3.2x	6.4%
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%

At inception14 a ZDP Share had a NAV of 100p, a Projected Final Cumulative Cover8 of 3.4x, and a Redemption Yield9 of 3.5%.

HURDLE RATES10

	Ordinary Shares Annualised Hurdle Rates to return			ZDP Shares Annualised Hurdle Rates to return
	100p	Share Price	Zero Value	127.25p	Zero Value
At	------------	------------	------------	------------	------------
30 June 2023	28.4%	1.3%	-68.6%	-68.6%	-99.7%
30 June 2022	16.2%	-0.7%	-42.6%	-42.6%	-94.8%
Inception14	1.5%	n/a	-17.0%	-17.0%	-57.2%

REDEMPTION YIELDS & TERMINAL NAVs (ORDINARY SHARES)

As at 30 June 2023

			Annualised Ordinary Share Redemption Yields11 Dividend Growth (per annum)
Capital Growth (per annum)	-20.0%	-10.0%		+0.0%	+10.0%	+20.0%	Terminal NAV12
	------------	------------		------------	------------	------------	------------
-20.0%	-23.8%	-22.6%		-21.3%	-19.9%	-18.4%	50.0p
-10.0%	-9.0%	-7.7%		-6.4%	-4.9%	-3.3%	60.3p
+0.0%	5.8%	7.1%		8.6%	10.1%	11.7%	70.7p
+10.0%	20.5%	22.0%		23.5%	25.1%	26.8%	81.0p
+20.0%	35.3%	36.8%		38.4%	40.0%	41.8%	91.3p

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.

1-14 Refer to Note 2, Alternative Performance Measurement, and Glossary.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors who were in office at the date of approving the financial statements confirm to the best of their knowledge that:

(a) 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;

(b) 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

(c) 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 2023

PRINCIPAL RISKS AND RISK MANAGEMENT

The Board carefully considers the risks faced by the Company and seeks to manage these risks through continual review, evaluation, 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 (page 30 of the Annual Report). The Audit Committee Report (pages 31 to 33 of the Annual Report) 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-established firms and the Board receives internal control reports from these firms, where available, to review the effectiveness of their control frameworks.

Emerging risks are those that could have a future impact on the Company. The Board regularly reviews them and, during the year, it considered the effects of economic and political developments within the risk category of market risk. 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 based on likelihood and impact. They tend to be relatively consistent from year to year given the nature of the Company and its business. Monitoring by the Board did not give rise to any changes during the year to the risk ratings applied to each of the principal risks. 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 extent to which the principal risks change during the year and the level of monitoring required, each principal risk has been categorised as either dynamic risk, requiring detailed monitoring as it can change regularly, or stable risk.

(i) Investment policy/performance risk (a portfolio management 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 Market risk below and Note 19 of the Annual Report 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.

(ii) Market risk (a portfolio management risk) – Investment performance is affected by a number of market risk factors, which cause 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. 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.

(iii) Structural conflicts of interest (an investor relations risk) – 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. The Board acts in a manner that it considers fair, reasonable and equitable to both classes of Shareholder. This is a stable risk.

(iv) Significant fall in investment income (a portfolio management risk)– 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 monitor investment income and it is considered a dynamic risk.

(v) Loss of key investment personnel (a portfolio management risk) – 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.

(vi) Regulatory risk (a regulatory and legal 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.

The Income Statement, Reconciliation of Movements in Shareholders’ Funds, Balance Sheet and Cash Flow Statement are set out below.

INCOME STATEMENT

Year to 30 June 2023

(audited)

	Year to			Year to
	30 June 2023			30 June 2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Net gains / (losses) on investments	-	10,052	10,052	-	(41,748)	(41,748)
Investment income	10,985	20	11,005	10,024	-	10,024
Other income	14	-	14	-	-	-
Investment management fee	(443)	(1,034)	(1,477)	(521)	(1,216)	(1,737)
Portfolio transaction costs	-	(313)	(313)	-	(329)	(329)
Other expenses	(357)	-	(357)	(335)	-	(335)
	--------	--------	--------	--------	--------	--------
Net return before finance costs and tax	10,199	8,725	18,924	9,168	(43,293)	(34,125)
Finance costs:
Appropriation to ZDP Shares	-	(2,024)	(2,024)	-	(1,956)	(1,956)
Interest expense and overdraft fee	(3)	(7)	(10)	(3)	(6)	(9)
	--------	--------	--------	--------	--------	--------
Return on ordinary activities before tax	10,196	6,694	16,890	9,165	(45,255)	(36,090)
Tax on ordinary activities	(24)	-	(24)	(22)	-	(22)
	--------	--------	--------	--------	--------	--------
Return attributable to Equity Shareholders	10,172	6,694	16,866	9,143	(45,255)	(36,112)
	======	======	=======	======	=======	=======
Returns per Ordinary Share	5.35p	3.52p	8.87p	4.81p	(23.79)p	(18.98)p

The Board declared on 27 July 2023 a second interim dividend of 3.30p per Ordinary Share. The Board also declared on 26 January 2023 a first interim dividend of 1.70p 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.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS

Year to 30 June 2023

(audited)

	Share	Special	Capital		Revenue
	capital	reserve	reserve		reserve		Total
	£’000	£’000	£’000		£’000		£’000
Balance as at 30 June 2022	1,902	187,035	(57,620)		7,635		138,952
Return on ordinary activities after tax	-	-	6,694		10,172		16,866
Equity dividends paid	-	-	-		(9,018)		(9,018)
	--------	--------	--------		--------		--------
Balance as at 30 June 2023	1,902	187,035	(50,926)		8,789		146,800
	======	======	======		======		======

Year to 30 June 2022
	Share	Special	Capital		Revenue
	capital	reserve	reserve		reserve		Total
	£’000	£’000	£’000		£’000		£’000
Balance as at 30 June 2021	1,902	187,035	(12,365)		5,417		181,989
Return on ordinary activities after tax	-	-	(45,255)		9,143		(36,112)
Equity dividends paid	-	-	-		(6,925)		(6,925)
	--------	--------	--------		--------		--------
Balance as at 30 June 2022	1,902	187,035	(57,620)		7,635		138,952
	======	======	======		======		======

BALANCE SHEET

As at 30 June 2023

(audited)

	30 June 2023	30 June 2022
	£’000	£’000
Fixed assets
Investments at fair value through profit or loss	202,150	193,062
	----------	----------
Current assets
Debtors	782	755
Cash at bank	2,949	1,590
	----------	----------
	3,731	2,345
Creditors (amounts falling due within one year)	(664)	(62)
	----------	----------
Net current assets	3,067	2,283
	----------	----------
Total Assets less Current Liabilities	205,217	195,345
Creditors (amounts falling due after more than one year)
ZDP Shares	(58,417)	(56,393)
	----------	----------
TOTAL NET ASSETS	146,800	138,952
	=======	=======
Capital and Reserves: Equity Interests
Share capital:
Ordinary Shares	1,902	1,902
Reserves:
Special reserve	187,035	187,035
Capital reserve	(50,926)	(57,620)
Revenue reserve	8,789	7,635
	----------	----------
TOTAL SHAREHOLDERS’ FUNDS	146,800	138,952
	=======	=======
Net Asset Value per Ordinary Share	77.16p	73.04p
Net Asset Value per ZDP Share	122.82p	118.57p

CASH FLOW STATEMENT

For the year to 30 June 2023

(audited)

	Year to 30 June 2023		Year to 30 June 2022
		£’000	£’000
Operating activities
Net revenue before finance costs and tax		10,199	9,168
Receipt of special dividend taken to capital		20	-
Tax (withheld) from income		(24)	(20)
Investment management fee charged to capital		(1,034)	(1,216)
(Increase) in debtors		(27)	(421)
(Decrease)/increase in creditors		(7)	9
		--------	--------
Cash inflow from operating activities		9,127	7,520
		=====	=====
Investing activities
Purchases of investments excluding transaction costs		(36,395)	(41,203)
Sales of investments excluding transaction costs		37,655	41,007
		--------	--------
Cash inflow/(outflow) from investing activities		1,260	(196)
		=====	=====
Financing activities
Equity dividends paid		(9,018)	(6,925)
Interest and fees paid		(10)	(9)
		--------	--------
Cash outflow from financing activities		(9,028)	(6,934)
		=====	=====
Change in cash during the period		1,359	390
		=====	=====
Cash at the start of the period		1,590	1,200
Cash at the end of the period		2,949	1,590
		======	======

SUMMARY NOTES TO THE FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES        

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).

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 24 of the Annual Report. In particular the Directors considered the implications of the proximity to the planned winding-up date of 1 July 2024 and that Shareholders will have a vote on proposals relating to the Company’s planned life, on or within the three months prior to 1 July 2024. The Directors may be released from the obligation to call a general meeting to wind up the Company if a special resolution has been passed to that effect not later than 1 July 2024. The Directors also considered the investment outlook, the objectives of both classes of Shareholder, potential sources of funding to finance the repayment of the entitlement due to the ZDP Shareholders and other future cash flows of the Company. The nature of any proposals that may be presented by the Directors relating to the Company’s planned life on which the Shareholders will be required to vote and the outcome of the vote on any such proposals represent a material uncertainty in the context of assessing the prospects of the Company beyond 1 July 2024. This may cast significant doubt on the ability of the Company to continue preparing its financial statements on a going concern basis to the extent that they include, and Shareholders vote for, a winding-up of the Company. If at some point in the future the Directors conclude it is not appropriate to prepare the financial statements on a going concern basis then adjustments would be required to reclassify all assets as current, and a provision for further liabilities, including liquidation costs, would be made. Consideration would also be given to valuing the portfolio on a discounted bid basis to reflect the cost of liquidating the portfolio in a shorter time frame.

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. Given the nature of the Company, the Board does not consider climate change material to the presentation of the financial statements.

2. ALTERNATIVE PERFORMANCE MEASURES

Alternative Performance Measures (APMs) are measures that are not defined under the requirements of FRS 102 and are unaudited. The Company believes that APMs, referred to within “Financial Highlights”, provide Shareholders with important information on the Company and are appropriate for an investment trust company. These APMs are also a component of reporting to the Board. A glossary including APMs can be found below and in the 2023 Annual Report.

3. INVESTMENT MANAGEMENT FEE

The Managers, Aberforth Partners LLP, receive an annual management fee, payable quarterly in advance, equal to 0.75% of the Company’s Total Assets. The management fee is allocated 70% to capital reserves and 30% to revenue reserves.

4. DIVIDENDS PAID         

Amounts recognised as distributions to equity holders:	Year to 30 June 2023 £’000	Year to 30 June 2022 £’000
In respect of the year to 30 June 2021:
Second interim dividend of 2.13p (paid on 27 August 2021)	-	4,052
In respect of the year to 30 June 2022 First interim dividend of 1.51p (paid on 8 March 2022)	-	2,873
Second interim dividend of 2.79p (paid on 26 August 2022)	5,308	-
Special dividend of 0.25p (paid on 26 August 2022) In respect of the year to 30 June 2023: First interim dividend of 1.70p (paid on 8 March 2023)	475 3,235	- -
	------------	------------
Total	9,018	6,925
	------------	------------

The second interim dividend for the year ended 30 June 2023 of 3.30p (2022: 2.79p) per Ordinary Share is payable on 31 August 2023 and has not been recognised in the financial statements as at 30 June 2023.  Deducting the second interim dividend from the Company’s revenue reserves at 30 June 2023 leaves revenue reserves equivalent to 1.32p per Ordinary Share.

5. RETURNS PER SHARE                                                                                                            

	Year to 30 June 2023	Year to 30 June 2022
Ordinary Shares
Net return for the year	£16,866,000	£(36,112,000)
Weighted average Ordinary Shares in issue during the year	190,250,000	190,250,000
Return per Ordinary Share	8.87p	(18.98)p
ZDP Shares
Appropriation to ZDP Shares for the year	£2,024,000	£1,956,000
Weighted average ZDP Shares in issue during the year	47,562,500	47,562,500
Return per ZDP Share	4.26p	4.11p

There are no dilutive or potentially dilutive shares in issue.

6. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

	Year to 30 June 2023 £’000	Year to 30 June 2022 £’000
Investments at fair value through profit or loss
Opening fair value	193,062	235,448
Opening fair value adjustment	38,832	(9,102)
	------------	------------
Opening book cost	231,894	226,346
Purchases at cost	36,734	40,342
Sale proceeds	(37,698)	(40,980)
Realised gains on sales	3,543	6,186
	------------	------------
Closing book cost	234,473	231,894
Closing fair value adjustment	(32,323)	(38,832)
	------------	------------
Closing fair value	202,150	193,062
	------------	------------

All investments are in ordinary shares listed on the London Stock Exchange.

	Year to 30 June 2023 £’000	Year to 30 June 2022 £’000
Gains/(losses) on investments:
Net realised gains on sales	3,543	6,186
Movement in fair value adjustment	6,509	(47,934)
	------------	------------
Net gains/(losses) on investments	10,052	(41,748)
	------------	------------

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;

Level 2 – using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and

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.

7. 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.                            

	30 June 2023			30 June 2022
	Ordinary Shares	ZDP Shares	Total	Ordinary Shares	ZDP Shares	Total
Net assets attributable	£146,800,000	£58,417,000	£205,217,000	£138,952,000	£56,393,000	£195,345,000
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)	77.16p	122.82p	86.29p	73.04p	118.57p	82.14p
Dividend reinvestment factor13 (b)	1.319066	-	1.226413	1.242432	-	1.174303
	------------	------------	------------	------------	------------	------------
NAV per Share on a total return basis at the end of the period (c) = (a) x (b)	101.78p	122.82p	105.83p	90.75p	118.57p	96.46p
	------------	------------	------------	------------	------------	------------
NAV per Share on a total return basis at the start of the period (d)	90.75p	118.57p	96.46p	114.43p	114.46p	113.40p
	------------	------------	------------	------------	------------	------------
Total Return performance  (c) / (d) - 1	12.2%	3.6%	9.7%	-20.7%	3.6%	-14.9%
	------------	------------	------------	------------	------------	------------

13 Refer to Glossary

8. SHARE CAPITAL

	Shares	£’000
As at 30 June 2023
Ordinary Shares of 1p each	190,250,000	1,902
ZDP Shares of 1p each	47,562,500	476
	------------	------------
Total issued and allotted	237,812,500	2,378
	------------	------------

There have been no changes in the issued share capital since the launch of the Company on 3 July 2017.

9. ZERO DIVIDEND PREFERENCE SHARES

Year ended:	30 June 2023 £’000	30 June 2022 £’000
Opening Balance	56,393	54,437
Issue costs amortised during the period	48	46
Capital growth of ZDP Shares	1,976	1,910
	------------	------------
Closing Balance	58,417	56,393
	------------	------------

10. RELATED PARTY TRANSACTIONS

The Directors have been identified as related parties and their fees and interests have been disclosed in the Directors’ Remuneration Report contained in the Annual Report. 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.

11. FURTHER INFORMATION

The foregoing do not constitute statutory accounts (as defined in section 434(3) of the Companies Act 2006) of the Company. The statutory accounts for the year ended 30 June 2022, which contained an unqualified Report of the Auditors, have been lodged with the Registrar of Companies and did not contain a statement required under section 498(2) or (3) of the Companies Act 2006.

Certain statements in this announcement are forward looking statements.  By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements.  Forward looking statements regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future.  Accordingly, undue reliance should not be placed on forward looking statements.

The Annual Report is expected to be posted to shareholders by 7 August 2023.  Members of the public may obtain copies from Aberforth Partners LLP, 14 Melville Street, Edinburgh EH3 7NS or from its website: www.aberforth.co.uk.

GLOSSARY:

1 Total Assets Total Return – 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.

2 Ordinary Share NAV Total Return – 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 Ordinary Shares were quoted ex dividend.

3 Ordinary Share Price Total Return – 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 at the close of business on the day the shares were quoted ex dividend.

4 ZDP Share NAV Total Return – represents the return on the entitlement of a ZDP Share. The ZDP Share NAV as at 30 June 2023 was 122.82p (30 June 2022: 118.57p).

5 ZDP Share Price Total Return – the theoretical return to a ZDP Shareholder, on a closing market price basis.

6 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.

7 Gearing – calculated by dividing the asset value attributable to the ZDP Shares by the asset value attributable to the Ordinary Shares.

8 Projected Final Cumulative Cover – 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 management fees charged to capital, and estimated winding-up costs.

9 Redemption Yield (ZDP Share) – 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.

10 Hurdle Rate - 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.

11 Redemption Yield (Ordinary Share) - the annualised rate at which projected future income and capital cash flows (based on assumed future capital and dividend growth rates) is discounted to produce an amount equal to the share price at the date of calculation.

12 Terminal NAV (Ordinary Share)- 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.

13 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 or the share price, as appropriate, on the day the Ordinary Shares were quoted ex dividend.

14 Inception Date – 30 June 2017.

CONTACT:

Euan Macdonald / Christopher Watt - Aberforth Partners LLP - 0131 220 0733

Aberforth Partners LLP

Managers and Secretaries

28 July 2023

ANNOUNCEMENT ENDS

---

---