Aberforth Split Level Income Trust Plc - Update on planned reconstruction and voluntary winding-up of the Company and further dividend

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, TO US PERSONS OR IN OR INTO THE UNITED STATES, OR INTO OR FROM CANADA, AUSTRALIA, JAPAN, NEW ZEALAND AND THE REPUBLIC OF SOUTH AFRICA.

This announcement is an advertisement and not a prospectus. This announcement does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities in Aberforth Split Level Income Trust plc (the "Company") or Aberforth Geared Value & Income Trust plc (“AGVIT”) or securities in any other entity, in any jurisdiction, including the United States, nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction. This announcement does not constitute a recommendation regarding any securities. Any investment decision must be made exclusively on the basis of the final prospectus published by AGVIT and any supplement thereto or the final circular published by the Company.

Aberforth Split Level Income Trust plc (the “Company”)

Update on planned reconstruction and voluntary winding-up of the Company and further dividend

Introduction and background

The last “Chairman’s Statement”, released with the Company’s Interim Report on 29 January 2024, shared the Board’s views about the planned winding-up of the Company. This announcement provides an update on these plans.

The Board has reached agreement in principle with Aberforth Geared Value & Income Trust plc ("AGVIT") on the outline terms of the scheme of reconstruction and voluntary winding-up of the Company, (the "Scheme") and associated transfer of part of the assets and undertaking of the Company to AGVIT in exchange for the issue of new ordinary shares and new ZDP shares in AGVIT (the "Proposals"). If the Company's shareholders ("Shareholders") approve of the Proposals, the Scheme is expected to become effective on 28 June 2024 and AGVIT will act as a rollover option for investors in the Company.

AGVIT will be a new investment trust, expected to launch on 1 July 2024, which will invest in a diversified portfolio of small UK quoted companies. Aberforth Partners, the Company's investment managers, will also be the investment managers of AGVIT. AGVIT’s capital structure will comprise ordinary shares with gearing via ZDP shares. Both classes of share will be issued at 100 pence per share on launch. The level of gearing for the ordinary shareholders in AGVIT at launch would be similar to the current gearing level of ASLIT, in a range of 30 to 40 per cent. of total ordinary shareholders’ funds.

AGVIT’s investment objective will be to provide AGVIT's ordinary shareholders with high total returns, incorporating an attractive level of income, and to provide AGVIT's ZDP shareholders with a pre- determined final capital entitlement on AGVIT's planned winding-up date of 30 June 2031. The gross redemption yield of the AGVIT ZDP shares at launch will be announced when the AGVIT prospectus is published by the end of May 2024. AGVIT’s portfolio construction will be aimed at delivering an attractive yield and will also be designed to take advantage of the significant recovery potential of UK equities in general and smaller companies in particular.

It is also proposed that AGVIT issue AGVIT ordinary shares and AGVIT ZDP shares at the issue price of 100 pence per share, pursuant to a placing and offer for subscription.

Benefits of the Proposals

The Board considers that the Proposals have the following benefits for Shareholders.

• They may offer Shareholders (depending on individual circumstances) the opportunity to roll over their investments in a tax efficient manner (without incurring an immediate liability to UK capital gains tax) into AGVIT's ordinary shares and/or ZDP shares.

• They enable Shareholders to maintain their exposure to a diversified portfolio of small UK quoted companies through a closed-ended investment vehicle with a fixed life without incurring significant realisation costs or portfolio reorganisation costs.

• They allow Ordinary Shareholders to maintain geared exposure to a portfolio of attractively valued small UK quoted companies.

• They enable Shareholders to continue to benefit from the management expertise of Aberforth Partners.

• They offer Ordinary Shareholders who wish to realise some or all of their investment the opportunity to do so at close to Net Asset Value.

• They avoid the need to realise all of the Company's small cap investment portfolio in the market to the extent that all or part of it is transferred to AGVIT under the Proposals, thereby saving potential realisation costs which would otherwise be borne by Ordinary Shareholders on the winding up of the Company.

• Shareholders who choose to roll over their investment in the Company into AGVIT will benefit from a £450,000 contribution from Aberforth Partners to the launch costs of AGVIT.

Further details of the Proposals

Under the terms of the proposed Scheme:

• Ordinary Shareholders (other than overseas holders) will be able to exchange some or all of their investment in the Company for ordinary shares in AGVIT and/or to realise some or all of their investment in the Company for cash. To the extent that their election for AGVIT ordinary shares is scaled back, Ordinary Shareholders will be able to elect for AGVIT ordinary shares and AGVIT ZDP shares in a ratio determined by AGVIT’s level of gearing.

• ZDP Shareholders (other than overseas holders) will be able to exchange some or all of their investment in the Company for ZDP shares in AGVIT and/or ordinary shares in AGVIT and/or to realise some or all of their investment in the Company for cash. To the extent that their election for AGVIT ZDP shares is scaled back, ZDP Shareholders will be able to elect for AGVIT ordinary shares and AGVIT ZDP shares in a ratio determined by AGVIT’s level of gearing.

If Shareholders approve of these Proposals, it is currently anticipated that AGVIT would acquire part or all of the Company’s assets, the consideration to be satisfied in part by the issue of AGVIT shares to Shareholders electing to roll over their investment into AGVIT, with the balance being payable by AGVIT to the Company in cash which it intends raising by means of a placing and offer for subscription.

It is intended that the AGVIT board shall have discretion (after consultation with ASLIT, Aberforth Partners and J.P. Morgan Cazenove) to scale back elections and/or applications to ensure that AGVIT:

• will not be larger than the Company; and
• the gearing of AGVIT ordinary shares by AGVIT ZDP shares will be in the range of 30 to 40 per cent.

In exercising its discretion, it is the intention of the AGVIT board to seek to ensure a fair allocation and give preference, so far as is practicable, in allocating AGVIT ordinary shares, to those Ordinary Shareholders who have elected (or are deemed to elect) to rollover into AGVIT ordinary shares and, in allocating AGVIT ZDP shares, the AGVIT board intends to give preference, so far as is practicable, to those investors who have also subscribed for (or rolled into) AGVIT ordinary shares and/or ZDP shares.

The AGVIT board anticipates that, in the absence of unforeseen circumstances, and on the basis of a gearing ratio at the higher end of the indicated 30-40%. range, the target aggregate dividends, in respect of the period from AGVIT's launch to 30 June 2025, will be approximately 5 pence per AGVIT ordinary share. This is not a profit forecast. There can be no guarantee that AGVIT will pay such or any dividends.

Second interim dividend

The Board had previously indicated that it planned to declare a second interim dividend to be paid to all Ordinary Shareholders (including those who elect to receive cash and not roll over their investment in the Company into AGVIT) by the end of June 2024 prior to the winding up of the Company and, in the absence of unforeseen circumstances, it was expected to be no less than 2.75p per Ordinary Share. The Board is pleased to announce that given the strength of the recent dividend experience, the Company’s revenue position is such that the Board can revise upwards its estimation for the second interim dividend and, in the absence of unforeseen circumstances, expects this to be 3.25p per Ordinary Share. In expressing this intention, which is not a profit forecast, the Board has been guided by the Investment Managers’ dividend estimates and revenue reserves as at 30 June 2023 of 1.32p per Ordinary Share. No further dividends are expected to be paid after this second interim dividend by the Company and Ordinary Shareholders will receive value for any remaining undistributed revenue reserves as part of the Scheme and the planned wind-up of the Company.

Next Steps

The Board, in conjunction with the AGVIT board, and advisers to both companies, is working towards publishing final proposals by the end of May 2024. It is currently envisaged that a shareholder circular setting out the details of the Scheme and containing notices of the general meetings at which Shareholder approval for, inter alia, the Scheme will be sought, will be sent to Shareholders by the end of May 2024. The relevant general meetings are expected to be held during June 2024. Shareholders will note that the Board’s plans are now at a relatively advanced stage though do remain subject to change, in whole or in part.

26 April 2024

For further information, please contact:

Investment Managers

   Aberforth Partners LLP +44 (0) 131 220 0733

   Euan Macdonald

Peter Shaw

Financial Advisers to the Company and AGVIT

J.P. Morgan Cazenove (JPMC) +44 (0) 207 742 4000

William Simmonds

Rupert Budge 

Solicitors to the Company and AGVIT

Dickson Minto LLP   +44 (0) 207 649 6823

Douglas Armstrong

Important notices

The content of this announcement, which has been prepared by, and is the sole responsibility of, the Company, has been approved by Aberforth Partners LLP solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 (as amended). Aberforth Partners LLP is authorised and regulated by the Financial Conduct Authority.

The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment from time to time.

J.P. Morgan Cazenove, which is authorised and regulated by the Financial Conduct Authority, is acting only for the Company and AGVIT in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible to anyone other than the Company and AGVIT for providing the protections afforded to clients of J.P. Morgan Cazenove or advice to any other person in relation to the matters contained herein.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. All statements other than statements on historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, proposed acquisitions and objectives, are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties and, accordingly, AGVIT's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement and cannot be relied upon as a guide to future performance. Aberforth Partners LLP, J.P. Morgan Cazenove and Dickson Minto LLP expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.

None of the Company, AGVIT, Aberforth Partners LLP, J.P. Morgan Cazenove or Dickson Minto LLP, or any of their respective affiliates, accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of this information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or associated companies, whether written, oral or in visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. The Company, AGVIT, Aberforth Partners LLP, J.P. Morgan Cazenove and Dickson Minto LLP, and their respective affiliates, accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.

This announcement does not constitute a prospectus relating to AGVIT, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company or AGVIT in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract therefor. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the prospectus being considered for publication by AGVIT in due course. The contents of such prospectus will, if published, supersede the information in this announcement.

Nothing in this document constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Copies of the prospectus, if published, will be available from Aberforth Partners LLP's website www.aberforth.co.uk.