Aberforth Split Level Income Trust plc — Annual Report 2022

Sep 7, 2022

Aberforth Split Level Income Trust plc Annual Report and Financial Statements 30 June 2022

Contents

• Strategic Report
  • Investment Objective
  • Financial Highlights
  • Chairman’s Statement
  • Investment Policy and Strategy
  • Principal Risks
  • Directors’ Duty to Promote the Success of the Company
  • Viability Statement
  • Key Performance Indicators
  • Hurdle Rates & Redemption Yields
  • Managers’ Report
  • Thirty Largest Investments
  • Investment Portfolio
  • Other Portfolio Information
• Other Business Information
• Governance Report
  • Board of Directors
  • Directors’ Report
  • Corporate Governance Report including Stewardship and Environmental, Social and Governance
  • Audit Committee Report
  • Directors’ Remuneration Policy
  • Directors’ Remuneration Report
  • Directors’ Responsibility Statement
• Financial Report
  • Independent Auditor’s Report
  • Income Statement
  • Reconciliation of Movements in Shareholders’ Funds
  • Balance Sheet
  • Cash Flow Statement
  • Notes to the Financial Statements
• Shareholder Information
  • General Information
  • Glossary
  • Corporate Information
• Annual General Meeting
  • Notice of the Annual General Meeting
  • Notes to the Notice of the Annual General Meeting

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 Value per Share	Ordinary Share Price (Premium/Discount)¹	Dividends per Share²	Special Dividends per Share²	Ongoing Charges³	Gearing³
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

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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 gearing³ level of 25%.

At inception a ZDP Share had a NAV of 100p, a Projected Final Cumulative Cover³ of 3.4x, and a Redemption Yield³ of 3.5%.

Zero Dividend Preference Share (ZDP Share)

	Net Asset Value per Share²	Share Price¹	Discount/ (Premium)¹	Projected Final Cumulative Cover³	Redemption Yield³
30 June 2022	118.6p	116.0p	2.2%	3.0x	4.7%
30 June 2021	114.5p	114.0p	0.4%	3.6x	3.7%
30 June 2020	110.5p	106.0p	4.0%	2.3x	4.7%

Periods to 30 June	Ordinary Share NAV¹	Ordinary Share Price¹	ZDP Share NAV¹	ZDP Share Price¹
2022 Total Assets
1 year	-14.9%	-20.7%	-23.2%	3.6%
Annualised 5 year and since inception³	-0.7%	-1.9%	-4.1%	3.5%
Cumulative 5 year and since inception³	-3.5%	-9.3%	-19.1%	18.6%

2 Strategic Report Aberforth Split Level Income Trust plc

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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

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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.

After accounting for the second interim dividend and the special dividend, retained revenue reserves will be 0.97p per Ordinary Share at 30 June 2022. These revenue reserves will be returned to Ordinary Shareholders as dividends by the end 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 companies. 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 movements 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

Strategic Report

Aberforth Split Level Income Trust plc

Strategic Report

Aberforth Split Level Income Trust plc

Principal Risks

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. 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-established 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.

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

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

		Ordinary Shares	ZDP Shares
At 30 June	100p Share Price	Zero Value 127.25p	Zero Value
2022	Annualised Hurdle Rates to return	16.2%	-0.7%
	Annualised Hurdle Rates to return	-42.6%	-42.6%
2021	Annualised Hurdle Rates to return	3.4%	-0.1%
	Annualised Hurdle Rates to return	-35.5%	-35.5%
Inception	Annualised Hurdle Rates to return	1.5%	n/a
	Annualised Hurdle Rates to return	-17.0%	-17.0%
Hurdle Rates
Redemption Yields as at 30 June 2022 (Ordinary Shares)		Annualised Ordinary Share Redemption Yields
		Dividend Growth (per annum)	Capital Growth (per annum)
		-20.0%	-10.0% +0.0% +10.0% +20.0%
Terminal NAV		-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.

Managers’ Report

Introduction

Stockmarket performance deteriorated through ASLIT’s last financial year. The modest positive returns of the first half gave way 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 MSCI (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
stocks
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).

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

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 of 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 stocks 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).

Leverage Category	Portfolio Weight (%)	Tracked Universe Weight (%)	As at End 2022 (Managers’ Estimate) Portfolio Weight (%)	As at End 2022 (Managers’ Estimate) Tracked Universe Weight (%)
None	14.4	12.6	14.9	12.8
Low	37.6	38.1	38.9	38.5
Medium	36.5	36.0	35.5	35.1
High	11.5	13.3	10.7	13.6

Number of stocks	Company	2021	2022	2023	2024
66	ASLIT	7.5x	6.7x	6.2x	5.1x
235	Tracked Universe	10.3x	8.8x	7.6x	6.2x
44	Growth stocks	14.6x	14.1x	12.3x	9.1x
191	The rump	9.6x	8.0x	6.9x	5.7x
159	Stocks <£600m market cap.	8.4x	6.8x	6.6x	5.7x
76	Stocks >£600m market cap.	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 Price earnings ratio 31 year average at 30 June 2022 with earnings –30%

Portfolio
# Strategic Report

Aberforth Split Level Income Trust plc

Investment Portfolio

As at 30 June 2022

Value £'000	% of Total Investments	Sector/Security	Business Activity
5,164	2.7	Morgan Advanced Materials	Manufacture of carbon & ceramic materials
5,077	2.6	Centamin	Gold miner
4,718	2.4	Anglo Pacific Group	Natural resources royalties
4,412	2.3	Bloomsbury Publishing	Independent publishing house
4,307	2.2	Wilmington Group	Business publishing & training
4,217	2.1	CMC Markets	Financial derivatives dealer
Top Ten Investments	55,767	28.9
4,028	2.1	Micro Focus	Legacy software assets
3,948	2.0	Videndum	Photographic & broadcast accessories
3,893	2.0	Bakkavor Group	Food manufacturer
3,831	2.0	Vistry Group	Housebuilding
3,823	2.0	Energean	Oil & gas exploration and production
3,802	2.0	Reach	UK newspaper publisher
3,683	1.9	Paypoint	Alternative payment services
3,610	1.9	Vesuvius	Metal flow engineering
3,525	1.8	Kenmare Resources	Miner of titanium minerals
3,506	1.8	Crest Nicholson	Housebuilding
Top Twenty Investments	93,416	48.4
3,496	1.8	STV Group	Multi-channel digital media
3,475	1.8	RPS Group	Energy & environmental consulting
3,425	1.8	TI Fluid Systems	Automotive parts manufacturer
3,414	1.8	International Personal Finance	Home credit provider
3,411	1.7	Drax Group	Electricity generation
3,401	1.7	Provident Financial	Personal credit provider
3,322	1.7	C&C Group	Brewer and drinks distributor
3,059	1.6	Sabre Insurance Group	Car insurance
3,041	1.6	Chesnara	Life insurance
3,026	1.6	Devro	Sausage casings
Top Thirty Investments	126,486	65.5
	66,576	34.5	Other Investments (36)
Total Investments	193,062	100.0
Net Liabilities	(54,110)
Total Net Assets	138,952

Investment Portfolio

As at 30 June 2022

Sector	Value £'000	% of Total	Security	Business Activity	Value £'000	% of Total
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 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
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

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Summary of Investment Transactions

For the year to 30 June 2022

Sector/Security	Portfolio Weight %	Value £'000	Portfolio Valuation £'000	Purchases/ (Sales) £'000	Appreciation/ (Depreciation) £'000
30 June 2021
30 June 2022
Net Portfolio
Cost

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Other Portfolio Information

Investment Portfolio

As at 30 June 2022

Sector/Security	Value £'000	% of Total Investments	Business Activity
Morgan Advanced Materials	5,164	2.7	Manufacture of carbon & ceramic materials
Centamin	5,077	2.6	Gold miner
Anglo Pacific Group	4,718	2.4	Natural resources royalties
Bloomsbury Publishing	4,412	2.3	Independent publishing house
Wilmington Group	4,307	2.2	Business publishing & training
CMC Markets	4,217	2.1	Financial derivatives dealer
Micro Focus	4,028	2.1	Legacy software assets
Videndum	3,948	2.0	Photographic & broadcast accessories
Bakkavor Group	3,893	2.0	Food manufacturer
Vistry Group	3,831	2.0	Housebuilding
Energean	3,823	2.0	Oil & gas exploration and production
Reach	3,802	2.0	UK newspaper publisher
Paypoint	3,683	1.9	Alternative payment services
Vesuvius	3,610	1.9	Metal flow engineering
Kenmare Resources	3,525	1.8	Miner of titanium minerals
Crest Nicholson	3,506	1.8	Housebuilding
STV Group	3,496	1.8	Multi-channel digital media
RPS Group	3,475	1.8	Energy & environmental consulting
TI Fluid Systems	3,425	1.8	Automotive parts manufacturer
International Personal Finance	3,414	1.8	Home credit provider
Drax Group	3,411	1.7	Electricity generation
Provident Financial	3,401	1.7	Personal credit provider
C&C Group	3,322	1.7	Brewer and drinks distributor
Sabre Insurance Group	3,059	1.6	Car insurance
Chesnara	3,041	1.6	Life insurance
Devro	3,026	1.6	Sausage casings
Total Investments	193,062	100.0

Strategic Report

FTSE Industry Classification Exposure Analysis

Index Classification	Number of Companies	Valuation £’000	Weight %	Number of Companies	Valuation £’000	Weight %
Technology	3	6,720	3	4,613	-3,763	7,570
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
Total	69	235,448	-309	-42,077	193,062	100

1 Includes transaction costs.

FTSE Index Classification Exposure Analysis

Index Classification	Number of Companies	Valuation £’000	Weight %	Number of Companies	Valuation £’000	Weight %
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
Total	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.

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

Angus 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

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.

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 Share
holders 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 Share
holders 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. The 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.

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 for 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 unanimously 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 with 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.

Governance Report

Aberforth Split Level Income Trust plc

Corporate Governance Report

Director	Eligible to attend	Attended	Eligible to 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	–	–

Meeting Focus	October	January	April	July
Board
Audit Committee
Corporate 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 of 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 operates 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.

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
			Meeting to be called if required
Financial Reporting			The 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.

	Matter Considered and Action taken by the Committee	Significant Issue	How the issue was addressed
Audit Committee Report	28	Governance Report	Aberforth Split Level Income Trust plc
		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.
## 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

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.

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 risks 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.

In 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.

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Directors’ Remuneration Policy 30

Governance Report

Aberforth Split Level Income Trust plc

This 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	Year to 30 June 2022	Year to 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

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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-election. 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.

Director	Date of Appointment	Date of 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 (£’000)	2021 (£’000)	Change (£’000)
Total Directors’ remuneration		136	136	0
Total dividends in respect of the year		8,656	5,802	2,854

Director	Fees 2022 (£)	Fees 2021 (£)
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
Total	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.

Directors’ Remuneration Report

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

(Performance Graph Image Placeholder - The provided text does not contain the data for the graph, so it's represented as a note)

Governance Report

Aberforth Split Level Income Trust plc

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

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.

Key audit matters
Materiality
Scoping
Significant changes in our approach

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. Summary 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.

We 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.# 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. 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.

Materiality	Basis of determining materiality	Rationale for the benchmark applied
£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.

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.

Financial Report

Aberforth Split Level Income Trust plc

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 which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

11.1. Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the company’s remuneration policies, key drivers for directors’ and the Manager’s, remuneration and performance targets;
• results of our enquiries of the Managers and the audit committee about their own identification and assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the company’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential 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).

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 misstatement 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. Corporate Governance Statement

The Listing Rules require us to review the directors' statement in relation to going concern, long-term viability and that part of the Corporate Governance Statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
* the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 21;
* the directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is appropriate set out on page 21;
* the directors' statement on fair, balanced and understandable set out on page 33;
* the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 25;
* the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 25; and
* the section describing the work of the audit committee 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. Matters on which we are required to report by exception

14.1. Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:
* we have not received all the information and explanations we require for our audit; or
* adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
* the financial statements are not in agreement with the accounting records and returns.

14.2. Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made or the part of the directors’ remuneration to be audited is not in agreement with the accounting records and returns.

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

Note	Year to 30 June 2022		Year to 30 June 2021
	Revenue £’000	Capital £’000	Total £’000	Revenue £’000
Net (losses)/gains on investments	11	–	(41,748)	(41,748)
Investment income	3	10,024	–	10,024
Investment management fee	4	(521)	(1,216)	(1,737)
Portfolio transaction costs	6	–	(329)	(329)
Other expenses	5	(335)	–	(335)
Net return before finance costs and tax		9,168	(43,293)	(34,125)
Finance costs:
Appropriation to ZDP Shares	7	–	(1,956)	(1,956)
Interest expense and overdraft fee	7	(3)	(6)	(9)
Return on ordinary activities before tax		9,165	(45,255)	(36,090)
Tax on ordinary activities	8	(22)	–	(22)
### Aberforth Split Level Income Trust plc
### 41 Reconciliation of Movements in Shareholders’ Funds

Year to 30 June 2022

Note	Share £’000	Special capital reserve £’000	Revenue reserve £’000	Total £’000
Balance as at 30 June 2021	1,902	187,035	(12,365)	5,417
Return on ordinary activities after tax	–	–	(45,255)	9,143
Equity dividends paid	9	–	–	–
Balance as at 30 June 2022	1,902	187,035	(57,620)	7,635

The accompanying notes form part of these financial statements.

Year to 30 June 2021

Note	Share £’000	Special capital reserve £’000	Revenue reserve £’000	Total £’000
Balance as at 30 June 2020	1,902	187,035	(95,786)	6,801
Return on ordinary activities after tax	–	–	83,421	5,522
Equity dividends paid	9	–	–	–
Balance as at 30 June 2021	1,902	187,035	(12,365)	5,417

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 2022 £’000	30 June 2021 £’000
Fixed assets
Investments at fair value through profit or loss	11	193,062
Current assets
Debtors	12	755
Cash at bank	18	1,590
		2,345
Creditors (amounts falling due within one year)	13	(62)
Net current assets		2,283
TOTAL ASSETS LESS CURRENT LIABILITIES		195,345
Creditors (amounts falling due after more than one year)
ZDP Shares	14	(56,393)
TOTAL NET ASSETS		138,952

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.

43 Financial Report Aberforth Split Level Income Trust plc

Cash Flow Statement

For the year to 30 June 2022

	Year to 30 June 2022 £’000	Year to 30 June 2021 £’000
Operating activities
Net revenue before finance costs and tax		9,168
Stock dividends	3	–
Tax (withheld) from income		(20)
Investment management fee charged to capital	4	(1,216)
(Increase)/decrease in debtors (excluding stock dividends receivable)		(421)
Increase/(decrease) in creditors	9	9
Cash inflow from operating activities		7,520
Investing activities
Purchases of investments excluding transaction costs		(41,203)
Sales of investments excluding transaction costs		41,007
Cash (outflow)/inflow from investing activities		(196)
Financing activities
Equity dividends paid	9	–

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.

2 Alternative Performance Measures

Alternative Performance Measures (APMs) are measures that are not defined under the requirements of FRS 102. The Company believes that APMs, referred to within “Financial Highlights” on page 1, provide Shareholders with important information on the Company and are appropriate for an investment trust company. These APMs are also a component of the reporting to the Board. A glossary of the APMs can be found on page 54.

3 Income

Income from investments
UK dividends	8,917	–	8,917	5,410
Overseas dividends	1,107	–	1,107	434
Property income distributions	–	–	–	86
Stock dividends	–	–	–	328
Total Income	10,024	–	10,024	6,258

During the year to 30 June 2022 the Company received seven (2021: three) special dividends totalling £973,000 (2021: £629,000). Of these a total of £973,000 (2021: £629,000) was recorded as revenue and £nil (2021: £nil) was recorded as capital, in accordance with the Company's accounting policy for income.

4 Investment Management Fee

Investment management fee	521	1,216	1,737	395
Total	521	1,126	1,737	921

Details of the investment management contract can be found on page 19.

Cash flow statement extract:

Interest and fees paid	(6,906)	(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# 5 Other Expenses

The expenses (including VAT, where applicable) have been charged to revenue:

	Year to 30 June 2022	Year to 30 June 2021
Directors’ fees	136	132
Auditor’s fee – Year end audit	40	36
Registrar fee	39	35
FCA and LSE listing fees	18	17
Depositary fee	18	12
Printing	11	9
Custody and other bank charges	11	9
AIC Fees	10	9
Media Listings	8	5
Directors’ and Officers’ liability insurance	8	5
Legal fees	1	5
Other expenses	35	38
Total	335	316

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.

	Year to 30 June 2022		Total	Year to 30 June 2021		Total
	Revenue	Capital		Revenue	Capital
	£’000	£’000	£’000	£’000	£’000	£’000
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.

Financial Report Aberforth Split Level Income Trust plc Notes to the Financial Statements# Financial Report Aberforth Split Level Income Trust plc 48 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.
Level 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

	30 June 2022 £’000	30 June 2021 £’000
Investment income receivable	747	327
Amounts due from brokers	–	80
Other debtors	8	9
Total	755	416

13 Creditors

	30 June 2022 £’000	30 June 2021 £’000
Amounts due to brokers	–	585
Other creditors	62	53
Total	62	638

14 Zero Dividend Preference Shares

	30 June 2022 £’000	30 June 2021 £’000
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
ZDP Shares of 1p each	47,562,500	476	47,562,500
Total issued and allotted	237,812,500	2,378	237,812,500

	30 June 2022		30 June 2021
	No. of Shares	£’000	No. of Shares	£’000
	30 June 2022 £’000	30 June 2021 £’000
	Year to	Year to
	30 June 2022	30 June 2021
	£’000	£’000
	£’000	£’000

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.

	30 June 2022		30 June 2021
	Total Net Assets	Ordinary Shares	ZDP Shares	Total Net Assets
	£’000	£’000	£’000	£’000
Net Assets attributable	£138,952,000	£56,393,000	£195,345,000	£181,989,000
Number of Shares at the reporting date	190,250,000	47,562,500	237,812,500	190,250,000
NAV per Share (a)	73.04p	118.57p	82.14p	95.66p
Dividend reinvestment factor 1 (b)	1.242432	–	1.174303	1.196195
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
NAV per Share on a total return basis at the start of the period (d)	114.43p	114.46p	113.40p	58.85p
Total Return performance (c) ÷ (d) -1	-20.7%	3.6%	-14.9%	94.4%

1 Defined in the Glossary on pages 54-55.

17 Capital and Reserves

	At 30 June 2021	Net gain on sales of investments	Movement in fair value adjustment	Cost of investment transactions	Investment management fee charged to capital	Interest charged to capital	ZDP Shares - Appropriation	ZDP Shares - Amortised issue costs	Revenue return attributable to Equity Shareholders	Equity dividends paid	At 30 June 2022
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
	1,902	187,035	(12,365)	5,417	–	–	–	–	9,143	–	181,989
	–	–	6,186	–	(1,216)	(6)	(1,910)	(46)	–	(6,925)	138,952
At 30 June 2022	1,902	187,035	(57,620)	7,635	(1,216)	(6)	(1,910)	(46)	9,143	(6,925)	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)

18 Cash and cash equivalents

	30 June 2022 £’000	30 June 2021 £’000
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 £’000	30 June 2021 £’000
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:	£’000	£’000
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 2022	30 June 2021
Maturity profile of the Company’s financial liabilities	£’000	£’000
Accrued expenses	62	53
Amounts due to brokers	–	585
ZDP Shares	60,523	60,523
Total liabilities	60,585	61,161

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-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

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
Ex-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

General Informationperformance is not a guide to the future. Your investment may be at risk as the value of investments may go down as well 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, or breaches of the maximum level of leverage employed by the Company.

	30 June 2022	30 June 2021
Maximum limit	1.05:1	1.05:1
Actual Level	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

	ISIN	SEDOL	Bloomberg/Reuters
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 Method	Gross Method
Exposure

Glossary

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 or 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

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 in 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.

Shareholder Information

Aberforth Split Level Income Trust plc

Directors

• Angus Gordon Lennox (Chairman)
• Graeme Bissett
• Dominic Fisher, OBE
• Lesley 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

Handelsbanken
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

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 14 Melville Street, Edinburgh EH3 7NS on 31 October 2022 at 11.00 a.m. for the following purposes.

Ordinary Business

To 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

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 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.# 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
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