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

Aberforth Split Level Income TrustAnnouncement

29/04/2024 07:00

 

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

 

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

 

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

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

 

Introduction and background

 

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

 

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

 

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

 

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

 

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

 

Benefits of the Proposals

 

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

 
* They may offer Shareholders (depending on individual circumstances) the
opportunity to roll over their investments in a tax efficient manner (without
incurring an immediate liability to UK capital gains tax) into AGVIT's
ordinary shares and/or ZDP shares.
 
* They enable Shareholders to maintain their exposure to a diversified
portfolio of small UK quoted companies through a closed-ended investment
vehicle with a fixed life without incurring significant realisation costs or
portfolio reorganisation costs.
 
* They allow Ordinary Shareholders to maintain geared exposure to a portfolio
of attractively valued small UK quoted companies.
 
* They enable Shareholders to continue to benefit from the management
expertise of Aberforth Partners.
 
* They offer Ordinary Shareholders who wish to realise some or all of their
investment the opportunity to do so at close to Net Asset Value.
 
* They avoid the need to realise all of the Company's small cap investment
portfolio in the market to the extent that all or part of it is transferred to
AGVIT under the Proposals, thereby saving potential realisation costs which
would otherwise be borne by Ordinary Shareholders on the winding up of the
Company.
 
* Shareholders who choose to roll over their investment in the Company into
AGVIT will benefit from a £450,000 contribution from Aberforth Partners to
the launch costs of AGVIT.
Further details of the Proposals

 

Under the terms of the proposed Scheme:

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

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

 

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

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

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

 

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

 

Second interim dividend

 

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

 

Next Steps

 

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


26 April 2024

 

 

 

For further information, please contact:

 

Investment Managers

   Aberforth Partners LLP +44 (0) 131 220 0733

   Euan Macdonald

Peter Shaw


Financial Advisers to the Company and AGVIT

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

William Simmonds

Rupert Budge 


Solicitors to the Company and AGVIT

Dickson Minto LLP   +44 (0) 207 649 6823

Douglas Armstrong

 

Important notices

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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



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