REG-Aberforth Geared Value & Income Trust Plc: Final Results
Thu 07:02
Aberforth Geared Value & Income Trust plc
Audited Annual Results for the period from Incorporation on 29 March 2024 to
30 June 2025
The following is an extract from the Company's Annual Report and Financial
Statements for the period from incorporation on 29 March 2024 to 30 June 2025,
which includes the period from the Company’s inception on 28 June 2024 and
launch on 1 July 2024.
FINANCIAL HIGHLIGHTS (SUMMARY)
Performance (Total Return) Period from Inception 19 on 28 June 2024 to 30 June 2025 (including launch costs) Period from Launch 20 on 1 July 2024 to 30 June 2025 (excluding launch costs)
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Total Assets 1 +2.6% +4.4%
Ordinary Share NAV 2 +1.3% +3.3%
Ordinary Share Price 4 -14.8% -14.8%
ZDP Share NAV 3 +7.0% +7.0%
ZDP Share Price 5 +8.0% +8.0%
1-21 Refer to Note 2, Alternative Performance Measures, and the Glossary.
The ZDP Share NAV total return of 7.0% is on an Articles basis (see Note 7)
Dividends Declared
Second Interim Dividend per Ordinary Share 3.50p
Special Dividend per Ordinary Share 0.85p
The first interim dividend of 1.50p and the second interim dividend of 3.50p
represent the total underlying dividends for the period to 30 June 2025 of
5.00p per Ordinary Share, which is at the top end of the Board’s targeted
range of 4.00p – 5.00p at launch. In addition, a special dividend of 0.85p
is declared and reflects the strong income performance. Total dividends for
the period to 30 June 2025 amount to 5.85p per Ordinary Share.
The second interim and special dividend have an ex-dividend date of 7 August
2025, record date of 8 August 2025 and pay date of 28 August 2025.
THE COMPANY
Aberforth Geared Value & Income Trust plc (the Company or AGVIT) is a
closed-ended investment company incorporated on 29 March 2024. It has a fixed
life of seven years from launch to 30 June 2031 and its shares are traded on
the London Stock Exchange's Main Market. The Company acted as a rollover
option for shareholders in Aberforth Split Level Income Trust plc (ASLIT) in
connection with the winding up of ASLIT on 1 July 2024. Further information is
set out in Note 9, the Company’s Prospectus issued on 28 May 2024, and is
also available on the Aberforth website www.aberforth.co.uk.
CHAIRMAN’S STATEMENT
Aberforth Geared Value & Income Trust (AGVIT or the Company) was launched on
the London Stock Exchange on 1 July 2024. This is the Company’s first Annual
Report and Financial Statements, covering the period to 30 June 2025.
Initial Public Offering (IPO)
Gross IPO proceeds, before launch costs, were £147.6m. The Company started
its life near fully invested since £132.7m was subscribed by shareholders in
Aberforth Split Level Income Trust (ASLIT) who elected to “roll over”
their investments into AGVIT. The balance of £14.9m came from the Company’s
placing and offer for subscription. On behalf of the Board, I would once again
like to thank all our fellow Shareholders for their support.
Company Information
• The Company is an investment trust comprising Ordinary Shares and
Zero Dividend Preference (ZDP) Shares issued in a ratio of 8:3. Capital
returns to the Ordinary Shareholders are effectively geared by the final
capital entitlement due to the ZDP Shareholders. In periods of rising equity
prices, this can benefit the net asset value performance attributable to the
Ordinary Shares, but the converse also holds true.
• AGVIT’s investment objective is to provide Ordinary Shareholders
with high total returns, incorporating an attractive level of income, and to
provide ZDP Shareholders with a pre-determined Final Capital Entitlement of
160.58p per ZDP share on the Planned Winding Up Date of 30 June 2031. Based on
the issue price of 100p per ZDP Share, this equates to a 7.0% gross redemption
yield.
• Ordinary Shareholders are entitled to all net income generated by
the portfolio of investments. On a Winding Up, Ordinary Shareholders are
entitled to receive undistributed revenue reserves in priority to the capital
entitlements of the ZDP Shareholders. Ordinary Shareholders are also entitled
to the net assets of the Company, if any, after all liabilities have been
settled and the entitlements of the ZDP Shares have been met.
• The Company invests in a diversified portfolio of 50-100 small UK
quoted companies. There were 68 holdings at 30 June 2025.
• Aberforth Partners LLP manage the investment portfolio within
parameters set by the Board. Their business was founded in 1990 and
specialises in investing in small UK quoted companies. The team of six fund
managers have considerable experience both of the asset class and of managing
investment trusts. They have consistently applied a value investment
philosophy to their selection of portfolio companies.
Investment Background
AGVIT’s successful launch came at a time of increasing interest in the UK
stockmarket. The imminent general election promised a more stable political
backdrop, while trading conditions for smaller companies were improving as the
economy recovered from the 2023 recession. Investors were also encouraged by
the elevated rate of M&A activity, which made very clear the attractiveness of
valuations within the Company’s investment universe.
Nevertheless, it is undoubtedly true that the investment environment has
become more challenging since launch. Much of the uncertainty emanates from
the US – the Trump administration’s positions on Ukraine, tariffs and most
recently, Iran have undermined confidence and unnerved investors. Closer to
home, the hopes for political stability clashed with the reality of
October’s Budget. Tax rises hurt businesses directly and households
indirectly. The government’s fiscal tightrope act weighs on sentiment
towards small UK quoted companies and has contributed to a volatile year.
Inevitably, the Company’s portfolio holdings have been caught up in this,
which has affected AGVIT’s capital performance since launch.
Review of Performance
For AGVIT to succeed for its Ordinary Shareholders over the seven year life,
capital returns at the total asset level should exceed the hurdle rate imposed
by the ZDP shares. Of course, such an outcome would also be consistent with
the delivery to ZDP Shareholders of their entitlement. When reporting
performance, “since inception” refers to periods since 28 June 2024 and
reflects the impact of certain one-off costs associated with the launch.
“Since launch” refers to periods since 1 July 2024 and excludes the
one-off costs.
Portfolio performance
Since launch Total Assets total return DNSCI (XIC) FTSE All-Share
To 30 June 2025 4.4% 11.1% 11.2%
• The table above shows the period’s Total Assets total return
performance. It measures the portfolio return and is unaffected by AGVIT’s
capital structure. Since it covers the period since launch, it is unaffected
by one-off launch costs and so is more comparable with equity indices.
• It is important to emphasise that AGVIT’s investment objective and
capital structure reduce the relevance of assessing its performance relative
to an equity index. Nevertheless, for context, the table also sets out the
performance of larger UK companies, represented by the FTSE All-Share, and of
small companies in the form of the Deutsche Numis Smaller Companies Index
(excluding Investment Companies). This latter index, abbreviated throughout
this report as DNSCI (XIC), is the Company’s opportunity base of small UK
quoted companies.
• The Managers’ Report delves into AGVIT’s total assets total
return, bringing to light influences on both the absolute and relative
performance.
Ordinary NAV performance
Total returns Total Assets since launch Ordinary NAV since launch Ordinary NAV since inception
To 30 June 2025 4.4% 3.3% 1.3%
• The performance of the Ordinary Shares is affected by the gearing
provided by the ZDP Shares. Since the portfolio’s capital performance was
below the ZDP Shares’ entitlement rate, the Ordinary NAV total return since
launch of 3.3% was lower than the 4.4% Total Assets total return.
• The Ordinary NAV total return since launch of 3.3% excludes the
one-off IPO costs. The Ordinary NAV total return since inception was 1.3%. It
is calculated after one-off IPO costs of c.£2.2m. Of these, c.£1.2m are fees
and expenses related to launch, which benefited from a contribution from the
Investment Managers of £450,000. The other main element arose from a decline
in the value of the investment portfolio between 21 June 2024, which was the
date agreed with ASLIT for the valuation of assets acquired from ASLIT, and 28
June 2024. This decline reflected general market weakness in that week.
NAV and share price performance
Since inception to 30 June 2025 NAV total return Premium/(Discount) to NAV Share price total return
Ordinary Share 1.3% -16.2% -14.8%
ZDP Share (Articles Basis) 7.0% 1.0% 8.0%
• In the period from inception to 30 June 2025, AGVIT’s Ordinary
Share NAV total return was 1.3%. The Ordinary Share price total return was
-14.8%, which was influenced by the discount of the share price to NAV
widening to 16.2% over the period. One of the advantages of AGVIT’s fixed
life structure is that shareholders have an opportunity for liquidity close to
NAV on planned wind-up.
• The ZDP Shares’ NAV has increased at a rate consistent with the
7.0% annual increase in their entitlement. The ZDP share price was at a 1.0%
premium to NAV at 30 June 2025. The projected final cumulative cover of the
ZDP Shares was unchanged at 2.0 times over the year.
• While AGVIT generated a positive total return, the portfolio’s
capital performance in the Company’s first year was not as we had hoped.
However, as the Managers set out in their report, the investment opportunity
over AGVIT’s planned life is compelling. Looking beyond the vagaries of near
term market sentiment, a better gauge of progress for AGVIT is arguably the
performance of the Revenue Return per Ordinary Share, which has been a bright
spot since launch.
Resilient Income Performance
Earnings
In my Half Yearly Report, I described how AGVIT’s income performance had
been good in its first six months. I am pleased to report that this positive
dividend experience continued in the second half of the year. The Revenue
Return per Ordinary Share in the period to 30 June 2025 was 6.85p. This
benefited from some one-off factors, including the favourable timing of some
ordinary dividends and from two special dividends. Nevertheless, underlying
investment income for the year is ahead of the Managers’ estimate at launch.
Moreover, looking through the transition from ASLIT to AGVIT, the portfolio
has grown its income year-on-year. This is another illustration of the
resilience of small UK quoted companies and testament to the relevance of the
Company’s investment proposition.
Ordinary dividend
AGVIT’s Prospectus stated that the Company will target dividends in the
range of 4.00-5.00p, in respect of the period from launch to 30 June 2025, and
that the Company’s policy is to distribute a significant proportion of its
net revenue in the form of dividends to Ordinary Shareholders.
In this context, the Board has declared a second interim dividend of 3.50p.
This, together with the first interim dividend of 1.50p paid on 10 March 2025,
brings the total Ordinary dividend in respect of the period from launch to 30
June 2025 to 5.00p. This level of Ordinary dividend is at the top end of the
Board’s targeted range of 4.00-5.00p in respect of the Ordinary dividend for
the period from launch to 30 June 2025.
Special dividend
On top of the Ordinary dividend of 5.00p, we propose a special dividend of
0.85p. This reflects the strong income performance, which benefits from
certain one-off factors noted previously, and the requirement for AGVIT to
comply with HMRC’s minimum retention test for investment trusts.
Revenue reserves
After accounting for the 5.85p of total dividends, AGVIT will be able to
retain 1.00p of revenue. The ability to retain revenue and to create
flexibility to support dividends in future periods is one of the main
structural advantages of an investment trust. At this early stage in the
Company’s planned life, the Board believes that this is a prudent level of
retention given the continuing volatility and uncertainties surrounding
geopolitics and the economy generally.
Dividend details
The second interim dividend of 3.50p and the special dividend of 0.85p have an
ex dividend date of 7 August 2025. They will be paid on 28 August 2025 to
Shareholders on the register at the close of business on 8 August 2025. The
Company operates a Dividend Reinvestment Plan, details of which are available
from Aberforth Partners LLP or on its website, www.aberforth.co.uk.
Stewardship
The Board is responsible for the effective stewardship of the Company’s
affairs. These include oversight of the Managers’ activities in relation to
Environmental, Social and Governance (ESG) matters, which are covered on pages
15 to 17 of the Annual Report. They also address the Managers’ ESG policies
and practices, along with their voting approach and activity during the year.
The Board endorses the Managers’ stewardship policy, which is set out in
their submission as a signatory to the UK Stewardship Code. This, together
with examples relating to voting and engagement with investee companies, can
be found in the “About Aberforth” section of the Managers’ website at
www.aberforth.co.uk.
Board Changes
As announced to The Stock Exchange, for personal reasons and as a result of
additional time commitments arising from other roles, Jane Tufnell has decided
not to stand for election as a Director at the Company’s Annual General
Meeting on 28 October 2025. Jane has made a significant contribution to the
Board’s deliberations, and we wish her well for the future. The Board is
engaging an external search firm to assist in the process of finding a new
director.
Share Buy-backs
The Board regularly reviews the circumstances in which buy-backs would be
appropriate for AGVIT. The capital structure influences the implementation of
buy-backs, but the Board considers it worthwhile to seek the authority at the
AGM to buy- back up to 14.99 per cent. of each class of Shares in issue that
was granted in the Prospectus. Any buy-backs will be subject to liquidity in
each class of Shares, would respect the rights of the ZDP Shareholders and
would provide useful net asset value per share enhancement for its continuing
Shareholders. As to the broader issue of discount control, we ought not to
lose sight of an important advantage of AGVIT’s fixed life structure, which
gives investors the opportunity to exit at near net asset value on planned
wind-up.
Annual General Meeting (AGM)
For those Shareholders that would like to meet members of the Board and
Aberforth’s investment team in person, the first AGM of the Company will be
held at 14 Melville Street, Edinburgh EH3 7NS at 11.00 am on 28 October 2025.
Details of the resolutions to be considered by Shareholders are set out in the
Notice of the Meeting on page 65 of the Annual Report . All shareholders are
encouraged to submit their vote by proxy in advance of the meeting. In
accordance with normal practice, the results of the AGM will be issued in a
regulatory news announcement and posted on Aberforth’s website. An update on
performance and the portfolio will be available on the Managers’ website
following the meeting.
Outlook
AGVIT endured a volatile year as macro-economic and geopolitical events
affected the outlook for profits and swayed stockmarket valuations. At home,
the UK’s fiscal position will continue to affect the path of the domestic
economy and the companies that rely on it. Overseas, the main challenge comes
from the US, the erstwhile source of stability in the financial world, as
Donald Trump’s words and actions increase uncertainty for businesses around
the world. In view of how the past twelve months unfolded, it is remarkable
that equities generated positive returns.
AGVIT’s progress has been slower than that of UK equities as a whole. The
Board and Managers have naturally reviewed the investment case that we
described at launch in order to test whether AGVIT’s proposition remains fit
for purpose.
• The Managers’ value investment style
This is progressing as we had hoped – London Business School data indicates
that the value cohort of smaller companies has performed well.
• Valuation recovery potential
This has seen partial success. While valuations of larger UK companies have
risen, those of smaller companies remain well below historical averages. This
bodes well for future investment returns.
• Continued M&A activity
As was anticipated, M&A interest for smaller companies has been elevated and
is likely to remain so as long as stockmarket valuations remain at current
levels.
• The resilience of small UK quoted companies
This has been a clear message from our discussions with the Managers –
notwithstanding the big picture uncertainties, smaller companies have traded
well and remain well financed.
• Attractive income characteristics
Nowhere is the resilience of smaller companies clearer than in AGVIT’s
income performance in its first year. In my experience, it is a reasonable
assumption that rising dividends will support capital growth in due course.
Of the five factors listed above, four have come through as expected, with
only the broad and meaningful recovery in smaller company valuations missing.
The Board and Managers believe that all five factors will contribute to
AGVIT’s returns over the next six years of its planned life.
As the year drew to a close, I was encouraged by indications that the
stockmarket had started to recognise the appeal of small UK quoted companies.
Boosted by the gearing from the ZDP Shares, the Ordinary Shares’ net asset
value total return in the admittedly short three month period ending 30 June
2025 was 21%. This illustrates what is possible when the market focuses its
attention on the asset class and on AGVIT’s investment opportunity. I remain
confident that the outlook for your Company is positive.
My fellow Directors and I always welcome the views of all Shareholders on any
matter pertinent to the Company, to which end my e-mail address is noted
below.
Angus Gordon Lennox
Chairman
30 July 2025
Angus.GordonLennox@aberforth.co.uk
Managers’ Report
Introduction
Stockmarket returns in the UK were good for the twelve months to 30 June 2025.
Larger UK companies, in the form of the FTSE All-Share, recorded a total
return of 11.2%. The DNSCI (XIC), which represents AGVIT’s investment
universe of smaller companies, was up by 11.1%. AGVIT’s total assets total
return, which measures the ungeared portfolio performance, was 4.4%.
Investment background
The positive returns from equities, in the UK and further afield, are
remarkable in view of the top-down developments over the twelve months.
Towards the end of the period, war was again making the headlines. The attacks
by Israel and the US on Iran’s nuclear facilities added to the uncertainty
from on-going conflicts in Ukraine and Gaza. The oil price fluctuated
accordingly, but the more significant geopolitical drama for markets has been
playing out in the US itself.
Centre stage has been Donald Trump, from the theatre of his Oval Office
set-pieces with other world leaders to his much- anticipated tariffs. A series
of announcements early in 2025 set the scene, but the “Liberation Day”
revelations in April were worse than financial markets had expected. The
deeply negative reaction of equity markets underlined the risk of trade wars
to economic activity and investment. Much of this original threat has
subsequently been diluted or deferred pending negotiations, which allowed
markets to rally, but damage has been done. The apparent capriciousness with
which tariffs have been imposed and then rescinded undermines confidence to
invest. Lower confidence feeds through to lower economic activity over time
and it may not be till the autumn that we understand the full ramifications
for the US and world economies of those announcements.
If there was a silver lining to the “Liberation Day”, it was to jolt other
countries out of their complacent reliance on US leadership. Germany has been
the best illustration so far. Its change of government was accompanied by the
promise of a significant boost to fiscal spending on defence and
infrastructure. The potential significance of this change can be gauged from
the recent relative performance of the German and US stockmarkets: in dollar
terms, the Dax outstripped the S&P 500 by 29% in the six months to 30 June
2025.
Tariffs imposed by the US have a limited direct effect on small UK quoted
companies. This reflects where these businesses operate. The UK economy
accounts for 53% of the revenues generated by companies in the DNSCI (XIC),
whereas the US economy accounts for just 11%. Moreover, that exposure to the
US is overwhelmingly revenue generated from assets within the US itself,
rather than from goods manufactured in the UK and transported across the
Atlantic. In meetings with AGVIT’s investee companies, the Managers
identified just a handful of holdings whose businesses could face a direct
impact from the tariffs originally set out on “Liberation Day”. In each
case, the exposure was manageable. The greater risk for small UK quoted
companies is the second order effects of tariffs through the hit to
confidence, investment and economic activity. To be clear, virtually all
businesses around the world, whether small or large, must contend with this.
The exposure of small UK quoted companies to the UK economy insulates them
from the direct effects of tariffs, but it also means that they are more
reliant on domestic policy. This was relevant as sentiment towards smaller
companies contended with the fallout from the October 2024 Budget. The changes
to employers’ national insurance contributions and to the national living
wage took effect in April, but companies’ profit forecasts and, by
extension, stockmarket valuations moved in anticipation as management teams
articulated how they would address the incremental cost pressures. The impact
is being spread through a combination of cost reductions, price increases and
narrower profit margins, with the balance varying by company. While this is
unhelpful for businesses operating in the domestic economy, overall trading
conditions have not been as bad as the headlines might suggest. Indeed, the
retail and leisure companies in which AGVIT invests have generally traded well
since the Budget, with revenues typically growing at low to mid single digit
rates. Demand is benefiting from wages that are presently growing above the
rate of inflation and from strong household balance sheets, with the saving
ratio, excluding the pandemic period, at its highest level for 30 years.
Analysis of performance and portfolio characteristics
AGVIT’s success over its planned seven year life will be determined by its
total assets performance. The ZDP Shareholders will earn their full
entitlement as long as total assets do not decline by more than 11.8% per
annum, at 30 June 2025, in capital terms. The Ordinary Shareholders will earn
a geared return if the total assets performance exceeds the gross redemption
yield of the ZDP Shares. In its first financial year, AGVIT’s total assets
did not clear this hurdle. The 4.4% total assets total return resulted in a
3.3% total return for holders of the Ordinary Shares.
Launch to 30 September 2024 3 months to 31 December 2024 3 months to 31 March 2025 3 months to 30 June 2025
Total assets total return +2.6% - 3.1% - 8.6% +14.9%
Ordinary share NAV total return +2.9% - 4.9% - 12.8% +21.1%
The 4.4% total assets total return was achieved in a volatile fashion, as the
mood of the stockmarket varied over the twelve month period. As the table
above sets out, AGVIT’s planned life started well, but the December quarter
was hampered by the Budget, which was unhelpful to businesses and affected the
valuation of the portfolio’s domestically oriented holdings. The March
quarter saw attention shift towards those companies earning their revenues
outside the UK, as concerns about Donald Trump’s tariffs escalated. Market
sentiment by this point was particularly weak, which combined with the gearing
from the ZDP Shares to produce a -12.8% Ordinary Share total return in the
three months to 31 March 2025. However, in the final quarter of the
financial year, the market became more comfortable with tariff risk and
recovered strongly. AGVIT fared well in these conditions: total assets
rebounded by 14.9% and the Ordinary Share net asset value total return was
+21.1%.
Another way to consider the 4.4% total assets total return is in relation to
the 11.1% total return of the DNSCI (XIC), which is AGVIT’s investment
universe. The following points give some context to the difference between the
two numbers.
• AGVIT’s portfolio at inception was substantially acquired from
Aberforth Split Level Income Trust on its planned wind-up. The inherited
portfolio had performed well in the months leading up to AGVIT’s inception,
buoyed by the initial recovery from the 2023 recession, by optimism about
greater political stability in the UK, and by takeover activity. While the
rate of M&A remains elevated, the other two factors have faded in the wake of
October’s Budget and concerns about trade wars. This hit the share prices of
AGVIT’s holdings whose profits are sensitive to the economic cycle. It is
notable that these cyclical companies enjoyed a recovery in their share prices
in the final quarter of the financial year as concerns about tariffs eased and
as the domestic oriented businesses reported good trading.
• Reflecting these top-down factors, as well as company specific
issues, stock selection hampered AGVIT’s investment performance relative to
that of the DNSCI (XIC). When comparing performance with the index, stocks not
held by AGVIT can also be influential. Judging by the experience through time
of the Managers’ other funds, these non holdings had an unusually large
effect on AGVIT’s performance over the past twelve months.
However, the impact of stock selection, both from holdings and non holdings,
was not out of line with instances of twelve month under-performance for the
Managers’ other funds, either in the twelve months to 30 June 2025 or over
the past 35 years. These funds have generated good investment returns over
time and so the Managers believe that the stocks they have selected for
AGVIT’s portfolio can generate returns that are consistent with AGVIT’s
investment objectives.
• Size positioning was an important influence. AGVIT has a relatively
high exposure to the “smaller small” companies within the DNSCI (XIC). At
the beginning of the 2024/25 financial year, AGVIT’s weighting in these was
48%, against 27% for the index. This weighting differential, combined with the
under-performance of “smaller smalls” against “larger smalls” meant
that size positioning had a meaningful impact on AGVIT’s performance
relative to the DNSCI (XIC) over the twelve months. Further detail on
AGVIT’s size positioning is given below.
• The Managers invest AGVIT’s assets in accordance with their value
investment philosophy. Consequently, AGVIT’s investment returns are
influenced by the stockmarket’s preference for more expensively priced
growth stocks or more modestly rated value stocks. To understand style effects
within the DNSCI (XIC), the Managers use analysis by London Business School
(LBS). This is based on price to book ratios: a high price to book denotes a
growth stock and a low price to book a value stock. When selecting stocks for
AGVIT, the Managers use a broader range of valuation techniques, but the LBS
approach provides a useful indication of the market’s style preference. Over
the 12 months to 30 June 2025, value stocks out-performed growth stocks, which
suggests that the Managers’ value style was helpful to AGVIT’s investment
performance.
The next table sets out a series of characteristics of both the portfolio and
the DNSCI (XIC). The paragraphs that follow provide context and explanation
for these characteristics.
30 June 2025 30 June 2024
Portfolio Characteristics AGVIT DNSCI (XIC) AGVIT DNSCI (XIC)
Number of companies 68 343 68 339
Weighted average market capitalisation £671m £1,132m £708m £986m
Weighting in “smaller small” companies* 44% 20% 48% 27%
Portfolio turnover 12% n/a n/a n/a
Price earnings (PE) ratio (historical) 10.7x 14.9x 10.2x 13.5x
Dividend yield (historical) 5.3% 3.4% 5.2% 3.4%
Dividend cover (historical) 1.8x 2.0x 1.9x 2.2x
*”Smaller small” companies are members of the DNSCI (XIC) that are not
also members of the FTSE 250
Size positioning
As described above, size positioning was an important influence on AGVIT’s
investment performance in the year to 30 June 2025. The reasoning for the
Managers’ current preference for “smaller small” over “larger small”
companies is twofold. First, there is little fundamental difference between
the two cohorts – geographical exposures, sector exposures, balance sheet
strength, profit growth, return on equity, etc. Second, there is a significant
valuation difference – the 2025 EV/EBITA for “smaller smalls” in the
DNSCI (XIC) is 8.9x, which is 20% lower than the 11.1x for the “larger
smalls”. These attributes matter over time – notwithstanding the
experience over the past twelve months, “smaller smalls” have
out-performed “larger smalls” over the past five years.
Balance sheets
The following table sets out the balance sheet profile of AGVIT’s portfolio
and of the Managers’ Tracked Universe. This subset of the DNSCI (XIC)
represents 98% by value of the index as a whole and is made up of the 230
companies that the Managers follow closely.
Weight in companies with: Net cash Net debt/EBITDA < 2x Net debt/EBITDA > 2x Other*
Tracked Universe 2025 30% 43% 21% 6%
Portfolio 2025 38% 47% 11% 4%
- Portfolio “smaller smalls” 45% 36% 12% 7%
- Portfolio “larger smalls” 30% 59% 11% 0%
*Includes loss-makers and lenders
The balance sheet profile of the portfolio and the Tracked Universe are
similarly robust. Around one third of each is represented by companies with
net cash on their balance sheets. The more highly leveraged companies tend to
be those with asset backing, such as pub businesses and property companies.
The final two lines of the table show that there is no meaningful difference
between the balance sheet profiles of “smaller small” and “larger
small” companies. The lower valuations of the former cohort are not
justified by weaker balance sheets.
Strong balance sheets are supporting dividend growth, as the next section
explains, and a continued high rate of share buy-backs. Over the twelve months
to 30 June 2025, 23 of AGVIT’s 68 investee companies bought back shares,
taking advantage of the attractive stockmarket valuations of their equity. The
economic logic of buy-backs at such valuations is compelling as long as they
do not deprive underlying businesses of capital needed for the maintenance of
assets and prudent growth.
Income
While AGVIT’s capital performance over the twelve months was volatile, it
made good progress in income terms. Revenue earned from dividends paid by
investee companies rose at double digit rates. The table below categorises
AGVIT’s 68 holdings at 30 June 2025 according to each company’s most
recent dividend action.
Nil Payer Cutter Unchanged Payer Increased Payer New/Returner
5 10 20 32 1
AGVIT’s positive income experience was driven by the 32 Increased Payers and
the one New / Returners. These out-weighed the drag from the 10 companies that
reduced their most recent dividends.
At 30 June 2025, the average historical dividend yield of AGVIT’s holdings
was 5.3% and the average dividend cover was 1.8x. These numbers, together with
the analysis in the table, demonstrate the resilience of smaller companies, a
quality that is often overlooked by the stockmarket. Looking ahead, the
tariffs and other macro economic challenges will have to be navigated, but
history suggests that yield and dividend growth will continue to be an
important component of the total returns delivered by small UK quoted
companies and by extension AGVIT.
Corporate Activity
The Managers are frequently asked what the catalyst will be for a re-rating of
small UK quoted companies. The answer is increasingly clear as the high rate
of takeovers continues. In the twelve months to 30 June 2025, agreed bids for
14 constituents of the DNSCI (XIC) were announced. AGVIT held six of these. In
addition, there were approaches outstanding for another three DNSCI (XIC)
constituents at the period end. For the 14 agreed bids, the average premium to
the undisturbed share price was 40% and the average EV/EBITA at the bid price
was 16.2x. In eight cases, the bidder was from overseas, while in three cases
the bidder was private equity.
As long as valuations across small companies remain so attractive, it is
likely that takeovers will continue. There is the opportunity for those
invested in the asset class to enjoy good investment returns by harvesting
takeover premiums as they await a broader re-rating.
The downside of takeovers could be a shrinking of the Managers’ investment
universe. However, there are reasons to believe that the opportunity set will
remain broad.
• First, last year’s changes to the Listing Rules should improve the
attractiveness of the UK stockmarket to IPOs over time.
• Second, ten AIM companies have recently moved or announced an
intention to move to the Main List. This makes them eligible investments for
AGVIT. The Managers have already started a holding in one of the ten and are
scrutinising others. The relisting trend is influenced by the new Listing
Rules, which level the governance playing field between AIM and the Main List,
and by the tax changes announced in the October 2024 Budget.
• Third, the definition of the DNSCI (XIC) – the bottom 10% by value
of the total UK stockmarket – means that there is a natural refreshing of
the index on its annual rebalancing. The number of companies in the DNSCI
(XIC) has been flat at around 350 for the past decade.
Engagement
Since Aberforth was founded in 1990, an integral part of the Managers’
investment process has been engagement with the boards of the investee
companies. The approach to engagement is purposeful, discreet and
constructive. Its aim is to improve investment outcomes for Aberforth’s
clients and investors. The Managers may engage on any topic that they perceive
to be affecting the valuation of a company. Their ability to engage is
improved by the large stakes – up to 25% of issued share capital – that
Aberforth’s clients can collectively take in investee companies.
As highlighted in the Prospectus, the high rate of takeover activity means
that M&A terms are a frequent topic of engagement. The Managers often seek to
improve terms or, if these are unattractive, to work with the boards of
investee companies to discourage takeover interest. The Managers wrote to
investee companies in 2024 to reinforce their expectations of boards when they
receive a takeover approach.
Another reason for engagement in 2025 stems from the new Listing Rules, which
were introduced last year. One of the changes removes the need for a
shareholder vote to approve significant transactions. The purpose was to
increase the attractiveness of the UK market to IPOs, but the unintended
consequence is that boards can more easily embark on transactions that are not
in the interests of shareholders. Solutions include a voluntary vote on a
potential transaction or timely consultation with shareholders before
agreement is reached with a counterparty. Without these, the Managers will
vote against the board of a company undertaking a transaction that is not in
shareholders’ interests.
Value roll and portfolio turnover
The main influence on AGVIT’s portfolio turnover in any period is usually
the stockmarket’s appetite for small UK quoted companies. If prices and
valuations are rising, the upsides to the Managers’ target prices are likely
to be narrowing. All else being equal, this would encourage the rotation of
AGVIT’s capital from companies with lower upsides to those with higher
upsides. The Managers term this dynamic the “value roll” and it has played
an important role in their funds’ capital and income returns over the years.
It follows that periods of higher portfolio turnover should be associated with
strong returns for AGVIT.
Portfolio turnover is defined as the lower of purchases and sales divided by
the average portfolio value. The long term average rate of turnover for the
Managers’ funds is 33%. In the twelve months to 30 June 2025, AGVIT’s
turnover was 12%. The low rate of value roll is symptomatic of the deep
under-valuation of small UK quoted companies – if the stockmarket does not
reflect their true value, there is no incentive to reduce the position.
Valuations
Price earnings (PE) ratio: 35 year average At 31 December 2024 At 30 June 2025
World equities* 15.8x 17.7x 18.0x
FTSE All-Share 15.3x 14.6x 16.2x
Smaller companies** 13.5x 11.9x 12.5x
AGVIT’s portfolio 12.0x*** 9.6x 10.1x
* Source: Bloomberg; Panmure Liberum ** DNSCI (XIC) to 2013 then Tracked
Universe *** Represented by Aberforth’s longest standing client
As the table above shows, AGVIT’s portfolio continues to benefit from the
triple valuation discount that was described in the Prospectus – AGVIT’s
portfolio PE is below that of smaller companies, which is below that of large
UK companies, which is below that of world equities. The meaningful change
since the end of 2024 has been the re-rating of large UK companies: the FTSE
All-Share’s historical PE has risen from 14.6x to 16.2x, which is still
below that of world equities but above its own long term average. The
re-rating of large UK companies shows what is possible for smaller companies.
From these starting valuations it is plausible that re-rating can contribute
to total returns from smaller companies and more particularly from AGVIT’s
portfolio in coming years.
The next table turns to forward valuations and uses the Managers’ favoured
metric, EV/EBITA (enterprise value to earnings before interest, tax and
amortisation). Ratios are set out for the portfolio, the Tracked Universe and
certain subdivisions of the Tracked Universe. The profits underlying the
ratios are based on the Managers’ forecasts for each company that they
track. The bullet points following the table summarise its main messages.
EV/EBITA 2024 2025 2026
AGVIT’s portfolio (68 stocks) 8.2x 8.0x 6.9x
Tracked Universe (230 stocks) 11.2x 10.5x 9.3x
- Growth stocks 16.0x 15.1x 13.6x
- Other stocks 10.6x 9.9x 8.7x
- Overseas facing stocks 10.2x 9.8x 8.3x
- Domestic facing stocks 12.0x 11.1x 10.0x
- “Smaller small” stocks 9.3x 8.9x 7.6x
- “Larger small” stocks 11.9x 11.1x 9.9x
• The ratios are lower for 2025 than for 2024. The Managers anticipate
modest profit growth in 2025, as lower interest rates and real wage growth
still seem likely to offset the increased uncertainty related to trade wars
and the Budget.
• The average EV/EBITA multiples of the portfolio are lower than those
of the Tracked Universe. This reflects the Managers’ value investment style
and the influence of the more highly valued growth stocks on the Tracked
Universe’s multiples.
• The valuation of overseas facing companies (those with more than 60%
of revenues outside the UK) is lower than that of domestic facing companies
(those with more than 60% of revenues in the UK). For much of the last ten
years, the reverse has been the case. Owing to the EU referendum and the
pandemic, domestically oriented companies have tended to trade on lower
multiples. However, tariff risk, which is more threatening to overseas facing
businesses, has narrowed the gap and broadened the opportunity base for the
value investor.
• As noted in the section above on size, the “smaller small”
companies within the DNSCI (XIC) remain more attractively valued than do the
“larger smalls”.
• Takeovers over the past twelve months were struck on average on a
multiple of 16.2x. This compares with the portfolio’s 2025 EV/EBITA of 8.0x.
Outlook and conclusion
When AGVIT launched twelve months ago, American exceptionalism was celebrated
and gauged by the success of the US stockmarket. Today, the investment outlook
has been complicated by Donald Trump’s convulsive second presidency and its
challenge to some of the assumptions that have long underpinned the financial
world. Dollar weakness may well be welcomed by the Trump administration and
has been seen before, but the present bout is accompanied by debate about
whether the dollar risks losing the exorbitant privilege of reserve currency
status. There is also debate about the risk-free nature of US government debt,
as fiscal spending looks set to rise under the “One Big Beautiful Bill
Act” and as foreign governments, disconcerted by the tariffs, question the
wisdom of parking their reserves in treasuries. Even the US stockmarket has
lost some of its lustre. The potential impact of the tariffs on the profits of
US businesses has seen European equities outshine their US counterparts so far
in 2025. The uncertainty emanating from the US complicates investment
decisions, whether for businesses considering capital projects or fund
managers selecting stocks.
The UK is inevitably caught up in this, but its low reliance on exported goods
and its trade deficits can be seen as a relative advantage in the context of
trade war risk. The greater challenge for the UK economy is government policy
and its fiscal position. Last year’s Budget highlighted the Chancellor’s
difficulty in delivering growth while adhering to the fiscal rules. As this
year’s Budget approaches and as the government struggles to implement its
reforms, a degree of caution on the part of businesses and households is
understandable. On the other hand, the government’s pragmatism and growth
ambitions are encouraging, though it would be better to see more of the
rhetoric turn into action.
Against this backdrop, UK equities have made headway, with the re-rating of
larger companies taking the FTSE All-Share’s PE back to its long term
average. The valuation anomaly remains smaller companies, whose PE is still
well below its long term average. Over time, it would be reasonable to expect
some of the renewed interest in the UK to filter down into the DNSCI (XIC)
and, indeed, this started to play out through the final quarter of AGVIT’s
financial year. Nevertheless, the medium term performance of smaller companies
against large has been disappointing. Over the three years to 30 June 2025,
the DNSCI (XIC) has lagged the FTSE All-Share by -0.7% per annum. This
contrasts with longer term out-performance of 1.5% per annum since
Aberforth’s inception in 1990 and 3.0% per annum over the full history of
the DNSCI (XIC) in 1955.
An important aspect of the recent performance of smaller companies is that it
is not driven by fundamental factors. Dividend growth is a useful gauge of
fundamental progress since there is a long history of data and it cannot
diverge meaningfully from profit growth over time. Using the most recent
London Business School data, dividend growth for smaller companies has
outstripped that of large companies by 1.4% per annum since both 1955 and
1990. Over the past three years, the differential has been higher at 3.2%
(9.7% versus 6.5%), which is clearly at odds with the total return data.
Indeed, the differential has been higher than average over the last five and
ten years as well, which indicates that smaller companies have coped better
than many would expect with the familiar challenges of Brexit, the pandemic,
the Truss Budget and the inflation spike of 2022.
Judging by the valuations, the stockmarket is missing the resilience and
superior growth of smaller companies. Rather, it seems distracted by their
relative illiquidity and volatility, but this obsession risks missing the
point of investment in the asset class. The small company premium – i.e. the
long term out-performance by smaller companies against larger companies – is
inextricably tied up with a willingness to take on liquidity and volatility
risk. Those able and willing to commit their capital to smaller companies are
rewarded over time for taking on that risk.
AGVIT is well placed to take advantage of the present situation. Its valuation
advantage is even greater than that of smaller companies, as previously
demonstrated in this report. It provides a high yield and should benefit from
the superior dividend growth available from the asset class. Its
closed-ended structure means that it can commit to investment in the
attractively valued “smaller small” companies, without the concern of a
demand for liquidity. Its diversified portfolio reduces the volatility risk of
an individual small cap stock and spreads it over 68 holdings. Its structural
gearing can enhance portfolio returns and reward shareholders who commit their
capital to AGVIT, while discount risk is addressed by its limited life.
None of these points means that AGVIT is impervious to today’s
macro-economic and geopolitical threats, or indeed those to come. They do,
however, improve the likelihood of a good investment experience over time,
particularly when other companies, overseas investors and private equity are
already taking advantage of the valuations on offer among small UK quoted
companies.
Aberforth Partners LLP
Managers
30 July 2025
FINANCIAL HIGHLIGHTS
TOTAL RETURN PERFORMANCE – see note 7 for further explanation
Period to 30 June 2025 Ordinary Share ZDP Share
Total Assets 1 N A V 2 Share Price 4 N A V 3 S
h
a
r
e
P
r
i
c
e
5
Since Inception 19 (including launch costs) 2.6% 1.3% -14.8% 7.0% 8.0%
Since Launch 20 (excluding launch costs) 4.4% 3.3% -14.8% 7.0% 8.0%
The ZDP Share NAV total return of 7.0% is on an Articles basis (see note 7).
ORDINARY SHARE
Capital Net Asset Value per Share a Share Price Discount 6 / (Premium) 7 ZDP:Equity Gearing Ratio 9
----------- ---------- ------------ -----------
30 June 2025 99.6p 83.5p 16.2% 40.0%
Inception 19 100.0p 100.0p 0.0% 37.5%
The total return per Ordinary Sharea for the period to 30 June 2025 was 1.71p.
Revenue Revenue Return per Share a Ordinary Dividends per Share a Special Dividends per Share Retained Revenue Reserves per Share 16 Ongoing Charges 11
----------- ---------- ------------ ----------- ------------
30 June 2025 6.85p 5.00p 0.85p 1.00p 1.4%
ZERO DIVIDEND PREFERENCE SHARE (ZDP SHARE)
Net Asset Value per Share a Share Price Discount 6 / (Premium) 7 Return per Share a Projected Final Cumulative Cover 13 Gross Redemption Yield 15
------------ ---------- ------------ ---------- ------------ ------------
30 June 2025 106.2p 108.0p (1.7)% 7.1p 2.0x 6.8%
Inception 19 100.0p 100.0p 0.0% n/a 2.0x 7.0%
HURDLE RATES10
Ordinary Shares Annualised Hurdle Rates to return ZDP Shares Annualised Hurdle Rates to return
100p Share Price Zero Value 160.58p Zero Value
------------ ------------ ------------ ------------ ------------
30 June 2025 3.6% 1.7% -11.8% -11.8% -58.3%
Inception 19 3.0% 3.0% -10.3% -10.3% -52.9%
REDEMPTION YIELDS AS AT 30 JUNE 2025 (ORDINARY SHARES)
Annualised Ordinary Share Redemption Yields 14 Dividend Growth (per annum)
Capital Growth (per annum) -20.0% -10.0% 0.0% +10.0% +20.0% Terminal NAV 17
------------ ------------ ------------ ------------ ------------ ------------
-20.0% -38.2% -30.5% -22.7% -14.8% -7.0% 0.0p
-10.0% -24.5% -20.7% -15.9% -10.2% -3.8% 8.1p
0.0% 0.9% 2.3% 4.3% 6.8% 10.1% 69.4p
+10.0% 16.0% 16.9% 18.2% 19.9% 22.1% 170.5p
+20.0% 28.8% 29.5% 30.5% 31.7% 33.3% 330.0p
Source: Aberforth Partners
Hurdle Rates, Redemption Yields and Final Cumulative Cover, are projected,
illustrative and do not represent profit forecasts. There is no guarantee
these returns will be achieved.
1-21 Refer to Note 2, Alternative Performance Measurement, and Glossary.
a UK GAAP measure (refer to Glossary)
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 was for the period of at least 12 months from the date of
approval of the financial statements. The Committee reported the results of
its assessment to the Board.
The Company’s business activities, capital structure, planned life and
borrowing facility, together with the factors likely to affect its development
and performance, are set out in the Strategic Report contained in the Annual
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.
DIRECTORS’ RESPONSIBILITY STATEMENT – ANNUAL REPORT AND FINANCIAL
STATEMENTS
The Directors who were in office at the date of approving the financial
statements confirm to the best of their knowledge that:
(a) the financial statements, which have been prepared in accordance with
applicable accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit/loss of the Company;
(b) the Strategic Report includes a fair review of the development and
performance of the business and financial position of the Company, together
with a description of the principal risks and uncertainties that it faces; and
(c) the Annual Report and Financial Statements, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
Shareholders to assess the Company’s performance, business model and
strategy.
On behalf of the Board
Angus Gordon Lennox
Chairman
30 July 2025
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 and operational. 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. Further
information regarding the Board's governance and oversight of risk can be
found on page 34 of the Annual Report. The Audit Committee Report on pages 35
to 37 of the Annual Report details the Committee's review process, matters
considered, and actions taken on internal controls and risks during the
period.
The Board regularly reviews emerging risks. These are risks that are still
evolving, are not fully understood, but that could have a future impact on the
Company. The Board also regularly monitors how the Managers integrate risks
into investment decision making.
Principal risks are those risks in the matrix that have the highest risk
ratings based on likelihood and impact. They are expected to be relatively
consistent from year to year given the nature of the Company and its business.
The principal risks faced by the Company, together with the approach taken by
the Board towards them, are summarised below. To indicate the extent to which
the principal risks change during the period and the level of monitoring
required, each principal risk has been categorised as either dynamic risk,
requiring detailed monitoring as it can change regularly, or stable risks.
Significant fall in capital performance
Risk – this is a portfolio management risk Mitigation/monitoring
The Company’s investment policy and strategy expose the portfolio to share price movements. The performance of the investment portfolio will be influenced by stock selection, liquidity and market risk (see Market risk below). Investment in small companies 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 and risk. Senior investment representatives of Aberforth Partners attend each Board meeting. This is a dynamic risk, with detailed consideration during the period. The Managers’ Report contains information on portfolio investment performance and risk.
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.
Market risk factors affecting portfolio management and/or investment performance
Risk – this is a portfolio management risk Mitigation/monitoring
Investment performance is affected by several market risk factors, such as economic, geopolitical, and societal factors, which cause uncertainty about future price movements of investments. The Board delegates consideration of market risk to the Managers to be carried out as part of the investment process. The Managers regularly assess the exposure to market risk when making investment decisions and the Board monitors the results via the Managers’ reporting. The Board and Managers closely monitor economic and political developments including the potential
effects of climate change (see pages 15 to 17 of the Annual Report). This was a dynamic risk during the period, in which the Managers reported on market risks including those referred to in the Managers’ Report.
Political and taxation changes outwith the Company's control
Risk – this is a portfolio management risk Mitigation/monitoring
Investment performance is affected by political and taxation risk factors, which cause uncertainty about future price movements of investments. The Board monitors in conjunction with the Managers the political and tax landscape affecting the Company and takes action if in the best interests of shareholders as a whole. Company advisors provide regular updates. This is a dynamic risk.
Structural conflicts of interest between the objectives of the Ordinary and ZDP Shareholders
Risk – this is an investor relations risk Mitigation/monitoring
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 The Board is cognisant of this risk and considers both sets of Shareholders and acts in a manner that it considers fair, reasonable and equitable to both classes of Shareholder. This is a stable risk.
both classes of Shareholder, there can be no guarantee that such a balance will be achieved and maintained during the life of the Company.
Significant fall in revenue generation from the portfolio
Risk – this is a portfolio management risk Mitigation/monitoring
A significant fall in investment income could lead to the inability to provide an attractive level of income to Ordinary Shareholders. The Board receives regular and detailed reports from the Managers on income performance together with income forecasts. The Board and Managers monitor investment income and it is considered a dynamic risk.
Loss of key investment management personnel
Risk – this is an operational and portfolio management risk Mitigation/monitoring
The Board believes that a risk exists in the potential 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.
Failure to meet the continuing obligations associated with regulatory risks
Risk – this is a regulatory and legal risk Mitigation/monitoring
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 tax. The Board reviews regular reports from the Secretaries to monitor compliance with regulations. This is a stable risk.
Cyber risk
Risk – this is an operational risk Mitigation/monitoring
The Company and Managers are subject to a cyber risk event negatively affecting shareholders or other stakeholders. The Board oversees the Managers’ (and other service providers’) cyber security controls via external control reports and Board update papers. This is a dynamic risk.
The Income Statement, Reconciliation of Movements in Shareholders’ Funds,
Balance Sheet and Cash Flow Statement are set out below.
INCOME STATEMENT
For the period from incorporation on 29 March 2024 to 30 June 2025
(audited)
Period to
30 June 2025
Revenue Capital Total
£’000 £’000 £’000
Net (losses) on investments - (1,062) (1,062)
Investment income 7,879 - 7,879
Other income 174 - 174
Investment management fee (note 3) (320) (746) (1,066)
Portfolio transaction costs i - (847) (847)
Other expenses (369) - (369)
-------- -------- --------
Net return before finance costs and tax 7,364 (2,655) 4,709
Finance costs:
Appropriation to ZDP Shares (note 8) - (2,859) (2,859)
Interest expense and overdraft fee (1) (4) (5)
-------- -------- --------
Return on ordinary activities before tax 7,363 (5,518) 1,845
Tax on ordinary activities (6) - (6)
-------- -------- --------
Return attributable to Equity Shareholders 7,357 (5,518) 1,839
======= ====== =======
Return per Ordinary Share (note 5) 6.85p (5.14)p 1.71p
The Board declared on 30 July 2025 a second interim dividend of 3.50p per
Ordinary Share and a special dividend of 0.85p per Ordinary Shares. The Board
also declared on 28 January 2025 a first interim dividend of 1.50p per
Ordinary Share.
The total column of this statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the
period. A Statement of Comprehensive Income is not required as all gains and
losses of the Company have been reflected in the above statement.
i Includes £602,000 in respect of stamp duty incurred on the transfer of
securities from Aberforth Split Level Income Trust plc to AGVIT
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
For the period from incorporation on 29 March 2024 to 30 June 2025
(audited)
Share Share Special Capital Revenue
capital premium reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
Balance as at 29 March 2024 - - - - - -
Return on ordinary activities after tax - - - (5,518) 7,357 1,839
Equity dividends paid (see note 4) - - - - (1,610) (1,610)
Issue of Ordinary Shares 1,073 106,258 - - - 107,331
Ordinary Share issue costs - (592) - - - (592)
Share Premium cancellation - (105,621) 105,621 - - -
Cost of Share Premium cancellation - (45) - - - (45)
Issue of redeemable Shares 50 - - - - 50
Redemption of redeemable Shares (50) - - - - (50)
-------- -------- -------- -------- -------- --------
Balance as at 30 June 2025 1,073 - 105,621 (5,518) 5,747 106,923
====== ====== ====== ====== ====== ======
BALANCE SHEET
As at 30 June 2025
(audited)
30 June 2025
£’000
Fixed assets
Investments at fair value through profit or loss (note 6) 147,998
----------
Current assets
Debtors 716
Cash at bank 1,049
----------
1,765
Creditors (amounts falling due within one year) (109)
----------
Net current assets 1,656
----------
Total Assets less Current Liabilities 149,654
Creditors (amounts falling due after more than one year)
ZDP Shares (note 8) (42,731)
----------
TOTAL NET ASSETS 106,923
=======
Capital and Reserves: Equity Interests
Share capital:
Ordinary Shares (note 9) 1,073
Reserves:
Special reserve 105,621
Capital reserve (5,518)
Revenue reserve 5,747
----------
TOTAL SHAREHOLDERS’ FUNDS 106,923
=======
Net Asset Value per Ordinary Share (note 7) 99.62p
Net Asset Value per ZDP Share (note 7) 106.17p
CASH FLOW STATEMENT
For the period from incorporation on 29 March 2024 to 30 June 2025
(audited)
Period to 30 June 2025
£’000
Operating activities
Net revenue before finance costs and tax 7,364
Tax (withheld) from income (6)
Investment management fee charged to capital (note 3) (746)
(Increase) in debtors (711)
Increase in creditors 78
--------
Cash inflow from operating activities 5,979
--------
Investing activities
Purchases of investments - excluding transaction costs (33,742)
Sales of investments - excluding transaction costs 16,608
--------
Cash (outflow) from investing activities (17,134)
--------
Financing activities
Proceeds from issue of Ordinary Shares (note 9) 2,651
Proceeds from issue of ZDP Shares (note 9) 12,182
Share issue costs paid (969)
Share premium cancellation costs paid (45)
Equity dividends paid (note 4) (1,610)
Interest and fees paid (5)
--------
Cash inflow from financing activities 12,204
--------
Change in cash during the period 1,049
=====
Cash at the start of the period -
Cash at the end of the period 1,049
======
SUMMARY NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been presented under Financial Reporting
Standard 102 (FRS 102) and the AIC’s Statement of Recommended Practice
“Financial Statements of Investment Trust Companies and Venture Capital
Trusts” (SORP). The financial statements have been prepared on a going
concern basis under the historical cost convention, modified to include the
revaluation of the Company’s investments as described below. The
Directors’ assessment of the basis of going concern is described in the
‘Going Concern’ section. 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 amount
of assets and liabilities within the next financial year. Given the nature of
the Company, the Board does not consider climate change material to the
presentation of the financial statements.
2. ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures (APMs) are measures that are not defined
under the requirements of FRS 102. The Company believes that APMs, referred to
within “Financial Highlights” section of this announcement, provide
Shareholders with important information on the Company. These APMs are also a
component of the internal management reporting to the Board. A glossary of the
APMs can be found at the end of this announcement and on page 63 of the Annual
Report.
3. INVESTMENT MANAGEMENT FEE
The Managers, Aberforth Partners LLP, receive an annual management fee,
payable quarterly in advance, equal to 0.75% of the Company’s Total Assets.
The management fee is allocated 70% to capital reserves and 30% to revenue
reserves.
4. DIVIDENDS PAID
Amounts recognised as distributions to equity holders in the period: Period ended 30 June 2025 £’000
In respect of the period to 30 June 2025:
First interim dividend of 1.50p (paid on 10 March 2025) 1,610
------------
Total 1,610
------------
The second interim dividend for the period ended 30 June 2025 of 3.50p per
Ordinary Share, and the special dividend for the period ended 30 June 2025 of
0.85p per Ordinary Share, both payable on 28 August 2025, have not been
recognised in the financial statements as at 30 June 2025. Deducting the
second interim dividend and special dividend from the Company’s revenue
reserves at 30 June 2025 leaves revenue reserves equivalent to 1.00p per
Ordinary Share.
5. RETURN PER
SHARE
Period ended 30 June 2025
Ordinary Shares
Net return for the period £1,839,000
Weighted average Ordinary Shares in issue during the period 107,331,000
Return per Ordinary Share 1.71p
ZDP Shares
Appropriation to ZDP Shares for the period £2,859,000
Weighted average ZDP Shares in issue during the period 40,249,000
Return per ZDP Share 7.10p
There are no dilutive or potentially dilutive shares in issue.
6. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
Period ended 30 June 2025 £’000
Investments at fair value through profit or loss
Opening fair value -
Opening fair value adjustment -
------------
Opening book cost -
Purchases at cost b 165,600
Sale proceeds (16,633)
Realised gains on sales 2,835
------------
Closing book cost 151,802
Closing fair value adjustment (3,804)
------------
Closing fair value 147,998
------------
b Includes £128.2m in respect of an in specie transfer of securities from
Aberforth Split Level Income Trust plc on launch.
All investments are in ordinary shares listed on the London Stock Exchange.
Period ended 30 June 2025 £’000
Gains/(losses) on investments:
Net realised gains on sales 2,835
Market value loss on transactions in period from 21 June 2024 to 28 June 2024 (see note 9) (93)
Movement in fair value adjustment (3,804)
------------
Net (losses) on investments (1,062)
------------
In accordance with FRS 102, fair value measurements have been classified using
the fair value hierarchy:
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
All investments are held at fair value through profit or loss, have been
classified as Level 1 and are traded on a recognised stock exchange.
7. NET ASSET VALUE (“NAV”) PER
SHARE
The Net Assets and the Net Asset Value per share attributable to the Ordinary
Shares and ZDP Shares are as follows.
30 June 2025
Ordinary Shares ZDP Shares Total
Net assets attributable £106,923,000 £42,731,000 £149,654,000
Number of Shares at the reporting date 107,331,000 40,249,000 147,580,000
------------ ------------ ------------
NAV per Share (a) 99.62p 106.17p 101.41p
Dividend reinvestment factor 8 (b) 1.016535 - 1.011587
------------ ------------ ------------
NAV per Share on a total return basis at the end of the period (c) = (a) x (b) 101.27p 106.17p 102.58p
------------ ------------ ------------
NAV per Share on a total return basis at Inception (d) 100.00p 100.00p 100.00p
------------ ------------ ------------
Total Return performance in the period since Inception (c) / (d) - 1 1.3% 6.2% 2.6%
------------ ------------ ------------
Total return performance since Launch reflects performance subsequent to the
charging of the costs of the Launch. From Launch to 30 June 2025, the Total
Assets Total Return performance is 4.4% and the Ordinary Share NAV Total
Return is 3.3%; both excluding the one-off Launch costs (see note 9). The ZDP
Share NAV, on an Articles basis, at 30 June 2025 was 107.00p and the ZDP Share
NAV Total Return performance in the period on an Articles basis, equivalent to
the gross redemption yield at Issue, was 7.0%.
8. ZERO DIVIDEND PREFERENCE SHARES
Period ended 30 June 2025 £’000
Opening Balance
Issue of ZDP Shares 40,249
Capitalisation of issue costs of ZDP Shares (377)
------------
Opening balance 39,872
Issue costs amortised during the period 43
Capital growth of ZDP Shares 2,816
------------
Closing Balance 42,731
------------
Expenses of £377,000 associated with the issue of the ZDP Shares have been
capitalised. These will be amortised over the expected life of the ZDP Shares
and charged to capital as a finance cost within the Income Statement.
9. SHARE CAPITAL
No. of Shares £’000
As at 30 June 2025
Ordinary Shares of 1p each 107,331,000 1,073
ZDP Shares of 1p each 40,249,000 402
----------------- ------------
Total issued and allotted 147,580,000 1,475
----------------- ------------
Upon incorporation on 29 March 2024, the Company issued and allotted 100
Ordinary Shares at £1 each. On 25 April 2024, 50,000 Redeemable Preference
Shares were issued and allotted to enable the Company to obtain a trading
certificate.
The Company acted as the rollover option for the existing shareholders of
Aberforth Split Level Income Trust plc (“ASLIT”) in connection with the
recommended proposals for the scheme of reconstruction and winding up of ASLIT
(the “Scheme”). ASLIT was a closed-ended, split capital investment trust,
with a similar investment policy, managed by Aberforth Partners LLP. ASLIT was
wound up on 30 June 2024, its planned winding-up date.
On 28 June 2024, the Company entered into a Transfer Agreement in connection
with the scheme of reconstruction and winding-up of ASLIT. Under this Transfer
Agreement, a proportion of the assets of ASLIT were transferred to AGVIT as
consideration for the issue of Ordinary and ZDP Shares to shareholders of
ASLIT who elected to roll over their investment in ASLIT to AGVIT. The
calculation date of 21 June 2024 was used for valuing ASLIT's assets
transferred to AGVIT.
On 28 June 2024, 104,680,290 Ordinary Shares and 28,066,949 ZDP Shares were
allotted to the shareholders of ASLIT who elected to roll over their
investment in ASLIT to AGVIT at the issue price of £1 each. Assets amounting
to £132.7 million were transferred from ASLIT in consideration for this
allotment, including securities valued at £128.2 million.
In addition, 2,650,710 Ordinary Shares and 12,182,051 ZDP Shares were allotted
to satisfy the demand of the Placing and Offer for Subscription at the issue
price of £1 each. The proceeds of these issues were used to acquire
securities for the Company’s investment portfolio. These allotments resulted
in the Company having a total of 107,331,000 Ordinary Shares and 40,249,000
ZDP Shares, which were admitted to listing on the Official List and to trading
on the London Stock Exchange on 1 July 2024. In addition, the 50,000
Redeemable Preference Shares were redeemed in full on 3 December 2024.
In November 2024, the High Court of Justice confirmed the cancellation of the
entire amount standing to the credit of the Share Premium account and the
creation of a Special Reserve, the balance of which may be treated as
distributable profits for all purposes as permitted by the Articles of the
Company. The Special Reserve will be available to be used for any buy-back of
Ordinary Shares and ZDP Shares as permitted by the Companies Act 2006 and in
accordance with the Company’s Articles of Association.
Costs of £592,000 associated with the issue of the Ordinary Shares, net of an
Aberforth Partners LLP cost contribution of £450,000, have been charged to
the Share Premium account. Costs of £377,000 associated with the issue of the
ZDP Shares will be amortised to capital as a finance cost in the Income
Statement over the planned life of the ZDP Shares. Stamp duty amounting to
£602,000 was also paid in relation to the transfer of securities from ASLIT
to AGVIT under the Transfer Agreement, as detailed above. This cost is
included in portfolio transaction costs as disclosed in the Income Statement.
Further details of the rights and responsibilities of the Ordinary and ZDP
Shareholders are available in the Annual Report and the Prospectus dated 28
May 2024, which is available on the Managers’ website www.aberforth.co.uk.
10. Financial instruments and risk management
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 to the financial statements contained in the Annual
Report 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 to
the financial statements contained in the Annual Report also includes the
basis on which income and expenses arising from financial assets and
liabilities are 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 from either 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.
For more information on the financial instruments and risk management, see
note 19 to the financial statements contained in the Annual Report.
11. RELATED PARTY TRANSACTIONS
The Directors have been identified as related parties and their fees and
interests have been disclosed in the Directors’ Remuneration Report
contained in the Annual Report on page 39 and 40. During the period 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.
12. FURTHER INFORMATION
The foregoing do not constitute statutory accounts (as defined in section
434(3) of the Companies Act 2006) of the Company. The statutory accounts for
the period ended 30 June 2025, which contained an unqualified Report of the
Auditors, will be lodged with the Registrar of Companies and did not contain a
statement required under section 498(2) or (3) of the Companies Act 2006.
Certain statements in this announcement are forward looking statements. By
their nature, forward looking statements involve a number of risks,
uncertainties or assumptions that could cause actual results or events to
differ materially from those expressed or implied by those statements.
Forward looking statements regarding past trends or activities should not be
taken as representation that such trends or activities will continue in the
future. Accordingly, undue reliance should not be placed on forward looking
statements.
The Annual Report is expected to be posted to shareholders by 7 August 2025.
Members of the public may obtain copies from Aberforth Partners LLP, 14
Melville Street, Edinburgh EH3 7NS or from its website: www.aberforth.co.uk. A
copy will also shortly be available for inspection at the National Storage
Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
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
1. Total Assets Total Return represents the 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 2025 was £149,654,000 and
the total number of shares in issue (Ordinary Shares plus ZDP Shares) was
147,580,000 producing a Total Assets per Share of 101.41p. Multiplying by the
dividend reinvestment factor of 1.011587 results in a Total Assets per Share
on a Total Return basis of 102.58p. The Total Assets Total Return since
Inception was therefore 2.6%, 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 7).
2. Ordinary Share NAV Total Return represents the theoretical return on the
NAV per Ordinary Share, assuming that dividends paid to 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
2025 was 99.62p and the dividend reinvestment factor was 1.016535. The
Ordinary Share NAV Total Return since Inception was therefore 1.3%, 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
7). The Ordinary Share NAV Total Return since Launch was 3.3% and is
calculated in the same way, except that it excludes the one-off Launch costs
by adjusting the Ordinary Share NAV at the start of the period.
3. ZDP Share NAV Total Return represents the return on the entitlement value
of a ZDP Share. The ZDP Share NAV, on an Accounts basis, as at 30 June 2025
was 106.17p. The ZDP Share NAV Total Return, on an Accounts basis, was
therefore 6.2%, 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. The
Accounts basis capitalises the expenses associated with the issue of the ZDP
Shares and amortises them over the expected life of the ZDP Shares. The ZDP
Share NAV, on an Articles basis, at 30 June 2025 was 107.00p and the ZDP Share
NAV Total Return in the period on an Articles basis, equivalent to the gross
redemption yield at issue, was 7% (see notes 7 and 8).
4. 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 2025 was 83.5p
and the dividend reinvestment factor was 1.020270. The Ordinary Share Price
Total Return was therefore -14.8%, 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.
5. 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 2025 was 108.0p. The ZDP Share Price Total Return was therefore 8.0%,
being the ZDP Share price at the end of the period divided by the ZDP Share
price at the start of the period.
6. 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.
7. 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.
Other Glossary Terms
8. Dividend Reinvestment Factor is calculated on the assumption that dividends
paid by the Company were reinvested into Ordinary Shares of the Company at the
NAV per Ordinary Share or the share price, as appropriate, on the day the
Ordinary Shares were quoted ex dividend.
9. ZDP:Equity Gearing Ratio is calculated by dividing the asset value
attributable to the ZDP Shares by the asset value attributable to the Ordinary
Shares.
10. 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.
11. 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.
12. Portfolio Turnover is calculated by summing the lesser of purchases and
sales over the relevant period divided by the average portfolio value for that
period.
13. 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 160.58p per ZDP Share on the planned
winding-up date, future estimated investment management fees charged to
capital, and estimated winding-up costs.
14. 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) are discounted to produce an amount equal to
the share price at the date of calculation.
15. Gross Redemption Yield (ZDP Share) is the annualised rate at which the
planned future payment of capital is discounted to produce an amount equal to
the price at the date of calculation.
16. Retained Revenue Reserves per Share is a cumulative figure of revenue
earned but not distributed and is calculated after accounting for dividends
paid by the Company, including those not yet recognised in the financial
statements.
17. 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.
Key Dates
18. Company Incorporation Date is 29 March 2024.
19. Inception Date is 28 June 2024. When reporting performance, "since
inception" refers to periods since 28 June 2024 and reflects the impact of
certain one off costs associated with the launch of the Company.
20. Launch/Listing Date is 1 July 2024. When reporting performance, "since
launch" refers to periods since 1 July 2024 and excludes the one off costs
associated with the launch of the Company.
21. Planned Winding-Up Date is 30 June 2031.
CONTACT:
Euan Macdonald / Peter Shaw, Aberforth Partners LLP, 0131 220 0733
Aberforth Partners LLPManagers and Secretaries
ANNOUNCEMENT ENDS
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