Aberforth Partners LLP - Presentation to AFUND Investors May 2021
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Aberforth Partners LLP Presentation to AFUND Investors May 2021 14 Melville Street ‐ Edinburgh EH3 7NS Tel 0131 220 0733 ‐ Fax 0131 220 0735 enquiries@aberforth.co.uk ‐ www.aberforth.co.uk Aberforth Partners LLP is authorised and regulated by the Financial Conduct Authority Aberforth Unit Trust Managers Limited is authorised and regulated by the Financial Conduct Authority
Aberforth Partners update
Over 30 years of value investing
─ We remain committed to the self‐imposed ceiling on the business
─ AUM capped at c.1.5% of the NSCI (XIC)’s market cap
─ Unchanged ownership structure, collegiate approach, investment focus
A consistent process as the partnership continues its natural evolution
─ Sonya Kim joined as an investment manager on 1 March 2021
─ The investment managers’ biographies are included in the appendix
Alignment of interests through the managers’ significant holdings in
the collective funds managed by the firm
UK Stewardship Code 2020 – updated report available on our website
Aberforth Partners LLP 1Performance – periods to 30 April
CAGR
16 months to AFUND
Total Return % YTD 1 Year April 2021 5 Year 10 Year inception
FTSE All‐Share 9.7 25.9 ‐1.1 6.9 6.1 7.8
FTSE 250 (XIC) 12.2 41.2 2.7 7.9 9.2 11.1
FTSE SmallCap (XIC) 23.4 69.5 25.5 10.5 11.3 8.0
NSCI (XIC) 16.9 55.9 11.9 9.5 10.0 10.2
AFUND 25.3 64.2 6.5 9.0 9.7 12.2
ASCoT NAV 27.5 69.9 7.9 9.3 10.1 *
ASCoT share price 22.3 71.7 2.1 10.5 11.4 **
Inception date for AFUND was 20/03/1991 * ASCoT NAV from inception 10/12/1990 12.8
**ASCoT Share price from inception 10/12/1990 12.7
NSCI (XIC) from ASCOT inception 10/12/1990 10.8
The recovery was initiated by the vaccines and has continued into 2021
AFUND’s 30 years since inception: 2.0% per annum out‐performance
16 month period to April underlines the cyclical skew of the portfolio
Aberforth Partners LLP Source: Aberforth Partners LLP; FTSE; London Business School. Data as at 30 April 2021. 2Factor effects on 16 month performance to 30 April 2021
We seek to understand businesses and value them, engaging when appropriate
Factors also affect the performance of our portfolios
The influence of factors has changed markedly over the course of the pandemic
16M to April 2021 10M to October 2020 6M to April 2021
Total return relative The full period The pandemic in full swing The vaccine recovery
Share prices fall Share prices rebound
AFUND / NSCI (XIC) ‐5% ‐18% +16%
Style factor: Value / growth within NSCI (XIC) ‐6% ‐24% +23%
Consistent value philosophy
Size factor: Smaller smalls / larger smalls +22% +5% +16%
Portfolio over‐weight smaller smalls
Geographical factor: Domestics / overseas within NSCI (XIC) ‐4% ‐15% +7%
Portfolio over‐weight domestics
Factor positioning scores: = bad for the portfolio's relative performance, = good
Aberforth Partners LLP Source: Aberforth Partners LLP; FTSE; London Business School. Data as at 30 April 2021. 3Winners and losers – 4 months to 30 April 2021
Attribution is the contribution to portfolio’s relative performance in basis points
10 Best winners Total return Attribution
10 Worst losers Total return Attribution
Rank Company (%) (bp) Rank Company (%) (bp)
1 Wincanton 72 111 1 Provident Financial ‐20 ‐85
2 Reach 53 110 2 Gamesys Group 70 ‐51
3 Lookers 214 69 3 Vectura Group ‐10 ‐46
4 Vitec Group 54 65 4 Morgan Advanced Materials ‐4 ‐46
5 International Personal Finance 57 61 5 Hammerson 70 ‐44
6 SIG 57 61 6 Investec 56 ‐40
7 Bakkavor Group 69 60 7 Argo Blockchain 488 ‐33
8 Just Group 56 55 8 888 Holdings 53 ‐30
9 Card Factory 102 49 9 FirstGroup ‐12 ‐29
10 Restaurant Group 89 46 10 De La Rue 5 ‐21
Not held in portfolio
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School; Portfolio Evaluation. Data as at 30 April 2021. 4Purchases and sales – 4 months to 30 April 2021
Top 10 Purchases Top 10 Sales
Rank Company £m Rank Company £m
1 Reach 1.9 1 RWS Holdings 3.1
2 C&C Group 1.6 2 Restaurant Group 2.2
3 Rathbone Brothers 1.5 3 Halfords Group 1.0
4 PageGroup 1.3 4 Mitchells & Butlers 0.9
5 Stagecoach Group 1.2 5 Forterra 0.6
6 Morgan Advanced Materials 1.2 6 Wincanton 0.4
7 Genel Energy 1.2 7 Reach 0.4
8 Wincanton 1.1 8 Alfa Financial Software Holdings 0.2
9 FirstGroup 1.1 9 Amigo Holdings 0.1
10 Just Group 1.1 10 Anglo Pacific Group 0.1
New Holding or Total Sales
4 month annualised turnover is 18%
Market recovery allows “value roll” to recommence
“Value roll”: sale of relatively expensive stocks & reinvestment into cheaper stocks
─ In the 4 months, average 2023 EV/EBITA of sales 11.3x versus 7.5x for purchases
Aberforth Partners LLP Source: Aberforth Partners LLP. Data as at 30 April 2021. 5Analysis of the December results season
99 companies in Aberforth’s Tracked Universe with December year ends
─ A useful cross‐section of the small cap universe
Aggregate Median Δ Aggregate Median Δ
2019 2020 2021
Δ YoY YoY Δ YoY YoY
Sales £85bn £71bn ‐16% ‐10% £79bn 10% 7%
% with higher sales 27% 78%
EBITA £7.5bn £3.5bn ‐54% ‐31% £5.9bn 69% 12%
% with higher EBITA 27% 65%
Margin 8.9% 4.9% 7.5%
% with higher Margin 29% 81%
Capex to depreciation ratio 1.34x 0.95x 1.28x
% with ratio > 1 63% 34% 41%
Aggregate net debt * £21bn £19bn £21bn
% with a stronger balance sheet 62% 42%
All figures exclude resources companies on account of the volatility in their profits; *Aggregate net debt excludes banks
The earnings of the portfolio fell sharply owing to its cyclical exposure
─ Despite a terrible year for profits, the results do suggest resilience
The portfolio stands to benefit from economic recovery and normalisation
─ There are signs that companies will start to reinvest for future growth
─ A return to pre‐pandemic profits probably comes in 2023
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School. Data as at 31 March 2021. 6Income – improving dividend experience
Portfolio categorised by holding's most recent dividend action
25
20 Other includes
companies that
Number of companies passed dividends
15
in 2020, but were
23 able to return to
10 21 21 the register
5
7 7
0
down nil payer no change increase other
The results season added to evidence of a nascent dividend recovery
─ Driven by economic recovery and companies returning to the dividend register
─ As nil payers resume dividends, income growth should be enhanced
However, not all holdings are anticipated to return to pre‐pandemic DPS
─ The managers continue to engage with boards on factors that influence dividends
Aberforth Partners LLP Source: Aberforth Partners LLP. Data as at 30 April 2021. 7Balance sheets – net debt/EBITDA categories
The chart shows the resilience of smaller companies using Aberforth’s forecasts
─ The bars are for the Tracked Universe, the crosses for the portfolio
─ The exposure to high leverage reduces in 2022 and 2023
─ This reflects the underlying generation of free cash flow
55%
Leverage profile of AFUND and the Tracked Universe
50%
X
X
45% X
40% X
% by value of Tracked Universe & Portfolio
35% X
30%
X
25%
X
20%
X
15%
X
10%
5%
0%
Net cash balance sheets Balance sheets < 2x Balance sheets > 2x
Tracked Universe position at 30/4/2021 Tracked 2022 Basis Tracked 2023 Basis
X AFUND position at 30/04/2021 X AFUND 2022 Basis X AFUND 2023 Basis
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School. Data as at 30 April 2021. 8Valuations – historical PEs
Absolute historical PE: Aberforth portfolio
20x
18x
Absolute PE of the portfolio
Back to the long term average
+1 Standard deviation
16x
14x
─ The chart illustrates the cyclical
PE x
12x
10x
8x ‐1 Standard deviation influence on valuations
6x
4x
─ PEs have reached higher levels in
previous recoveries
Aberforth PE
Relative historical PE: Aberforth portfolio vs NSCI (XIC)
Portfolio PE relative to NSCI (XIC) PE
1.20
1.10
Re‐rating to long term average
1.00
+1 Sta ndard deviation
─ Out‐performance during the
PE x relative
0.90
0.80
‐1 Sta ndard deviation
vaccine recovery
0.70
0.60 ─ Portfolio’s earnings dropped more
0.50
0.40
sharply and should rebound more
Aberforth v NSCI (XIC)
sharply too
Relative historical PE: NSCI (XIC) vs FTSE All‐Share (XIC) NSCI (XIC) PE versus FTSE All‐Share PE
Small companies unusually cheap
1.60
1.40
1.20 +1 Standard deviation relative to large companies
PE relative
1.00
─ Small cap profits have fared better
0.80
0.60
‐1 Standard deviation ─ Sector effects influential
0.40
NSCI (XIC) v FTAS (XIC)
Aberforth Partners LLP Source: Aberforth Partners LLP; FTSE; London Business School. Data as at 30 April 2021. 9Prospects for value after six months of the rally
AFUND has benefited from a rotation to value since the vaccine announcements
─ Risks remain: Brexit and the development of the pandemic
But what might allow the rotation to continue?
1. Continued normalisation
─ The recovery from the pandemic and recession has not fully played out
─ See Portfolio categorisation slide for what this might mean for the portfolio
2. Reflation
─ Monetary policy is joined by fiscal stimulus to jump‐start higher economic activity
─ The split between real economic growth and inflation is unclear
─ Both could be seen to benefit the prospects of value relative to growth
3. Value has led since the vaccines, but growth has not retrenched
─ Growth cohort of NSCI (XIC) +28% since 31 October 2020
─ Money has not yet moved meaningfully away from growth
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School. Data as at 30 April 2021. 10Portfolio categorisation
55% of portfolio holdings still below their pre‐pandemic prices
Despite strong gains, portfolio valuations remain attractive
This suggests that the recovery has not fully played out
Proportion of portfolio in holdings Proportion of portfolio in holdings
45% 55%
above their end‐2019 prices below their end‐2019 prices
Total Return since end‐2019 43% Total Return since end‐2019 ‐26%
Total Return YTD 36% Total Return YTD 24%
Weighted upside 42% Weighted upside 46%
YTD Net purchases/(sales) £17m YTD Net purchases/(sales) £28m
Reach 4.0% Redde Northgate 2.5%
Wincanton 2.9% Brewin Dolphin Holdings 2.2%
Vitec Group 2.6% Morgan Advanced Materials 2.2%
Just Group 2.5% SIG 2.2%
TI Fluid Systems 2.4% Bakkavor Group 2.0%
Robert Walters 2.3% International Personal Finance 2.0%
Vesuvius 2.1% Provident Financial 2.0%
Spire Healthcare Group 2.0% Rank Group 2.0%
Eurocell 1.8% FirstGroup 1.9%
De La Rue 1.7% Rathbone Brothers 1.9%
… see appendix for full portfolio … see appendix for full portfolio
Aberforth Partners LLP Source: Aberforth Partners LLP; Portfolio Evaluation. Data as at 30 April 2021. 11Higher bond yields tend to help the value style
Value minus Growth performance within the NSCI (XIC), three month periods
20.0%
Yields: 2.0% to 3.2% Yields: 0.5% to 1.7%
Yields: 1.5% to 3.0% 15.0%
No follow‐through in the Scepticism after previous
“The great rotation”
UK … Brexit? false dawns
10.0%
5.0%
0.0%
‐5.0%
‐10.0%
‐15.0%
Periods of rising 10 year US government bond yields Value minus Growth: 3 month total returns
Rising government bond yields should be to the relative advantage of value
Fiscal stimulus may sustain the current rise in yields and the value rally
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School; Bloomberg. Data as at 30 April 2021. 12The long term value premium
The chart shows the value premium over the long term
It has been absent since the financial crisis
─ Illustrated by the red bars and by the downwardly sloping green line
A welcome revival over the past six months … so far only just discernible
19%
The Value Premium: NSCI (XIC) value component vs NSCI (XIC) * Index
870
17%
– since Index inception +3.1% p.a. – since **ASCoT’s inception +1.4% p.a.
15%
670
13%
11%
Value component of NSCI (XIC) vs NSCI (XIC)
9%
470
7%
5%
3% 270
1%
‐1%
70
‐3%
‐5%
‐7% ‐130
Dec‐64
Dec‐73
Dec‐82
Dec‐91
Dec‐00
Dec‐09
Dec‐18
Sep‐62
Sep‐71
Sep‐80
Sep‐89
Sep‐98
Sep‐07
Sep‐16
Jun‐60
Mar‐67
Jun‐69
Mar‐76
Jun‐78
Mar‐85
Jun‐87
Mar‐94
Jun‐96
Mar‐03
Jun‐05
Mar‐12
Jun‐14
Mar‐21
Rolling 5 year Value component of NSCI (XIC) vs NSCI (XIC) Value performance relative to NSCI (XIC) (RHS)
*NSCI data based on extended NSCI (XIC) from 1980 and NSCI for prior dates; **ASCOT’s inception date: 31/12/1990 used as opposed to 10/12/1990.
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School. Data as at 30 April 2021. 13Morningstar style box categorisation
Small cap fund positioning by style (x‐axis) remain highly polarised
─ No meaningful shift in the growth consensus
*Aberforth
Investment
Trusts
Mid Cap ITs
Unit Trusts
Size
* Aberforth
Style
Aberforth Partners LLP *Aberforth “Standard Value” portfolio. Source: Aberforth Partners LLP; Morningstar. Data available as at 10 May 2021. 14Valuation – EV/EBITA
The cyclical influence on the portfolio’s valuation shown in the table
─ The small discount to the Tracked Universe in 2020 widens to more
familiar levels of c.20% as the upside of that cyclicality comes through
The growth stocks retain much higher valuations
─ By 2022 more than double the multiple of the portfolio
NSCI Number Weighted avg.
EV/EBITA 2020 2021 2022 2023 weight of stocks market cap.
Growth stocks 20.1x 22.4x 19.1x 16.7x 19% 42 £992m
The rump 14.5x 12.6x 10.2x 8.7x 78% 199 £1,017m
Tracked Universe 15.3x 13.7x 11.1x 9.5x 97% 241 £1,012m
AFUND 13.9x 10.9x 8.8x 7.5x 79 £696m
Relative to Tracked (%) 91 80 80 79
The portfolio also stands out against private equity, M&A and IPO valuations
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School. Data as at 30 April 2021. 15Valuation – corporate activity
There has been a pick up in corporate activity across the market
─ Investors, corporates and private equity are re‐engaging with UK assets
─ Recent M&A and IPO transactions show the extent of the value stretch
M&A premiums have averaged 49% since October 2020*
─ Two deals highlight the portfolio’s attractive valuations
M&A target Takeover premium Takeover valuation Portfolio comparator Valuation
Gamesys 41% 23x 2019 EV/EBITA Rank 13x 2019 EV/EBITA
Urban & Civic 64% 1.0x 2020 NAV U and I Group 0.5x 2020 NAV
IPOs show the continuing lure of secular growth and promise of future profits
─ Two examples with direct relevance to portfolio holdings
IPO 2023 valuation Portfolio comparator 2023 valuation
Moonpig 25x EV/EBITA Card Factory 7x EV/EBITA
Cazoo Ltd (US SPAC listing) Loss making; 1.3x EV/Sales Lookers 5x EV/EBITA ; c.0.1x EV/Sales
*Average premium of the ten NSCI (XIC) M&A transactions announced since October 2020
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School. 16After six months of rallying share prices, what’s left?
Portfolio weighted upside 43%
─ Share price target plus two years of dividends
─ Targets set in context of current small cap valuations
─ No general small cap re‐rating is assumed
─ Upside back roughly to pre‐pandemic levels
─ Prospective PE of 9.4x and 13.0x at target
─ The upside does not assume any “value roll”
Not a forecast!
Aberforth Partners LLP Source: Aberforth Partners LLP; FTSE; Bloomberg. Data as at 30 April 2021. 17Conclusion
The cyclical recovery is a tailwind for smaller companies and value
Normalisation of economies and monetary conditions presents
challenges and opportunities
─ Will the winners of the past ten years continue to out‐perform?
The portfolio is well diversified and is invested in resilient businesses
─ They have coped well with another crisis
─ They should benefit from the on‐going recovery
─ Thereafter, they can resume normal rates of investment and profit growth
The upside from the portfolio is supported by attractive valuations and
the opportunity for “value roll”
AFUND remains highly differentiated from its competitors
Aberforth Partners LLP 18Appendix Aberforth Partners LLP 19
Stewardship
UK Stewardship Code 2020 – updated report available on our website
ESG considerations are integrated in our investment process
─ Examples in the stewardship policy illustrate this integration
Aberforth will not launch separate ESG products
Our approach to ESG continues to evolve
─ Effective Governance enables the development and implementation of
Environmental and Social policies
─ No exclusion lists … anything in the NSCI (XIC) is a potential investment
─ Engagement can improve both ESG outcomes and investment returns*
─ Aberforth’s long record of engagement positions us well
* Bernstein “Fund Management Strategy: Activism short term and "bad", ESG long term and "good"?”
Aberforth Partners LLP Source: Aberforth Partners LLP 20Portfolio categorisation: full portfolio
Proportion of portfolio in holdings Proportion of portfolio in holdings
45% 55%
above their end‐2019 prices below their end‐2019 prices
Total Return since end‐2019 43% Total Return since end‐2019 ‐26%
Total Return YTD 36% Total Return YTD 24%
Weighted upside 42% Weighted upside 46%
YTD Net purchases/(sales) £17m YTD Net purchases/(sales) £28m
Reach 4.0% Kenmare Resources 1.1% Redde Northgate 2.5% RM 1.3%
Wincanton 2.9% Lookers 1.1% Brewin Dolphin Holdings 2.2% Stagecoach Group 1.1%
Vitec Group 2.6% City Of London Investment Group 0.9% Morgan Advanced Materials 2.2% Forterra 1.1%
Just Group 2.5% RHI Magnesita 0.9% SIG 2.2% Castings 1.1%
TI Fluid Systems 2.4% Zegona Communications 0.9% Bakkavor Group 2.0% Card Factory 1.0%
Robert Walters 2.3% Capital 0.8% International Personal Finance 2.0% Hostelworld Group 1.0%
Vesuvius 2.1% Xaar 0.7% Provident Financial 2.0% Harbour Energy 0.9%
Spire Healthcare Group 2.0% Gem Diamonds 0.6% Rank Group 2.0% U and I Group 0.8%
Eurocell 1.8% Alfa Financial Software Holdings 0.6% FirstGroup 1.9% Go‐Ahead Group 0.8%
De La Rue 1.7% Dialight 0.6% Rathbone Brothers 1.9% STV Group 0.7%
Mitchells & Butlers 1.7% Smiths News 0.6% DFS Furniture 1.8% Foxtons Group 0.7%
Vectura Group 1.7% Centaur Media 0.4% Crest Nicholson Holdings 1.7% Hyve Group 0.7%
Keller Group 1.6% Hansard Global 0.3% TT Electronics 1.7% Hollywood Bowl Group 0.7%
CMC Markets 1.6% Babcock International Group 0.1% Medica Group 1.5% Topps Tiles 0.7%
Micro Focus 1.4% Halfords Group 0.1% Senior 1.5% Genel Energy 0.5%
Charles Stanley Group 1.1% McBride 0.1% C&C Group 1.5% Pharos Energy 0.5%
PageGroup 1.1% McKay Securities 1.4% Speedy Hire 0.5%
Wilmington 1.4% PayPoint 0.4%
EnQuest 1.4% Essentra 0.4%
Headlam Group 1.4% McColl's Retail Group 0.2%
Anglo Pacific Group 1.3% Gulf Marine Services 0.1%
RPS Group 1.3% REA Holdings 0.1%
Aberforth Partners LLP Source: Aberforth Partners LLP; Portfolio Evaluation. Data as at 30 April 2021. 21Top 20 holdings
Total
Rank Company Activity
portfolio (%)
1 Reach UK newspaper publisher 4.0
2 Wincanton Logistics 2.9
3 Vitec Group Photographic & broadcast accessories 2.6
4 Redde Northgate Van rental 2.5
5 Just Group Individually underwritten annuities 2.5
6 TI Fluid Systems Automotive parts manufacturer 2.4
7 Robert Walters Recruitment 2.3
8 Brewin Dolphin Holdings Private client fund manager 2.2
9 Morgan Advanced Materials Manufacture of carbon & ceramic materials 2.2
10 SIG Specialist building products distributor 2.2
11 Vesuvius Metal flow engineering 2.1
12 Bakkavor Group Food manufacturer 2.0
13 Spire Healthcare Group Private healthcare provider 2.0
14 International Personal Finance Home credit provider 2.0
15 Provident Financial Personal credit provider 2.0
16 Rank Group Multi‐channel gaming operator 2.0
17 FirstGroup Bus & rail operator 1.9
18 Rathbone Brothers Private client fund manager 1.9
19 DFS Furniture Furniture retailer 1.8
20 Eurocell Manufacture of UPVC building products 1.8
Top 20 45.3
21 ‐ 30 16.3
31 ‐ 79 38.4
Actively managed portfolio with an active share of 75% 100.0
Aberforth Partners LLP Source: Aberforth Partners LLP. Data as at 30 April 2021. 22AFUND – sector exposures
NSCI (XIC) AFUND
Sector Significant holdings
weight weight
Technology 5.8% 3.7% TT Electronics
Telecommunications 2.2% 0.9%
Health Care 3.4% 5.2% Vectura Group, Spire Healthcare Group
Brewin Dolphin Holdings, International Personal Finance, Just Group,
Financials 14.7% 15.4% CMC Markets, Provident Financial, Rathbone Brothers
Real Estate 9.0% 3.0%
DFS Furniture, FirstGroup, Mitchells & Butlers, Reach, TI Fluid Systems, Rank Group,
Consumer Discretionary 22.0% 28.1% Crest Nicholson Holdings
Consumer Staples 4.9% 3.9% Bakkavor Group
De La Rue, Eurocell, Keller Group, Morgan Advanced Materials, Robert Walters,
Industrials 24.4% 31.4% Vesuvius, Vitec Group, Wincanton, SIG, Redde Northgate
Basic Materials 6.5% 4.8%
Energy 4.5% 3.5%
Utilities 2.7% 0.0%
Aberforth Partners LLP Source: Aberforth Partners LLP; London Business School. Data as at 30 April 2021. 232021 growth stocks
Securities
4imprint Group JTC
888 Holdings Mode Global Holdings
AG Barr Nanoco Group
Alfa Financial Software Holdings NCC Group
Allied Minds On The Beach Group
Aptitude Software Group Oxford Biomedica
Arix Bioscience Oxford Instruments
Avon Rubber Pensana
BATM Advanced Communications Porvair
Calisen PPHE Hotel Group
Clarkson PureTech Health
Clipper Logistics PZ Cussons
Dignity Sanne Group
discoverIE Group SolGold
DP Eurasia Supply@Me Capital
Esken Telecom Plus
FDM Group Holdings The Gym Group
Fisher (James) & Sons Treatt
Gresham Technologies Watches of Switzerland Group
HeiQ XP Power
Helios Towers Zoetic International
Hilton Food Group Zotefoams
IP Group
See slide "Valuation ‐ EV/EBITA" for context
Aberforth Partners LLP Source: Aberforth Partners LLP. Data as at 1 January 2021. 243 collective investment vehicles
Aberforth Smaller Companies Aberforth UK Small Aberforth Split Level
Trust (ASCoT) Companies Fund (AFUND) Income Trust (ASLIT)
Inception December 1990 March 1991 July 2017
Structure Closed‐end Open‐end Closed‐end
Gearing Tactical = 5.0% N/A Structural (ZDPs) = 23.4%
Size (AUM) £1,519m £201m £230m
Number of investee companies 79 79 68
Benchmark NSCI (XIC) NSCI (XIC) N/A
Investment philosophy Value Value Value/Income
Management fees (ongoing charges) 74 bps* (81 bps) 75 bps (83 bps) 103 bps (126 bps)
Performance fee No No No
RDR: platforms >20 >15 >20
RDR: clean price N/A Yes N/A
Authority: share buyback Yes N/A No
Authority: dividends from capital No N/A No
Richard Davidson Angus Gordon Lennox
Chairman N/A
Richard.Davidson@aberforth.co.uk Angus.GordonLennox@aberforth.co.uk
* For a full explanation of the fee structure and ongoing charges, please refer to the Fund’s Annual Report or visit www.aberforth.co.uk
Aberforth Partners LLP Source: Aberforth Partners LLP. Data as at 30 April 2021. 25Investment trust
Aberforth Smaller Companies Trust plc (ASCoT)
next continuation vote in March 2023 and every 3 years thereafter
Ordinary shares authority to buy‐in up to 13,299,587 shares has been granted
88,723,066
cumulative shares bought‐in for cancellation = 10,086,722
as at 30 April 2021 actual was 5.0%
Gearing potential for up to £130m or 8.6%
Dividends Based on the following historic actuals:
2020 final announced January 2021 paid March 2021 (22.90p)
33.30p interim announced July 2020 paid August 2020 (10.40p)
interim announced July 2019 paid August 2019 (10.00p)
2019
final announced January 2020 paid March 2020 (22.00p)
36.00p
special announced January 2020 paid March 2020 (4.00p)
interim announced July 2018 paid August 2018 (9.50p)
2018
final announced January 2019 paid March 2019 (20.75p)
38.00p
special announced January 2019 paid March 2019 (7.75p)
Note: Further details available in the Fund’s Annual Report and from www.aberforth.co.uk
Aberforth Partners LLP Source: Aberforth Partners LLP. Data as at 30 April 2021. 26Unit trust
Aberforth UK Small Companies Fund (AFUND)
As 30 April 2021 Issue Price Cancellation Price Units in Issue
Accumulation Units £306.66 £300.71 382,664
Income Units £218.58 £214.34 391,768
Limited issue fund with Accumulation and Income units
value at cancellation price: £199m
no entry or exit charged; dealing spread 1.9% (mid‐basis)
yield on Income units: 0.8%
current distribution period ends 31 December 2020; paid February 2021
previous distribution period ended 30 June 2020; paid 28 August 2020
annual management fee: 0.75%; no performance fee
5/8 of management fee allocated to capital
Daily subscriptions and redemptions
deals can be placed each business day prior to 4.30pm
dual priced fund; prices calculated using closing prices each business day
“forward pricing”
Note: Further details available in the Fund’s Annual Report, Prospectus and Key Investor Information Document and from www.aberforth.co.uk
Aberforth Partners LLP Source: Aberforth Partners LLP. Data as at 30 April 2021. 27Investment trust
Aberforth Split Level Income Trust plc (ASLIT)
Ordinary shares all net income, plus all net assets on a winding up – after ZDP
190,250,000 entitlements met
Zero Dividend Preference
no dividends, but final capital entitlement of 127.25p on planned
(ZDP) shares winding up date
47,562,500
Life planned winding up date: 1 July 2024
Gearing structural gearing via the ZDP shares
Based on the following historic actuals:
Dividends
2021 First interim paid March 2021 (0.92p)
2020 First interim paid March 2020 (1.51p)
4.22p Second interim paid August 2020 (2.71p)
2019 First interim paid March 2019 (1.45p)
4.35p Second interim paid August 2019 (2.71p)
Special paid August 2019 (0.19p)
Note: Further details available in the Fund’s Prospectus and from www.aberforth.co.uk
Aberforth Partners LLP Source: Aberforth Partners LLP. Data as at 30 April 2021. 28Investment managers SAMUEL G FORD MEng, CFA Sam joined Aberforth in August 2019 and became a Partner in May 2021. He is responsible for the following sectors – Aerospace and Defence; Alternative Energy; Electronic and Electrical Equipment; Health Care Providers; Media; Medical Equipment and Services; Oil, Gas and Coal; Pharmaceuticals and Biotechnology; Technology Hardware and Equipment; and Telecommunications Equipment. As a fund manager on M&G Investments’ equity income team for the previous 5 years, he managed UK equity portfolios for a range of clients. Prior to that he was an investment manager with Alliance Trust for 8 years. JEREMY G A HALL MA (Hons) Jeremy joined Aberforth in October 2018 and became a Partner in January 2020. He is responsible for the following sectors – Banks; Beverages; Chemicals; Finance and Credit Services; Food Producers; Industrial Materials; Investment Banking and Brokerage Services; and Tobacco. Fund management roles with Abbey National Asset Managers and SVM Asset Management were followed by ten years with Cartesian Capital Partners LLP, where he was a partner and managed UK equity portfolios for a range of clients. SONYA KIM, CFA Sonya joined Aberforth on 1 March 2021. She has a background in value investment and company analysis, having previously worked for Kiltearn Partners. Her earlier career includes time at Standard Life Investments and Baillie Gifford. Her academic background features a BA in Mathematics from New York University, followed by a Masters of Finance at Massachusetts Institute of Technology. Sonya is a CFA charterholder. EUAN R MACDONALD BA (Hons) Euan joined Aberforth in May 2001 and became a Partner in May 2004. He is responsible for the following sectors – Automobiles & Parts; Consumer Services; General Industrials; Industrial Engineering; Leisure Goods; Life Insurance; Non‐life Insurance; Software & Computer Services; and Telecommunications Service Providers. Previously he was with Baillie Gifford for 10 years where he managed portfolios invested in small companies both in Continental Europe and the UK. KEITH F MUIR BEng (Hons), CFA Keith joined Aberforth in March 2011 and became a Partner in May 2014. He is responsible for the following sectors – Construction and Materials; Household Goods and Home Construction; Mortgage Real Estate Investment Trusts; Real Estate Investment and Services; and Real Estate Investment Trusts. Previously he was an investment director with Standard Life Investments for 13 years and spent the last 9 years as a senior member of the smaller companies team with associated portfolio management responsibilities. Prior to that he gained experience with Southpac, Scottish Equitable and Murray Johnstone. PETER R SHAW BCom (Hons), CA Peter joined Aberforth in April 2016 and became a Partner in May 2017. He is responsible for the following sectors – Industrial Support Services; Industrial Transportation; Personal Care, Drug and Grocery Stores; Personal Goods; Retailers; and Waste and Disposal Services. He joined from Kames Capital where he spent 15 years in equity fund management. Initially the experience gained was exclusively in the small company market. However, the subsequent integration of the small company team into the broader UK equity team led to a wider range of portfolio and research responsibilities. CHRISTOPHER N WATT BSc (Hons) Christopher joined Aberforth in April 2016 and became a Partner in May 2017. He is responsible for the following sectors – Electricity; Gas, Water & Multi‐utilities; Industrial Metals & Mining; Precious Metals & Mining; and Travel & Leisure. He joined from Jupiter Asset Management where he spent 15 years in investment management. He was a member of the value team at Jupiter with responsibility for managing a number of UK equity mandates. Aberforth Partners LLP 29
Glossary – Aberforth Funds
Aberforth’s investment philosophy and putting it into practice is explained further at www.aberforth.co.uk/about‐Aberforth/
Aberforth Standard Value refers to The Aberforth Smaller Companies Trust plc, Aberforth’s longest standing client.
Accumulation Units: units not receiving a cash payment representing income; rather, income will be included in the value of the units.
Active Share is calculated by summing the absolute differences between a portfolio’s weight in a stock and an index’s weight in a stock for all
the stocks in the portfolio or index. The total is then divided by two to give a ratio between 0% and 100%.
AUM: Assets Under Management.
CAGR: Compound Annual Growth Rate is the annualised rate of growth over the specified time period.
Cancellation refers to the cancellation of units by the Trustee.
Discount is the amount by which the stockmarket price is lower than the Net Asset Value, or NAV, per Ordinary Share. The discount is normally
expressed as a percentage of the NAV per Ordinary Share. The opposite of a discount is a premium.
DPS: Dividend Per Share.
ESG: Environmental, Social and Governance.
EV/EBITA: Enterprise Value divided by Earnings Before Interest, Tax and Amorisation.
EV/EBITDA: Enterprise Value divided by Earnings Before Interest, Tax, Depreciation and Amorisation.
Funds: ASCoT – The Aberforth Smaller Companies Trust plc; ASLIT – Aberforth Split Level Income Trust plc; AFUND – Aberforth UK Small
Companies Fund.
Gearing is the use of debt to increase capital.
Issue refers to the issue of units by the Trustee.
Hurdle rate is the rate of capital growth per annum to return a stated amount per share at the planned winding‐up date.
Income Units entitle the holder to a cash distribution representing the net income attributable to that unit at each income allocation date.
IPO: Initial Public Offering.
Leverage is a measurement of the use of debt.
M&A: Mergers and Acquisitions.
Net Asset Value (ZDP Share) is the value of the entitlement to the ZDP Shareholders.
NSCI (XIC): The Numis Smaller Companies Index (excluding Investment Companies).
PE: The price‐earnings ratio (P/E ratio).
Aberforth Partners LLP Source: Aberforth Partners LLP 30Glossary – Aberforth Funds
Redemption Yield (Ordinary Share) is the annualised rate at which projected future income and capital cash flows (based on assumed future
capital/dividend growth rates) is discounted to produce an amount equal to the share price at the date of calculation.
Redemption Yield (ZDP Share) is the annualised rate at which the total discounted value of the planned future payment of capital equates to
its share price at the date of calculation.
Retained Revenue: the accumulated income that has not been distributed.
Rump is the Tracked Universe, adjusted to exclude the growth stocks.
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.
Tracked Universe refers to those constituents of the NSCI (XIC) that Aberforth follows closely and whose financial characteristics are
aggregated on internal systems.
Total return: capital appreciation plus reinvested dividends.
Turnover is calculated by summing the lesser of purchases and sales and dividing by the average portfolio value.
Unit: an equal portion representing part ownership of a unit trust fund.
Value style: the strategy by which all Aberforth’s portfolios are invested.
Value Premium: the relative out/(under) performance of the value investment style.
ZDP: Zero Dividend Preference shares are a share class that receive no dividends. Instead, holders receive a fixed capital payment on the
redemption date.
Aberforth Partners LLP Source: Aberforth Partners LLP 31Important information Aberforth Partners LLP 32
Important information
Throughout this presentation references to: SMALL COMPANIES mean constituents of the Numis Smaller Companies
Index (Excluding Investment Companies) which are referred to as “NSCI (XIC)”; LARGE COMPANIES mean constituents
of the FTSE All‐Share Index which are referred to as “FTAS”; total return means with dividends reinvested (prior to
2.7.97 with gross dividends reinvested thereafter with net dividends reinvested); and Aberforth clients’ portfolio
characteristics use one of Aberforth’s “Standard Value” clients as representative unless otherwise stated.
Sources of data used in the presentation are detailed on the relevant pages. Source references to London Business
School refer to Numis/Paul Marsh and Elroy Dimson – London Business School.
Source references to FTSE refer to FTSE International Limited (“FTSE”) © FTSE 2021. FTSE® is a trade mark of the
London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the
FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for
any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data and no party may rely on any FTSE
indices, ratings and/or underlying data contained in this communication. No further distribution of FTSE data is
permitted without FTSE’s express written consent. FTSE does not promote, sponsor or endorse the content of this
communication.
The information contained in this presentation is for background purposes and is subject to updating, revision and
amendment. This presentation does not contain, and does not purport to contain, a full description of the Fund(s) or
all the information investors should consider before investing in the Fund(s). All expressions of opinion are subject to
change without notice and do not constitute advice and should not be relied upon as a promise or representation as to
the future. This presentation may contain forward‐looking statements which are based on current expectations and
assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied in such statements. Such forward‐looking statements are
not a reliable indicator of future performance. This presentation is not intended as an offer, invitation or solicitation for
the purchase or sale of any investment, nor is its issuance intended to give rise to any other legal relations whatsoever
and this presentation must not be relied upon for the purposes of any investment decision. While this presentation has
been prepared in good faith, no representation or warranty of any sort, express or implied, is made in respect of this
presentation and no liability whatsoever is accepted by Aberforth Partners LLP or Aberforth Unit Trust Managers Limited
or any other person in relation thereto.
Aberforth Partners LLP May 2021 33Important information
The information contained in this presentation does not constitute an offer of, or an invitation to apply for, securities in
any jurisdiction where such an offer or invitation is unlawful or in which the person making such offer is not qualified to
do so or to whom it is unlawful to make such an offer or solicitation. Specifically, any Fund(s) described will not be
registered under the U.S. Securities Act of 1933, as amended, and may not be directly or indirectly sold or offered in the
U.S.A. or any of its territories or possessions or areas subject to its jurisdiction or to or for the benefit of a U.S. person.
Persons resident in countries other than the UK should consult with their professional advisers as to whether they
require any governmental or other consents in order to enable them to invest in any product described in these pages.
Aberforth Partners LLP is a limited liability partnership registered in England and Wales (registered number OC313353)
and its registered office address is The Broadgate Tower, Primrose Street, London EC2A 2EW. It has its principal place of
business at 14 Melville Street, Edinburgh EH3 7NS.
Aberforth Unit Trust Managers Limited is a company registered in Scotland (registered number 124771) and its registered
office address is 14 Melville Street, Edinburgh EH3 7NS. Aberforth Unit Trust Managers Limited is wholly owned by
Aberforth Partners LLP.
Aberforth Partners LLP and Aberforth Unit Trust Managers Limited are authorised and regulated by the Financial Conduct
Authority.
Aberforth Partners LLP May 2021 34Risk warnings
Capital may be at risk as the value of investments may go down as well as up and is not guaranteed; therefore investors
may not get back the amount originally invested.
Past performance is not a guide to future performance, nor a reliable indicator of future results or performance.
Investments in shares of smaller companies are generally considered to carry a higher degree of risk as the market for their
shares is often less liquid than that for shares of larger companies, making shares of smaller companies more difficult to
buy and sell. Smaller companies can also be expected, in comparison to larger companies, to have less mature businesses, a
more restricted depth of management and a higher risk profile.
The performance of shares of smaller companies may be more volatile than the shares of larger companies over short time
periods; therefore investors should regard such investments as long term.
Unless the performance of an investment meets or exceeds the rate of inflation, the real value of that investment will
reduce.
Changes in economic or political conditions or other factors can substantially and potentially adversely affect the value of
investments and, accordingly, the performance and prospects of the funds managed by Aberforth Partners LLP or Aberforth
Unit Trust Managers Limited.
The market price of securities issued by the fund may fluctuate significantly and investors may not be able to sell their
securities at or above the price at which they acquired them. Securities markets have in the past experienced extreme
volatility that has often been unrelated to the operating performance of particular companies. Any broad market
fluctuations may adversely affect the market price of the units issued by the fund.
There can be no guarantee that the investment objective of the fund will be achieved or provide the returns sought by the
fund.
Aberforth Partners LLP May 2021 35Risk warnings
The dealing spread of Aberforth UK Small Companies Fund, which represents the difference between the buying and
selling prices, will have an impact on the realisable value of any investment made in this fund, particularly in the short
term. To mitigate the impact of capital erosion, investors should regard investments in this fund as long term.
Tax legislation and the levels of relief from taxation can change at any time. Any change in the tax status of the fund or in
tax legislation could affect the value of the investments held by the fund or affect its ability to provide returns to its
investors. The tax treatment of an investment, and any dividends received, will depend on the individual circumstances of
the investor and may be subject to change in the future. If investors are in any doubt as to their tax position, they should
consult their professional adviser.
An investment in the fund is only suitable for investors who are capable of evaluating the merits and risks of such an
investment and who have sufficient resources to be able to bear any losses which may arise from such an investment
(which may be equal to the whole amount invested). Such an investment should be regarded as long term in nature and
complementary to existing investments in a range of other financial assets and should not form a major part of an
investment portfolio.
Aberforth Partners LLP May 2021 36You can also read
